Is Democracy Sustainable?

Democracy is for PR only in corrupt neofeudal nations

by Charles Hugh-Smith

Correspondent Chris rightly critiqued me for not mentioning democracy (or the lack thereof) in my recent entry on China: Do We Have What It Takes To Get From Here To There? Part 2: China. It is indeed vital to include democracy in any discussion of corruption, for it raises this question: is democracy possible in a corrupt society?

We can phrase the question as a corollary: in honor of my new book Why Things Are Falling Apart and What We Can Do About It , let's call it WTAFA Corollary #1:

If the citizenry cannot replace a dysfunctional government and/or limit the power of the financial Aristocracy at the ballot box, the nation is a democracy in name only.

In other words, if the citizenry cannot dislodge a parasitic, predatory financial Aristocracy via elections, then "democracy" is merely a public-relations facade, a simulacra designed to create the illusion that the citizenry "have a voice" when in fact they are debt-serfs in a neofeudal State.

When the Status Quo remains the same no matter who gets elected, democracy is a sham. We might profitably look to Japan as an example of a nation which replaced its dysfunctional dominant party via elections to little effect (Do We Have What It Takes To Get From Here To There? Part 1: Japan).

We can ask this question of Greece: in a pervasively corrupt neofeudal society, is democracy even possible?

Neofeudalism is characterized by a carefully nurtured facade of social mobility and democracy while the actual machinery of governance is corrupted at every level.

This corruption may manifest as first-order daily-life corruption such as buying entry to college, bribing officials for licenses, and so on, but the truly serious corruption is the second-order variety that functions behind the closed doors of central banks and financial/political Elites.

Here in the U.S., the people elected Barack Obama in 2008 on the implicit promise that the politically dominant financial sector would be limited in some meaningful fashion. Instead, President Obama immediately nixed any meaningful reform.

Japan nears fifth recession in 15 years

Harakiri in slow motion

By Ben McLannahan in Tokyo

The Japanese economy has shrunk at its fastest pace since the earthquake-hit first quarter of 2011, piling pressure on the government to try to avert recession.

Yoshihiko Noda, prime minister, described the 3.5 per cent annualised decline in the July-September period as “severe”. Seiji Maehara, economy minister, said Japan had possibly entered a “recessionary phase”.

Many of Japan’s economic indicators have deteriorated since September, leading economists to predict that the nation has entered its fifth technical recession – two consecutive quarters of contraction – of the past 15 years.

“The question is how long and deep this downturn will be and how policy makers will react,” said Masamichi Adachi, an economist at JPMorgan.

The economy posted relatively strong growth in the first half of the year, as output was boosted by reconstruction in areas of northeastern Japan devastated by the March 2011 earthquake and tsunami. But it took a turn for the worse in the third quarter, as demand ebbed in China while Europe remained sluggish.

In July-September, Japanese exports fell 5 per cent, while household consumption and business investment also slipped. Excluding early 2011, the data released on Monday marked Japan’s biggest quarterly contraction since the fourth quarter of 2008 during the Lehman crisis.

The people have spoken

Why President Obama Was Reelected

By James E. Miller

It’s a safe assumption to make that the reelection of Barack Hussein Obama to the office of the United States Presidency will be talked about for decades to come. In history textbooks, 2012 will be referred as a momentous election year when the nation came together and collectively decided to stick with a president through the thick. Like Franklin Roosevelt, Abraham Lincoln, and other “transformative” presidents before him, Obama will be praised for keeping the country together in the midst of economic difficulty. In sum, he will be called a popular figure who triumphed over America’s old guard and lead the nation into a new era of solidarity and renewed social tolerance.

The lavishing has already begun with prominent voices on the left like Paul Krugman declaring the “new America” has made Obama their champion. It’s being said in major newspapers across the world that this new incarnation of the American experiment is much more attuned to the struggle of minorities and the downtrodden. They went with a President who will use the divine power of the federal government to lift the disenfranchised onto the platform of dignified living.

Like most of what passes for accepted history, this is downright propaganda. The country as a whole wasn’t frightened over sudden change by throwing out the incumbent. It wasn’t a declaration of a new, more diverse America. Shaping a new destiny wasn’t on the casual voter’s mind on November 6^th.

There is a rational explanation for the President’s reelection which doesn’t invoke a deep or complex meaning. The only way to explain the outcome is in the simplest and direct prose: the moochers prevailed.

The UK's Most Disturbing Number

Total Unfunded Pension Obligations = 321% Of GDP

by Tyler Durden

For all our UK readers, who hope some day to collect pension benefits, we have two messages: i) our condolences, and ii) you won't.   Why? The answer comes straight from the ONS:

The new supplementary table published by ONS in Levy (2012)10 includes the following headline figures for Government pension obligations as at end December 2010:

• Social security pension schemes (i.e. unfunded state pension scheme obligations): £3.843 trillion, being 263 per cent of gross domestic product (GDP) (£3.497 trillion at end of December 2009)
• Centrally – administered unfunded pension schemes for public sector employees (i.e. unfunded public service pension scheme obligations): £852 billion, being 58 per cent of GDP (£915 billion at end of December 2009)
• Funded DB pension schemes for which government is responsible: £313 billion, being 21 per cent of GDP (£332 billion at end of December 2009).

In summary, the estimates in the new supplementary table indicate a total Government pension obligation, at the end of December 2010, of £5.01 trillion, or 342 per cent of GDP, of which around £4.7 trillion relates to unfunded obligations.

The Sun Sets on American Empire

The Short American Century: A Post-Mortem

By DANIEL LARISON

Throughout the campaign season, Mitt Romney and Barack Obama alike insisted that the 21st century must be another American century—that the U.S. should continue to be the world’s predominant military, economic, and political power for generations to come. After ten years of shattered hegemonic dreams, leaders of both parties still feel compelled to declare their loyalty to the vision that inspired the follies of the Bush era. Foreign-policy debate continues to turn on the question of how to preserve American hegemony, rather than how to secure U.S. interests once America is no longer so dominant. What nobody in Washington can acknowledge is the subject that this book addresses: the American Century, to the extent that it ever was real, is now definitely at an end.

Henry Luce famously coined the phrase in a 1941 issue of Life. He declared that America’s role was to “exert upon the world the full impact of our influence for such purposes as we see fit by such means as we see fit.” As Luce imagined it, that influence would extend to economic and cultural dominance as well as political. His missionary vision took for granted that America had not only the right but the obligation to propagate its values and exercise leadership throughout the world. Seventy years later, Luce’s idea is still part of Washington’s bipartisan consensus, but in recent years it has collided with the practical limits of American power.

The Fiscal Cliff and America's Coming Recession

Obama and the Crash of 2013

By Peter Ferrara

Since the end of World War II two thirds of a century ago, federal spending has been stable at around 20% of GDP. America prospered to become the mightiest economic power in the history of the world with the federal government limited to that level of spending.

But President Obama is certain he has a better idea. He wants higher taxes and higher federal spending. Only with that can he “spread the wealth around.” He believes that would make the economy grow faster “from the middle class out,” as the middle class and the poor spend the money “the rich” were wasting in savings and investment.

That is fallacious economics, based on the idea that we can spend ourselves rich. Economic growth and prosperity for working people and the middle class does not stem from increased spending and consumption. It stems from increased production and productivity. And that stems precisely from savings and investment.

You can’t consume what you don’t produce. Increased savings means increased investment, which is what creates new jobs and provides workers with the tools to be more productive. That increased productivity enables workers to earn higher wages, as wages in a competitive market equal the marginal productivity of labor (what the worker adds to production). The increased demand for labor created by the investment drives wages up to this level of productivity.

Spare me the miseducated thinking about the essential role of consumer demand to drive economic growth and prosperity. In a market economy, consumer demand can never be inadequate for the economy to grow and prosper. If demand is insufficient to clear the market for any good or service, then the price of the good or service will fall until demand equals supply.

Explaining Germany's Infantile Crush on Obama

Unrequited Love

by Jan Fleischhauer

It's too bad that Mitt Romney didn't win. If the Republicans had won, we could finally have known for sure that our suspicion of America's imminent demise is correct. "Four more years," translated into the German viewpoint means little more than a "four-year reprieve."

For the über-watchful among us, the signs of the downfall are obvious. One must only take a look at the condition of the streets (every fourth bridge is crumbling!), or the entirely outdated power grid, to come to the conclusion that this country has its future behind it. A nation that has its utility lines hanging from poles in the street, instead of burying them in an orderly fashion underground, cannot really be taken seriously.

With a bit of luck, the specter across the Atlantic might even take care of itself. It can't be ruled out. When they are not shooting each other or being fried by dangling power lines then the Americans might simply pop. Two out of every three US citizens are overweight, or even obese! Every child in Germany knows the numbers.

There is hardly an issue about which Germans as so united as they are by their desire to see America on its knees. It unites both the left and the right. Wherever they look, they see decay, a lack of culture and ignorance. "A perverse mixture of irresponsibility, greed, and religious zealotry," as my adversary, columnist Jacob Augstein, furiously argued on Monday.

A Blessing to Live in Germany

What a blessing it is, one must conclude, to live in Germany, a country where the highways are regularly repaired and the washing machines use so little water that one could water the entire Sahara with what is left over. In which citizens' initiatives are formed against McDonald's, and two-bit crime dramas are considered the pinnacle of TV entertainment. If the utility poles here were to snap like toothpicks, then it would be the fault of some natural catastrophe, the likes of which would make a hurricane seem like a gentle breeze.

Reading Between The Lines

Blame it on the Greeks

By Mark J. Grant

Tomorrow the Wizard turns 620. I was out with him last night in a little pre-birthday celebration and I asked him how it felt to have that many years under his belt. He laughed and replied that being a Wizard had it occurred to me that he might not have started at one? No, I admit, I had not thought of that, which opened up a realm of possibilities that the old codger could actually be far older or far younger than was generally presumed. I then asked him if he planned to be around for his 630th birthday day and he replied that the odds were good. He said he had done a whole statistical model and that very few people died between 620 and 630 and so he was likely to make it to the next milestone. At the end of the evening, with a twinkle in his eye, he informed me that he would not be here on Saturday in any event. He said that he had learned something from the Europeans and that he was going to follow their lead. He informed me that he was going to get on his broomstick, fly across the international dateline and so never have an actual birthday. Then he will return to America and claim that the damn thing never happened. I guess he is still learning a thing or two!

Reading Between the Lines

One of the great faults with paying attention to Europe is to take what they tell you as factual. The media trumpets what they are given by the various sources of information in Europe but a quite skeptical eye is what is needed. They claim that they do not have the “Final Troika Report” on Greece because they have not stamped it “Final” yet and so they blame their indecision on the magic trick that they are performing. Everyone on the Continent has the report but since they can agree on almost nothing they have blamed the lack of the rubber stamp as the culprit. They should just come out and say that,“It is the rubber stamp’s fault” and be done with it.

The poverty of environmentalism

Mark Boyle argues that we should all live without money to help save the planet. No thanks.

by Rob Lyons 

In one of the many eminently quotable scenes from Quentin Tarantino’s Pulp Fiction, two gangsters – Jules and Vincent – are sat in a diner discussing what Jules will do now that he has been the beneficiary of a ‘miracle’: someone shooting at him at point-blank range has managed to miss him completely. Jules decides that this ‘act of God’ is a sign that he should give up being a gangster and ‘walk the earth, like Cain in Kung Fu’ until he gets another sign from God.

Vincent is unimpressed. ‘No Jules, you’re gonna be like those pieces of shit out there who beg for change. They walk around like a bunch of fuckin’ zombies, they sleep in garbage bins, they eat what I throw away, and dogs piss on ‘em. They got a word for ‘em, they’re called bums. And without a job, residence, or legal tender, that’s what you’re gonna be: a fuckin’ bum!’

Mark Boyle would beg to differ on this assessment of a life without money. Born in Donegal in north-west Ireland, Boyle took a business degree but, having discovered the ideas of Mahatma Gandhi, decided that business in its mainstream form was not for him. He then lived in Bristol in England for a few years, running organic food businesses until a conversation with a friend suggested to him that money itself was the barrier to relationships between people and communities. So, he decided to see if it was possible to live without money.

The GOP’s Asian-American Fiasco

How Republicans alienated a once-allied bloc of voters

By LEON HADAR

If you are trying to figure out why the Republicans lost this presidential election and why they will probably continue to lose more in the future, forget for a second Latino voters (well, only for a second) and think for a few minutes about Asian-American voters.

In fact, let’s think about them strategically. Say you are a Republican politico who is analyzing the economic status, social mobility, and cultural disposition of various demographic groups and the voting behavior of their members.

And here is this bloc of voters who, let’s see, tend to gravitate to the private sector with many of them creating and managing small businesses. Actually, some of them belong to the wealthiest 1 percent of Americans, and most are doing quite well in terms of income and job security. They also are very family-oriented and subscribe to more traditional values.

Based on these and other social and economic indications, Asian-Americans as an electoral bloc should be natural political ally of a Republican Party that is, after all, committed to the principles of the free market, supports the interests of small businesses, and celebrates hard work and family values, which is probably the way to describe what Asian-Americans are all about.

Reality doesn't need to win Electoral College

American electorate opts to defer course correction for another four years – if they get that long

By MARK STEYN

Amid the ruin and rubble of the grey morning after, it may seem in poor taste to do anything so vulgar as plug the new and stunningly topical paperback edition of my book, "After America" – or, as Dennis Miller re-titled it on the radio the other day, "Wednesday." But the business of America is business, as Calvin Coolidge said long ago in an alternative universe, and I certainly could use a little. So I'm going to be vulgar and plug away. The central question of "Wednesday" – I mean, "After America" – is whether the Brokest Nation In History is capable of meaningful course correction. On Tuesday, the American people answered that question. The rest of the world will make its dispositions accordingly.

In the weeks ahead, Democrats and Republicans will reach a triumphant "bipartisan" deal to avert the "fiscal cliff" through some artful bookkeeping mechanism that postpones Taxmageddon for another year, or six months, or three, when they can reach yet another triumphant deal to postpone it yet again. Harry Reid has already announced that he wants to raise the debt ceiling – or, more accurately, lower the debt abyss – by $2.4 trillion before the end of the year, and no doubt we can look forward to a spectacular "bipartisan" agreement on that, too. It took the government of the United States two centuries to rack up its first trillion dollars in debt. Now Washington piles on another trillion every nine months. Forward!

US Set to Re-stage Greek Tragedy

Germany, Europe and the world are hoping that the same fate is not in store for the US

By David Böcking

The US has more in common with heavily indebted southern European countries than it might like to admit. And if the country doesn't reach agreement on deficit reduction measures soon, the similarities could become impossible to ignore. The fiscal cliff looms in the near future, and it’s not just the US that is under threat.

The US has finally voted and the dark visions of America's future broadcast on television screens across the country -- and most intensively in battleground states -- have come to an end. Supporters of both Barack Obama and Mitt Romney had developed doomsday scenarios for what would happen if their candidate's opponent were to win. Four more years of Obama, the ads warned, would result in pure socialism. A Romney presidency would see the middle and lower classes brutally exploited.

But following Obama's re-election, Americans are now facing a different, much more real horror scenario: In just a few weeks time, thousands of children could be denied vaccinations, federally funded school programs could screech to a halt, adults may be forced to forego HIV tests and subsidized housing vouchers would dry up. Even the work of air-traffic controllers, the FBI, border officials and the military could be drastically curtailed.

That and more is looming just over the horizon according to the White House if the country is allowed to plunge off the "fiscal cliff" at the beginning of next year. Coined by Federal Reserve head Ben Bernanke, it refers to the vast array of cuts and tax increases which will automatically go into effect if Republicans and Democrats can't agree on measures to slash the US budget deficit.

Do We Have What It Takes To Get From Here To There? Part 2: China

Pull aside the curtain and what you find is a China crippled by corruption and debt

by Charles Hugh Smith

Does China have what it takes to get from here (industrialized export economy) to there (sustainable growth, widespread prosperity)? The same can be asked of every nation: do they have what it takes to move beyond their current limitations to the next level?

Let's start with the fundamentals, what every nation must have to establish a stable, sustainable, widely shared prosperity. These are not just ethical niceties--these are the foundation of economic security.

Consider corruption. Corruption isn't just a "values" issue: corrupt societies have corrupt economies, and these economies are severely limited by that corruption. A deeply, pervasively corrupt economy cannot get from here to there.

Corruption acts as a "tax" on the economy, siphoning money from the productive to the parasitic unproductive Elites skimming the bribes, payoffs, protection money, unofficial "fees," etc. By definition, the money skimmed by corruption reduces the disposable income of households and enterprises, reducing their consumption and investment.

"Income" derived from corruption is the classic example of "unearned" feudal rights being imposed on serfs, a broad-based "tax" that keeps them impoverished.

The other side of the corruption coin is transparency: thus it is no surprise that Transparency International is the organization that monitors corruption globally and that issues its annual The Corruption Perceptions Index that ranks countries/territories based on how corrupt their public sector is perceived to be.

The top of the least--most transparent, least corrupt--are Denmark, New Zealand, Singapore, Finland and Sweden, with Canada, Netherlands, Australia, Switzerland and Norway close behind.

Germany ranks 15, Japan 17, Chile 21, the U.S. 22, France 25, Spain 30, Souyth Korea 39, Italy 67, Brazil 69, China 78, India 87, Egypt and Mexico, tied at 98, Indonesia 110, Vietnam 116, Syria and Uganda, tied at 127, Azerbaijan 134, Iran 146, Russia 154, and at the bottom of the list (or the top if we are measuring corruption), Iraq, Afghanistan, Myanmar and Somalia at 175 - 178.

Back to Constitutional Conservatism

The GOP needs new ideas rooted in old ones

By JACK HUNTER

Now that Mitt Romney has lost, virtually everyone agrees that the Republican Party needs to change. Liberals say the GOP needs to become more moderate. Conservatives say it has become too moderate. In a way, both sides are right — and wrong.

The moderate Republican ticket that liberals and GOP establishment types covet has been tried recently: Mitt Romney and John McCain. Conservatives are right that a more moderate Republican Party is not the answer.

What many of them are wrong about is conservatism. To turn on talk radio or watch Fox News is not to experience the philosophy of Bill Buckley, the rhetoric of Ronald Reagan, or even something like the free market proposals of Jack Kemp. Aside from Paul Ryan’s proposals for entitlement reform—one of the few tangibly conservative and positive differences that separated the Romney and Obama tickets—the populist Right remained stuck on stupid: The President “apologizes” for America; the U.S is threatened by Sharia Law; “Where’s the birth certificate?” Obama eats dog. Donald Trump. Dinesh D’Souza.

Demagoguery, partisanship, and conspiracy theories do not represent ideas. They represent a lack of them. Throw in some clumsy language about “legitimate rape” and couple it with Romney’s Dubya impression on foreign policy, and Americans saw a “conservatism” they didn’t want. Who can blame them?

The Looming Sunni-Shia Crisis

Sectarian tension roils four Mideast countries

By KELLEY VLAHOS

No one — not Washington, nor the establishment press — seems ready to confront the Sunni-Shia conflagration that threatens to rock whatever narrow foreign policy hold the U.S. has in the region, promising a bleak landscape of war for years to come.

Foreign policy had been largely sidelined in American political discourse over the last year, but now that President Obama has secured a second term, and the roiling conditions in the Middle East before November 6 haven’t subsided — they will become harder to ignore.

“No one is paying attention to this,” says Adil Shamoo, an Iraqi-American author and professor at the University of Maryland. Shamoo was born and raised in Iraq and is a Chaldean Christian who is horrified at the sectarian strife that has divided his native country since the American invasion of Iraq nearly 10 years ago. He sees the American presence there as unleashing the simmering tensions between the Sunni and long-repressed Shia majority, leading to institutional discrimination and a backlash against other religious minorities, particularly the now-dwindling Iraqi Christian population. Worse, he sees the conflict playing out throughout the region today.

“I think it’s the most dangerous development in the Middle East, in the Muslim world,” he told TAC in a recent interview, “because you’re talking about hundreds of millions of people potentially fighting each other and it has become real now.”

Do We Have What It Takes To Get From Here To There? Part 1: Japan

The Japanese model of incrementally perfecting consumer technologies may well have have reached marginal returns

by Charles Hugh-Smith

Do we have what it takes to get from here to there?

This apparently simple question offers profound insights into the dynamics of individuals, households, enterprises and nation-states. If we answer this question honestly, it establishes a "road map" of what must be in place before a progression from here to a more sustainable future ("there") can take place.

Individuals, households, enterprises and nations can have goals--where they want to be in the future--but to get there, they need to construct the necessary foundation of values, processes, skillsets, networks, practical experience and capital.

Since my partner and I built about 100 houses back in the mid-1980s, I see building a house as a useful analogy for getting from here to there: each step requires different tools, skills, experience and sufficient capital invested to get to the next phase. If you don't have all of these in hand for each step, the goal of completing the house will remain a fantasy.

As correspondent Mark G. recently observed in an email, "hyper-centralized entities are institutionally incapable of adopting decentralized solutions." I immediately thought of the Federal Reserve, which has responded to a crisis of centralized "too big to fail" banks holding phantom collateral to support massive leverage and debt with increasingly centralized actions to recapitalize those same centralized banks.

Rolling Over The Fiscal Cliff

The Next Four Years Won't be as Good as the Last

BY LANCE ROBERTS

The people have spoken and President Obama will serve another four years presiding over the United States. Furthermore, there is very little change to the makeup of the House and the Senate, which leaves the Administration in the same battle for control as it was prior to the election. The question now is what will the next four years look like economically?

One thing that has been overlooked on many fronts is that Obama had control of the House and the Senate when he first entered office in 2009. This control lead to the passing of ObamaCare, successive bailout programs for housing, automobiles, and the financial industry which flooded the economy, and financial markets, with dollars - a lot of dollars. Those injections, combined with a massively bombed out economy from the financial crisis, led to a sharp rebound in economic growth which was almost entirely centered around inventory restocking and a resumption of exported goods and services.

However, in 2010, Obama lost control of the House to the Republicans which has led to two subsequent years of political gridlock. That gridlock has resulted in very little progress in providing the fiscal policies necessary to support economic growth.

This lack of progress, which has clouded the planning ability for small businesses, combined with the recession in Europe and slowdown in China, has reduced the need for continued buildup of inventories as the exportation of goods and services has been slowing. The chart below shows the boom in both exports and imports post the recessionary bottom as stimulus impacted the economy and the subsequent fade as economic strength has waned.

Desperate times for Cristina Fernandez

Argentina Cuts Voting Age as Fernandez Aims to Boost Support

By Eliana Raszewski

Argentine lawmakers approved a bill lowering the country’s voting age, a move that could rally youth support as President Cristina Fernandez de Kirchner tries to revert a slide in her popularity ahead of congressional elections next year.

The lower house approved the bill in a 131-2 vote yesterday, converting Argentina into one of only a handful of nations where 16-year-olds can vote. The government-backed bill, which passed the Senate in early October, allows young people to cast ballots two years before voting becomes mandatory at age 18.

Fernandez has courted young voters since being elected in 2007, naming members of the government-aligned “La Campora” youth group to top positions and tapping funds from the social security agency to provide students with free laptops. Expanding the suffrage may help build support for the government even further as the opposition tries to capitalize on growing frustration with Fernandez’s handling of the economy, political analyst Carlos Fara said.

“The government believes that the more politically active young people will vote for the ruling party,” said Fara, who runs Carlos Fara & Asociados in Buenos Aires.

3 Myths You Still Believe About Automotive Manufacturing

The idea of buying "American cars" is in several ways a myth that is used to sell cars

By Tyler Crowe

Last year's "Halftime in America" ad from Chrysler was probably meant to inspire patriotism and allude to the resurgence of American automotive manufacturing. What this ad failed to mention, though, was that it was brought to you by an Italian company.

The idea of buying "American cars" is in several ways a myth that is used to sell cars -- and it's not the only one.

Myth 1: Buying "American" cars
When Americans hear the term "American car," our knee-jerk association is the American brands. While it is true that General Motors (NYSE: GM  ) , Ford (NYSE: F  ) , and Chrysler originated in the United States, it doesn't necessarily mean the cars they manufacture are more American than the foreign brands. Every year, Cars.com puts out a list of the most "made in USA" cars on the road. This list measures whether the car is assembled in the U.S., and the percentage of parts that originate here. Of the 2012 models, five of the top seven come from Japanese manufacturers.

Car Make and Model	Assembly Plant	Percent "Made in U.S."
Toyota Camry	Georgetown, Ky.	80%
Ford F-150	Dearborn, Mich.	60%
Honda Accord	Marysville, Ohio	80%
Toyota Siena	Princeton, Idaho	75%
Honda Pilot	Lincoln, Ala.	70%
Chevrolet Traverse	Lansing, Mich.	75%
Toyota Tundra	San Antonio, Texas	80%

Sources: Cars.com and abcnews.go.com.