The Beginning is the End is the Beginning

The Hamster wheel

M.E. Escher - Up and Down

By Ashvin Pandurangi

The latest revolution of the Euro Crisis Cycle has brought us back to talks of restructuring Greek sovereign debt through "Private Sector Involvement" (PSI), which are somehow taking place in a Universe where debt restructuring is not allowed to be confused with "debt default" or "bankruptcy". On Friday January 20, the IIF (representing some of Greece’s creditors) and the Greek government announced that they had finally reached an "agreement" on the basic structure of the restructuring (or the basic restructuring of the structure?).  

Here’s the live blog update from The Guardian on Friday, which really stood out to me:

A framework of the deal -- the basic structure of the bond swap that the Greek finance minister Evangelos Venizelos wants to present at Monday's eurogroup meeting -- has been accepted by both sides, "put in place" and I understand committed to paper.

But it would also seem that other aspects of the agreement - be them legal, technical or matters of substance -- remain unresolved and will be discussed at negotiations that resume at 7:30pm local time [6.30 GMT] and look set to continue over the weekend.

The happy warrior

ON RESISTING EVIL

By M. Rothbard

How can anyone, finding himself surrounded by a rising tide of evil, fail to do his utmost to fight against it? In our century, we have been inundated by a flood of evil, in the form of collectivism, socialism, egalitarianism, and nihilism. It has always been crystal clear to me that we have a compelling moral obligation, for the sake of ourselves, our loved ones, our posterity, our friends, our neighbors, and our country, to do battle against that evil.

It has therefore always been a mystery to me how people who have seen and identified this evil and have therefore entered the lists against it, either gradually or suddenly abandon that fight. How can one see the truth, understand one's compelling duty, and then, simply give up and even go on to betray the cause and its comrades? And yet, in the two movements and

The privileged clique

Putting plankton before people

Eco-warriors who campaign against the building of dams are damning the poor to live at nature’s mercy.

by Nick Thorne 

A good example of the ‘case against big dams’ was presented in a recent article for Al-Jazeera by Lori Pottinger of California-based NGO International Rivers, which campaigns against large dams and to promote ‘living rivers’. She wrote that ‘large dams have wiped out species; flooded huge areas of wetlands, forests and farmlands; displaced tens of millions of people, and affected close to half a billion people living downstream’. So if big dams have such damaging consequences for the planet’s inhabitants and its flora and fauna, how could anyone be in favour of them?

Well, Pottinger’s argument is simply flawed, with her outlook being typical of the worst kind of misanthropy. She begins with an emotive but meaningless extended metaphor: ‘Rivers act as the planet’s circulatory system. Like our body’s circulation system, the planetary

The Loan

An Exchange of Wealth for Income

by Keith Weiner

As the title of this essay suggests, a loan is an exchange of wealth for income. Like everything else in a free market (imagine happier days of yore), it is a voluntary trade. Contrary to the endemic language of victimization, both parties regard themselves as gaining thereby, or else they would not enter into the transaction. 

In a loan, one party is the borrower and the other is the lender. Mechanically, it is very simple. The lender gives the borrower money and the borrower agrees to pay interest on the outstanding balance and to repay the principle. As with many principles in economics, one can shed light on a trade by looking back in history to a time before the trade existed and considering how the trade developed.

It is part of the nature of being a human that one is born unable to work, living on the surplus produced by one’s parents. One grows up and then one can work for a time. And then one becomes old and infirm, living but not able to work. If one wishes not to starve to death

Common Criminals

To the memory of Wilman Villar Mendoza

By Yoani Sanchez

A couple of years ago, my friend Eugenio Leal decided ask for the report of his criminal record, necessary paperwork when applying for certain jobs. With confidence, he applied for the form where it would say he had never been convicted of any crime but found, in its place, a disagreeable surprise: it appeared that he was the perpetrator of a “robbery with force” in the town where he’d been born, although in fact he had never even run a red light. Eugenio protested, because he knew this wasn’t a bureaucratic error nor a mere accident. His activities as a dissident had already made him the victim of repudiation rallies, arrests and threats, and now a blot on his criminal record had been added. He had gone from being a member of the opposition to someone with a past as a “common criminal,” something very useful to the political police to discredit him.

Sailing fully loaded

Our Many Layers of Entitlement 

    the entitlement mindset includes much more than government benefits programs.

The word entitlement commonly refers to government benefits to which we are entitled as taxpayers and/or citizens/residents. But there are layers of entitlement in the American psyche far beyond government benefits programs.

Let's start with the government benefits entitlements. The programs most people refer to as entitlements are Social Security and Medicare, which taxpayers pay for with payroll taxes (even if the money just goes into one giant Federal pot).

Beyond these "I paid into them" entitlements are the "welfare" entitlements of Medicaid, Section 8 Housing, SNAP/food stamps, etc., which are paid out of general tax revenues and which are

United Welfare States of America

In 2011 Nearly Half The Population Received Some Form Of Government Benefit

by Zero Hedge

While politicians may debate whether or not America is the most "generous" (with other generations' money of course) socialist welfare state in the history of mankind, the undoctored numbers make the affirmative case quite clear and without any chance for confusion. The single most disturbing statistic: in 2011 nearly half of the population lived in a household that receives some form of government benefit, which in turn accounted for 65% of total federal spending, or $2.5 trillion, and amount to 15% of GDP. And yet some people out there still think these people, long since indoctrinated to do little but mooch off the welfare state (which will continue subsidizing its existence so long as debt rates are so low that the government can issue trillions each year without fears of consequences) will halt their iTunes purchases, will voluntarily stop subsisting on the government's teat, or will rebel against a government which is their only source of income? Why? Especially since something tells us that there will be a peculiar overlap between this 50% and the 50% of Americans that pay zero taxes.

Of course, this chart should be observed in conjunction with the "What is this?" chart we presented two days ago from Morgan Stanley which pretty much explains everything about the US "economy"

Show me

Where Should the Burden of Proof Rest?

By Robert Higgs

Perhaps you have been struck, as I have been repeatedly over the years, by the way in which certain disputes are framed. A writer, reporter, or discussant recognizes a difference of views on some matter: A maintains X, and B maintains Y. Yet, even though a difference is acknowledged, the question is resolved by concluding that X must be the case because B has not proven that Y is the case.  This conclusion is often reached only on the assumption that A does not, or should not, bear a similar burden of proof.

Libertarians, for example, constantly encounter this situation when they argue against state provision of some good or service currently provided by the state. The libertarians might argue, say, that private suppliers can provide personal security in better quality or at lower cost than the government police can. Critics claim that the

We are doomed

The rule of law and other fairy tales

click at ή εγώ ή ο άλλος

Fiat money is doomed anyway

Making the Transition to a New Gold Standard

by Larry White 

Nixon Ending The Gold Standard

Suppose for the sake of argument that we all agree to the following proposition: If we could change the monetary regime with zero switching cost, merely by snapping our fingers, we would prefer the US to be on a gold standard. In the most general terms a gold standard means a monetary system in which a standard mass (so many grams or ounces) of pure gold defines the unit of account, and standardized pieces of gold serve as the ultimate media of redemption. Currency notes, checks, and electronic funds transfers are all denominated in gold and are redeemable claims to gold.[1] The question then arises: What would be the least costly way for the United States to make the transition to a new gold standard? We need to choose a low-cost method to insure that the agreed benefits of being on the gold standard exceed the costs of switching over.

Two transitional paths suggest themselves. (1) One path is to let a parallel gold standard grow up alongside the current fiat dollar. (2) The more conventional path, as followed after the suspension of the gold standard during the US Civil War, is to set a date after which the US dollar is to be meaningfully defined as so many grams of pure gold. Or as it is more commonly put, an effective parity is established

The politics of war

Stop the Madness

Despite all the hype, Iran's nuclear program has yet to violate international law. It's time to calm down, think, and above all halt the rush to war.

BY YOUSAF BUTT 

Olli Heinonen is alarmed that Iran has begun producing 20 percent enriched uranium at a new, deeply buried site, and calculates that Iranian scientists could further purify the material to the 90 percent enrichment needed for a bomb in about six months' time. This prediction, however, is based on unsubstantiated assumptions regarding Iranian intentions, and only serves to provide ammunition for hawks in Washington that would rush the United States into another destructive war in the Middle East.

If Tehran enriched uranium to 90 percent, it would be forced to break its four decade-long adherence to the Nuclear Non-Proliferation Treaty (NPT) -- a momentous step that would likely prompt swift military action from the United States or Israel. Furthermore, Heinonen fails to mention that, according to the International Atomic Energy Agency, "All nuclear material in the facility remains under the

Deceits and delusions

The euro-crisis and democracy

by DETLEV SCHLICHTER

Anybody with any knowledge of economics should feel uneasy at the sight of a country where half of recorded economic activity is conducted by the state. Are such semi-socialist societies operable, and if so, for how long? That complete socialism is impossible and that any attempt to establish it must fail, we know for sure since Ludwig von Mises explained it in detail in 1922 with his masterly Die Gemeinwirtschaft (Socialism). The only reasons that the Soviet Union did not collapse earlier but managed to drag out its persistent economic decline for seventy-odd years are that it introduced full socialization to no more than seventy percent of its economy, and that it had its bureaucrats constantly peek through the Iron Curtain and observe market prices in the capitalist West to be able to

Corporatocracy Has Replaced Capitalism

Why We Are Totally Finished

Corporatocracy: A government that serves the interest of, and may de facto be run by corporations.

By D Sherman Okst

Capitalism Fixes Problems & Preserves Democracy: Capitalism is what we should be relying on to fix our problems. Capitalism has it's own ecosystem, just like biology's ecosystem. An economic ecosystem that weeds out the weak, has parasites that eat the failures and new bacteria that evolves and grows replacements for

Teaching and common sense

How’s My Teaching?

More policymakers are adopting evaluation systems based on classroom performance.

By MARCUS A. WINTERS

New York mayor Michael Bloomberg, New York governor Andrew Cuomo, and New Jersey governor Chris Christie are the latest high-profile policymakers to pursue radical changes in the evaluation of public school teachers. While the policy details—in particular, how they would use students’ test scores to evaluate teachers—get the most attention, the most promising aspect of these proposals is that they represent a fundamental shift in philosophy. The new approach is much better aligned with what we now know about teachers and how we should employ them.

Under the current system, public schools measure teacher quality by placing heavy weight on a set of professional credentials. In order to enter the classroom, a prospective teacher must earn a degree from an education college and must be certified. Teachers earning advanced degrees get rewarded with higher salaries.

The secret contract

The Secret Document That Transformed China

by DAVID KESTENBAUM and JACOB GOLDSTEIN

In 1978, the farmers in a small Chinese village called Xiaogang gathered in a mud hut to sign a secret contract. They thought it might get them executed. Instead, it wound up transforming China's economy in ways that are still reverberating today.

The contract was so risky — and such a big deal — because it was created at the height of communism in China. Everyone worked on the village's collective farm; there was no personal property.

"Back then, even one straw belonged to the group," says Yen Jingchang, who was a farmer in Xiaogang in 1978. "No one owned anything."

At one meeting with communist party officials, a farmer asked: "What about the teeth in my head? Do I own those?" Answer: No. Your teeth belong to the collective.

In theory, the government would take what the collective grew, and would also distribute food to each family. There was no incentive to work hard — to go out to the fields early, to put in extra effort, Yen Jingchang says.

"Work hard, don't work hard — everyone gets the same," he says. "So people don't want to work."

In Xiaogang there was never enough food, and the farmers often had to go to other villages to beg. Their children were going hungry. They were desperate.

Gentlemen, Choose Your Disaster

Staring into the Abyss

By John Mauldin

"If we want everything to stay as it is, everything will have to change."

– from The Leopard by Giuseppe Tomasi di Lamedusa

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought, and that's sort of exactly the Mexican story. It took forever and then it took a night."

– Rudiger Dornbusch

Europe's leaders are committed to keeping both the euro and the eurozone as it is. But for it to do so, everything must change, as the wonderful quote from the 1958 Italian novel suggests. This is no easy task, as no one wants a change that will impact them negatively; and there is no change that will allow things to stay the same that does not impact all severely, as we will see. 

Choices, Debt, and the Endgame

The choices we make today are constrained by the choices we made in the past, and the choices we make in the future will be limited by the choices we make today. Europe chose to create a free trade

Making investments that actually make sense

Shifting Capital From the Productive to the Sexy

By Warren Meyer

Sexy black hole for money.
But did we mention it was sexy? 

What is it about intellectuals that seem to, generation after generation, fall in love with totalitarian regimes because of their grand and triumphal projects?  Whether it was the trains running on time in Italy, or the Moscow subways, or now high-speed rail lines in China, western dupes constantly fall for the lure of the great pyramid without seeing the diversion of resources and loss of liberty that went into building it.

Writers like Thomas Friedman and Joel Epstein in the Huffington Post have eulogized China and its monumental spending projects.    These are the same folks who, generations ago, tried disastrously to emulate Mussolini’s “forward-thinking” economic regime in the National Industrial Recovery Act.  These are the same folks who wanted to emulate MITI’s management of the Japanese economy (which drove them right into a 20-year recession).  These are the same folks who oohed and ahhed over the multi-billion dollar Beijing

The fragility of civilization

The Sinking of the West By Mark Steyn Abe Greenwald of Commentary magazine tweets: "Is there any chance that Mark Steyn won’t use the Italian captain fleeing the sinking ship as the lead metaphor in a column on EU collapse?" Oh, dear. You’ve got to get up early in the morning to beat me to civilizational-collapse metaphors. Been there, done that. See page 185 of my most recent book, where I contrast the orderly, dignified, and moving behavior of those on the Titanic (the ship, not the mendacious Hollywood blockbuster) with that manifested in more recent disasters. There was no orderly evacuation from the Costa Concordia, just chaos punctuated by individual acts of courage from, for example, an Hungarian violinist in the orchestra and a ship’s entertainer in a Spiderman costume, both of whom helped children to safety, the former paying with his life. The miserable Captain Schettino, by contrast, is presently under house arrest, charged with manslaughter and abandoning ship. His explanation is that, when the vessel listed suddenly, he fell into a lifeboat and was unable to climb out. Seriously. Could happen to anyone, slippery decks and all that. Next thing you know, he was safe on shore, leaving his passengers all at sea. On the other hand, the audio of him being ordered by Coast Guard officers to return to his ship and refusing to do so is not helpful to this version of events.

The murder of Wilmar Villar Mendoza

A brief moment of clarity

By Alberto de la Cruz

When I found out the Castro regime had accomplished their mission of ending the life of Wilmar Villar Mendoza, I was once again unprepared for the nausea and the painful knot in the pit of my stomach. It is a sensation that I have never been able to get used to no matter how many times I endure the painful experience. It is the same severe and unpleasant reaction I experienced when I learned of Orlando Zapata Tamayo's horrid assassination, and that caustic malaise returned upon hearing the news of the violent murder of Juan Wilfredo Soto and again when the Castro regime finally silenced Laura Pollan. Nevertheless, I cannot get used to it. Each and every time, it hits me like a ton of bricks. Another Cuban life extinguished, another Cuban family destroyed, another Cuban voice in chains crying out for freedom violently silenced.

But within all this pain of loss, amongst the injustice and brutality of a vile dictatorship and its indiscriminate and unforgivable taking of yet another life, a brief moment of clarity emerges. As it happened upon the murders of Zapata Tamayo, Soto, and Pollan, for a brief moment, the assassination of Wilmar Villar Mendoza tore down the facade and the lies of the Castro dictatorship that has as acted as their shield for so many decades. For that brief moment, as the light of life in Wilmar extinguished and his soul slipped out of his body, the Castro regime was exposed to the world for what it is: A brutal, merciless, and murderous dictatorship.

It may not last long -- perhaps hours, maybe days -- but for the moment, the Castro dictatorship is exposed. This brief moment of clarity brought about by the murder of Villar Mendoza has ripped away the shroud they hide behind and the light of truth has pierced the lies that have kept the entire island of Cuba in a diabolical darkness for more than a half-century. For a brief moment, the murderous Castro dictatorship finds itself with no crevice to crawl into and no place to hide. Today, hours after the death of Wilmar, the decades of Castro lies and propaganda have no power to defend  Fidel and Raul. For a brief moment, there is sufficient clarity to expose them for the brutal and murderous dictators that they are.

But alas, it is only for a brief moment.

Perhaps as early as tomorrow, this moment of clarity will dissolve and the lies will return to subjugate the truth. Not because this clarity is too weak or a fleeting moment, but because the world will close its eyes and turn away from the unpleasant truth. Unfortunately, there are too many people in this world who strive for the same darkness the Castro regime strives for, albeit for different reasons. The Castro brothers seek darkness in Cuba to cover and hide their crimes and murders, while the world seeks darkness in Cuba to cover their indifference and apathy towards the enslaved Cuban people.

Nevertheless, for now, Wilmar Villar Mendoza's death is not in vain: for a brief moment, there is clarity in Cuba.

The cynicism is breathtaking.

Keystone Madness

By Robert Samuelson

President Obama's rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn't often that a president makes a decision that has no redeeming virtues and -- beyond the symbolism -- won't even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his re-election that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.

Aside from the political and public relations victory, environmentalists won't get much. Stopping the pipeline won't halt the development of tar sands, to which the Canadian government is committed; therefore, there will be little effect on global warming emissions. Indeed, Obama's decision might add to them. If Canada builds a pipeline from Alberta to the Pacific for export to Asia, moving all that oil across the ocean by tanker will create extra emissions. There will also be the risk of added spills.

From Munich to Istanbul

Civilization in Reverse

By Victor Davis Hanson

In Greek mythology, the prophetess Cassandra was doomed both to tell the truth and to be ignored. Our modern version is a bankrupt Greece that we seem to discount.

News accounts abound now of impoverished Athens residents scrounging pharmacies for scarce medicine — as Greece is squeezed to make interest payments to the supposedly euro-pinching German banks.

Such accounts may be exaggerations, but they should warn us that yearly progress is never assured. Instead, history offers plenty of examples of life becoming far worse than it had been centuries earlier. The biographer Plutarch, writing 500 years after the glories of classical Greece, lamented that in his time weeds grew amid the empty colonnades of the once-impressive Greek city-states. In America, most would prefer to live in the Detroit of 1941 than the Detroit of 2011. The quality of today’s air travel has regressed to the climate of yesterday’s bus service.

In 2000, Greeks apparently assumed that they had struck it rich with their newfound money-laden European Union lenders — even though they certainly had not earned their new riches through increased productivity, the discovery of more natural resources, or greater collective investment and savings.

When yesterday had a future

40 ways to lose your future

by Stoneleigh

Imagine that at a certain point the US, the EU or the Global economy reach the point where:

1.   Deflation is inevitable due to Ponzi dynamics (see http://theautomaticearth.blogspot.com/2008/11/debt-rattle-november-26-2008-from-top.html)

2.   The collapse of credit will crash the money supply as credit is the vast majority of the effective money supply

3.   Cash will be king for a long time

4.   Printing one's way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction)

You Can't Fool Mother Nature For Long

The Substitution of Debt for Productivity

The "big story" of the U.S. economy is that we have substituted expansion of debt for meaningful increases in productivity.

By Charles Hugh Smith

For the past 30 years, the U.S. economy has become increasingly dependent on explosive debt expansion for its "growth" rather than on meaningful rises in meaningful productivity. Growth is in quotes because growth based on secular increases in productivity--that is, the same investment of labor and capital produces goods and services of greater value--is qualitatively different from "growth" based on a pyramiding of debt.

The Road to Nirvana

Capitalism Loses Against Chimera

Store for locals on an island across Florida

by Chidem Kurdas

Gripes about capitalism go back 150 years and more. In the Communist Manifesto of 1848 Marx and Engels thundered that the specter of revolution haunted Europe, that the periodic reappearance of commercial crises “put on its trial, each time more threateningly, the existence of the entire bourgeois society.” They were not the first to assail the system and were followed by numerous others spanning the political spectrum.

Thus the Financial Times recently started a series on  “The Crisis of Capitalism.”  Europe suffers from a sovereign debt crisis due to over-spending by governments—why is that the crisis of capitalism?

Siding with the Angels

The Eternal Peril of the Simple Answer

History is harder to untangle than politicians would lead us to believe.

By Thomas Sowell

Anyone who has ever been in a Third World country, or even in a slum neighborhood at home, is likely to wonder why there can be such dire poverty among some people while others are prospering.

Both politicians and intellectuals have tended to have simple answers to that question, even if these simple answers have been different in different eras.

A hundred years ago, the prevailing answer was that some people are innately and genetically inferior. Not only was this answer