It’s a mess and it’s not over

A Brief Guide To The Euro Crisis

By Jeff Harding

There are several things that you need to know about the eurozone crisis and Wednesday’s Summit agreement:

     1.   It isn’t over.

     2.   The European Monetary Union’s (EMU) “architecture” is a failure.

     3.   They spent too much and can’t possibly repay the debt.

     4.   Banks will need to be bailed out.

     5.   They will print money.

In order to understand the EU summit “breakthrough” we need to understand how the players in eurozone look at it. Last week a leaked confidential assessment of the problem that was prepared by the IMF was published by Linkiesta’s Fabrizio Goria. The document revealed the IMF’s private assessment of Greece and the requirements for a bailout. We were tipped off to the document by our friends at TrumanFactor.com. The complete document can be found here.

Here is a summary of how the IMF sees the problem:

1.   [T]he Greek economy is increasingly adjusting through recession and related wage-price channels, rather than through structural reform-driven increases in productivity. This is due to “administrative capacity limitations in the Greek government” which is a diplomatic way of saying that the Greek government can’t pull off the reforms.

2.   In keeping with experience to date under the program, it is assumed that Greece will take longer to implement structural reforms, and that a longer timeframe is necessary for them to yield “macroeconomic dividends” (i.e., economic growth). They paint a dismal picture as Greece falls into a severe recession.

3.   Greece won’t raise as much money as projected through privatization of public assets. Through 2020, total privatization proceeds would amount to €46 billion, instead of the €66 billion assumed.

4.   They assume that Greece will run fiscal surpluses starting in 2013 but note that  it requires “sustained and unwavering commitment to fiscal prudence by the Greek authorities.”

5.   They won’t be able to return to private markets to finance their debt until after 2020. This will require “official financing” (i.e., a bailout from the solvent eurozone members) of €252 billion through 2020.

6.   They are very concerned that Greece will not meet these targets because their economy and government is not robust enough to withstand economic shocks (low growth, high interest rates), thus throwing off the entire projection on which the bailout is based. If this occurs, then Greece may not be able to go back to the markets to refinance its debt until 2027.

7.   In order for Greece to have “sustainable” debt levels, the following needs to happen:

1.   Generous official support (up to €440 billion under the worst case scenario), and

2.   At least a 50% haircut to their debt, which requires cooperation from its private bank creditors. This would get Greece down to a debt level of 120% of GDP by 2020. Under the worst case scenarios, they see the debt level rising to 208% of GDP.

8.   Another requirement is €30 billion of support for creditor banks to recapitalize.

As you can see, these policy conclusions are based on assumptions that someone in the IMF just made up (they understand this). Like all projections, especially ones going out more than a few years, they are fictions and are impossible to verify or have any confidence in.  Yet … if you look at these assumptions, this is what the Summit participants are basing their agreement on.

Here is what happened Wednesday at the Summit.

No way out

The Eurocratic Agreement Explained, and Related Observations

By DoctoRx

I have been trying to find a good description of what actually was accomplished in the Brussels all-nighter, and am happy to pass along a link to an on-line summary of a print piece from Britain’s The Economist, which provides a good summary of many of the main points, plus commentary.  This is a very mainstream publication, so what it says what it says, it says it not lightly.  Here is a quote and a link to the entire (brief) summary piece: 

As it is, this deal at best fails to solve the euro crisis; at worst it may even make it worse. As the shortcomings of each component become clear, investors’ fears will surely return, bond yields will rise and banks’ funding problems will worsen.Yet again, disaster will loom. And yet again, the ECB will end up staving it off. . .

No one is always correct, but if the above represents the considered point of view of such an august pillar of the Establishment, it supports the idea that the knee-jerk market reaction that followed the dramatic 4 A. M. announcement in Brussels should not be viewed as representing an important and durable view of matters that will have any predictive value for the markets in the future.

In support of the above, the financial columnist Ambrose Evans-Pritchard wants to scare us about Portugal.  He says that monetary contraction there has intensified and mimics that of Greece before its crisis intensified. Portugal has nearly as many people as Greece and carries a large debt load.

Finally, Mish makes a persuasive case today for an imminent real estate-led economic hard landing in China  and concludes as follows:

The property bust is underway in China and will spread from city to city just as it did in the US.  No city will be immune and commodity prices will be smashed in the downturn.

Perhaps the most explainable market move yesterday was the move up in the euro not only against the U. S. dollar but also against gold.  After all, they eurocrats did not “print”.  Instead of Greece going to its own currency (which I jokingly think of as the “drama” rather than the old “drachma”), Greece is being forced to deflate its prices internally in order to compete within the eurozone.  The same is true for Ireland and Portugal.  Spanish unemployment rose in the last quarter to 21.5%.  The ECB’s policy rate is well above that of the Fed’s.  If Mish is correct on trend, then the clear driver of the global commodities boom for the last several years, China, is about to lead a change of fortune in those assets.  We could see oil much lower, easily into the $60s for WTI, and copper lose at least another dollar per pound.  At least on a trading basis, the easiest way for most people to profit from that trend, if it occurs, is with easily tradable high quality bonds, or at least bonds that for now are agreed by market participants to be of high quality, as fears of “inflation” temporarily give way to fears of “deflation”.  If that happens, please be comforted:  the Fed never believes that it is out of bullets.  There is more ”shock and awe” that could come our way from the Fed.     

Watch out

The Welfare Tipping Point

By Jeff Harding

This article from the Wall Street Journal is something to worry about:

Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived households receiving benefits in the third quarter of 2008.

We are quickly approaching a tipping point where the have not are equal to the haves. That is bad for a democracy where voters can vote themselves benefits from the government. This is something that Mises and Hayek warned us about, rightly so. What we are seeing is the result of Keynesian economics and the welfare state. As the Fed and the government continue to destroy capital and destroy incentive through foolish regulations, we all become poorer, especially those on the bottom quintiles. 

The share of people relying on government benefits has reached a historic high, in large part from the deep recession and meager recovery, but also because of the expansion of government programs over the years. (See a timeline on the history of government benefits programs here.)
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor).Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.High unemployment and increased reliance on government programs has also shrunk the nation’s share of taxpayers. Some 46.4% of households will pay no federal income tax this year, according to the nonpartisan Tax Policy Center. That’s up from 39.9% in 2007, the year the recession began.

What is really happening is a redistribution of wealth brought about the by the poverty inflicted on Americans as the result of bad economic policy.

Is everyone entitled to his own facts?

50 Amazing Numbers About the Economy

By Morgan Housel
Here's some easy reading for your Friday afternoon. 

Did you know that:

50. From 1948 until 2007, the average duration of unemployment was 13.5 weeks. Today, it's 40.5 weeks.

49. In 1982, a 30-year mortgage carried an interest rate of 17.6%. Today, it's 4.1%. On a $250,000 loan, that's the difference between a monthly payment of $3,686 versus $1,210.

48. In 2000, 69% of businesses offered workers health insurance. By 2009, just 60% did, according to the Kaiser Family Foundation.

47. In 1952, corporate taxes were 6.1% of GDP, and employment taxes were 1.8% of GDP. In 2009, corporate taxes were 1% of GDP, and employment taxes were 6.3% of GDP.

46. The day after Standard & Poor's downgraded U.S. Treasuries was the second best day for Treasuries in modern history.

45. "Just 1 in 7 U.S. workers is of normal weight without a chronic health problem," according to The Wall Street Journal, citing Gallup data.

44. Adjusted for inflation, nationwide home prices have dropped 8.5% since 1979. Unrelated: 60% of homeowners say a major reason they bought a home is because they think it will make a good retirement investment.

43. The markup AT&T (NYSE: T  ) charges for a single text message ($0.20) compared with a standard mobile data package ($25 for 2 gigs) is roughly 10 million percent.

42. Tax evasion has added an estimated $3 trillion to the national debt over the past decade, according to David Callahan of Demos, citing Internal Revenue Service data.

41. According to The Wall Street Journal, "every year 17,000 American-trained masters and doctoral students leave the U.S. to find work elsewhere."

40. Over the past 25 years, college tuition has increased at nearly four times the rate of broader inflation.

39. Health care for an average family now runs $19,393 a year, according to the Milliman Medical Index. It was about half that much in 2002.

38. Power to the people! According to The Los Angeles Times: "Some 75% of respondents said they were following the [California] budget debate, yet only 16% were aware that state spending has shrunk by billions of dollars over the last three years."

37. California will spend $5.7 billion on its main public universities this year, and $9.6 billion on prisons, according to The Bay Citizen.

36. The labor force participation rate for men has dropped from 87% in 1948 to 71% today.         

35. The personal savings rate in August was 4.5%. Since 1959, it has averaged 7%. Returning to that level would divert more than $200 billion a year from consumer spending into saving.

34. 5.5 million Americans are unemployed and not receiving unemployment benefits. Last year, that number was 1.4 million.

33. The U.S. government provides health care for a minority of its population (elderly and poor) at a greater cost per citizen than many European countries spend on universal coverage.

32. As a percentage of GDP, federal taxes in 2010 were the lowest since 1950.

31. Between 2007 and 2009, those with a bachelor's degree saw the employment-to-population ratio fall by just 0.5%. For those without a bachelor's degree, it fell by more than 2%.

30. Household debt payments as a percentage of income are now at the lowest level since 1994.

29. Despite record federal deficits, total debt throughout the economy -- public plus private -- as a percentage of GDP has been dropping since 2008. Households are shedding debt faster than the government can go into it.

28. Just not student debt: Total student loans outstanding are expected to reach $1 trillion this year. The average student now leaves college with nearly $23,000 of debt. As Time pointed out, "Students today are borrowing double the amount they did ten years ago -- after adjusting for inflation.

A bankrupt corporation

Things couldn’t be clearer

By The Dinocrat

Imagine a company that seems even worse than the firms of Wall Street. Among other things, the company:

– Is a monopoly, yet somehow manages to lose trillions of dollars every year – Refuses to manage to a budget, most recently not even presenting one for over 2 years – Carries a large segment of employees who are paid to do nothing productive… – Has massive unfunded pension liabilities on the books – Borrows profligately and has record amounts of debt – Often acts contrary to the best interests of its shareholders and its board of directors – Uses the shareholder’s money for projects with which they disagree… – Provides salaries, benefits and job security that are far beyond those of their own shareholders – Follows dubious accounting rules that do not meet American GAAP… – Can set its own rules, and ignore them if they so choose – Can force us to buy their products and services… – Can confiscate private property for its own use or turn it over to others that it favors… – Has a CEO that makes roughly 10 times that of the average employee… – if you include the cost of the other bennies -– fully paid health care, private security for the CEO and his family, company cars and private jets -– it is more like 100 times… – the CEO is guaranteed that salary for the rest of their life

Bonus fun: the CEO of the company “warned his recession-battered supporters that if he loses the 2012 election it could herald a new, painful era of self-reliance in America.” Can’t happen soon enough.

A painful era of self-reliance

Adult Babies

There’s almost nothing you can’t get government to pay for.

By Mark Steyn 

Last Thursday was officially “Diaper Need Awareness Day” in the State of Connecticut. Were you aware of it? There are so many awareness-raising days, it’s hard to keep track. Maybe we could have an Awareness-Raising Day Awareness Day. At any rate, the first annual Diaper Need Awareness Day was proclaimed by Dan Malloy, governor of the Nutmeg State, and they had a big old awareness-raising get-together in New Haven. It’s not clear yet whether they’ve got an official ribbon. We’re running a bit low on ribbon colors these days: It’s not just pink ribbons for breast cancer, but also teal for agoraphobia, periwinkle for acid reflux, pink-and-blue ribbons for amniotic fluid embolisms, and pinstripe ribbons for amyotrophic lateral sclerosis. We could use a Ribbon-Hue Awareness Day to raise awareness about how we’re falling behind in the race for more ribbon colors.

If you’re wondering what sentient being isn’t aware of diapers, you’re missing the point: Connecticut representative Rosa DeLauro is raising awareness of the need for diapers in order to, as Politico reported, “push the Federal Government to provide free diapers to poor families.” Congresswoman DeLauro has introduced the DIAPER Act — that’s to say, the Diaper Investment and Aid to Promote Economic Recovery Act. So don’t worry, it’s not welfare, it’s “stimulus.” As Fox News put it, “A U.S. congresswoman in Connecticut wants to boost the economy by offering free diapers to low-income families.” And, given that sinking bazillions of dollars into green-jobs schemes to build eco-cars in Finland and a federal program to buy guns for Mexican drug cartels and all the other fascinating innovations of the Obama administration haven’t worked, who’s to say borrowing money from the Chinese politburo and sticking it in your kid’s diaper isn’t the kind of outside-the-box thinking that will do the trick?

In fact, the federal government already provides free diapers for at least one lucky American. Stanley Thornton Jr. of California receives Supplementary Security Income disability checks from the Social Security Administration in order to sit around the house all day wearing a giant diaper and a giant onesie, sucking on a giant pacifier and playing with a giant baby rattle. Stanley Jr. runs a website for fellow “adult babies” called BedWettingABDL.com. I believe I first heard of the “adult baby” phenomenon some years ago in London. If memory serves, there was a club, and the members lay around in giant cribs being read bedtime stories by a bosomy nanny. Minor celebrities and possibly backbench Tory members of Parliament may have been involved. In those days, it was what we called a “fetish” and you had to do it on your own dime. Now it’s a “disability” and the United States government picks up the tab. And, if that’s not progress, what is?

Sen. Tom Coburn happened to catch Stan with his babysitter and fellow disability-check recipient on a reality show, and wondered how a chap capable of running a popular website and doing such complicated carpentry jobs as his own giant highchair could be legitimately classified as “disabled.” But the Social Security Administration said Junior qualifies, and Senator Coburn was condemned as heartless: Why, if those mean Republicans got their way, the streets would be crawling with giant babies bawling, “I want my mommy!” Conversely, if Congresswoman DeLauro gets her way and the stampede for government Huggies gets going, Stanley Thornton Jr. will still be entitled to park his giant pedal car in the disabled space while the penniless single mom from Hartford has to leave the Toyota at the back of the lot and hike in.

An able-bodied man paid by the government of the United States to lie in a giant crib wetting his diaper week in week out is almost too poignant an emblem of the republic at twilight. But, as Hillaire Belloc wrote, “Always keep a hold of Nurse / For fear of finding something worse.” Only last week, ABC News reported:

At a million-dollar San Francisco fundraiser today, President Obama warned his recession-battered supporters that if he loses the 2012 election it could herald a new, painful era of self-reliance in America.

Oh, no! The horror!

“Self-reliance” is now a pejorative? Nice to have that clarified. And San Francisco, a city that registers more dogs than it has kids enrolled in its schools and in which adults are perforce the children they never bothered having, seems as good a place as any to make it official. In less enlightened times, “self-reliance” was the great animating principle of the American experiment. By the standards of the day, George III was one of the most benign, caring rulers on earth: You were his mewling charges, and he was the regal babysitter. Then a bunch of settlers in small towns clinging to wilderness and thousands of miles from His Majesty the Nanny decided they didn’t need him and they could stand on their own. What’s the word for that? Oh, yeah: self-reliance.

Is it too late for a Self-Reliance Awareness Day? No, there’s no ribbons. Make your own damn ribbon. If that’s too much to hope for, how about a Multi-Trillion-Dollar Debt Awareness Day? The ribbon starts out black but turns deeper and deeper red. How about a We’ve Spent All the Money Including the Money for an Awareness-Raising Ribbon Day? An Impending Societal Collapse Awareness Day?

Yes, yes. I’m aware the cost of diapers adds up over a month, and you can’t use your food stamps to pay for them. Tough. This country’s broke. As I said last week, it has to pay back $15 trillion just to get back to having nothing at all. And that’s more money than anyone ever has had to pay back. Were you aware of that? Distressingly large numbers of Americans still pining for ever more swaddling in the government cradle seem entirely unaware.

Congresswoman DeLauro is thinking too small: Maybe we could all be issued with free diapers. As a casual glance at the headlines suggests, there’s almost nothing you can’t get government to pay for, but that’s no reason not to demand more. At its core, the “Occupy Wall Street” movement (in the political rather than the diaper-filling sense) is a plea for ever more extended adolescence funded at public expense. Don’t knock it. Dozing around listening to drum circles all day is more dangerous than it looks. Last week, several dozen members of “Occupy Las Vegas” occupying land located under the final approach to Runway 19 at McCarran International Airport narrowly missed being hit by a 50-pound slab of what’s euphemistically known as “blue ice” that fell from the bathroom of the president’s plane. Perhaps, as a symbol of the new post-self-reliant America of adult babies, Air Force One should be fitted with a giant diaper.

Half time break

Everyone Bails Out Everyone

WSJ Editorial

European deal has something for everyone, except the real problem.

Is anyone surprised at what Europe wrought? Contrary to headlines, European policy makers did not leave Brussels yesterday morning with the "final, even groundbreaking" plan to end the euro-zone's debt crises that they had promised earlier in the week. Details are still sketchy on many of the announced measures, including those to increase the firepower of the European Union bailout fund and prop up the continent's banks. Remaining disagreements are serious, and that means we're far from through with euro-crisis summitry.

What the summit does highlight, however, is that Europe's piecemeal approach is not going to cohere into a real or lasting solution if policy makers continue to ignore the underlying economic anemia that has afflicted the economies of Europe for decades. The patient has risen from his bed and not fallen down. This is one definition of progress.

Thursday's deal offers the sort of grab-bag familiar in Brussels. Greece gets another package of bailout loans, totaling €130 billion in value. Various parts of the EU's bailout machinery will be tweaked or boosted. But let's climb across the deal plank by thin plank.

The biggest accomplishment is the agreement to impose a voluntary 50% write-down on private holdings of Greek debt. This is progress for a Continent that dared not to breathe the word haircut only months ago.

But that's small consolation now that the European Central Bank, the International Monetary Fund and euro-zone governments hold about 40% of all Greek debt, a figure that will only grow as privately held bonds mature. As long as these institutions refuse to take haircuts on their own Greek holdings, a private-sector haircut can only go so far toward reducing total debt. As it is, the voluntary write-down is expected to reduce outstanding Greek debt to—this is almost comic—120% of GDP by 2020. This gives new meaning to kicking the can down the road. And that's the best-case scenario.

To prevent the write-down from tanking European banks, the deal provides for a raft of measures for bank recapitalization. One requires euro-zone banks to achieve a 9% capital ratio for core Tier 1 capital by June 2012. The European Banking Authority (EBA) estimates that this amounts to a €106 billion hole for Europe's largest banks to fill. Whether these new capital requirements will do much good remains to be seen. Still fresh in most memories is that Franco-Belgian lender Dexia fully met its own Tier 1 requirements before it went down earlier this month.

Another corner of the bank recapitalization plans is that national governments will increase their own bank guarantees. The EBA's statement notes that these public guarantees are needed to prop up banks "against the backdrop of the increasing concerns regarding sovereign debt." Translation in any language: More government spending and taxpayer guarantees are required to forestall fears that Europe's governments are already in one of history's deepest holes of debt.

That brings us to the summit's last plank, an agreement to pump up the €440 billion European Financial Stability Facility. Details of course will be negotiated later, but the bailout fund is now authorized to act as a bond insurer, guaranteeing first-losses up to an as-yet undecided amount on new issuance of euro-zone sovereign debt.

The legal basis for this is dubious under the Rome Treaty, which explicitly forbids member states from guaranteeing each others' debt. And insurance doesn't come cheap when the sovereigns being insured are the same ones that might be bankrupted by having to pay more into an insurance fund. A first-loss guarantee may reduce the probability of default, but it raises the costs of default if it does happen.

In short, everyone is bailing out everyone. The larger problem betrayed by yesterday's agreement is that European leaders continue to act as if they are mainly dealing with a crisis of confidence, which can be restored with evermore far-reaching bailout schemes. Absent from this week's communiqués are any new ideas for promoting the structural economic reforms—both at the periphery and at the center of the euro zone—that might create real confidence in the euro zone's long-term economic prospects. The new bailout money Greece is getting doesn't even come with new conditions for implementing structural reforms, as the first bailout package did.

Not surprisingly, markets rallied at yesterday's news, with the euro gaining 2.4% against the dollar. That isn't the first time a Brussels summit has triggered a burst of market relief. But without economic growth and more fundamental reform, yesterday's deal will merely be the latest palliative.

Feminists and the Sex Industry

Hard Core

By NATASHA VARGAS-COOPER

As recently as 15 years ago, if somebody wanted vivid depictions of, say, two men simultaneously performing anal penetration on the same woman, securing such a delicacy would require substantial effort because the pornographic repertoire was still limited by the costs and imprecision of distribution. Leaving aside matters of taste and propriety, just how big an audience of horny derelicts or hurried businessmen would wriggle into a Pussycat Theater, with its sticky floors, and, in the company of others, watch a double-anal double feature? Most likely, the producers were more comfortable knowing they could aggregate a much larger audience with an hour of good old-fashioned blow jobs and randy nurses. Even as porn migrated from film reels to videocassettes, there lingered some thorny logistical problems to overcome. The clunky videotape still had to be smuggled into the family residence, had to be viewed in a secured environment from which nosy children and spouses were barred, and then had to be stored in a crawl space, safe, or dedicated dungeon—or reluctantly tossed in the trash.

The difficulty of acquiring this material may have hinted at a great, and therefore pent-up, demand. Then, technology produced the Second Coming: the Inter­net. And then the Rapture itself: broadband. Pornography is now, indisputably, omnipresent: in 2007, a quarter of all Internet searches were related to pornography. Nielsen ratings showed that in January 2010, more than a quarter of Internet users in the United States, almost 60 million people, visited a pornographic Web site. That number represents nearly a fifth of all the men, women, and children in this country—and it doesn’t even take into account the incomprehensible amount of porn distributed through peer-to-peer downloading networks, shared hard drives, Internet chat rooms, and message boards.

So, perhaps it’s no surprise that, for those who crave the more drastic masturbatory aid, the Internet offers easy access to a Grand Guignol of the outright bizarre (Midget Porn, Clown Porn, Girl-Fight Gang-Bang Porn). What is surprising is what now constitutes widely available, routine stuff in the major porn portals: episodes of men—or groups of men—having sex with women who are seven months pregnant; the ho-hum of husbands filming their scrawny white wives having sex with paunchy black men in budget motels; simulations of father-daughter (or mother-daughter) incest; and of course, a fixture on any well-trafficked site: double anal.

When a 13-year-old girl can sit in math class, hide her Hello Kitty smart phone behind her textbook, and pull up such an extreme video in less time than it would take her to text a vote for her favoriteAmerican Idol contestant, we’ve certainly reached some kind of new societal landmark. It’s important, however, to distinguish between what has changed and what hasn’t.

Porn’s new pervasiveness and influence on the culture at large haven’t necessarily introduced anything new into our sexual repertoire: humans, after all, have been having sex—weird, debased, and otherwise—for quite a while. But pervasive hard-core porn has allowed many people to flirt openly with practices that may have always been desired, but had been deeply buried under social restraint. Take anal sex: in a 1992 study that surveyed sexual behaviors, published by the University of Chicago, 20 percent of women ages 25 to 29 reported having anal sex. In a study published in October 2010 by the Center for Sexual Health Promotion at Indiana University, the instances of anal sex reported by women in the same age cohort had more than doubled, to 46 percent. The practice has even made its way into the younger female demographic: the Indiana study shows 20 percent of 18- and 19-year-olds have had anal sex at least once.

Talking about Utopia

The Facts of Life Are Conservative, Even in Zuccotti Park

By Joseph Ashby

Peeking through Occupy Wall Street's cloudy drum sessions, group speeches, and celebrity visits are a few rays of reality's sunlight.  These glimmers of the real world show that even the campers of Zuccotti Park aren't immune to Margaret Thatcher's famous declaration that "the facts of life are conservative."

Conservatism is the natural political outgrowth from the real life experience.  Humans are naturally flawed, greedy, and untrustworthy.  Conservatives recognize that fact and promote the market system and divided government in order to pit one greedy person against another.

Conversely, the left continually denies and fights against human nature (inevitably losing to it).  For leftists, it's always a matter of finding the right human to rule -- the disinterested regulator, the consumer-protecting bureaucrat, the messianic president, etc.  That is the nature of the OWS protests: to replace one group of self-interested people on Wall Street with another group of magically not self-interested people in government.  But because government isn't magic, utopias never quite work out in real life -- not even in Zuccotti Park.  In one news story after another, Thatcher's "facts of life" are on display.  Let's look at four examples.

Conservative Fact of Life: Give a man a fish, and he'll stick around for another.

Providing for folks in need is a good thing, but handouts are dangerous tools.  At any point in the giver-receiver relationship, there's a risk of doing more harm than good.  If the recipient becomes dependent or feels entitled to his benefits, his initiative atrophies like an unused muscle.  Too often the receiver is left less prepared and less likely to succeed in the future.  Thus long-term well-being is sacrificed in the name of short-term "help."

The negative effects of welfare can appear quickly, as OWS recently learned.  Zuccotti Park has become a hotspot for vagrants in search of free food.  Protestor Lauren Digioia recently explained to reporters that OWS has "compassion toward everyone," but that "there are rules and guidelines."  Specifically, "[i]f you're going to come here and get our food, bedding and clothing, have books and medical supplies for no charge, they need to give back."  Digioia added, "There's a lot of takers here and they feel entitled."

Conservative Fact of Life: Everybody is wealthier than somebody, but that doesn't give anyone the right to take from others.

Protestor Nan Terrie allegedly came to Zuccotti Park with a $5,500 Mac laptop (near the top 1% of portable computers, perhaps).   One night after Terrie succumbed to fatigue after a long day as a kitchen volunteer, preparing meals for fellow protestors, a thief made off with the high-end computer.

"Stealing is our biggest problem at the moment," Terrie told reporters.  A problem indeed.  Suddenly it didn't matter that the computer was $2,000 more than even the most tricked out MacBook Pro available in the Apple online store.  Or that scores of laptops exist at a fraction of the price (the computer I'm using to write this article was 1/10 the price of the Terrie's stolen Mac).  No, the only thing that mattered was that taking something that someone else earned was wrong.  That fact holds for a college student's electronic devices as well as a hedge fund manager's compensation.

Conservative Fact of Life: Rugged individualism is the only sensible approach to life.

America was built by people who refused to wait around for someone else to make them a living.  From the frontiersman who left everything to chase his dreams in the American West to the entrepreneurs of the Forbes 400 list, Americans who make their own way are the most successful.

It didn't take long for protestor Peter Hogness to learn whom he could trust.  Angry about empty promises regarding the protestor status in Zuccotti Park, Hogness stumbled upon true wisdom.  "One thing we have learned from this is that we need to rely on ourselves and not on promises from elected officials," Hogness told reporters.

Conservative Fact of Life: Though she's a seductive mistress, Utopia never quite works out as a wife.

Conservative author and columnist Dr. Thomas Sowell once said that he would love to live in the kind of world envisioned by the left.  In such a world we would have few inequalities, few wants, and men would act as angels, working for the common good.  The problem for the left is that their vision is based on a premise that does not exist in the real world.

The longer the OWS protests last, the more they confront the real world.  As money has begun to roll in from supporters (reportedly $500,000), life has only become more complicated.  "F**k Finance," said Bryan Smith when he couldn't get access to the funds he wanted.  "I hope Mayor Bloomberg gets an injunction and demands to see the movement's books."

When Elija Moses requested $8,000 to replace his vandalized drum set, he was turned down.  "We don't have the power for [purchases that large]," explained Finance Committeeman Pete Dutro.  "They have to go to the General Assembly."

Moses put it best when he simply said, "I'm really frustrated."  Yes, Utopia can be quite frustrating for anyone who believes it can exist.  Alas, an earthly Eden does not exist, and its mortal imitations are no more than an unwieldy collection of committees, assemblies, and frustrated citizens. 

It's unlikely that these experiences will change minds among the Occupiers.  (But there's always hope -- even Sowell was once a committed Marxist.)  Unfortunately, once Occupy Wall Street has picketed its final bank, sung its last rendition of Cumbayá and gone home, it will take just one sentence to define the movement: "The truths of conservatism stared them in the face; sadly, they failed to notice."

On accepting facts

3 Misconceptions That Need to Die

By Morgan Housel 

At a conference in Philadelphia earlier this month, a Wharton professor noted that one of the country's biggest economic problems is a tsunami of misinformation. You can't have a rational debate when facts are so easily supplanted by overreaching statements, broad generalizations, and misconceptions. And if you can't have a rational debate, how does anything important get done? As author William Feather once advised, "Beware of the person who can't be bothered by details." There seems to be no shortage of those people lately.

Here are three misconceptions that need to be put to rest.

Misconception 1: Most of what Americans spend their money on is made in China.

Fact: Just 2.7% of personal consumption expenditures go to Chinese-made goods and services. 88.5% of U.S. consumer spending is on American-made goods and services.

I used that statistic in an article last week, and the response from readers was overwhelming:Hogwash. People just didn't believe it.

The figure comes from a Federal Reserve report. You can read it here.

A common rebuttal I got was, "How can it only be 2.7% when almost everything in Wal-Mart(NYSE: WMT  ) is made in China?" Because Wal-Mart's $260 billion in U.S. revenue isn't exactly reflective of America's $14.5 trillion economy. Wal-Mart might sell a broad range of knickknacks, many of which are made in China, but the vast majority of what Americans spend their money on is not knickknacks.

The Bureau of Labor Statistics closely tracks how an average American spends their money in an annual report called the Consumer Expenditure Survey. In 2010, the average American spent 34% of their income on housing, 13% on food, 11% on insurance and pensions, 7% on health care, and 2% on education. Those categories alone make up nearly 70% of total spending, and are comprised almost entirely of American-made goods and services (only 7% of food is imported, according to the USDA).

Even when looking at physical goods alone, Chinese imports still account for just a small fraction of U.S. spending. Just 6.4% of nondurable goods -- things like food, clothing and toys -- purchased in the U.S. are made in China; 76.2% are made in America. For durable goods -- things like cars and furniture -- 12% are made in China; 66.6% are made in America.

Another way to grasp the value of Chinese-made goods is to look at imports. The U.S. is on track to import $340 billion worth of goods from China this year, which is 2.3% of our $14.5 trillion economy. Is that a lot? Yes. Is it most of what we spend our money on? Not by a long shot.

Part of the misconception is likely driven by the notion that America's manufacturing base has been in steep decline. The truth, surprising to many, is that real manufacturing output today is near an all-time high. What's dropped precipitously in recent decades is manufacturingemployment. Technology and automation has allowed American manufacturers to build more stuff with far fewer workers than in the past. One good example: In 1950, a U.S. Steel (NYSE:X  ) plant in Gary, Ind., produced 6 million tons of steel with 30,000 workers. Today, it produces 7.5 million tons with 5,000 workers. Output has gone up; employment has dropped like a rock.

    Misconception 2: We owe most of our debt to China.

Fact: China owns 7.8% of U.S. government debt outstanding.

As of August, China owned $1.14 trillion of Treasuries. Government debt stood at $14.6 trillion that month. That's 7.8%.

Who owns the rest? The largest holder of U.S. debt is the federal government itself. Various government trust funds like the Social Security trust fund own about $4.4 trillion worth of Treasury securities. The Federal Reserve owns another $1.6 trillion. Both are unique owners: Interest paid on debt held by federal trust funds is used to cover a portion of federal spending, and the vast majority of interest earned by the Federal Reserve is remitted back to the U.S. Treasury.

The rest of our debt is owned by state and local governments ($700 billion), private domestic investors ($3.1 trillion), and other non-Chinese foreign investors ($3.5 trillion).

Does China own a lot of our debt? Yes, but it's a qualified yes. Of all Treasury debt held by foreigners, China is indeed the largest owner ($1.14 trillion), followed by Japan ($937 billion) and the U.K. ($397 billion).

Right there, you can see that Japan and the U.K. combined own more U.S. debt than China. Now, how many times have you heard someone say that we borrow an inordinate amount of money from Japan and the U.K.? I never have. But how often do you hear some version of the "China is our banker" line? Too often, I'd say.

    Misconception 3: We get most of our oil from the Middle East.

Fact: Just 9.2% of oil consumed in the U.S. comes from the Middle East.

According the U.S. Energy Information Administration, the U.S. consumes 19.2 million barrels of petroleum products per day. Of that amount, a net 49% is produced domestically. The rest is imported.

Where is it imported from? Only a small fraction comes from the Middle East, and that fraction has been declining in recent years. So far this year, imports from the Persian Gulf region -- which includes Bahrain, Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates -- have made up 9.2% of total petroleum supplied to the U.S. In 2001, that number was 14.1%.

The U.S. imports more than twice as much petroleum from Canada and Mexico than it does from the Middle East. Add in the share produced domestically, and the majority of petroleum consumed in the U.S. comes from North America.

This isn't to belittle our energy situation. The nation still relies on imports for about half of its oil. That's bad. But should the Middle East get the attention it does when we talk about oil reliance? In terms of security and geopolitical stability, perhaps. In terms of volume, probably not.

"People will generally accept facts as truth only if the facts agree with what they already believe," said Andy Rooney. 

Teaching people how to read

The ‘Arab Spring’—Good and Hard

By Ed Driscoll

As H.L. Mencken wrote right around the time that Woodrow Wilson started giving America its first taste of liberal fascism in the 20th century, “Democracy is the theory that the common people know what they want, and deserve to get it good and hard.”

Kate McMillan of the Small Dead Animals blog likes to describe the so-called “Arab Spring,” as “What We Really Need Is Democracy. With a totalitarian party to vote for.”

Guess what! They’re in luck. Allahpundit delivers his trademark “good news,” noting that “Libya embraces shari’a law while Islamists are poised to win big in Tunisian elections.” In other words, time for the Arab world to really get it good and hard:

Whatever meager civic institutions existed in Egypt and Libya before Mubarak and Qaddafi have long since disintegrated. In Libya, especially, they’re basically rebuilding society from scratch, so no surprise that they’d turn to their one common bond as a foundation, especially when that common bond comes with a ready-made legal code built into it. And if you agree with Reuel Marc Gerecht that all societies follow the same basic civic learning curve — although some take much longer than others to advance — then a period of Islamist fascist rule is all part of the lesson on the way to something better. (Iran, of course, has been there and done that.) As Gerecht once put it, “you don’t get to arrive at Thomas Jefferson unless you first pass through Martin Luther.” Let’s hope so. And let’s hope it takes less than 250 years this time.

And Gerecht’s model tacitly assumes that the makings of a more liberal society are there if the right leadership is installed. I’m skeptical about that for the same reason as Spengler, writing about Egypt a few weeks ago: “Western economists can concoct all the economic recovery plans in the world, but a country that can’t teach half its people to read, and can’t produce employable university graduates, and can’t feed itself, is going to go down the drain.” So the Islamists will fail — and then the moderate regime that replaces them will fail, so who knows what the real next stop on this learning curve is. Only one thing is certain: Given the region’s track record, it’ll be awesome.

Hey, remember back in August, when President Obama told us, “You had an Arab Spring in the Middle East that promises more democracy and more human rights for people,” and Al Gore said that America needed its own “Arab Spring?”