Confronting the Political Reality of Debt

Lenders and Spenders

Is federal debt really nothing more than money ‘we owe to ourselves’? No. It frays the political fabric, and we are feeling its effects already.

By Arnold Kling

“The debt we create is basically money we owe to ourselves, and the burden it imposes does not involve a real transfer of resources,” Paul Krugman wrote recently in “Debt Is (Mostly) Money We Owe to Ourselves.”

“That’s not to say that high debt can’t cause problems — it certainly can. But these are problems of distribution and incentives, not the burden of debt as is commonly understood.... talking about leaving a burden to our children is especially nonsensical; what we are leaving behind is promises that some of our children will pay money to other children, which is a very different kettle of fish,” he added.

If this little lullaby (“the debt is something we owe to ourselves”) helps you sleep, then you may be in for a rude awakening. Government debt frays the political fabric, and we are feeling its effects already.

Think of a simple economy, where the only product is corn. There is no foreign sector, and there are no financial claims more complicated than IOUs.

There are two types of people in our economy: Lenders and Spenders. Sammy Spender and Lois Lender each grow two bushels of corn per year. However, Sammy wants to eat three bushels this year. There are three ways that this can happen.

Private loan: In a purely private transaction, Sammy borrows one bushel of corn from Lois this year and pays her back one bushel of corn next year.

One-time redistribution: The government redistributes corn by taxing one bushel of corn away from Lois and giving it to Sammy.

Government borrowing: The government borrows one bushel of corn from Lois this year and gives it to Sammy. It then pays Lois back out of taxes next year.

Gaza and Energy Geopolitics

War in Gaza = War Over Natural Gas?

By George Washington

We extensively documented that the wars in the Middle East and North Africa are largely about oil and gas.  (Update: Iran has just started building its gas pipeline to Syria.)

As Professor Michel Chossudovsky noted in 2009, gas may be a central reason for the war over Gaza as well:

This is a war of conquest. Discovered in 2000, there are extensive gas reserves off the Gaza coastline.

British Gas (BG Group) and its partner, the Athens based Consolidated Contractors International Company (CCC) owned by Lebanon’s Sabbagh and Koury families, were granted oil and gas exploration rights in a 25 year agreement signed in November 1999 with the Palestinian Authority.

The rights to the offshore gas field are respectively British Gas (60 percent); Consolidated Contractors (CCC) (30 percent); and the Investment Fund of the Palestinian Authority (10 percent). (Haaretz, October 21, 2007).

The PA-BG-CCC agreement includes field development and the construction of a gas pipeline.(Middle East Economic Digest, Jan 5, 2001).

The BG licence covers the entire Gazan offshore marine area, which is contiguous to several Israeli offshore gas facilities. (See Map below). It should be noted that 60 percent of the gas reserves along the Gaza-Israel coastline belong to Palestine.

The BG Group drilled two wells in 2000: Gaza Marine-1 and Gaza Marine-2. Reserves are estimated by British Gas to be of the order of 1.4 trillion cubic feet, valued at approximately 4 billion dollars. These are the figures made public by British Gas. The size of Palestine’s gas reserves could be much larger.

New balance of terror in the Middle East

Arrogance and delusion ?

By Kaveh L Afrasiabi 

In the week-long war between Israel and the Palestinians, slowly but surely signs have emerged of a new "balance of terror" reflecting Hamas's enhanced ability to strike back at Israel via the Iran-made long range Fajr-5 rocket. 

Compared with the previous war in 2009, when Hamas relied on the shorter range and more inaccurate rockets that rattled southern Israel before a ceasefire went into effect, this time we are witnessing a "more disciplined" and sophisticated Hamas missile brigade that reportedly has some 15,000 military personnel operating through a network of tunnels.

It comes as little surprise then that Hamas has set its own conditions for a truce despite the deadly waves of Israeli air bombardment that have resulted in the death or injury of hundreds of civilians in the densely populated Gaza, described by professor Noam Chomsky on his recent Gaza visit [1] as the world's largest open-prison. Its inhabitants live in increasingly horrible and uninhabitable conditions as the direct result of Israeli collective punishment of the population ruled by Hamas, which now wants the lifting of the Israeli blockade of the area as a term of truce.

How Hamas Won the War

It doesn’t really matter if Israel wins the battle

Young Palestinians punishing a traitor 

BY AARON DAVID MILLER

Cruel Middle East ironies abound. And here's a doozy for you.

Why is it that Hamas -- purveyor of terror, launcher of Iranian-supplied rockets, and source of "death to the Jews" tropes -- is getting more attention, traction, legitimacy and support than the "good" Palestinian, the reasonable and grandfatherly Mahmoud Abbas, who has foresworn violence in favor of negotiations? Since the crisis began, President Obama seems to have talked to every other Middle Eastern leader except Abbas.

The Israeli operation against Hamas may yet take a large bite out of the Palestinian Islamist organization in Gaza, but the "Hamas trumps Abbas" dynamic has been underway for some time now and is likely to continue. I'd offer four reasons why.

Feckless Fatah

Abbas's party is in disarray. The Islamists' victory in the 2006 Palestinian legislative elections, its takeover of Gaza in 2007, Fatah's own sense of political drift, and the absence of a credible peace process created an opening for Hamas -- the religious manifestation of Palestinian nationalism. Had Yasir Arafat still been alive, Hamas would never have come as far as it has.

Arafat's death left a huge leadership vacuum in a political culture where persona, not institutions, figures prominently. Abbas had electoral legitimacy but he lacked the authority, street cred, and elan of the historical struggle. And in a Palestinian national movement without direction and strategy, it didn't take much to create an alternative to a tired, divided, corrupt, and ineffective Fatah.

Europe Is Now Sinking Fast

"Do I feel lucky?" Well, do ya?

by Alasdair Macleod
With the Eurozone having being displaced from the financial headlines by the American presidential election, you might have briefly thought that its problems had gone away. They haven’t.

It’s just that the public is expected to absorb one major story at a time. And now that the presidential election is done and dusted, Europe is rapidly returning to the headlines. This is not desired by the powers-that-be, who desperately need us to believe things will get better with a little patience.

Behind the scenes, in order to prevent a systemic crisis, the authorities (through the European Central Bank) have been hard at work keeping a lid on interest rates for Spain and Italy, which act as everyone’s market bellweather. Their strategy focuses on the hope that high bond yields are just a lack of 'animal spirits' – and if only they can be reignited!

Time is working against all countries in the Eurozone because the good are being dragged down by the bad.

You don’t have to be an economic genius to understand that the perpetual uncertainty over the Eurozone’s future has led to a widespread freeze on industrial investment and development. Industrial production is collapsing at an accelerating rate, falling 7% year-on-year in Spain and Greece, 4.8% in Italy, and 2.1% in France. The downtrends for industrial production are readily apparent in the chart below:

The businesses that are doing well (and there are some) are those businesses with strong balance sheets and solid export order books for non-Eurozone markets; unfortunately, they are concentrated in countries like Germany, Holland, Finland, and Austria. They are not located where they can contribute to economic progress in Spain, Italy, Greece, or France, and so they are not adding to the tax revenue desperately sought by those governments.

The Banking Cartel's End Game

A 100% Digital Monetary System

By JS Kim

There is no doubt that the elite have always sought to carefully manufacture news and to control the beliefs of the masses through their interests in funding education and in owning media distribution channels for centuries. There is a wealth of history that chronicles the elite’s desires to control and sway public opinion by manufacturing news versusthe honorable journalism pursuit of reporting news in a fair and accurate manner. For example, in 1917, Congressman Oscar Callaway stated, as documented in the Congressional Record:

"In March, 1915, the J.P. Morgan interests, the steel, shipbuilding, and powder interests, and their subsidiary organizations, got together 12 men high up in the newspaper world and employed them to select the most influential newspapers in the United States and sufficient number of them to control generally the policy of the daily press of the United States. These 12 men worked the problem out by selecting 170 newspapers, and then began, by an elimination process, to retain only those necessary for the purpose of controlling the general policy of the daily press throughout the country. They found it was only necessary to purchase the control of 25 of the greatest newspapers. The 25 papers were agreed upon; emissaries were sent to purchase the policy, national and international, of these papers; an agreement was reached; the policy of the papers was bought, to be paid for by the month; an editor was furnished for each paper to properly supervise and edit information regarding the questions of preparedness, militarism, financial policies, and other things of national and international nature considered vital to the interest of the purchasers.”

"This contract is in existence at the present time, and it accounts for the news columns of the daily press of the country being filled with all sorts of preparedness argument and misrepresentations as to the present condition of the United States Army and Navy and the possibility and probability of the United States being attacked by foreign foes. This policy also included the suppression of everything in opposition to the wishes of the interests served. The effectiveness of this scheme has been conclusively demonstrated by the character of stuff carried in the daily press throughout the country since March, 1915. They have resorted to anything necessary to commercialize public sentiment and sandbag the national congress into making extravagant and wasteful appropriations for the Army and Navy under the false pretense that it was necessary. Their stock argument is that it is ‘patriotism’ They are playing on every prejudice and passion of the American people."

On The Road To Zero Growth

The Future Of America

By Tyler Durden

Jeremy Grantham's latest quarterly letter is out, in which he discusses, as the title suggests, the road to zero US growth. From the punchline:

With a little luck, U.S. GDP growth (even after an increasing squeeze from rising resource costs and environmental damage) should remain modestly positive, even out to 2030 and 2050, in the range of 1% at the high down to a few basis points at worst. Increasingly, the growth will be qualitative. Qualitatively, growth is likely to be limited to services as manufactured goods will bear the brunt of the rising input costs. It would certainly help a lot if considerable changes were made in how GDP is measured. It needs to be closer to what we all apparently think it is already: a reasonable measure of the utility of useful goods and services. 

The key issue will be how much unnecessary pain we inflict on ourselves by defending the status quo, mainly by denying the unpleasant parts of the puzzle and moving very slowly to address real problems.  

This, unfortunately, is our current mode. We need to move aggressively with capital – while we still have it – and brain power to completely re-tool energy, farming, and resource efficiency. We need to do all of this to buy time for our global population to gracefully decline. It can certainly be done.

Summary:

·        The U.S. GDP growth rate that we have become accustomed to for over a hundred years – in excess of 3% a year – is not just hiding behind temporary setbacks. It is gone forever. Yet most business people (and the Fed) assume that economic growth will recover to its old rates.

·        Going forward, GDP growth (conventionally measured) for the U.S. is likely to be about only 1.4% a year, and adjusted growth about 0.9%.

Jobs Created or Saved or Both

43 TROUBLING FACTS ABOUT THE YOUTH UNEMPLOYMENT CRISIS

by Scott Gerber

The class of 2012 is graduating from community colleges, four-year colleges and universities all across America this month. When they toss their caps in the air, I suggest you duck — because this graduating class has a lot to protest. While overall U.S. unemployment has dropped to about 8 percent — in part because many Americans have simply given up looking for work — recent college grads face a much more dismal reality: one out of every two was either jobless or underemployed in 2011.

To combat this epidemic, the Young Entrepreneur Council recently launched the national #FixYoungAmerica campaign. In April, we held a #FixYoungAmerica rally  on 300+ college campuses in all 50 states, in which tens of thousands of students participated, and this week, we released #FixYoungAmerica: How to Rebuild Our Economy and Put Young Americans Back to Work (for Good) a book of essays written by nonprofit founders, educators, politicians and entrepreneurs who shared their own entrepreneurial solutions for ending the youth unemployment crisis in America. Unfortunately, throughout the campaign, what we’ve really uncovered is just how bad chronic unemployment really is for young people right now, including college grads. The fact is, young Americans need all the help they can get, and they need it now.

What’s the class of 2012 up against? Take a look for yourself:

1.    1 out of 2 college grads — about 1.5 million, or about 53.6 percent, of bachelor’s degree holders age 25 or younger — were unemployed or underemployed in 2011.

2.   Fewer than half of college grads from the class of 2008 to today found jobs within a year of graduation — down from 73 percent.

3.   For high school grads (age 17-20), the unemployment rate was 31.1 percent from April 2011-March 2012; underemployment was 54 percent.

4.   For young college grads (age 21-24), unemployment was 9.4 percent last year, while underemployment was 19.1 percent.

The Future of America's Working Class

Britain's situation should represent a warning about America's future

by Joel Kotkin

Watford, England, sits at the end of a spur on the London tube's Metropolitan line, a somewhat dreary city of some 80,000 rising amid the pleasant green Hertfordshire countryside. Although not utterly destitute like parts of south or east London, its shabby High Street reflects a now-diminished British dream of class mobility. It also stands as a potential warning to the U.S., where working-class, blue-collar white Americans have been among the biggest losers in the country's deep, persistent recession.

As you walk through Watford, midday drinkers linger outside the One Bell pub near the center of town. Many of these might be considered "yobs," a term applied to youthful, largely white, working-class youths, many of whom work only occasionally or not at all. In the British press yobs are frequently linked to petty crime and violent behavior--including a recent stabbing outside another Watford pub, and soccer-related hooliganism.

In Britain alcoholism among the disaffected youth has reached epidemic proportions. Britain now suffers among the highest rates of alcohol consumption in the advanced industrial world, and unlike in most countries, boozing is on the upswing.

Some in the media, particularly on the left, decry unflattering descriptions of Britain's young white working class as "demonizing a whole generation." But many others see yobism as the natural product of decades of neglect from the country's three main political parties.

In Britain today white, working-class children now seem to do worse in school than immigrants. A 2003 Home Office study found white men more likely to admit breaking the law than racial minorities; they are also more likely to take dangerous drugs. London School of Economics scholar Dick Hobbs, who grew in a hardscabble section of east London, traces yobism in large part to the decline of blue-collar opportunities throughout Britain. "The social capital that was there went [away]," he suggests. "And so did the power of the labor force. People lost their confidence and never got it back."

Food is too cheap and too expensive?

Poor saps 

by Rob Lyons 

Earlier this month, Jan Kees Vis, the global director for sustainable sourcing development at Unilever, told the CropWorld 2012 conference in London that food was too cheap encouraging waste. ‘Places that offer food for lunch – chilled, day-fresh [food] – have made incredible growth, but the result is a lot of food is wasted’, he said. ‘A big factor in why we waste so much food is that food has become too cheap. If it weren’t, we wouldn’t waste so much of it.’

On Monday, a report on the Guardian website suggested that Britain is in ‘nutrition recession’. The article begins: ‘Austerity Britain is experiencing a nutritional recession, with rising food prices and shrinking incomes driving up consumption of fatty foods, reducing the amount of fruit and vegetables we buy, and condeming [sic] people on the lowest incomes to an increasingly unhealthy diet.’ A related article about a fairly typical couple in Bristol, Nicola and Tony, illustrated the point. The couple have two sons but have just £40 per week to spend on food for the family, despite the fact that they both work.

America's Double Trouble and The Reckoning

U.S. Debt Higher than Greece

By Andy Sutton

Now that the untold billions have been spent trying to convince America that our leaders actually know what they’re doing, they’re going to get put to an early test, and a critical one at that. Looming large are two big issues: the debt ceiling (again), and the ‘fiscal cliff’ automatic budget cuts. While they may seem like two separate issues, it all really ties together rather nicely into one big package that can be loosely labeled as yet another attempt to spend more than is brought in and at the same time justify it.  The good news is that the players are the same so the egos are the same and we can use that as barometer based on how they ‘handled’ the situation in 2010. The bad news is the egos are the same and they did a pitiful job in 2010, opting to simply kick the can down the road as opposed to actually embarking on any meaningful reform pathway.

The ‘American Superiority’ Myth

We’ve all heard countless times from mainstream economists, policymakers, and their ilk that America is somehow immune from consequences. They always pin their argument on the dollar standard.  ‘Our’ central bank issues the reserve currency of the globe and that alone immunizes us from any repercussions. The 25% unemployment of Spain and Greece? The 50% unemployment among the young people in Spain? Forget about it! Never going to happen here because our paper is better than everyone else’s. Right? Sounds good, but only if you take them at their word and ignore the realities that lie just under the surface.

While it may be true that the reserve status can buy us some extra time, it is by no means a guarantee against hardship. In fact, it is quite the opposite in that it guarantees that our beating will be worse than everyone else’s because we’ll be the last to fall. Greece’s problems started when debt/GDP crossed the 103% area. The rest of the PIIGS and all of Europe for that matter ran into problems in that same area, a few points here and there.

The Looters Are in Control

The message is, “You lost.”

By Wayne Siggard,

The election was all about new math:  47 = 51. The foresight and genius of the Founders knew no bounds.  Ben Franklin said, “Once the people find they can vote themselves money, that will herald the end of the republic.”  The trumpets have sounded.  The heralds have announced the awakening of the masses to that reality.  The greatest and most free nation the world has ever known has just sold its birthright for a mess of pottage; or, at least, the promise of an Obama phone. The takers have voted to take control over the producers.

Everyone will now get a fair shot — except that those who work in government and those who take government welfare will get a fairer shot.  Obama knows that you didn’t build that company.  You didn’t live frugally and save more money than your neighbor while they spent theirs on drugs or riotous living.  He knows this because he didn’t get anything without government assistance — affirmative action put him ahead of more qualified people who earned a spot that he took, just like Elizabeth Warren. You couldn’t possibly have gotten anything on your own merit or hard work.

"A claim for material position can be met only by a government with totalitarian powers." – Friedrich von Hayek

Von Mises said that full government control of all activities of the individual is virtually the goal of both national parties.  Have you ever tried to drill an oil or gas well?  Have you ever tried to build a house or commercial building?  Have you ever tried to manufacture and sell a product?  The International Building Code (IBC) increases in size, restrictions and requirements every year. Why? Because a bureaucracy needs to expand to justify its existence.

"Power tends to corrupt, and absolute power corrupts absolutely." – Lord Acton 

Liberty vs. War

A Brief History

by Jeffrey M. Herbener

In his book, Anatomy of the State, Murray Rothbard wrote,

Just as the two basic and mutually exclusive interrelations between men are peaceful cooperation or coercive exploitation, production or predation, so the history of mankind, particularly its economic history, may be considered as a contest between these two principles.[1]

This contest has been one-sided. In the ancient world, empires dominated political life. Merciless systems of slavery, theft, and war ruled around the world. One exception in a territory surrounded by such empires was the tribes of Israel. Even though warned by God himself of the misery they would suffer if they willingly surrendered the freedom they enjoyed under the decentralized polity of the judges in order to have an earthly king rule over them, they clamored for their own enslavement. It is instructive that the prize the Israelites deemed worth paying so heavy a price to obtain was to have a king to lead them in battle. With Saul as king, Israel no longer enjoyed periods of peace as under the judges, but was constantly at war. As Samuel had warned, Saul took their sons for soldiers, their daughters and male and female servants as slaves, the best of their lands, produce, and flocks and thereby, reduced the Israelites to servitude.[2]

The Israelites would not be the last people to succumb to the siren song of war. About the importance of war as a device for aggrandizing the power of the state in its contest against liberty, Rothbard wrote,

In war, State power is pushed to its ultimate, and, under the slogans of "defense" and "emergency," it can impose a tyranny upon the public such as might be openly resisted in time of peace. War thus provides many benefits to a State, and indeed every modern war has brought to the warring peoples a permanent legacy of increased State burdens upon society.[3]

War not only vastly extends the wealth transfers used by the state to bolster its rule but advances pro-state ideology. Because the state lives parasitically on the production of its hosts, those who benefit from the state's wealth transfers must always be a minority of the population. The majority must be the victims of the state and, therefore, their acquiescence in predation by the state must be engineered; otherwise that state is finished. The legitimacy of the state must be manufactured and maintained through ideology.

The Parasite That Kills Its Hostess

You may lose your job, but the proletarian masses will come out ahead. Or not.

By Robert Tracinski

The news about the bankruptcy of Hostess, maker of the Twinkie and other legendary junk foods, touched off some memories of growing up in a mid-sized Midwestern town in the 1970s and '80s. No, not that kind of memory, though come to think of it, the 1980s was the last time I actually ate a Hostess snack. What I'm recalling has a lot less nostalgic charm: the whole phenomenon of a kamikaze labor union that keeps demanding more for workers--who end up getting nothing when their employer goes belly-up.

That's pretty much what the unions did, or tried to do, to three of the big employers in our area, and it taught me some early lessons about the real nature of labor unions and of government intervention.

I grew up in an area known as the Quad Cities, a cluster of four towns in Illinois and Iowa, on opposite banks of the Mississippi River. The big local employers at the time were the Rock Island Arsenal, which made howitzers and machine guns for the US Army, the celebrated Rock Island Line, and two big manufacturers of farm equipment, John Deere and International Harvester.

What might strike you about this list is that half of these companies no longer exist. I watched them go down, and that's why the Hostess story seems so familiar.

Take the Rock Island Line, the popular name for the Chicago, Rock Island, and Pacific Railroad. The line's Wikipedia entry tells the story pretty much as I remember it, only worse.

"By the summer of 1979, the Brotherhood of Locomotive Engineers and the United Transportation Union had accepted new agreements. The Brotherhood of Railway and Airline Clerks (BRAC) held firm to their demand that pay increases be back dated to the expiration date of the previous agreement.

How Bimbos Saved the American Republic

For those worried about America becoming a plutocracy, bimbos are the unsung heroes, our magnificent hidden resource

by Robert Weissberg
Another American election has come and gone, this one noteworthy for its complete absence of candidates from America’s richest, most famous family dynasties. As far as I can tell, names with an Old Money, Social Register flavor—Rockefellers, Mellons, Fords, Astors, Vanderbilts, Morgans, Amours, Stanfords, Carnegies, and the du Ponts—are a rarity in today’s political landscape. Yes, the last half-century has seen three Rockefellers (Winthrop, Nelson, and Jay) and two generations of Bushes plus a few Kennedys, but this stream is all but dry.

The absence of these names is hardly trivial. The Founders feared the political consequences of powerful, rich families, even in the absence of aristocratic titles. The Constitution recognized this possibility when it authorized hoi polloi-dominated state legislatures to choose Senators rather than direct election where only the richest, most powerful could win an expensive statewide election. The Electoral College centered on states, not the popular vote, likewise insulated the Republic from influential dynastic families (e.g., the Adamses of Massachusetts, the Livingstons and Van Rensselaers of New York) that might dominate a particular state or region but not the entire nation.

The retreat of prominent families from civic life is a complicated story, but let me suggest one critical but often neglected explanation: the salutary role of bimbos (also known as tarts, floozies, vamps, and more recently, Natashas). In a nutshell, as these gorgeous and typically empty-headed women marry into rich families, the family’s genetic stock declines. With this decline, public careers for offspring slip beyond reach. Yes, the descendants of John Jacob Astor or Commodore Vanderbilt still enjoy money and power, but this is not power over the public realm. The Republic has been saved.

Never Has Less Cost More

Dismal economic growth is the flip side of trillion dollar deficits 

By J.T. Young

The official verdict is in: Washington has never paid so much for so little. Last week, the Congressional Budget Office released its final tally on the federal government's "fourth consecutive year with a deficit above $1 trillion." And in return, America finished the fourth year of its worst peacetime economic recovery since the Depression.

If government spending was supposed to equal prosperity, America has not gotten what it's paid for. Not that it hasn't paid a lot.

The federal government spent $3.5 trillion in fiscal year 2012. As CBO observes: "Federal spending has totaled between $3.5 trillion and $3.6 trillion in each of the past four years…" Prior to these four years, government spending had never broken $3 trillion.

Put into perspective, the entire federal debt held by the public did not reach the last four years' levels of annual spending until 1995.

Little surprise then that Washington racked up mind-boggling deficits over these last four years. Before these last four years, Washington's annual deficit had peaked at $459 billion. Last year's deficit? $1.1 trillion -- well more than twice the record high before these last four years' -- and the lowest of the four.

Put into perspective, total federal spending did not equal last year's deficit spending until 1989.

The Care and Breeding of Docile Students

Imposing docility by expelling troublemakers

by Robert Weissberg

The American people have increasingly become docile and reliant on government largess. I see a parallel between this burgeoning dependency and the breeding of dachshunds. 

The dachshund was bred as a killing machine to burrow and eradicate badgers, rabbits and, in the United States, prairie dogs. Its body is muscular with paws adapted to digging, and it has a keen sense of smell. Its large lung capacity allows it to dig underneath its prey to catch it by surprise. Packs of dachshunds were even used to hunt wild boar and wolverines. Thus, in their natural state they are not pets suitable for small children.

But little money is to be made breeding subterranean killing machines no matter how cute or adorable. Professional breeders have therefore wisely bred out the dachshund’s hyper-aggressive traits to arrive at an animal that more closely resembles a submissive toy poodle. It does not take much. Just cull out the snarly ones and voilà—you have a cute, tame wiener dog. 

World Bank Back In Charge Of Global Warming Business

Channeling the cash into the pockets of the bank, broker and trader "community" of climate-conscious finance professionals

By Andrew_McKillop

Following a Group of 20 finance ministers meeting in Mexico City this month, in the wake of superstorm Sandy, Bank of Italy governor Ignazio Visco told reporters: “The World Bank has gone back to being in charge of climate change,” “For a certain period....., it had stopped”.

This followed the report on climate change by the Potsdam Institute for Climate Impact Research, commissioned by the World Bank and released this month, which bluntly says "a 4 degC warmer world must be avoided".

The report was itself a superproduction of gory predictions, a throwback to the days before the ill-fated (for alarmists) Copenhagen conference on climate change of December 2009. It starkly says the world risks “cataclysmic changes” caused by extreme heatwaves, rising seas and depleted food stocks as it heads toward a "probably unstoppable" global warming of 4 degrees Celsius this century.

Gaza crisis has more to come

Τime may be running dangerously short

By Victor Kotsev 
On Sunday night, an Egyptian effort to establish a ceasefire between Israel and the Gaza militant factions reportedly collapsed. An Israeli ground invasion of the Gaza Strip loomed, after missiles landed near Tel Aviv for four days in a row - once near Jerusalem, even farther away. 
Though nobody was hurt in these specific attacks, they came as a slap in the face of the stated goals of the ongoing Israeli operation: stopping the missile fire and restoring deterrence. Rockets had not been aimed at the heart of Israel for over 20 years, since the former Iraqi dictator Saddam Hussein fired Scud missiles during the First Gulf War. Therefore, as tanks and artillery units rolled toward Gaza and reserve soldiers were reporting for duty (75,000 initially, an increase of more than 40% of the army's active personnel), a long and bloody operation appeared to be in store, and only an effective miracle of diplomacy could prevent that. 
Pinning down the beginning of the crisis is almost as difficult as forecasting its end. The Atlantic published an elaborate timeline of its gradual escalation, which involved the targeted assassination of a top Gaza militant, Ahmed al-Jabari, as well as the firing of some 150 rockets into southern Israel during the previous weekend. 

The storm that blew away rationalism

The belief that recent storms were caused by climate change echoes Medieval Europe's superstitions about weather

by Dominic Standish 

After flooding disruption in New York, the Caribbean and Venice over the past few weeks, global warming has acted as a prism through which bad weather events have been interpreted. Now, following his re-election, President Barack Obama has indicated that the US needs to address the threat of global warming.

Hurricane Sandy brought havoc in the Caribbean, especially Haiti, and caused approximately 60 deaths. Then the storm hit the US east coast; New York experienced exceptional floods and at least 40 people lost their lives. Next, Venice in Italy witnessed high flooding on 11 November, when the city’s tide measurements reached their sixth-highest level for 140 years. No one died from these floods in Venice, but - like Haiti and New York - the economic impact was significant.

The Butcher, the Brewer, the Baker, and the Bureaucrat

Or How a Welfare-State Altruist “Cares”

by Robert Tracinski

A long, brutal recession is prompting a certain degree of soul-searching and even philosophical debate in this election year. One example is a piece of honest introspection from a left-leaning commentator who stumbles upon an important truth while still showing us the cultural and philosophical blinders of the mainstream cultural elites.

The honest part is a sort of inadvertent admission of those blinders. In a piece mostly devoted to denouncing Federal Reserve Chairman Ben Bernanke for failing to print more money, Jonathan Chait ends up offering a poignant reflection on the distance between the cultural elites in Washington, DC—including himself—and those who are suffering in this economy.

The political scientist Larry Bartels has found (and measured) that members of Congress respond much more strongly to the preferences of their affluent constituents than their poor ones. And for affluent people, there is essentially no recession. Unemployment for workers with a bachelors degree is 4 percent—boom times. Unemployment is also unusually low in the Washington, D.C., area, owing to our economy’s reliance on federal spending, which has not had to impose the punishing austerity of so many state and local governments.

2013 Looks a Lot Like 1937 in Four Fearsome Ways

When Government Plays God

By Amity Shlaes

Will 2013 be 1937? This is the question many analysts are posing as the stock market has dropped after the U.S. election. On Nov. 16, they noted that industrial production, a crucial figure, dropped as well.

In this case, “1937” means a market drop similar to the one after the re-election of another Democratic president, Franklin D. Roosevelt, in 1936.

The drop wasn’t immediate in that case; it came in the first full year after the election. Industrial production plummeted by 34.5 percent. The Dow Jones Industrial Average dropped by half, from almost 200 in early 1937 to less than 100 at the end of March 1938.

It’s hard to imagine stock indexes dropping by half today, or unemployment rising past 15 percent, as they did in the “depression within the Depression.” But the parallels are visible enough to be worth tracing. They have to do with the danger of big government, and can be captured in a few categories.

The Unadulterated Gold Standard Part Two

Free Market Money

by Keith Weiner

In Part I, we looked at the period prior to and during the time of what we now call the Classical Gold Standard.  It should be underscored that it worked pretty darned well.  Under this standard, the United States produced more wealth at a faster pace than any other country before, or since.  There were problems; such as laws to fix prices, and regulations to force banks to buy government bonds, but they were not an essential property of the gold standard.

The essential was that people had a right to own and trade gold coins.  They had the right to deposit them in a bank, if the bank offered attractive terms (especially the payment of interest).  Banks had a right to take deposits, to buy assets, and to pay interest.  Banks had a right to issue paper notes that were claims against gold.  Banks had a right to lend their deposits (fractional reserves).

Despite some government interference, the Classical Gold Standard enabled a Golden Age of prosperity and full employment that is totally out of reach today (not to be confused with the rapid development of technology).  This is not to say there were not business failures, bank failures and panics – what were later called depressions and now recessions.  A free market does not attempt to guarantee that no one can ever lose money.  It is merely an environment in which no one is forced to subsidize someone else’s risks or losses.