The Theatre of the Absurd

Too late for prayers and useless pity

 Mrs. Ethel Chauvenet: Does Elwood see anybody these days?

 Veta Louise Simmons: Oh, yes, Aunt Ethel, Elwood sees “somebody.”
                                                       -The play, Harvey

by Mark Grant

Andrew Ross Sorkin once speculated that I was the next “Doctor Doom.” Anyone that knows me or that reads my commentary with any frequency would know that this is hardly my personality nor would I stir pots for the pleasure of watching the froth. Sometimes it is just that I can see the rabbit leaning on the light post before others even see the street corner upon which it is standing. Others may also see the lamp post but they are frightened to admit it because their leaders have screamed for so long that it isn’t there and will never be there; never mind any 6’3” pookah. However as the light is beginning to dawn and as the early morning shadows that played tricks with your vision dissipate; more and more people can see the vague outline of Harvey leaning against the lamp post and, startled by his presence or not, they can no longer turn away and pretend him out of existence.

“What can I do for you Mr. Dowd?

 “What did you have in mind?”

The troika arrives in Athens tomorrow. The preliminary estimates of meeting the budgetary targets under the Memorandum of Understanding signed off on by the EU, the IMF and the Greek government indicate an achievement somewhat akin to an Olympian running down the track in the opposite direction. A novel approach, no doubt, but one hardly likely to win any race.

Beware of Greeks bearing gifts

Can Shakespeare illuminate the Greek crisis?

The National Theatre is scouring Ancient Greece, via Timon of Athens, for moral thoughts on the recession.

by Patrick Marmion 

A Shakespeare play about a Greek who takes on too much debt and is then hung out to dry by his friends? It is surely a gift of a play, the very thing which we have been looking for to act as a metaphor not just for the financial crisis in general, but for the Eurozone crisis in particular. The miracle is perhaps that the UK National Theatre’s artistic director, Nicholas Hytner, hadn’t thought of staging Timon of Athens before.

With Simon Russell Beale in the title role, the modern-dress production is certain to be a big hit. It also ticks the social-commentary boxes and maintains the National Theatre’s need to be ‘relevant’. Hytner ensures, moreover, that the play is staged as a thoroughly contemporary parable of consumption, debt and ruin. Timon and the wealthy nobility of Ancient Greece are suited and booted as corporate stiffs in a world hermetically sealed from ordinary people who are here presented as whistle-blasting rioters protesting noisily but at the security gates.

Inside what is surely the Sainsbury Wing of London’s National Gallery, the play kicks off with a champagne reception celebrating a sponsorship deal in ‘The Timon Room’. The room houses what else but El Greco’s painting of Jesus casting out moneylenders from the temple. While Timon bathes in the spectacle of his munificence, the collection of favoured artists and groupies clutching flutes of bubbly fill out a world in which Shakespeare’s vision of Ancient Greece seems to map perfectly on to the twenty-first century.

In a confessional, postmodern world where truth is relative, subjectivity is king

Are Roswell believers really that barmy?

It’s easy to mock the geeks who think aliens crash-landed in New Mexico, but their paranoia is part of a big trend today.

by Patrick West 

’X-Files fans. Create the effect of being abducted by aliens by drinking two bottles of vodka. You’ll invariably wake up in a strange place the following morning, having had your memory mysteriously “erased”.’

So ran a ‘Top Tip’ in Viz comic some years ago. Such advice may be sarcastic, but it does demonstrate that we tend to mistrust tales of alien abduction. There is the suspicion that those who profess to have had one were probably drunk or stoned at the time, or that they’re congenital fantasists, or mentally unstable.

This month sees the sixty-fifth anniversary of the Roswell incident of 1947, when, legend has it, a flying saucer crash-landed in New Mexico. The US authorities supposedly removed five humanoid corpses from the wreckage, hid them, and have been trying to cover up the event ever since - although they continue to insist that the wreckage was merely that of a high-altitude weather balloon. Still, the fable persists, and now a former CIA agent, Chase Brandon, has surfaced to endorse it, telling the Huffington Post: ‘It was not a damn weather balloon - it was what it was billed when people first reported it. It was a craft that clearly did not come from this planet, it crashed and I don’t doubt for a second that the use of the word “remains” and “cadavers” was exactly what people were talking about.’

The Cost Of Government Regulation: $1.75 Trillion

The Cost Of "Intervention"

By Bill Buckler

The Competitive Enterprise Institute (CEI) is a small “think tank” in Washington DC which puts out an annual report called: “Ten Thousand Commandments”. The report deals with the regulatory agencies of the US federal government and the cost of the regulations they continually introduce - and enforce. This report would be typical of the regulatory function of pretty well every government in the world.

In all interventionist economies, regulations are not set by the “lawmakers”. The “lawmakers” merely pass the laws, their enforcement is left to the various bureaucratic departments of government. And in order to “enforce” the laws, the bureaucrats see it as their function to impose regulations - countless thousands of them. The cost of complying with these regulations is met by those being regulated. It does NOT show up in the annual budgets (funded or unfunded) of the government.

In their Ten Thousand Commandments 2012 report which was released in June, the CEI estimates the cost of US government regulation at $US 1.75 TRILLION. That is just under half (48 percent) of the budget of the federal government. It is almost ten times the total of all corporate taxes collected and almost double the total collected from individual income taxes. It is also one-third higher than the total of all pre-tax corporate profits. It is the hidden cost of doing business in an interventionist economy. The fact that the cost of complying with these regulations is substantially higher than the total of corporate profits is a stark illustration of the end result of economic intervention. That end result is capital consumption.

In the US, the federal government lists its regulations in what is called the Code of Federal Regulations. These rules of the economic “game” cover 169,000 pages and more than ten new ones are added every day, seven days a week and 365 days a year. In 2011, the US Congress passed a total of 81 new “laws” while government agencies issued 3,807 new regulations. As the CEI points out, if there ever was an example of government without the consent of ANYONE - this is it.

Everything You Love You Owe to Free Markets

The state thrives on an economically ignorant public

By Llewellyn H. Rockwell Jr

I'm sure that you have had this experience before, or something similar to it. You are sitting at lunch in a nice restaurant or perhaps a hotel. Waiters are coming and going. The food is fantastic. The conversation about all things is going well. You talk about the weather, music, movies, health, trivialities in the news, kids, and so on. But then the topic turns to economics, and things change.

You are not the aggressive type so you don't proclaim the merits of the free market immediately. You wait and let the others talk. Their biases against business appear right away in the repetition of the media's latest calumny against the market, such as that gas station owners are causing inflation by jacking up prices to pad their pockets at our expense, or that Walmart is, of course, the worst possible thing that can ever happen to a community.

You begin to offer a corrective, pointing out the other side. Then the truth emerges in the form of a naïve if definitive announcement from one person: "Well, I suppose I'm really a socialist at heart." Others nod in agreement.

On one hand there is nothing to say, really. You are surrounded by the blessings of capitalism. The buffet table, which you and your lunch partners only had to walk into a building to find, has a greater variety of food at a cheaper price than that which was available to any living person — king, lord, duke, plutocrat, or pope — in almost all of the history of the world. Not even 50 years ago would this have been imaginable.

All of history has been defined by the struggle for food. And yet that struggle has been abolished, not just for the rich but for everyone living in developed economies. The ancients, peering into this scene, might have assumed it to be Elysium. Medieval man conjured up such scenes only in visions of Utopia. Even in the late 19th century, the most gilded palace of the richest industrialist required a vast staff and immense trouble to come anywhere near approximating it.

We owe this scene to capitalism. To put it differently, we owe this scene to centuries of capital accumulation at the hands of free people who have put capital to work on behalf of economic innovations, at once competing with others for profit and cooperating with millions upon millions of people in an ever-expanding global network of the division of labor. The savings, investments, risks, and work of hundreds of years and uncountable numbers of free people have gone into making this scene possible, thanks to the ever-remarkable capacity for a society developing under conditions of liberty to achieve the highest aspirations of the society's members.

IMF Seeks to Halt Aid to Greece

September Bankruptcy Awaits - Dominoes Will Fall

By Mike "Mish" Shedlock

According to Der Spiegel, the IMF Wants to Stop Aid to Greece as soon as the ESM is up and running in September. At that time Greece would become bankrupt.

This is a translation from German: 

The patience of the International Monetary Fund (IMF) with Greece comes to an end: According to information obtained by SPIEGEL, senior IMF officials told EU leaders in Brussels that the IMF was no longer willing to provide additional funds for Greece.

The Troika estimates that Greece needs between ten and 50 billion € to meet targets, but many governments in the euro zone are no longer willing to shoulder new burdens. In addition, countries like the Netherlands and Finland, have linked their support because the IMF was involved.

Falling Interest Rates Destroy Capital

The Sudden Capital Death Syndrome

by Keith Weiner

Falling interest rates are a feature of our current monetary regime, so central that any look at a graph of 10-year Treasury yields shows that it is a ratchet (and a racket, but that is a topic for another day!).  There are corrections, but over 31 years the rate of interest has been falling too steadily and for too long to be the product of random chance.  It is a salient, if not the central fact, of life in the irredeemable US dollar system, as I have written (http://keithweiner.posterous.com/irredeemable-paper-money-feature-451).

Here is a graph of the interest rate on the 10-year US Treasury bond.  The graph begins in the second half of July 1981.  This was the peak of the parabolic rise interest rates, with the rate at around 16%.  Today, the rate is 1.6%.

Pathological Falling Interest Rates

Professor Antal Fekete introduced the proposition that a falling interest rate (as opposed to a low and stable rate) causes capital destruction.  But all other economists, commentators, and observers miss the point.  It is no less a phenomenon for being unseen.  In early 2008, a question was left begging: how could a company like Bear Stearns which had strong and growing net income collapse so suddenly?

Here is Bear’s five-year net income and total shareholder’s equity

Year	2003	2004	2005	2006	2007
Income	$1.156B	$1.345B	$1.462B	$2.054B	$0.233
Equity	$7.47B	$8.99B	$10.8B	$12.1B	$11.8B

Isn’t that odd?  Even in 2007, Bear shows a profit.  And they show robust growth in shareholder equity, with only a minor setback in 2007.

And yet, by early 2008 Bear experienced what I will call Sudden Capital Death Syndrome.  JP Morgan bought them on Mar 16, for just over $1B.  But the deal hinged on the Fed taking on $29B of Bear’s liabilities, so the real enterprise value was closer to $-19B.

We Have Forgotten What Even the Sumerians and Babylonians Knew About Money

The amount of debts will always surpass the size of the real economy

by WashingtonsBlog

Mike “Mish” Shedlock has repeatedly pointed out that we have reached “peak credit” – and there will not in our lifetimes be as much credit as we saw from 2000-2008.

I noted last year:

Michael Hudson is a highly-regarded economist. He is a Distinguished Research Professor at the University of Missouri, Kansas City, who has advised the U.S., Canadian, Mexican and Latvian governments as well as the United Nations Institute for Training and Research. He is a former Wall Street economist at Chase Manhattan Bank who also helped establish the world’s first sovereign debt fund.

Hudson says that – in every country and throughout history – debt always grows exponentially, while the economy always grows as an S-curve.

Moreover, Hudson says that the ancient Sumerians and Babylonians knew that debts had to be periodically forgiven, because the amount of debts will always surpass the size of the real economy.

For example, Hudson noted in 2004:

Mesopotamian economic thought c. 2000 BC rested on a more realistic mathematical foundation than does today’s orthodoxy. At least the Babylonians appear to have recognized that over time the debt overhead became more and more intrusive as it tended to exceed the ability to pay, culminating in a concentration of property ownership in the hands of creditors.

Trashing Achievements

It's called Envy

by Thomas Sowell

There was a time, within living memory, when the achievements of others were not only admired but were often taken as an inspiration for imitation of the same qualities that had served these achievers well, even if we were not in the same field of endeavor and were not expecting to achieve on the same scale.

The perseverance of Thomas Edison, as he tried scores of materials for the filament of the light bulb he was inventing; the dedication of Abraham Lincoln as he studied law on his own while struggling to make a living – these were things young people were taught to admire, even if they had no intention of becoming inventors or lawyers, much less President of the United States.

Somewhere along the way, all that changed. Today, the very concept of achievement is de-emphasized and sometimes attacked. Following in the footsteps of Barack Obama, Professor Elizabeth Warren of Harvard has made the downgrading of high achievers the centerpiece of her election campaign against Senator Scott Brown.

To cheering audiences, Professor Warren says, "there is nobody in this country who got rich on his own. Nobody. You build a factory out there, good for you, but I want to be clear. You moved your goods to market on the roads the rest of us paid for. You hired workers that the rest of us paid to educate."

Censorship and Greatness

We have to rely on our own sense of limits and boundaries

by Theodore Dalrymple

Nothing infuriates like the truth, especially when it controverts a deeply-held prejudice such as that censorship is bad for great art and even incompatible with its production. Whenever, therefore, I adduce a certain truth that is obvious to the point of truism, namely that the majority of great art in human history has been produced in conditions of censorship, or at least of such severe self-inhibition because of social or political pressure that it amounts to censorship, I find that I am the object of fury, as if I were personally the Chief Inquisitor of the Spanish Inquisition. Here is a truth that, even if it is true, ought never to be uttered: that ought, in fact, to be the object of self-censorship.

The IMF is the leader of the Eurosceptic camp now

IMF loses all faith in the euro project

By Ambrose Evans-Pritchard

The IMF’s latest report on the eurozone is an astonishing document. When the full history of this episode is written, this "Article IV Consultation" will be cited as a key exhibit.

The euro area crisis has reached a new and critical stage. Despite major policy actions, financial markets in parts of the region remain under acute stress, raising questions about the viability of the monetary union itself."

The adverse links between sovereigns, banks, and the real economy are stronger than ever. Financial markets are increasingly fragmenting along national borders.

It said the eurozone is unworkable in its current form, a half-baked currency union that spreads contagion like wildfire without the backup machinery to contain the damage:

The euro area is in an uncomfortable and unsustainable halfway point. While it is sufficiently integrated to allow escalating problems in one country to spill over to others, it lacks the economic flexibility or policy tools to deal with these spillovers.

Crucially, the euro area also lacks essential financial and fiscal policy tools to stabilise the monetary union. As the crisis has illustrated, without a strong common financial stability framework, banking problems are hard to contain and resolve in an integrated market.

Bulgaria in no danger to become Greece

“Southern Europe Does Almost Nothing—Except Complain”

By Wolf Richter   

“While Eastern Europe is largely implementing the necessary reforms, Southern Europe does almost nothing—except complain,” said Bulgarian Finance Minister Simeon Djankov in an interview, a withering blast aimed at neighboring Greece.

And in Greece, “The risk of bankruptcy is still existent,” said Fotis Kouvelis, the leader of Democratic Left, smallest of the three parties in the coalition government. His way of reminding the bailout Troika—the EU, the European Central Bank (ECB), and the IMF—to open the money spigot all the way, or else! The Troika inspectors are scheduled to return to Athens next week to have another look [read.... Greece Flails About, Troika Inspectors Paint “Awful Picture,” Merkel Draws A Line, German Industry & Voters Back Her: It’s Almost Over For Greece].

In September, armed with the inspectors’ final report, the Troika will decide whether or not to make the next bailout payment to Greece. If the decision is no, Greece will default and most likely return to the drachma.

“We demand an extension,” Kouvelis said, summarizing eloquently the strategy since the June elections. Instead of implementing with fiendish dedication the reforms that the prior government had agreed to in exchange for the second bailout package, the new government insists on renegotiating those reforms and then delaying those renegotiated reforms, while insisting on the continuous flow of other people’s billions. He complained about the recession, and that therefore structural reforms couldn’t be implemented.

How close are we to new Great Depression?

The Broken Link

The risk of a new depression - a sustained, severe recession - has struck fear into the heart of markets and driven monetary policy in developed economies since the current financial crisis began.

By Catherine Boyle

The risk of a new depression - a sustained, severe recession - has struck fear into the heart of markets and driven monetary policy in developed economies since the current financial crisis began.

"We're in a very unfortunate position to be here," Richard Duncan, author of The New Depression, warned on CNBC's "Squawk Box Europe" Monday.

"When we broke the link between money and gold, this removed all constraints on credit creation. This explosion of credit created the world we live in, but it now seems that credit cannot expand any further because the private sector is incapable of repaying the debt it has already, and if credit begins to contract, there's a very real danger that we will collapse into a new Great Depression," he argued.

"If this credit bubble pops, the depression could be so severe that I don't think our civilization could survive it."

The Caesar in DC is busy

Building roadblocks

Instead of roads and bridges, Obama-sized government funds stasis and sclerosis: The Hoover Dam of regulatory obstruction, the Golden Gateway to dependency.

By mark steyn

On the evidence of last week's Republican campaign events, President Obama's instant classic – "You didn't build that" – is to Mitt Romney what that radioactive arachnid is to Spider-Man: It got under his skin, and, in an instant, the geeky stiff was transformed into a muscular Captain Capitalism swinging through the streets and deftly squirting his webbing all over Community-Organizerman. Rattled by the reborn Romney, the Obama campaign launched an attack on Romney's attack on Obama's attack on American business. First they showed Romney quoting Obama: "He said, 'If you've got a business, you didn't build that. Somebody else made that happen.'" And then the Obama team moved in for the kill: "The only problem? That's not what he said."

Indeed. What Obama actually said was:

Exasperated lenders get blunt with Greece

The Fat Lady is on Stage

By Dina Kyriakidou

The International Monetary Fund's mission chief for Greece, Poul Thomsen, walked grim-faced into his first meeting with newly elected Prime Minister Antonis Samaras on July 5 wearing a black tie looking as if he was going to a funeral.

Whether he was making a point or not, the first meet-and-greet visit by Greece's exasperated international lenders with the new government was blunt, both sides told Reuters.

"Talking to them was like going to a doctor, who is looking over your tests shaking his head, and you're wondering if you are going to live or die," a senior Greek government official told Reuters, on condition of anonymity, after the visit.

What's So Bad About Deflation?

What's not to like?

Perhaps all the assumptions about inflation being good and deflation being bad miss the key question: cui bono (to whose benefit?)

by Charles Hugh-Smith

One of the most widely accepted truisms of our time is that deflation is bad: bad for debtors, bad for the indebted government, and therefore bad for the economy.

What all this overlooks is how wonderful mild deflation is for those who owe no debt but who own the debt and the income streams that flow from debt. What the "deflation is bad" argument ignores is who controls the financial and political systems, and what set of conditions benefits them.

The entire Survival+ critique is based on one simple but revealing question: cui bono--to whose benefit?

What exactly is the American military?

Meet America's socialist military

BY ROSA BROOKS

F. Scott Fitzgerald, meticulous chronicler of American social class, famously confided to Ernest Hemingway that "the rich are different from the rest of us."

"Yes," was Hemingway's laconic reply. "They have more money."

These days, the same could be said of the American military. Is the military different from the rest of us? Yes -- it has more money.

How new technology is driving a U.S. industrial comeback.

The Future of Manufacturing Is in America, Not China

BY VIVEK WADHWA

A furor broke out last week after it was reported that the uniforms of U.S. Olympians would be manufactured in China. "They should take all the uniforms, put them in a big pile, and burn them," said an apoplectic Sen. Harry Reid. The story tapped into the anger -- and fear -- that Americans feel about the loss of manufacturing to China. Seduced by government subsidies, cheap labor, lax regulations, and a rigged currency, U.S. industry has rushed to China in recent decades, with millions of American jobs lost. It is these fears, rather than the Olympic uniforms themselves, that triggered last week's congressional uproar.

But Ralph Lauren berets aside, the larger trends show that the tide has turned, and it is China's turn to worry. Many CEOs, including Dow Chemicals' Andrew Liveris, have declared their intentions to bring manufacturing back to the United States. What is going to accelerate the trend isn't, as people believe, the rising cost of Chinese labor or a rising yuan. The real threat to China comes from technology. Technical advances will soon lead to the same hollowing out of China's manufacturing industry that they have to U.S industry over the past two decades.

Several technologies advancing and converging will cause this.

First, robotics. The robots of today aren't the androids or Cylons that we are used to seeing in science fiction movies, but specialized electromechanical devices run by software and remote control. As computers become more powerful, so do the abilities of these devices. Robots are now capable of performing surgery, milking cows, doing military reconnaissance and combat, and flying fighter jets. Several companies, such Willow Garage, iRobot, and 9th Sense, sell robot-development kits for which university students and open-source communities are developing ever more sophisticated applications.

Black America & The Marriage Gap

From “family values” to “collective action”

By ROD DREHER

As an addendum to the earlier discussion of America & hip-hop, consider this story from The New York Times. It begins with an anecdote about two white women, friends from childhood, who have ended up in very different places economically:

But a friendship that evokes parity by day becomes a study of inequality at night and a testament to the way family structure deepens class divides. Ms. Faulkner is married and living on two paychecks, while Ms. Schairer is raising her children by herself. That gives the Faulkner family a profound advantage in income and nurturing time, and makes their children statistically more likely to finish college, find good jobs and form stable marriages.

Ms. Faulkner goes home to a trim subdivision and weekends crowded with children’s events. Ms. Schairer’s rent consumes more than half her income, and she scrapes by on food stamps.

The Rule of Law

What do we do about it?

by Andrew P. Napolitano

The greatest distinguishing factor between countries in which there is some freedom and those where authoritarian governments manage personal behavior is the Rule of Law. The idea that the very laws that the government is charged with enforcing could restrain the government itself is uniquely Western and was accepted with near unanimity at the time of the creation of the American Republic. Without that concept underlying the exercise of governmental power, there is little hope for freedom.

The Rule of Law is a three-legged stool on which freedom sits. The first leg requires that all laws be enacted in advance of the behavior they seek to regulate and be crafted and promulgated in public by a legitimate authority. The goal of all laws must be the preservation of individual freedom. A law is not legitimate if it is written by an evil genius in secret or if it punishes behavior that was lawful when the behavior took place or if its goal is to solidify the strength of those in power. It also is not legitimate if it is written by the president instead of Congress.

Happy interventionists

The economist’s attack on your property

Pieter Brueghel the Younger, 'Paying the Tax (The Tax Collector)' 

by DETLEV SCHLICHTER

Last week, the Deutsches Institut für Wirtschaftsforschung (DIW), or German Institute for Economic Research, an influential think tank, proposed an ingenious solution to the Euro Zone debt crisis. The German government should issue a Zwangsanleihe, a compulsory bond that every German with savings of €250,000 or more should be compelled to underwrite with 10 percent of his or her own money. Such measures could help the German state grab another €230 billion in resources from the private sector to support its bailout commitments, the DIW economists announced with apparent satisfaction.

Didn’t economists once use to explain the importance of clearly delineated and legally protected private property, of free and voluntary exchange, and of true market prices? By explaining how capitalism works, these economists also demonstrated the limits and dangers of state interference, which is the reason why those who rather put their faith in strong political leadership and governmental design than the spontaneous order of free markets called economics – after Thomas Carlyle – the ‘dismal science’.