Just be yourself

It' s very simple to be yourself,
but quite difficult to be simple.

                               

A few tips about 2016

You've got to know when to hold 'em
Know when to fold 'em
Know when to walk away
And know when to run 
You never count your money 
When you're sittin' at the table 
There'll be time enough for countin' 
When the dealin's done.

This time is different

A short comment on Greek elections

CENSORSHIP IS BEING OUTSOURCED TO THE MOB

Two recent cases Down Under show how dangerous Twittermobs can be.

By BRENDAN O’NEILL

One of the curious things about the twenty-first-century West is that it feels deeply censorious even though, historically speaking, there isn’t a huge amount of state censorship. Yes, many Western societies have anti-‘hate speech’ laws, debate-choking defamation statutes, and a host of methods for regulating the raucous press, all of which limit how daring or just downright offensive we can be. But we don’t exactly live under nightmarish Orwellian regimes that pass laws explicitly designed to silence political opinions, or to punish anti-Christ iconoclasm, or to criminalise people found in possession of indecent novels or art. How do we explain the existence of an almost unprecedented culture of censoriousness in the absence of too much old-style state censorship?

It’s because censorship has been outsourced to the mob. Censorship is alive and well; it’s just that today it is enforced, not so much by brute law and the copper’s boot, but by mobs of self-styled guardians of acceptable thought.

The illiberal job that was once done by the state and its offshoots - the policing of thought and the punishment of outré speech - is now increasingly done by informal intolerant networks. Outsourcing has been all the rage among Western states in recent years. They’ve outsourced responsibility for aspects of policing, for the guarding of prisoners, even for the fighting of wars, as we saw with the use of mercenary outfits in the West’s conquering of Iraq. Now, the moral authority to decree what can and can’t be uttered in the public sphere has been outsourced, too, passed from the government to moral lynch mobs, noisy cliques of non-state censors. The relatively small amount of explicit state censorship today shouldn’t be taken as a sign that we live in a more free society, but rather speaks to something quite terrifying - that the state doesn’t really need to enact laws that police our words at a time when there are so many mobs willing to do that dirty work on its behalf.

In Australia over the past week, there have been two striking examples of outsourced censoriousness, which reveal how this new phenomenon works and how damaging it can be.

In the first case, a Georgian opera singer, Tamar Iveri, was hounded out of Opera Australia (OA) after it was revealed she once made homophobic comments on her Facebook page. Ms Iveri had been due to perform in OA’s production of Otello, which opens in Sydney next month. But then someone exposed that, a year ago, she had said on FB that she was glad Georgian protesters had spat on Gay Pride marchers in Tbilisi, and had asked the Georgian president not to let into Georgia what she called the ‘West’s faecal masses’ - that is, homosexuals. Oz’s left-leaners, small-L liberals and artsworld inhabitants decided that such a person was not fit to perform in Australia, and so they used their considerable influence - their newspaper columns, their social-networking pages, the financial leverage of their patronage of the arts, which they made clear could be withdrawn - to put pressure on OA to drop Ms Iveri. They won. Ms Iveri was cast out, dumped by OA on the basis that her views were ‘unconscionable’. And thus was Australian opera made morally pure once more.

Read more : http://www.spiked-online.com/freespeechnow/fsn_article/censorship-is-being-outsourced-to-the-mob#.U7ima9fg_h4

We Will Be Told Hyperinflation Is Necessary, Proper, Patriotic, And Ethical

Each round of money printing eventually feeds back into the price system, creating demand for another round of money printing ... and another ... and another

by Patrick Barron

Hyperinflation leads to the complete breakdown in the demand for a currency, which means simply that no one wishes to hold it. Everyone wants to get rid of that kind of money as fast as possible. Prices, denominated in the hyper-inflated currency, suddenly and dramatically go through the roof. The most famous examples, although there are many others, are Germany in the early 1920s and Zimbabwe just a few years ago. German Reichsmarks and Zim dollars were printed in million and even trillion unit denominations.

We may scoff at such insanity and assume that America could never suffer from such an event. We are modern. We know too much. Our monetary leaders are wise and have unprecedented power to prevent such an awful outcome.

Think again.

Our monetary leaders do not understand the true nature of money and banking; thus, theyadvocate monetary expansion as the cure for every economic ill. The multiple quantitative easing programs perfectly illustrate this mindset. Furthermore, our monetary leaders actually advocate a steady increase in the price level, what is popularly known as inflation. Any perceived reduction in the inflation rate is seen as a potentially dangerous deflationary trend, which must be countered by an increase in the money supply, a reduction in interest rates, and/or quantitative easing. So an increase in inflation will be viewed as success, which must be built upon to ensure that it continues. This mindset will prevail even when inflation runs at extremely high rates.

Like previous hyperinflations throughout time, the actions that produce an American hyperinflation will be seen as necessary, proper, patriotic, and ethical; just as they were seen by the monetary authorities in Weimar Germany and modern Zimbabwe. Neither the German nor the Zimbabwean monetary authorities were willing to admit that there was any alternative to their inflationist policies. The same will happen in America.

The most likely trigger to hyperinflation is an increase in prices following a loss of confidence in the dollar overseas and its repatriation to our shores. Committed to a low interest rate policy, our monetary authorities will dismiss the only legitimate option to printing more money — allowing interest rates to rise. Only the noninflationary investment by the public in government bonds would prevent a rise in the price level, but such an action would trigger a recession. This necessary and inevitable event will be vehemently opposed by our government, just as it has been for several years to this date.

Instead, the government will demand and the Fed will acquiesce in even further expansions to the money supply via direct purchases of these government bonds, formerly held by our overseas trading partners. This will produce even higher levels of inflation, of course. Then, in order to prevent the loss of purchasing power by politically connected groups, the government will print even more money to fund special payouts to these groups. For example, government will demand that Social Security beneficiaries get their automatic increases; likewise for the quarter of the population getting disability benefits. Military and government employee pay will be increased. Funding for government cost-plus contracts will ratchet up. As the dollar drops in value overseas, local purchases by our overextended military will cost more in dollar terms (as the dollar buys fewer units of the local currencies), necessitating an emergency increase in funding. Of course, such action is necessary, proper, patriotic, and ethical.

Other federal employee sectors like air traffic controllers and the TSA workers will likely threaten to go on strike and block access to air terminal gates unless they get a pay increase to restore the purchasing power of their now meager salaries.

State and local governments will also be under stress to increase the pay of their public safety workers or suffer strikes which would threaten social chaos. Not having the ability to increase taxes or print their own money, the federal government will be asked to step in and print more money to placate the police and firemen. Doing so will be seen as necessary, proper, patriotic, and ethical.

Each round of money printing eventually feeds back into the price system, creating demand for another round of money printing ... and another ... and another, with each successive increase larger than the previous one, as is the nature of foolishly trying to restore money’s purchasing power with even more money. The law of diminishing marginal utility applies to money as it does to all goods and services. The political and social pressure to print more money to prevent a loss of purchasing power by the politically connected and government workers will be seen as absolutely necessary, proper, patriotic, and ethical.

Many will not survive. Just as in Weimar Germany, the elderly who are retired on the fruits of a lifetime of savings will find themselves impoverished to the point of despair. Suicides among the elderly will be common. Prostitution will increase, as one’s body becomes the only saleable resource for many. Guns will disappear from gun shops, if not through panic buying then by outright theft by armed gangs, many of whom may be your previously law-abiding neighbors.

Businesses will be vilified for raising prices. Goods will disappear from the market as producer revenue lags behind the increase in the cost of replacement resources. Government’s knee-jerk solution is to impose wage and price controls, which simply drive the remaining goods and services from the white market to the gangster-controlled black market. Some will sit out the insanity. Better to build inventory than sell it at a loss. Better still to close up shop and wait out the insanity. So government does the necessary, proper, patriotic, and ethical thing: it prints even more money and prices increase still more.

The money you have become accustomed to using and saving eventually becomes worthless; it no longer serves as a medium of exchange. No one will accept it. Yet the government continues to print it in ever greater quantities and attempts to force the citizens to accept it. Our military forces overseas cannot purchase food or electrical power with their now worthless dollars. They become a real danger to the local inhabitants, most of whom are unarmed. The US takes emergency steps to evacuate dependents back to the States. It even considers abandoning our bases and equipment and evacuating our uniformed troops when previously friendly allies turn hostile.

Read more at :

http://mises.org/daily/6617/We-Will-Be-Told-Hyperinflation-is-Necessary-Proper-Patriotic-and-Ethical

Welcome back to the eurozone nightmare

Monetary union remains as flawed as ever

By Liam Halligan

The eurozone has recently been off our news radar. We Britons have become smug of late given our new-found growth, now that we’re the most rapidly expanding economy in the Western world (almost).

We certainly have a sense that the “Continental” economies aren’t doing as well as ours. Apart from those pesky Germans, of course, who are annoyingly good at making stuff the rest of the world wants to buy.

Yet, the fear of the euro as a tinderbox, which at any minute could spark financial meltdown, seems to have gone. The euro as a ticking-time bomb, about to explode, causing another Lehman-style Minsky moment on global markets – all that has been dealt with, we think, sorted, solved?

I would like to tell you that’s true. But I can’t, because it isn’t. The eurozone’s deep structural flaws remain as ever they were.

This jerry-built monetary union, for all the fanfare, arrogance and “solidarity”, is fundamentally just as vulnerable as it was in the summer of 2012, when, suddenly, everyone started worrying that the single currency wasn’t, as we’d always been told, “irreversible”.

Until then, it was only been “nutters” like me who openly questioned the eurozone’s long-term survival. We raised such “mad” questions not because we’d spent much of our adult lives studying economics, history and the minutiae of currency unions – oh no – but because we were “cranks” and “xenophobes”.

Back in that Olympic summer, however, as government bond yields in the likes of Greece, Spain and Italy spiked, and riots broke out in previously laid-back European capitals, everyone realised that some profligate members could crash-out of monetary union, forced by market vigilantes and window-smashing thugs, or maybe even kicked-out by Germany (with the Finns and the Dutch providing moral cover).

But then the newish European Central Bank president, Mario Draghi, promised to do “whatever it takes” to save the euro. At the same time, politicians began talking about a “banking union” – and with extremely serious faces. As if by magic, there was calm. The markets relented and bond yields fell back.

Since then, while it hasn’t been plain sailing, there’s been far less talk of a stormy “break-up” of monetary union. The euro is actually set to end 2013 as one of the best-performing main currencies – up from $1.32 in early January to around $1.37 today.

The fact that the US government wanted this dollar depreciation, deliberately stoking it by expanding the Fed’s balance sheet $85bn (£52bn) a month is, of course, completely irrelevant.

 Read more at:

http://www.telegraph.co.uk/finance/comment/liamhalligan/10517889/Liam-Halligan-Welcome-back-to-the-eurozone-nightmare.html

The Post-Work Economy

A permanent dependency class means a citizenry deprived of dignity

By Mark Steyn

One consequence of the botched launch of Obamacare is that it has, judging from his plummeting numbers with “Millennials,” diminished Barack Obama’s cool. It’s not merely that the website isn’t state-of-the-art but that the art it’s flailing to be state of is that of the mid-20th-century social program. The emperor has hipster garb, but underneath he’s just another Commissar Squaresville. So, health care being an irredeemable downer for the foreseeable future, this week the president pivoted (as they say) to “economic inequality,” which will be, he assures us, his principal focus for the rest of his term. And what’s his big idea for this new priority? Stand well back: He wants to increase the minimum wage!

Meanwhile, Jeff Bezos of Amazon (a non-government website) is musing about delivering his products to customers across the country (and the planet) within hours by using drones.

Drones! If there’s one thing Obama can do, it’s drones. He’s renowned across Yemen and Waziristan as the Domino’s of drones. If he’d thought to have your health-insurance-cancellation notices dropped by drone, Obamacare might have been a viable business model. Yet, even in Obama’s sole area of expertise and dominant market share, the private sector is already outpacing him.

Who has a greater grasp of the economic contours of the day after tomorrow — Bezos or Obama? My colleague Jonah Goldberg notes that the day before the president’s speech on “inequality,” Applebee’s announced that it was introducing computer “menu tablets” to its restaurants. Automated supermarket checkout, 3D printing, driverless vehicles . . . what has the “minimum wage” to do with any of that? To get your minimum wage increased, you first have to have a minimum-wage job.

In my book (which I shall forbear to plug, but is available at Amazon, and with which Jeff Bezos will be happy to drone your aunt this holiday season), I write:

Once upon a time, millions of Americans worked on farms. Then, as agriculture declined, they moved into the factories. When manufacturing was outsourced, they settled into low-paying service jobs or better-paying cubicle jobs — so-called “professional services” often deriving from the ever swelling accounting and legal administration that now attends almost any activity in America. What comes next?

Or, more to the point, what if there is no “next”?

What do millions of people do in a world in which, in Marxian terms, “capital” no longer needs “labor”? America’s liberal elite seem to enjoy having a domestic-servant class on hand, but, unlike the Downton Abbey crowd, are vaguely uncomfortable with having them drawn from the sturdy yokel stock of the village, and thus favor, to a degree only the Saudis can match, importing their maids and pool-boys from a permanent subordinate class of cheap foreign labor. Hence the fetishization of the “undocumented,” soon to be reflected in the multi-million bipartisan amnesty for those willing to do “the jobs Americans won’t do.”

So what jobs will Americans get to do? We dignify the new age as “the knowledge economy,” although, to the casual observer, it doesn’t seem to require a lot of knowledge. One of the advantages of Obamacare, according to Nancy Pelosi, is that it will liberate the citizenry: “Think of an economy where people could be an artist or a photographer or a writer without worrying about keeping their day job in order to have health insurance.” It’s certainly true that employer-based health coverage distorts the job market, but what’s more likely in a world without work? A new golden age of American sculpture and opera? Or millions more people who live vicariously through celebrity gossip and electronic diversions? One of the differences between government health care in America compared to, say, Sweden is the costs of obesity, heart disease, childhood diabetes, etc. In an ever more sedentary society where fewer and fewer have to get up to go to work in the morning, is it likely that those trends will diminish or increase?

The World’s New Outlaws

With America’s presence in the world receding, regional hegemons flex their muscles.

By  Victor Davis Hanson

The American custodianship of the postwar world for the last 70 years is receding. Give it its due: The American super-presence ensured the destruction of Axis fascism, led to the eventual defeat of Soviet-led global Communism, and spearheaded the effort to thwart the ability of radical Islam to disrupt global commerce in general and Western life in particular.

American military power and bipartisan proactive diplomacy also brought back Japan and Germany into the family of nations and allowed their dynamism to be expressed through economic rather than military power. It protected the territorial integrity of smaller and weaker nations. It guaranteed open seas, free commerce, and reliable and safe global transportation. Without a free-market U.S. economy, NATO, and American military power there would have been no globalization.

In contrast, the world that Hitler, Mussolini, Tojo, Stalin and his successors, and bin Laden and the Islamists envisioned was quite a bit different. Regional enclaves would have their own laws and protocols overseen by local hegemons immune from global scrutiny. Tragically, we are reentering just such an age, not through the defeat of the United States but through its abdication of power.

In the Middle East, Iran in the next decade will become the de facto hegemon, coupling wild threats with private assurances that it not only has nuclear weapons, but also is more likely than others to use them. In response, the Gulf states will either buy their own nuclear weapons from fellow Sunni Pakistan, or form some sort of de facto alliance with nuclear Israel. At some point when Iran’s serial junk talk promising the end of the “Zionists” is supercharged with nukes, it will earn a response.

Europe and Its Slippery Energy Slope

Europe must untangle its energy Gordian knot, fast.

By Llewellyn King 

Europe, at present the world's largest market and largest economic bloc, is in decline and living standards are in danger. That was the sober message at an energy conference here, delivered by a battery of speakers from across eastern Europe.

The narrative is that energy is what is dragging Europe down – not low birthrates and pervasive social-safety networks, but increasing dependence on expensive energy imports and hopelessly tangled markets.

Although delegates gathered to discuss the particular problems of eastern Europe, many had comments about the energy dependence across Europe; its labyrinthine regulations in nearly all 28 countries, its inability to form capital for large projects like nuclear, and governments intruding into the market.

The result is a patchwork of contradictions, counterproductive regulations, political fiats and multiple objectives that leave Europeans paying more for energy than they need to and failing to develop indigenous sources, such as their own shale gas deposits in Ukraine and Poland. It also leaves countries dependent on capricious and expensive gas from Russia, unsure of whether they can build needed electric generating plant in the future and poorly interconnected, sometimes by both gas pipelines and electric lines.

Good intentions have also had their impact. The European Commission has pushed renewable energy and subsidized these at the cost of others. The result is imperfect markets and, more important, imperfectly engineered systems.

Germany and other countries are dealing with what is called “loop flow” – when the renewables aren't performing, either because the wind has dropped or the sun has set, fossil fuels plants have to be activated. This means that renewable systems are often shadowed by old-fashioned gas and coal generation that has to be built, but which isn't counted toward the cost of the renewable generation.

With increasing use of wind, which is the most advanced renewable, the problem of loop flow is increased, pushing up the price of electricity. Germany is badly affected and the problem is getting worse because it heavily committed to wind after abandoning nuclear, following the Fukusima-Daiichi accident in Japan.

Frank Umbach, associate director of the European Center for Energy and Resource Security at King's College, London, said energy costs in Germany are now driving manufacturing out of the country and to the United States.

Umbach said that as Britain de-industrialized 15 years ago, Germany was beginning to go the same way. He said Britain had been able to sustain itself through financial services and other service-sector jobs, but that was not a prospect for Germany, the industrial mainstay of the European Union. Now Britain, with its new nuclear policy, is trying to re-industrialize, he said.
Umbach urged that Europe get serious about shale gas and even burning coal. His argument was that there are environment safeguards available and that more are being developed, such as the new less environmentally assaulting techniques in hydraulic fracturing (fracking) used to extract tightly bound natural gas from shale formations.

Several speakers said the region has to face the reality that it is no longer able to generate the capital it needs for liquified natural gas terminals, nuclear power plants and unconventional gas recovery in Ukraine, Poland and in the Black Sea offshore Romania and Bulgaria.

In France, the Far Right Rises and Rises

France Accelerates Descent Towards Fascism

By Walter Russell Mead

President François Hollande is now the most unpopular French leader of the Fifth Republic. Opinion polls put his approval rating at just 21 percent. French citizens find his strict tax plans deeply upsetting and fear that his policies are weakening the economy and selling out the country to Brussels and Berlin. “Opinion poll after opinion poll reveals that the French are pessimistic about their future,” writes Jeremy Jennings, a professor at Kings College in London.

Hollande appears to be in real trouble. “Attempts to reassert his authority before the French electorate have unfailingly backfired,” Jennings writes. “Even members of his own party have taken to booing and whistling when Hollande’s name is mentioned. Not only this, but his government looks to be disintegrating…. Ministers frequently and publicly disagree with each other. Measures are announced, only to be withdrawn days later after the latest round of popular protests. The impression is one of confusion and panic.”

As Hollande slips the popularity of Marine Le Pen, the head of the far right National Front party, is growing, despite her controversial views on immigrants, Islam, and European integration. “Only last month a poll published in the left-wing Nouvel Observateur revealed that in next year’s European elections more people intended to vote for the Front National than for any other party.”

Le Pen has worked hard to take her party into the mainstream. Her father, Jean-Marie Le Pen, the founder of the National Front, was successfully prosecuted for denying the Holocaust, a legacy that still haunts the party. When Marine proposed an alliance with the similarly anti-EU UK Independence Party, Nigel Farage said his party would never “get into bed” with the National Front and its “deeply embedded” elements of anti-Semitism. Nevertheless, Le Pen has managed to broaden her support by appealing to voters’ sense of patriotism and championing strong defense and security policies, while railing against the euro (“a German invention”), the weakening of French industry and agriculture by “pot-bellied emirs” and ”voracious big bosses,” and the rising number of immigrants (“itinerant thieves”) taking jobs and housing from true French. The National Front, she has suggested, should be described not as “far right” but as the “patriot party.”

It’s working. Her popularity is growing—a recent poll found that 56 percent of French voters think Le Pen is the most capable politician to take on Hollande—and so is her political influence. Sarkozy’s former prime minister has spoken publicly about the prospect of an alliance with the National Front. “We will be in power in the next 10 years,” Le Pen told Bloomberg last month.

It is disillusionment with the moderate parties of both the right (Sarkozy) and the left (Hollande) in France, occurring at the same time as an economic decline and harsh austerity (?) imposed by Brussels (and reality), that is causing many French voters to find some comfort in Le Pen’s message of national strength and pride. Though still held at arm’s length by most voters, she is growing increasingly popular and her rise could have resounding implications for French politics, France’s role in the EU, and for the EU itself.

Revolutionary France’s Road to Hyperinflation

Paper money eventually returns to its intrinsic value — zero

by Frank Hollenbeck

Today, anyone who talks about hyperinflation is treated like the shepherd boy who cried wolf. When the wolf actually does show up, though, belated warnings will do little to keep the flock safe.

The current Federal Reserve strategy is apparently to wait for significant price inflation to show up in the consumer price index before tapering. Yet history tells us that you treat inflation like a sunburn. You don’t wait for your skin to turn red to take action. You protect yourself before leaving home. Once inflation really picks up steam, it becomes almost impossible to control as the politics and economics of the situation combine to make the urge to print irresistible.

The hyperinflation of 1790s France illustrates one way in which inflationary monetary policy becomes unmanageable in an environment of economic stagnation and debt, and in the face of special interests who benefit from, and demand, easy money.

In 1789, France found itself in a situation of heavy debt and serious deficits. At the time, France had the strongest and shrewdest financial minds of the time. They were keenly aware of the risks of printing fiat currency since they had experienced just decades earlier the disastrous Mississippi Bubble under the guidance of John Law.

France had learned how easy it is to issue paper money and nearly impossible to keep it in check. Thus, the debate over the first issuance of the paper money, known as assignats, in April 1790 was heated, and only passed because the new currency (paying 3 percent interest to the holder) was collateralized by the land stolen from the church and fugitive aristocracy. This land constituted almost a third of France and was located in the best places.

Once the assignats were issued, business activity picked up, but within five months the French government was again in financial trouble. The first issuance was considered a rousing success, just like the first issuance of paper money under John Law. However, the debate over the second issuance during the month of September 1790 was even more chaotic since many remembered the slippery slope to hyperinflation. Additional constraints were added to satisfy the naysayers. For example, once land was purchased by French citizens, the payment in currency was to be destroyed to take the new paper currency out of circulation.

Arsonists Running the Fire Brigade

Promoting Failure

By John Mauldin

The true measure of a career is to be able to be content, even proud, that you succeeded through your own endeavors without leaving a trail of casualties in your wake.

– Alan Greenspan

If economists could manage to get themselves thought of as humble, competent people on a level with dentists, that would be splendid.

– John Maynard Keynes

And He spoke a parable to them: "Can the blind lead the blind? Will they not both fall into the ditch?"

– Luke 6:39-40

Six years ago I hosted my first Thanksgiving in a Dallas high-rise, and my then-90-year-old mother came to celebrate, along with about 25 other family members and friends. We were ensconced in the 21^st floor penthouse, carousing merrily, when the fire alarms went off and fire trucks began to descend on the building. There was indeed a fire, and we had to carry my poor mother down 21 flights of stairs through smoke and chaos as the firemen rushed to put out the fire. So much for the advanced fire-sprinkler system, which failed to work correctly.

I wrote one of my better letters that week, called "The Financial Fire Trucks Are Gathering." You can read all about it here, if you like. I led off by forming an analogy to my Thanksgiving Day experience:

I rather think the stock market is acting like we did at dinner. When the alarms go off, we note that we have heard them several times over the past few months, and there has never been a real fire. Sure, we had a credit crisis in August, but the Fed came to the rescue. Yes, the subprime market is nonexistent. And the housing market is in free-fall. But the economy is weathering the various crises quite well. Wasn't GDP at an almost inexplicably high 4.9% last quarter, when we were in the middle of the credit crisis? And Abu Dhabi injects $7.5 billion in capital into Citigroup, setting the market's mind at ease. All is well. So party on like it's 1999.

However, I think when we look out the window from the lofty market heights, we see a few fire trucks starting to gather, and those sirens are telling us that more are on the way. There is smoke coming from the building. Attention must be paid.

I was wrong when I took the (decidedly contrarian) position that we were in for a mild recession. It turned out to be much worse than even I thought it would be, though I had the direction right. Sadly, it usually turns out that I have been overly optimistic.

This year we again brought my now-96-year-old mother to my new, not-quite-finished high-rise apartment to share Thanksgiving with 60 people; only this time we had to contract with a private ambulance, as she is, sadly, bedridden, although mentally still with us. And I couldn't help pondering, do we now have an economy and a market that must be totally taken care of by an ever-watchful central bank, which can no longer move on its own?

I am becoming increasingly exercised that the new direction of the US Federal Reserve, which is shaping up as "extended forward rate guidance" of a zero-interest-rate policy (ZIRP) through 2017, is going to have significant unintended consequences. My London partner, Niels Jensen, reminded me in his November client letter that,

In his masterpiece The General Theory of Employment, Interest and Money, John Maynard Keynes referred to what he called the "euthanasia of the rentier". Keynes argued that interest rates should be lowered to the point where it secures full employment (through an increase in investments). At the same time he recognized that such a policy would probably destroy the livelihoods of those who lived off of their investment income, hence the expression. Published in 1936, little did he know that his book referred to the implications of a policy which, three quarters of a century later, would be on everybody's lips. Welcome to QE.

It is this neo-Keynesian fetish that low interest rates can somehow spur consumer spending and increase employment and should thus be promoted even at the expense of savers and retirees that is at the heart of today's central banking policies. The counterproductive fact that savers and retirees have less to spend and therefore less propensity to consume seems to be lost in the equation. It is financial repression of the most serious variety, done in the name of the greater good; and it is hurting those who played by the rules, working and saving all their lives, only to see the goal posts moved as the game nears its end.

Central banks around the world have engineered multiple bubbles over the last few decades, only to protest innocence and ask for further regulatory authority and more freedom to perform untested operations on our economic body without benefit of anesthesia. Their justifications are theoretical in nature, derived from limited-variable models that are supposed to somehow predict the behavior of a massively variable economy. The fact that their models have been stunningly wrong for decades seems to not diminish the vigor with which central bankers attempt to micromanage the economy.

Is France the New Italy?

With or without new monetary stimulus, though, France needs reform

By Bloomberg

If U.S. President Barack Obama thinks he’s having a difficult autumn, then maybe he should consider the season French President Francois Hollande is experiencing. Paris in springtime may have been lovely as usual, but fall has been horrible.

The French unemployment rate stands at 11 percent. After growing tepidly in the second quarter, the economy shrank again in the third. Standard and Poor’s just downgraded the government’s debt -- for the second time in less than two years. Hollande’s Socialist administration faces protests over taxes and burdensome regulation not just from business leaders, as you might expect, but also from farmers, shopkeepers, teachers, truck drivers and soccer players.

The European Commission recently called on the government to speed up economic reform. Speaking from its conveniently located Paris headquarters, the Organization for Economic Cooperation and Development restated the message in a detailed report issued last week: “In recent years, a significant adjustment has been under way in several European countries that have accelerated the introduction of essential reforms. This adjustment hasn’t yet happened in France.”

The White House is concerned that some recent polls have shown Obama’s approval rating dropping below 40 percent. For Hollande, who was elected only last year, it stands at 15 percent.

Even discounting for the French flair for umbrage, the backlash against Hollande is extraordinary. The economy -- the second-biggest in the euro area after Germany -- is in deep trouble, and the government looks helpless. Seemingly intractable problems and a lack of effective leadership threaten to turn France into Europe’s new Italy.

Pensions misery looms for the 'have-it-all’ generation

As the baby boomers approach retirement, many face a pensions crisis thanks to quantitative easing. 

By Jeremy Warner

Intergenerational unfairness is one of those intellectually sloppy complaints that nevertheless commands a strong following among a certain cadre of privileged young metropolitan types. It even has its own think tank – the grandly named Intergenerational Foundation. Already there is a huge volume of literature on how voracious baby boomers have stolen the food from their children’s mouths – and pretty vacuous stuff it is too.

When it comes to the aberration of absurdly high house prices, there may even be something in it, but it seems an oddly irrelevant obsession set against much more worrying divides, such as wealth and regional disparities within generations. The unfairness lies not in the fact that the old are in aggregate so much richer than the young – this has always been the case – but that children from poorer backgrounds will generally be at a substantial disadvantage to those from richer ones.

Yet for those who continue to insist that the baby boomers have had it cushy, consider the following. Say you have done the right thing throughout your working life, and saved when means allowed. A typical middle-income earner might in that time reasonably hope to accumulate a pension pot of perhaps a couple of hundred thousand pounds. This, at least, is the position a friend finds himself in approaching retirement age. As it happens, the average pot on buying an annuity is much smaller – just £33,000.

To his dismay, my friend has discovered that his own, considerably larger sum will buy him and his wife a pension of little more than £10,000 a year, and that’s assuming both no inflation-proofing and that he invests the lot, rather than take his entitlement to a tax-free lump sum. Together with the basic state pension, this may be just about enough to keep the wolf from the door, but it can hardly be thought of an example of rampant intergenerational unfairness. Many retirees face much worse, leaving them reliant on benefits.

Game of Thrones – European Style

Winter Is Coming

BY JOHN MAULDIN

In 2009-10 it seemed like this letter was all Europe all the time. There was a never-ending crisis from one corner of the Continent to the other. That time seems to have slowly faded from our collective consciousness, but the Eurozone crisis is not over, and it will not end quickly or soon. Even if it seems to unfold in slow motion – like the slow build-up in a Game of Thrones storyline to violent internecine clashes followed by more slow plot developments but never any real resolution, the Eurozone debacle has never really gone away. The structural imbalances have still not been fixed; politicians and central bankers have still not agreed to solve major fiscal problems; the overall economy still disintegrates; unemployment is staggeringly high in some countries and still rising; and the people are growing restless.

Just as in the Game of Thrones, the Eurozone drama seems to drag on interminably. It seems to take forever to get to the next installment. I think GRR Martin (the wickedly brilliant creator of the series) should be confined to his Santa Fe villa until he finishes his epic – one of the few lapses in my personal belief that we should be allowed the freedom to control our own time. I read the first of the books in 1996 and the fifth when it came out in 2011, and he will need to finish at least two more. You can do the math, but it is clearly taking longer and longer between books – just as Europe seems to be taking longer and longer between successive peaks of its crisis. Perhaps we should confine the leaders of Europe to a far-northern Scandinavian hotel with hard beds and minimal amenities until they resolve their problems.

In the latest installment of the Eurozone crisis, deflation is back and winter is coming. This week we'll look at what is shaping up to be a very interesting year in Europe. I am going to visit a number of themes and offer links to readers who want to delve more deeply, as to develop each one would take several months' worth of letters. Next year it probably shall.

One of the continuing themes in the Game of Thrones is that a winter of epic proportions looms in the immediate future, and the world is not prepared for it. "Winter is coming" is whispered by worried wise men who urge various leaders to prepare, yet they put off the necessary in the face of the urgent. Signs that a European winter, too, is coming have lately been cropping up.

Key measures of inflation are decelerating across the Eurozone, and the region is as close as it has ever been to a deflationary bust. It's troubling enough that Eurozone headline CPI collapsed from 1.1% in August to 0.7% in September and that core CPI fell from 1.0% to 0.8% over the same period; but measures of Eurozone money supply (M1, M2, & M3) are also decelerating rapidly, suggesting that the deflationary trend will most likely continue without decisive action from the ECB, which has been strangely absent from the current rush by central bankers to print mountains of money. And the ECB could actually make a case for such action!

Even worse, this new round of borderline deflationary data is coming not just from a small number of lost causes like Greece or Cyprus. Ten out of the seventeen Eurozone countries experienced rapidly decelerating inflation rates over the past few months, including Italy and France. Spain officially fell into deflation for the first time since February 2010. In many ways, the situation is even worse than the CPI numbers suggest. Note that Italy, France, and Germany all hover barely above 1% inflation. And their numbers are falling.

There are two major problems associated with an extended period of ultra-low inflation or deflation in the Eurozone. First, peripheral countries will have a much harder time servicing and retiring their debts without the extra boost to nominal GDP that positive inflation provides. Even if you are working on lowering the absolute amount of your debt, it is impossible to improve your debt-to-GDP ratio when GDP is falling and your debts are growing. Moreover, outright deflation works to crush debtors (and debtor nations) by increasing the real weight of the debt and triggering the destructive debt-deflation cycle described in Irving Fisher's Debt Deflation Theory of Great Depressions(1933).

Knockouts High and Low

Without self-restraint, we slip toward barbarism

By  Mark Steyn

On November 22, 1963, two other notable men died, and got relegated to the foot of page 37 — the British authors C. S. Lewis and Aldous Huxley. Lewis endures because of the Narnia books (and films), but there’s a lot more in the back of his wardrobe. In his book The Abolition of Man, he writes of “men without chests” — the chest being “the indispensable liaison” between the head and the gut, between “cerebral man” and “visceral man.” In the chest beat what Lewis calls “the trained emotions.” Without them there is no honor or virtue, but only “intellect” and/or “appetite.”

Speaking of appetite, have you played the “Knockout” game yet? Groups of black youths roam the streets looking for a solitary pedestrian, preferably white (hence the alternate name “polar-bearing”) but Asian or Hispanic will do. The trick is to knock him to the ground with a single punch. There’s a virtually limitless supply of targets: In New York, a 78-year-old woman was selected, and went down nice and easy, as near-octogenarian biddies tend to when sucker-punched. But, when you’re really rockin’, you can not only floor the unsuspecting sucker but kill him: That’s what happened to 46-year-old Ralph Santiago of Hoboken, N.J., whose head was slammed into an iron fence, whereupon he slumped to the sidewalk with his neck broken. And anyway the one-punch rule is flexible: In upstate New York, a 13-year-old boy socked 51-year-old Michael Daniels but with insufficient juice to down him. So his buddy threw a bonus punch, and the guy died from cerebral bleeding. Widely available video exists of almost all Knockout incidents, since the really cool thing is to have your buddies film it and upload it to YouTube. And it’s so simple to do in an age when every moronic savage has his own “smart phone.”

There’s no economic motive. The 78-year-old in New York was laden with bags from department stores, but none were touched. You slug an elderly widow not for the 50 bucks in her purse but for the satisfaction of seeing her hit the pavement. In response, some commentators are calling for these attacks to be recategorized: As things stand, if white youths target a black guy it’s a hate crime, but vice versa is merely common assault. I doubt this would make very much difference. “No justification of virtue will enable a man to be virtuous,” wrote Lewis — and, likewise, no law can prevent a thug punching an old lady to the ground if the thug is minded to. “A society’s first line of defense is not the law but customs, traditions, and moral values,” wrote Professor Walter Williams a few years ago. “They include important thou-shalt-nots such as shalt not murder, shalt not steal, shalt not lie and cheat, but they also include all those courtesies one might call ladylike and gentlemanly conduct. Policemen and laws can never replace these restraints on personal conduct.”

Restraint is an unfashionable concept these day, but it is the indispensable feature of civilized society. To paraphrase my compatriot George Jonas, punching a spinster’s lights out isn’t wrong because it’s illegal, it’s illegal because it’s wrong. But, in a world without restraints, what’s to stop you? If a certain percentage of your population feels no moral revulsion at randomly pulverizing fellow citizens for sport, a million laws will avail you naught: The societal safety lock is off.