The Big Fat Greek Bailout

In the meantime, the debasement of paper money continues

by DETLEV SCHLICHTER

Greece was bailed out for the second time in four months. Or did it default? Well, a bit of both, I guess.

All bondholders are equal. But some are more equal than others. If you are the ECB, your Greek bonds were exchanged, par for par, for new Greek bonds, and you can go on pretending that they are worth their principal amount. You won’t have to report a loss for now. But if you are a ‘private’ entity – and that is a rather loosely used term these days as it includes the banking industry which is either now partially owned by the state or to a considerable degree dependent on ongoing support from the lender-of-last resort – more than half your Greek investment was wiped out. So Greece defaulted. But as you ‘agreed’ to the ‘haircut’ it was in fact a ‘voluntary restructuring’, although you really had no choice.

Bankruptcy is not nice. Everybody loses. The creditors take a hit as they will have to write off most of what they lent. The borrower takes a hit as he will now be cut off from new credit and will have to live of whatever sources of income the creditors could not lay their hands on. Chances are he will not get a penny of new credit for a while. In that respect Greece is not doing badly at all. Although it just defaulted on €107 billon of private credit, Greece immediately gets another €130 billion taken from taxpayers in other countries. And these new loans plus the ones that were agreed at the time of the last bailout were just made cheaper. They now only cost 2 percent per annum after 3.5 before the restructuring.

A CDS trigger event is now not only expected but welcome

As Greek CDS Hit Record, German Economy Minister Accuses Greece Of Reneging

by Tyler Durden

Remember Greece, where everything is supposedly fixed, except that nothing is until Greek bondholders all agree to get nothing for something? Or in other words, where Germany is hoping it can assign blame to hedge funds for not allowing the 75% PSI trigger threshold to be reached so there is a faceless monster that can be accused to achieving Germany's political goals? No? As the following reminder from Germany's Economy Minister Roseler shows, whose report has been acquired by Bloomberg, if not German anger then certainly confusion, is seething: "For the Greek government, the programs “obviously have no priority,” the ministry said. “This is unacceptable from the German standpoint." Wait, you mean a record February collapse in the Greek economy is inadmissable? 

Sure enough, Greek CDS, contrary to expectations for a no trigger event, just hit an all-time high earlier at 76 points up front (i.e., more buyers than sellers), as basis player are loading up on protection and preparing for the March 8 PSI deadline.

From Bloomberg:

Greece is reneging on programs to spur its economic competitiveness that it signed with Germany since July, calling into question its willingness and capacity to revitalize its economy, the Economy Ministry in Berlin said.

How Gogol, Chekhov and Dostoyevsky Explain the Post-Soviet World

Lost in Transition

BY THOMAS DE WAAL 

Twenty years ago, 15 new states emerged from the wreck of the Soviet Union, uneven shards from a broken monolith. One story turned into 15. Most Soviet watchers have been struggling to keep up ever since. How to tell these multiple stories?

In retrospect, it is evident that Western commentators failed to predict or explain what has happened to these countries: their lurches from one crisis to another, weird hybrid political systems, unstable stability.

Commentators have long tried to project models from the rest of the world ("transition to a market economy," "evolution of a party system") onto countries that have very different histories and cultural assumptions from the West and often from each other. I have read about Russian Prime Minister Vladimir Putin's "ethnocentric patriotism," his "delegative democracy trap," and his building of a "neo-patrimonial state" -- all very intelligent stuff. What I take away from such jargon is a nicely constructed model or two (for both Putin and the political scientists), but not the insights I seek into a living society.

Is catastrophic global warming, like Millennium Bug, a mistake?

Richard Lindzen exposing  the alarmists

By James Delingpole 

Professor Richard Lindzen is one of the world's greatest atmospheric physicists: perhaps the greatest. What he doesn't know about the science behind climate change probably isn't worth knowing. But even if you weren't aware of all this, even if you'd come to the talk he gave in the House of Commons this week without prejudice or expectation, I can pretty much guarantee you would have been blown away by his elegant dismissal of Catastrophic Anthropogenic Global Warming theory.

Broke, broker, brokest

A brave New World

When the young people come of age and figure out what the boomers did to them, there is going to be hell to pay. And far worse than the present is the future — as shown in an alarming government chart actually that understates debt by $3 trillion!

The Regulatory-Industrial Complex

The public is being served - on a platter

by Llewellyn H. Rockwell Jr.

Socialists want socialism for everyone else, but capitalism for themselves, while capitalists want capitalism for everyone else, but socialism for themselves.

Neither Ted Kennedy nor Jane Fonda practices a vow of poverty, nor are they taking any homeless into their mansions, while too many big companies try to short-circuit the market with government privileges. And one way they do it is through the regulatory agencies that acne Washington, DC.

If I may make a public confession: I used to work for the US Congress. I've since gone straight, of course, but the experience had its value, much as the future criminologist might benefit from serving with the James Gang.

For one thing, being on Capitol Hill showed me that, unlike the republic of the Founding Fathers' vision, our DC Leviathan exists only to extract money and power from the people for itself and the special interests.

Ludwig von Mises called this an inevitable "caste conflict." There can be no natural class conflict in society, Mises showed, since the free market harmonizes all economic interests, but in a system of government-granted privileges, there must be a struggle between those who live off the government and the rest of us. It is a disguised struggle, of course, since truth threatens the loot.

Are We Looking at the Wrong Depression?

Innovation, deleveraging  and economic realignment 

By Stephen Davies

Today a lot of people are looking to economic history for help in understanding the current world economic situation and the options open to us. (This includes economists, many of whom have finally rediscovered an interest in economic history.)

Most of this attention is being paid to the Great Depression of the 1930s. However, it is worth pointing out the important ways in which the present situation differs from that of the 1930s. Many observers (most notably Paul Krugman) argue that we are presently in a classic liquidity trap, where monetary policy has no purchase on the real world economy. The main evidence for this is that despite massive expansion of the basic money supply by the Federal Reserve and other central banks, there has not been the kind of inflation that many had predicted. The argument is that this situation is similar to the one Keynes identified in the early 1930s and that therefore the same policy response—fiscal stimulus—is appropriate.

The Americans of Europe

Europe's Clashin' Culture

By Tyler Durden

As the ECB supposedly takes it foot off the gas, and EU Summits and 'events' loom large for the careening wagon of shared sacrifice, unity, and sovereign risk, perhaps it is the nodding donkeys of Greek and Italian technocrats juxtaposed with Ireland's feistier "R" word gambit (and of course Zee German Overlords) that makes Art Cashin reflect somewhat philosophically on recent headlines. Their stereotypical interpretation has him concerned as the potential for ever-increasing culture clashes increases across the pond as sour memories and generational hatreds abound.

Sour Memories, Generational Hatreds And Stereotypes - To put this part of the note in better perspective, let’s reprise some comments from mid-month. We were writing about some folks from Europe who were kind enough to pay a visit to an irregular meeting of the Friends of Fermentation.

The conversation quickly went from the topic of the day, Greece, to the topic of the year, the existence and survival of the Euro-zone.

 As the conversation became more intense, emotions rose closer to the surface. One finally said – “Look, over the last 150 years, the Germans have tried to dominate Europe through military might more than three times. The results were horrible for all.

Strange bedfellows

A surreal commitment to Stalinism

Román Gubern and Paul Hammond’s excellent new biography of the surrealist filmmaker Luis Buñuel reveals the reactionary impulses behind his anarchical facade. 

By James Heartfield 

Filmmaker Luis Buñuel made a name for himself, along with the painter Salvador Dali, overthrowing the rules of filmmaking with surrealist masterpieces like Un Chien Andalou and L’Age d’Or (meaning ‘Age of Gold’, it also sounds like ‘Large Door’ in English). These were followed by avant-garde films like That Obscure Object of Desire and The Discreet Charm of the Bourgeoisie. But until now, Buñuel’s work in Spain, and for the Republic in the Spanish Civil War (1936-1939), has been largely unknown. Román Gubern and Paul Hammond’s brilliant and exhaustive new book, Luis Buñuel: The Red Years, 1929 – 1939, fills in the gap.

Surrealism was dismissed in Britain for many years. Un Chien Andalou was very rarely screened: the surest way to ‘see’ it was by listening to the singer and critic, George Melly, retell every one of its series of nightmarish scenes. The surrealists overturned the symbolic meaning of things, bringing together jarring images in their wilful disruption of aesthetic beauty and meaning. Nowadays it is commonly understood that this was the most interesting movement in modern art and it’s a shame that the surrealists’ ideas were diluted down to homoeopathically small doses in Pop Art and, later, in the works of the Young British Artists. As a result, surrealism has lost its shock value. In their day, and to their delight, the surrealists’ work caused outrage, like Marcel Duchamp’s ‘Fountain’ (a urinal signed ‘R Mutt’), for instance. By contrast, today, visitors to Tate Modern in London, where the urinal is on permanent display, walk reverentially around it, as if it were a holy relic.

The Perfection Of Crony Capitalism

Use Regulation To Destroy Competitors

Crony capitalism uses its wealth to impose government regulations designed to hinder, cripple and destroy small business competitors.

by Charles Hugh Smith

In the U.S. we now have the perfection of cloaked crony capitalism: corporate cartels use their vast concentrations of capital and revenue to buy the political leverage needed to write regulations specifically designed to eliminate competition.

Recall that the most profitable business model is a monopoly or cartel protected from competition by the coercive Central State. Imposing complex regulations on small business competitors effectively cripples an entire class competitors, but does so in "stealth mode"--after all, more regulations are a "good thing" (especially to credulous Liberals) which "protect the public" (and every politico loves claiming his/her new raft of regulations will "protect the public.")

This masks the key dynamic of crony capitalism: gaming the government is the most profitable business model. Where else can you "invest" a few hundred thousand dollars (to buy political "access" and lobbying) and "earn" a return in the millions of dollars, and eliminate potential competitors, too? No other "investment" even comes close.

You will hear the echo throughout the world

The Existential Financial Problem Of Our Time

by Tim Price

In December last year, the poet Alice Oswald withdrew from the TS Eliot poetry prize on the grounds that the prize was being sponsored by an investment company (Aurum, a fund of hedge funds manager).

How you feel about this principled stance may depend on whether you are a UK taxpayer. If you are a UK taxpayer, you will probably feel relieved that your tax pounds are no longer being squandered on the Arts Council's sponsorship of the prize in question "a tiny victory" but a victory nevertheless against the arrogant dissipations of the state.

Ms Oswald seems to believe that poetry prizes should be funded with everybody else's money, rather than by a private patron grown-up enough to be responsible for its discretionary expenditure (private patronage being what you might call "traditional" in the arts).

As a graduate in English Language and Literature, this commentator has no animus against poets. But I am not sure we want them in charge of the economy. They are notorious for starving in garrets for a reason.

One More Greek Tragedy

We are approaching an endgame

“The end crowns all, and that old common arbitrator, Time, will one day end it.”                                                -William Shakespeare, Troilus and Cressida

by Mark J. Grant

March 20 will mark the spot on your calendar, and while it is certainly not “the” endgame; it is one of the continuum.  During the next twenty-three days we are going to get some answers to a number of questions that have been unanswered and a number of verdicts that will set the stage for the performance. 

In the end I suspect there is going to be a decision made by Germany whether to fund the Greek bond payment independently of everything else or just to let them go and destroy the grand myth. Germany will probably end up playing chicken with itself in an exceedingly bizarre pact with the Devil. In the first instance there is more and more evidence that the PSI will not go as hoped as many institutional investors do not take the bait and are not willing to roll-over for the good of Greece and Europe. 

Burdened, Crushed, Doomed

This Is Small Business in America

By Charles H. Smith

  

If you make it increasingly costly and risky to open a small enterprise, then no wonder unemployment remains high.

You hear a lot about Kafkaesque stifling bureaucracy in Greece and other struggling European nations, but America's Status Quo is trying its best to destroy small enterprise with taxes and crushing bureaucracy. I am self-employed, and have been for most of my life. When I did take a paid position, it was in other small enterprises or local non-profit organizations.

I mention this because there is an unbridgeable divide in any discussion of small business between those who have no experience in entrepreneural enterprise (i.e. they've worked for the government, NGOs/non-profits or Corporate America their entire careers) and those who have.

There are all sorts of similar chasms that cannot be crossed and which quickly reveal a surreal disconnect from actual lived reality: for example, the difference between actually playing football--yes, with pads, a muddy field and guys trying to slam you to the ground--and being an armchair quarterback who's never been hit even once, never caught a pass or ever struggled to bring down a faster, bigger player. (And yes, I did play football in high school as a poor dumb skinny kid who mostly warmed the bench for good reason, but I lettered.)

A Quote for every day

Seeking the right Answers

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

                                                                

                                                                      -Anne Rice

Somebody must pay the ferryman

Greece is Just a Preview of What's Coming For the Rest of Us
By Ben Davies

All eyes are on Greece these days, with hopes that the situation there can soon be resolved and global recovery kicked into high gear.

Sadly, those hopes are misguided claims Ben Davies, CEO of Hinde Capital. In fact, he says, Greece's pain foreshadows the future awaiting the rest of the world. 

It all comes down to simple math. Greece has increased its debts at a rate far faster than its income has grown. At some point, the debt became so large that the country could no longer service it.

What makes the rest of the PIIGS immune from a similar fate? Or Japan? Or the US? Or the OECD, in general?

Nothing.

Yes, Greece had a smaller, shakier economy and doesn't have a central bank to print its own currency at will like Japan or the US. But even those countries with a printing press learn that after a certain point, expanding the money supply only complicates the problem of too much debt by inflating key economic input costs and dangerously weakening the currency. 

About Debt and Slavery

Two Forms Of Slavery That Still Exist In America

By Ashvin Pandurangi

It is almost surprising that the concept of slavery is very foreign to those living in the developed world, especially the U.S., since it was extensively practiced as recently as 70 years ago.

What’s more disturbing about this ignorance is the fact that the system of post-Civil War slavery in the U.S. was not so different than the systems of slavery many Americans and Europeans will be experiencing in upcoming years. Indeed, I’m sure many people will probably take offense to such a comparison even being made, as they feel it demeans the atrocious acts committed in the past.

I would argue, however, that we demean history by failing to understand it and learn from it. Many people refer to debt slavery when referencing current policies of the West, especially in Greece right now where the concept has become very real, but they perhaps still under-estimate how bad it can get. These systems of slavery are primarily borne out of deeply-rooted economic structures which foster high levels of dependency, greed and malice by those with unchecked levels of political power. In the late 19^th and early 20^th centuries, these powerful groups consisted of wealthy Southern agricultural and industrial elites.

The Perversion of Rights

The all-you-can-eat salad bar of rights

The perversion of the concept of rights is killing the Western world

By Mark Steyn

CNN’s John King did his best the other night, producing a question from one of his viewers:

“Since birth control is the latest hot topic, which candidate believes in birth control, and if not, why?”

To their credit, no Republican candidate was inclined to accept the premise of the question. King might have done better to put the issue to Danica Patrick. For some reason, Michelle Fields of the Daily Caller sought the views of the NASCAR driver and Sports Illustrated swimwear model about “the Obama administration’s dictate that religious employers provide health-care plans that cover contraceptives.” Miss Patrick, a practicing Catholic, gave the perfect citizen’s response for the Age of Obama:

“I leave it up to the government to make good decisions for Americans.”

That’s the real “hot topic” here — whether a majority of citizens, in America as elsewhere in the West, is willing to “leave it up to the government” to make decisions on everything that matters. On the face of it, the choice between the Obama administration and the Catholic Church should not be a tough one. On the one hand, we have the plain language of the First Amendment as stated in the U.S. Constitution since 1791: “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof.”

Place your bets

One PSI Chart To Rule Them All

How western economies embraced economic Fascism

The Economic Leadership Secrets of Benito Mussolini

By Jim Powell,

Benito Mussolini, Italy’s dictator from 1922 to 1943, is perhaps best-remembered as Hitler’s inept ally who was strung up by his outraged countrymen.

But he originated an economic system – economic fascism – that was acclaimed in his heyday, influenced U.S. economic policy during the 1930s, and is surprisingly similar to some of President Obama’s policies. If we wish to anticipate consequences of those policies, we need to understand where they came from and where they led.

A letter to the indebted nations of Europe

You have spent more than you earned

By Huang Xiangyang

Dear Sirs / Madams

I know you are in trouble and want China to help. I have heard your repeated calls in the media for our leaders to bail you out by buying the debt of European governments. I want to assure you your entreaties have not been in vain.

Last week our premier pledged that China will "get more deeply involved" in resolving your debt crisis. Our central bank governor tried to buoy up market confidence in the euro by vowing to continue holding your sovereign debts. Such comments came even as the international rating agencies - Moody's, Standard & Poor's and Fitch Ratings - cut their ratings for your nations because of the weakening prospects for an overhaul in Europe.

New Push for Reform in China

The Limits of Statism

Influential Report to Warn of Economic Crisis Unless State-Run Firms Are Scaled Back

By BOB DAVIS

BEIJING—An exclusive preview of an economic report on China, prepared by the World Bank and government insiders considered to have the ear of the nation's leaders, offers a surprising prescription: China could face an economic crisis unless it implements deep reforms, including scaling back its vast state-owned enterprises and making them operate more like commercial firms.

"China 2030," a report set to be released Monday by the bank and a Chinese government think tank, addresses some of China's most politically sensitive economic issues, according to a half-dozen individuals involved in preparing and reviewing it.

It is designed to influence the next generation of Chinese leaders who take office starting this year, these people said. And it challenges the way China's economic model has developed during the past decade under President Hu Jintao, when the role of the state in the world's second-largest economy has steadily expanded.

The Discreet Charm of the Never Ending Bailouts

Investors should prepare for Greek ‘bail-out III’

By Sushil Wadhwani

At last the tortuous process leading to agreeing a second Greek bail-out deal has ended. The main significance of the deal is that it was agreed. After all, many market participants had begun to fear that it would not be and that Greece would default. Accordingly, some were worrying about the potential consequences of a euro break-up scenario that they believed might have made the Lehman bankruptcy and its aftermath look trivial.

Of course, the deal does not solve Greece’s problems. Thus, it is widely recognised that we will probably be worrying about Greece again later. The analysis conducted by the International Monetary Fund is said to recognise the risks that the necessary competitiveness adjustment could come about via an even deeper and more protracted recession, which could imply that the debt-to-gross domestic product ratio ends up at 160 per cent of GDP in 2020, rather than the 120 per cent for which the programme is aiming. Besides, the process may be “accident-prone”. For example, it is possible that the Greek government that emerges after elections due in April will ask to renegotiate the deal.

The Lady Vanishes

Our one-night stand with freedom

By George Jonas

I wrote in a recent column that individual liberty diminished during the last half-century while state intrusion into people’s business and private affairs increased. A reader demanded examples. This intrigued me. The growth of the administrative state in the last 50 years has been no less noticeable than, say, advances in medicine. Yet if I had written “medical know-how has advanced since the war” I doubt if any reader would have demanded examples.

I guess that’s because medical advances are welcome, but increased government and decreased liberty aren’t. Many are bothered by decreased liberty, but those who like government — yes, there are such people — worry that it’s not increasing quickly enough. Why, it’s scandalous that anyone can still get a canary without a licence.

We in the West are gung-ho to export democracy, but sometimes it seems we’re keen to ship it overseas mainly because we’ve not much use for it ourselves. We go through these Mao-jacketed phases when we export democracy and import tyranny. Perhaps before exporting democracy wholesale, we should try it at home.

All right, this is just a wisecrack, but what comes next isn’t. We went from pre-democracy directly to post-democracy, leaping over democracy on the way. In 18th-century France, after removing the King’s head from the body politic, the revolutionaries replaced it with their own. Liberty’s children began building their brave new world by turning Reason into a deity. That’s when the state turned into a secular theocracy, worshipping shibboleths of its own making as though they were divine revelations.

Is Something Better than Nothing?

Greek Deal Leaves Europe on the Road to Disaster

By Clive Crook

If Europe’s new plan for Greece succeeds, nobody will be more surprised than the politicians who designed it. At best, the arrangement is a holding action, one that fails yet again to deal with the much larger confidence crisis facing the euro area.

The deal announced on Tuesday starts with private lenders. Their representatives agreed to accept even bigger losses on Greek government bonds than previously discussed. The bonds’ face value will be cut by 53.5 percent, and they’ll pay a low interest rate, starting at 2 percent then rising later. Altogether, this reduces their net present value by about 75 percent, far more than deemed necessary just weeks ago.

The Future of the Euro

Footing the bill for malinvestments will shape the future of the euro

by Philipp Bagus

The problems of the eurozone are ultimately malinvestments. In Greece these days the struggle continues about who will ultimately foot the bill for these investments. During the early 2000s an expansionary monetary policy lowered interest rates artificially. Entrepreneurs financed investment projects that only looked profitable due to the low interest rates but were not sustained by real savings. Housing bubbles and consumption booms developed in the periphery.

Watching the Monetary Politbureau

The Age of Kremlinology

Ben Bernanke, chief of the monetary politbureau, praying for his theories to work.

By Pater Tenebrarum

As long time readers know, we have often compared the parsing of the statements issued by the Federal Reserve to the now defunct job of 'Kremlinology'. This was a quite similar exercise during the cold war era, when knowledgeable journalists and observers of geopolitics used to parse every phrase emanating from the Moscow politbureau in the Kremlin to discover the hidden meaning in its often obscure statements.

Were reformers gaining ground? Was the old guard getting ready to alter course? Were the hawks or the doves prevailing? These seemed all highly important questions in an age of 'mutually assured destruction', with tens of thousands of nuclear armed warheads ready to rub out civilization at the push of a button.

Beliefs matter. A lot.

Dangerous Ideas

by chris martenson

We are at a key turning moment in history. The actions that we will soon decide to take will be determined by the beliefs we hold. At a time like this, holding the wrong set of beliefs can destroy your wealth, sap your joy, and even prove to be life-shortening.

Knowing the 'right' sets of beliefs to hold is never easy, but it is especially difficult at large turning points because, by definition, most people are holding onto old beliefs. Running against the crowd is difficult for everyone and impossible for many.

“If you think you can or think you cannot, you are correct.” 

~ Henry Ford

Beliefs matter. A lot. 

One’s experiences in life and one’s beliefs are closely connected. For instance, simply believing in the likelihood of success vastly improves the chances of good things happening to us and our accomplishing difficult tasks. 

Economic Lessons in the News

50p tax rate 'failing to boost revenues’

The U.K. government is learning about the economic lesson that "if you tax something, you get less of it."  Following an increase in the top marginal income tax rate to 50%, tax revenues from high-income taxpayers are falling, and are not going up, as the Treasury somehow expected by ignoring the economic lesson that "people respond to incentives." A U.K. Treasury official explained the disappointing drop in tax revenues by saying it "was partly due to highly-paid individuals arranging their affairs to avoid paying the 50% rate."

By Robert Winnett, and James Kirkup

The amount of income tax paid fell sharply last month in the first formal indication that the new 50p higher rate is not raising the expected amount of revenue.

Liberty, Economy and Ecology

Government must be the moderator, not the manager

By John A. Baden and Robert Ethie

Prosperity and Ecology

For years environmentalists ignored or discounted the strong correlation between economic prosperity and environmental concern. But when prosperity is at risk, people willingly trade environmental quality for economic gain. This occurs even in wealthy nations. In our political campaigns environmental themes are crowded out by economic issues. As Michael R. Deland, former chairman of the President’s Council on Environmental Quality, observed: "in a recession there is an increased sensitivity to the job side of the equation."

This is because wealth fosters both environmental concern and the capacity to exercise that concern in a concrete way, e.g., with sewage treatment plants. The 1992 World Bank World Development Report shows that less than two percent of sewage in Latin America is treated. Worldwide more than one billion people have no safe water. In China, two-thirds of rivers near large cities are too polluted for fish. These are problems that require capital, not promises and Green pretenses.

How to implode a supernova star

When Risk Is Disconnected From Consequence, the System Itself Is at Risk   

If we understand risk cannot be eliminated, it can only be transferred, then we will understand why the current financial trickery in Europe and elsewhere is doomed to fail.

by Charles Hugh Smith

The entire global economy's fundamental financial instability can be traced back to one simple rule of Nature: risk cannot be eliminated, it can only be transferred to others or masked. And when it is transferred to others or masked, then the causal feedback between risk and consequence is severed.

Once risk has been disconnected from consequence, then it is impossible to discover the price of capital and risk. Once capital and risk have been mispriced, then the inevitable result is misallocation of capital and a positive feedback loop of self-referential, self-reinforcing risk.

Once the causal negative feedback of the real world--consequence--is no longer available to those taking on risk, then only positive feedback remains. Positive feedback inevitably leads to runaway reactions that self-destruct.

Moral Cover and Business Opportunities

Green Bootleggers and Baptists
By Bjørn Lomborg

In May, the United Nations’ International Panel on Climate Change made media waves with a new report on renewable energy. As in the past, the IPCC first issued a short summary; only later would it reveal all of the data. So it was left up to the IPCC’s spin-doctors to present the take-home message for journalists.

The first line of the IPCC’s press release declared, “Close to 80% of the world‘s energy supply could be met by renewables by mid-century if backed by the right enabling public policies.” That story was repeated by media organizations worldwide.

Last month, the IPCC released the full report, together with the data behind this startlingly optimistic claim. Only then did it emerge that it was based solely on the most optimistic of 164 modeling scenarios that researchers investigated. And this single scenario stemmed from a single study that was traced back to a report by the environmental organization Greenpeace. The author of that report – a Greenpeace staff member – was one of the IPCC’s lead authors.

Fast-talking political scam artists

The Ongoing Recovery from the Folly of Intellectuals

By Patrick Cox   

I’ve often referred to a theory of business cycles that was first described by the Austrian Joseph Schumpeter, but amplified by contemporary American Thomas Sowell. Both are brilliant economists who have described in mathematical detail how free markets produce the most wealth and well-being for society, including for those at the lower end of the financial spectrum.

It is their explanation for why things go wrong, however, that I find most illuminating. Both Schumpeter and Sowell write about “intellectuals” who have academic credentials of some sort but are lacking in knowledge that would make them particularly valuable to the market. Incapable of commanding significant wealth and status through voluntary market mechanisms, these intellectuals resent the wealth of more-successful people. As a result, they envy and resent the entire market system that has failed to reward them as they believe they deserve to be rewarded.

Others have also explored this theme. Another Austrian, Helmut Schoeck, wrote the book that is widely considered a masterpiece of sociology, Envy: A Theory of Social Behavior (Der Neid: Eine Theorie der Gesellschaft). You can go back even further, if you like, to the Tenth Commandment’s proscription on “coveting.”

The Strength of Human Materials

The New Generation

The posthumous tale of a Russian professor’s nightmarish encounter with a former student

By Aleksandr Solzhenitsyn

They were writing the Strength of Materials exam.

Anatoly Pavlovich Vozdvizhensky, an engineer and associate professor in the Faculty of Civil Engineering, could see that his student Konoplyov’s face was very flushed.  He had broken into a sweat and had missed his turn to come up to the examiner’s desk. Then, with a heavy gait, he approached and quietly asked for a different set of questions. Anatoly Pavlovich gazed at the sweaty face beneath a low forehead and met the desperate, imploring look in his bright eyes—and he gave him some new questions.