The Wheels Are Coming Off The Wagon Again

Spain, Greece and The Union of Hopers

By Pater Tenebrarum

The evolving situation and growing uncertainty over Greece's future and the recent fourth attempt to right the floundering ship of Spain's banking industry predictably has markets on edge.

As to Spain's banking plan, it is already ridiculed for the way too low cost estimates mentioned by finance minister Louis de Guindos, who opined that   less than €15 billion in public funds will be required and that 'no effect on the public debt is to be expected'. In some other universe perhaps, but not in this one.

Embracing progress

No thanks to fearmongers, life is good on planet Earth

By Marian L. Tupy

“The battle to feed all of humanity is over. In the 1970s, hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.” Thus began “The Population Bomb,” a 1968 book by Stanford University professor Paul Ehrlich. Since those now infamous words were written, world population has doubled from 3.5 billion to 7 billion, inflation-adjusted average annual income per person has risen from $3,147 to $5,997, and life expectancy at birth has increased from 59 years to 69 years.

The Arrival of Peak Government

The down slope of Peak Government will be disorderly and rife with unintended consequences

by charles hugh smith

Most informed people are familiar with the concept of Peak Oil, but fewer are aware that we’re also entering the era of Peak Government. The central misconception of Peak Oil -- that it’s not about “running out of oil,” it’s about running out of cheap, easy-to-access oil -- can also be applied to Peak Government: It’s not about government disappearing, it’s about government shrinking.

Central government -- the Central State -- has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State. Thus we have little recent historical experience of Peak Government and few if any conceptual guideposts to help us understand this contraction.

Monti warns of tears in Italy's social fabric

In Italy, the economic crisis is transformed into a "cultural" one

By Reuters

Italy's social fabric is being torn by recession and tensions are growing among its citizens, Prime Minister Mario Monti said on Sunday.

Speaking to a group of students in the central Italian town of Arezzo, Monti urged Italians to stick together and "not give up" in the face of a shrinking economy and rising unemployment.

Chameleon Nation

The Noble Lie

by Victor Hanson

Sometimes a trivial embarrassment can become a teachable moment. It was recently revealed that Harvard professor and U.S. Senate candidate Elizabeth Warren had self-identified as a Native American for nearly a decade -- apparently to enhance her academic career by claiming minority status. Warren, a blond multimillionaire, could not substantiate her claim of 1/32 Cherokee heritage. (And would it have reflected any better on her if she could have?) Instead, she fell back on the stereotyped caricature that she had "high cheekbones."

Not long ago, University of Colorado academic Ward Churchill was likewise exposed as a fraud in his claims of Native American ancestry. This racial con artist was able to fabricate an entire minority identity and parlay it into an activist professorship otherwise not possible for a white male of his limited talent.

Greece Should Adopt The US Dollar

A Crazy Idea That Might Just Work

By Charles Hugh Smith

Before you dismiss my crazy idea out of hand, hear me out. 
It might not be as crazy as it seems on first blush.
I have a straightforward three-point plan to set Greece on a sustainable, positive pathway. But before we can understand how the plan resolves Greece's no-win situation (yet another Kobayashi Maru scenario), we first need to understand very clearly why the euro currency failed.

I have covered this many times before: 

Why The European Union Is Doomed (March 28, 2011)
Why the Eurozone and the Euro Are Both Doomed (June 23, 2011)
Three More Reasons the Eurozone Is Doomed (September 22, 2011)
Yet Another Reason Why the Euro Is Doomed (October 17, 2011)

If we had to distill the dynamic down to a single paragraph, it would be this: By accepting the "strong currency" euro that was supported by promises of fiscal prudence, Greece and the other weaker economies of Europe artificially raised market willingness to lend them money and lowered the interest rate they would pay. At the same time, the euro also lowered the cost of goods from Germany by eliminating the market arbitrage of currencies. I know this may sound complicated, but we can grasp the core dynamics using household analogies.

Ain't Gonna Work On Angie's Farm No More

A grand experiment gone bad

“The wind is rushing after us, and the clouds are flying after us, and the moon is plunging after us, and the whole wild night is in pursuit of us; but, so far we are pursued by nothing else.”

                 -Charles Dickens, The Tale of Two Cities

By Mark Grant

I have left St. John’s Newfoundland and I will be three days at sea now heading for Reykjavik, Iceland. The seas are up, the wind is cold and icy, the sky is that grey color of mid-winter in the arctic north and it is all reminiscent of what is taking place in Europe as the seams come undone and as bleak depression is the mood on the Continent.

How Brown Ruined California in His First Term

Governor Brown wants "Temporary" Tax hikes

By MIKE SHEDLOCK

California, like Greece is perpetually in fiscal trouble. Overoptimistic revenue forecasts coupled with spending $2 billion more than expected has California in a deep hole. Governor Jerry Brown has the same non-solution as ever, hike taxes.

Brown wants a "temporary" (as in seven years) tax hike. Given we all know there are no such things as temporary tax hikes in California (seven years is permanent enough in the first place), and also given the California school budget needs an axe, I say let him.

Please consider California deficit has soared to $16 billion, Gov. Jerry Brown says

The Greek Lie

Greece Explained In One Picture

We were going to do a caption contest out of this image, but unfortunately this is not funny. It is tragic. Many people will lose all their money, savings, livelihood, and more because of this..

What is it? 

It is a picture taken at the Athens ministry of finance.

The European Farce

Will the continent act to avert an economic cataclysm?

By Niall Ferguson:

In the midst of a severe financial crisis, the French have just elected a champagne socialist on promises of a 75 percent top tax rate and a lower retirement age. The Greeks also had an election in which the established parties lost to a ragbag of splinter groups. The outcome of the election was that they need to have another election. (Cue Zorba the Greek theme music.) Meanwhile, the wailing gloom of the flamenco emanates from Spain, where youth unemployment is now around 50 percent.

Within a few hours of arriving in London, I hear the following announcement on the train: “We apologize for the late departure of this service. This was due to the late arrival of essential personnel. [Translation: the driver overslept.] However, we are happy to inform customers that the London Underground is running a nearly normal service.” It’s that “nearly” that is so quintessentially English.

The New European Serfdom

Cutting Greece out of the Bank Bailout equation

by John Aziz

So let’s assume Greece is going to leave the Eurozone and suffer the consequences of default, exit, capital controls, a deposit freeze, the drachmatization of euro claims, and depreciation.

It’s going to be a painful time for the Greek people. But what about for Greece’s highly-leveraged creditors, who must now bite the bullet of a disorderly default? Surely the ramifications of a Greek exit will be worse for the international financial system?

Apocalypse 2.0

Prediction is very difficult, especially if it’s about the future

by Marian L. Tupy

In 1972, the Club of Rome published an extremely popular and influential neo-Malthusian tract called The Limits to Growth. This apocalyptic warning about over-population, over-consumption, and environmental destruction sold some 12 million copies and was translated into 37 languages. According to the authors of The Limits to Growth, “Serious stresses involving population, resources, and environment are clearly visible ahead. Despite greater material output, the world’s people will be poorer in many ways than they are today.”

How accurate were those predictions? As I wrote on May 4 in the Washington Times, since the late 1960s,

 [The] world population has doubled from 3.5 billion to 7 billion, inflation-adjusted average annual income per person has risen from $3,147 to $5,997, and life expectancy at birth has increased from 59 years to 69 years.

Democracy and Debt

The Broken Link

By Michael Hudson

Book V of Aristotle’s Politics describes the eternal transition of oligarchies making themselves into hereditary aristocracies – which end up being overthrown by tyrants or develop internal rivalries as some families decide to “take the multitude into their camp” and usher in democracy, within which an oligarchy emerges once again, followed by aristocracy, democracy, and so on throughout history.

Debt has been the main dynamic driving these shifts – always with new twists and turns. It polarizes wealth to create a creditor class, whose oligarchic rule is ended as new leaders (“tyrants” to Aristotle) win popular support by cancelling the debts and redistributing property or taking its usufruct for the state.

How to talk about creative destruction

Schumpeter in the White House

by Guy Sorman

The 2012 presidential race will be, in part, a showdown between two different models of economic growth. President Barack Obama and his Democratic administration will defend the once-discredited and now-resurgent theory that government must act as the economy’s “tutor” and use public funds to stimulate it. The Republican nominee, presumably Mitt Romney, will advance the free-market argument that the main source of new growth is the innovative energy of American entrepreneurs and that government needs to get out of the way.

The Demography of Debtors

A government big enough to give you everything you want, isn't big enough to get you to give any of it back

By Mark Steyn

The other day, Abdul Qadir Fitrat, the governor of Afghanistan's central bank, fled the country. The only wonder is that there aren't more fleeing. Not Afghans; central bankers. I mean, you gotta figure that throughout the G-20 there are more than a few with the vague but growing feeling that the jig's up big time.

Round about the time the Afghan central banker was heading for the hills, the Greek central banker ventured some rare criticisms of his government. "Piling more taxes on taxpayers has reached its limit," said Giorgos Provopoulos. The alleged austerity measures do not "place enough emphasis on the containment of spending."

Western Sharia

Integration Versus Accommodation

By Andrew C. McCarthy

Ismail Belghar, a 36-year-old Muslim man living in Australia, assaulted, abducted, and nearly killed his sister-in-law. The victim, a 25-year-old Moroccan named Canan Kokden, had dared to take her older sister, Mrs. B, to the beach without Belghar’s permission. This heinous effrontery was amplified, Belghar later recounted for police, when Mrs. B thereupon “displayed her body,” sustaining the shoulder sunburn that tipped him off.

To Australians, this may have been, well, just a day at the beach. For Belghar, though, it was an “abhorrent” offense against sharia, Islam’s legal code and comprehensive societal framework.

Cheap Natural Gas Heralds an Energy Revolution

The Economics of Natural Gas

By S. Fred Singer

All bets are off for the future of energy in the United States and, indeed, the world, as the price of natural gas plummets to ever-lower values—thanks to the development of technology that can access gas and liquids trapped in hitherto inaccessible shale rocks. In 2011, shale gas accounted for a quarter of U.S. natural gas production. But this seemingly bright future may depend on a court decision (expected in June 2012) and, of course, on the outcome of the November elections.

They are making up the “plan” as they go along

Germany Has Waved The White Flag And Will Allow Printing And Inflation to the very end

"A common mistake that people make when trying to design something completely foolproof is to underestimate the ingenuity of complete fools."

            - Douglas Adams, The Hitchhiker's Guide to the Galaxy

By John Mauldin

For quite some time I have been making the case that for the eurozone to survive, the European Central Bank would have to print more money than any of us can now imagine. That the sentiment among European leaders was that they were prepared for such a move was clear – except for Germany, which is haunted by fears of a return to the days of the Weimar Republic and hyperinflation.

When Germany agreed to a fixed monetary union and a European Central Bank, it was with the clear understanding that it would be run along the lines of the German central bank, the Bundesbank. The members of the Bundesbank and the German members of the ECB were most outspoken about the need for a conservative monetary policy that would keep a clamp on inflation.

Hollande's economic illiteracy

Democracy is the theory that the common people know what they want and deserve to get it good and hard

By Mark Hendrickson

The election of Socialist Party candidate Francois Hollande to the presidency of France epitomizes the sorry state of contemporary democracy. By that, I don’t mean to imply that the French people should have voted for the incumbent, Nicolas Sarkozy. Neither would be capable of solving France’s intractable problems in a way acceptable to French voters, nor are the problems with democracy unique to France. To varying degrees they exist throughout Europe as well as here in the United States.

The Europe Crisis from a European Perspective

Flawed from the Start

by Alasdair Macleod

When we talk about Europe today in an economic context, we really mean the Eurozone, whose seventeen members are the core of Europe and share a common currency, the euro. The euro first came into existence thirteen years ago, on January 1, 1999, replacing national currencies for eleven states; Greece joined two years later. In theory, the idea of a common currency for European nations with common borders is logical, and it was Canadian economist Robert Mundell's work on optimum currency areas that provided much of the theoretical cover.

However, the concept was flawed from the start.

Europe has bet the farm. Let’s Roll

Things that go Bump in the Night

by Mark Grant

Europe is heading for a showdown and in a number of places; that much can be acknowledged with certainty. The first, and perhaps the most important, is the stand-off between France and the European Commission. The EU budgetary office is demanding that France reduce its deficit to 3.00% for 2012 while the projection is for 4.50% so that the Commission is threatening France with large fines. 

Black Swans And Complexity

Nassim Taleb is wrong about the financial crisis and black swans

by Jim Lewis

The ongoing financial crisis is not the result of a perplexing phenomenon of complexity. It is the beginning of a train wreck we have seen for decades. We are not wandering into a surprise or horrified by the dark specter of a Black Swan rearing its long tailed head; this macro crisis appeared on the horizon long ago, easily calculated by any actuary armed with the knowledge that governments were not investing tax streams, but stealing them for current consumption.

Double or Nothing

How Wall Street is Destroying Itself

by John Azis

There’s nothing controversial about the claim— reported on by Slate, Bloomberg and Harvard Magazine — that in the last 20 years Wall Street has moved away from an investment-led model, to a gambling-led model.

This was exemplified by the failure of LTCM which blew up unsuccessfully making huge interest rate bets for tiny profits, or “picking up nickels in front of a streamroller”, and by Jon Corzine’s MF Global doing practically the same thing with European debt (while at the same time stealing from clients).

As Nassim Taleb described in The Black Swan these kinds of trades — betting large amounts for small frequent profits — is extremely fragile because eventually (and probably sooner in the real world than in a model) losses will happen (and of course if you are betting big, losses will be big). If you are running your business on the basis of leverage, this is especially dangerous, because facing a margin call or a downgrade you may be left in a fire sale to raise collateral.

"Peak oil" is "Peak idiocy"

200 Year Supply of Oil in Green River Formation

By Mark Perry

The Green River Formation, the world's largest oil shale deposit, is located in a largely vacant region of mostly federal land on the western edge of the Rocky Mountains that includes portions of Wyoming, Utah, and Colorado (see map above).

Here's an excerpt from testimony about the Green River Formation that was provided on Thursday by Anu K. Mittal, Government Accountability Office (GAO) Director of Natural Resources and Environment, to the House Subcommittee on Energy and Environment, Committee on Science, Space, and Technology titled "Unconventional Oil and Gas Production: Opportunities and Challenges of Oil Shale Development":

Hayek’s Tolerant and Pluralistic Liberal Vision

Disagreement is the basis of tolerance and progress

by Steven Horwitz

I write this on the 113th birthday of F. A. Hayek, perhaps the most important economist and social philosopher of the twentieth century. So much has been written about Hayek and his contributions that it is sometimes hard to find a point of entry to say something both new and valuable. But that challenge hasn’t stopped me for the last 25 years, and it’s not going to stop me now.

While much has been said about Hayek’s economics, political theory, and theory of knowledge, not nearly as much has been said about his broader vision of a liberal society. It’s one thing to talk of constitutions and spontaneous orders and the use of knowledge in society, but what is the vision behind it all? What kind of world is the liberal order, what Hayek called the “Great Society,” at the more personal level?

A global program of mass human sacrifice

The New Holocaust Deniers

By Robert Zubrin 

Recently, in conjunction with publication of my new book, Merchants of Despair ^[1], which exposes the crimes of the global Malthusian movement, I was interviewed on the radio by a liberal talk show host. When I brought up the issue of race- or caste-targeted forced sterilization programs instituted in Peru, India, and many other Third World countries with USAID and World Bank funds, the host chose to deal with the matter by pooh-poohing the existence of these atrocities.

Everything is up for grabs this November

The Antietam of the Culture War

by Patrick J. Buchanan   

It took Joe Biden’s public embrace of same-sex marriage to smoke him out.

But after Joe told David Gregory of “Meet the Press” he was “absolutely comfortable” with homosexuals marrying, Barack Obama could not maintain his credibility with the cultural elite if he stuck with the biblical view that God ordained marriage as solely between a man and woman. The biblical view had to go.

Creating Jobs versus Creating Value

Creating jobs is easy; it’s creating value that’s hard

By Steven Horwitz

Picking on New York Times columnist Paul Krugman is one of the largest participation sports on the Internet. And rightfully so, since he often says ridiculous things that demand a response from those who understand basic economics better than he does, despite his having won a Nobel Prize. His January 26 column, “Jobs, Jobs and Cars,” has him once again making such an argument. This time it’s on the subject of job creation.

The miracles of the Free Market

"Mr. Gorbachev, tear down this wall!"

East Germany - before and after.

The Keynesian Cure for Hunger

Eat More

By Richard W. Fulmer

Sylvia Nasar, author of the New York Times bestseller, A Beautiful Mind, has a new book: Grand Pursuit: The Story of Economic Genius, which reviews the lives and ideas of a dozen economists from Marx to Keynes and Hayek to India’s Amartya Sen. It begins with a description of life in Jane Austen’s England (1775–1817). Briefly, it was a Malthusian world in which any improvement in living standards was quickly followed by an increase in population that drove living standards back down to the subsistence level—a level at which nine-tenths of the population was constantly at risk of death from disease and starvation. Nasar assures us that as grim as this world was, life was far worse on the Continent.

Shock and Awe in Stockton

The town the housing boom broke

By Michelle Conlin and Jim Christie

For decades, Stockton, California suffered a civic inferiority complex. Los Angeles had celebrities and sunny beaches. San Francisco was awash in tech futurism and post-pubescent billionaires. Stockton was the polyester, buy-generic cousin, a dingy commercial hub for Central Valley farms that was just far enough from the San Francisco Bay area to be an irrelevance for the state's coastal elites.
But then came the housing boom, and sorry Stockton practically started to strut. Its loamy farmlands - among the most fertile in the United States - gave way to shiny subdivisions. Middle-class families, priced out of the Bay area housing market, snapped up the new homes, happily trading extreme commutes for the suburban niceties of four bedrooms and a yard.

Europe's Crisis

A Roadmap From the Past

Hayek and Röpke saw it all coming

By Peter B. Doran & P. Bracy Bersnak

These are rough days for the European Union (EU). What began as a sovereign debt crisis has now metastasized into a political debacle for the leaders left holding the bag. Nicolas Sarkozy's electoral defeat in France, the ouster of an austerity-minded government in Greece; and last month's collapse of the governing coalition in the Netherlands are all symptoms of a deeper problem for Europe: bloated governments are hard to tame, even when there is no money left to pay for them.

This is bad news for Europe. But the political tumult on the continent is also a stunning vindication of the post-War thinkers who anticipated this outcome. These individuals, men like Friedrich von Hayek and Wilhelm Röpke, would become founding intellectual fathers behind the modern conservative movement in Europe and the United States. Even today, their foresight provides a defining roadmap for navigating away from Europe's current crisis and offers a chilling warning to the United States about repeating the same mistakes.

Dream deterred

Α defense system that turns out to be a mirage

By Kennette Benedict 

The dream of a shield against nuclear bombs has been around since the earliest days of the nuclear age. The idea has always been deceptively simple: Build missiles that can shoot down nuclear-tipped intercontinental ballistic missiles as they come across the ocean from the Soviet Union toward the United States (or vice-versa). Although this would be the equivalent of trying to hit a bullet with a bullet or an arrow with an arrow, there have always been political and military leaders who feel sure it can be done. The most recent efforts began 27 years ago with the Strategic Defense Initiative of the Reagan administration -- and have been pursued by missile defense agencies ever since.

A Seedy Business

You have to feed the government pig first

By Joseph Salerno

A Brooklyn bagel shop owner was assessed  $1, 650 in fines by a New York City Health Inspector because–get ready for this–poppy and sesame seeds fall to the floor as he makes his bagels.  Alex Gormakh, the owner and a recent immigrant from Russia, opened  B & B Empire Bagel Cafe in June 2011.  Gormakh’s deli passed inspections both before and after he was cited for violations in October, and in the most recent inspection it received the highest cleanliness grade of “A.”   Nevertheless, his appeal of the fine has been denied at two separate hearings.   As a fellow Brooklyn bagel shop owner, whose establishment did pass inspection, points out, no matter how many times a day you sweep there will always be an accumulation of seeds on the floor.  To avoid future citations, Gormakh and his son have now invested almost $900,000 in larger stainless steel preparation tables in the hope of avoiding seed fall out and a water-filter vacuum to suck up any wayward seeds.

But Gormakh has learned a valuable lesson in doing business in the American mixed economy:  

“If you want to work you have to pay.  In Russia, they call it corruption.  Here they call it something else.  Either way, you have to pay.”

The petty politics of the anti-inequality brigade

False premises and radical politics

by Daniel Ben-Ami 

It is easy to make the mistake of assuming there is a big drive towards equality in the world today. Politicians, pundits and even billionaire financiers rail against the dangers of inequality, excess and greed. A handful of Occupy protesters claiming to represent the ‘99 per cent’ against the super-rich ‘one per cent’ are widely lauded in influential circles. Parallel campaigns slate the wealthy for failing to pay their fair share of tax. Officially sanctioned campaigns promote fairness, social justice, social equality, equal access to education and the like.