Entitlement Reform, Tea Party Style

New CBO numbers leave no other choice

By Peter Ferrara

The Tea Party/Republican House majority was elected in 2010 to stop the runaway Obama Progressive Democrat big government spending spree. And it has had a decisive effect in that regard, as recorded in the annual CBO budget report released last week.

Federal spending soared from $2.655 trillion in 2006, when the Democrat Congress was elected to replace the Republican Congress, to $3.6 trillion in fiscal 2011, reflecting the last spending legislation adopted by that completely Democrat Congress in the prior year, an increase of 36% in just four years of control.

But after the new Tea Party/Republican House majority forced a major budget showdown in 2011, total, actual, nominal federal spending actually declined in fiscal 2012 to $3.54 trillion. Such an absolute decline rarely ever happens with federal spending. But for the next 2013 fiscal year, which just ended September 30, it happened again, declining to $3.45 trillion. That is the first two year decline in federal spending since the end of the Korean War.

In the process, total federal spending was slashed from a record peak (except only during World War II) of 24.4% of GDP in 2009 to 20.8% in 2013. That peak is still above the long-term average since World War II. These declines in spending are due to the budget caps and sequester adopted in the 2011 budget deal with the House Tea Party/Republicans.

Similar progress has been made against the deficit. The deficit for the last budget adopted by the full Republican Congress was $160 billion in fiscal year 2007. But the Democrat Congress had raised that to $1.413 trillion by 2009, almost nine times as much, the greatest government deficit in world history, ever. In just five years as President, Obama has borrowed roughly $5.7 trillion, which is larger than the entire gross federal debt in the year 2000, more than debt accumulated under all other American Presidents, from George Washington up until George Bush. Since the Democrat Congress was elected in the fall of 2006, the national debt has doubled.

But the deficit for 2013 is down to $680 billion, less than half of its peak under the full Democrat Congress repudiated in 2010. That is still the biggest deficit in world history, except for under President Obama.

Fools and their Futile Appeals

Useless Idiots

by Tim Newman

In all the books I have read about Stalin and the Great Terror (e.g. 1, 2, 3, 4), there is a discussion on the reaction of middle and upper echelon Communists when they are first arrested by the NKVD.  Consistently, and to the point that one must assume this was typical, they report reactions of utter surprise and bewilderment, followed rapidly by the conclusion that it must be some kind of terrible mistake.  Those of more senior rank implored their captors and families to inform Stalin in person and beg him to intervene; whilst those from the middle ranks – sometimes even after they’d been tortured, processed, and shipped off to the camps – would labour under the delusion that Stalin was entirely unaware of what was going on, and they were caught up in some kind of rogue operation of which he would never approve.  It dawned on them very, very late – and sometimes not at all – that Stalin personally oversaw this apparatus of terror and in many instances had ordered the arrest of the individual in person.

Reading these books gave me a new, and as far as I know, somewhat unusual (in the sense that I don’t know anyone else who shares it) view on the victims of the Great Terror: that their innocence cannot automatically be assumed.  For sure, the crimes for which they were actually charged were dreamed up out of nowhere, and there were undoubtedly a very great many who perished or suffered who were entirely innocent in all respects.  But many of the victims of the second wave of terror were those who took part in the first wave: thousands of NKVD thugs who were happy to sign the orders, knock on the doors, dish out the beatings, and pull the triggers found themselves up against a wall alongside thousands of Communists who had cheered them on earlier.  Similarly, the third wave incorporated thousands of those who actively participated in the first and second waves, and thousands more of those who, up until their own arrest, thought it was all fine and dandy.  For these individuals, it is difficult to feel much sympathy.

Mark Holland, of the now sadly defunct Blognor Regis, put this brilliantly in a post which is no longer online in response to this obituary of Alexandr Solzhenitsyn:

Meanwhile, [Solzhenitsyn] switched faiths, throwing out Christianity in favour of Marxism, by which he professed himself “absolutely sincerely enthralled” – and this in spite of the fact that, at 14, he had witnessed his substitute father, an engineer friend of the family, being dragged off in the first spate of purges, and some of his father’s relatives, too, denounced as kulaks and exiled to Siberia.

At university Solzhenitsyn was awarded a Stalinist scholarship for his keen work in the Communist youth league … in 1939 he was reported to have attended more to his copy of Marx’s Das Kapital, than to his young bride.

A Faustian bargain

Social Security: The New Deal’s Fiscal Ponzi

Charles Ponzi 1920

by David Stockman

The Social Security Act of 1935 had virtually nothing to do with ending the depression, and if anything it had a contractionary impact. Payroll taxes began in 1937 while regular benefit payments did not commence until 1940.

Yet its fiscal legacy threatens disaster in the present era because its core principle of “social insurance” inexorably gives rise to a fiscal doomsday machine. When in the context of modern political democracy the state offers universal transfer payments to its citizens without proof of need, it offers thereby to bankrupt itself—eventually.

By contrast, a minor portion of the 1935 legislation embodied the opposite principle—namely, the means-tested safety net offered through categorical aid for the low-income elderly, blind, disabled and dependent families. These programs were inherently self-contained because beneficiaries of means-tested transfers simply do not have the wherewithal—that is, PACs and organized lobbying machinery—to “capture” policy-making and thereby imperil the public purse.

To the extent that means-tested social welfare is strictly cash-based, as was cogently advocated by Milton Friedman in his negative income tax plan, it is even more fiscally stable. Such purely cash based transfers do not enlist and mobilize the lobbying power of providers and vendors of in-kind assistance, such as housing and medical services.

Social insurance, on the other hand, suffers the twin disability of being regressive as a distributional matter and explosively expansionary as a fiscal matter. The source of both ills is the principle of “income replacement” provided through mandatory socialization of huge population pools.

Aristocracy in America

Huckleberry Finn portrays both the American dream and its nightmarish underside

By Paul Cantor

Mark Twain's Adventures of Huckleberry Finn is at once a comic masterpiece and a serious exploration of what distinguishes the American character, above all, its love of freedom and independence. Although still widely read in its original book form, Huckleberry Finn has passed into the broader realm of American pop culture. It is endlessly recycled in film and television versions, often in Disneyfied adaptations that turn it into musical comedy. It has become the sort of book that is commonly described as "beloved." Despite its racist language, which often keeps it from being taught to young people in schools, it is often classified as a children's book.

Yet Huckleberry Finn is dark and deeply unnerving. It is filled with an unending parade of con artists, impostors, vigilantes, lynch mobs, and other practitioners of fraud and deception or cruelty and inhumanity. Wherever one turns, one finds murder or the threat of murder. At its most disturbing, Huckleberry Finn confronts the darkest blot on the land of the free—the crime of slavery. The book seems misanthropic, anticipating Twain's cynical vision in his later work, especially the Mysterious Stranger fragments. To varying degrees, he seems to be questioning conventional morality and religious faith in Huckleberry Finn. It seems to be the very opposite of a children's book as commonly understood.

Of Mice and Men, Morals and Markets

Under the shiny veneer of science

by Bart Wilson

Good morals make for good markets is hardly a contentious claim. Reputations for honest dealing grease the wheels of commerce. But does it go the other way? Do markets foster good morals? The intuition of most people is that markets may do many positive things, but, no, they don't cultivate ethically better people. If anything, people are moral in spite of the tendency of markets to corrupt their morals. In a recent paper published in Science, Armin Falk and Nora Szech set out to test whether participating in a market institution causally corrupts its participants.

In one treatment the instructions state (translated by the authors from the original German) that "the life of a mouse is entrusted to your care. It is a healthy, young mouse, living with some other mice together in a small group. The expected lifetime of this mouse is approximately two years." The experimenters then ask the participants to choose one of two trivia quizzes. "In Quiz A, at the end of the experiment, you earn no additional money besides the 20 euros for participation and the mouse stays alive." But "[i]n Quiz B, at the end of the experiment, you get 10 euros in addition. As another consequence, the mouse will get killed." The instructions then explain how the mouse is gassed and the subjects are shown a 30-second video. Importantly, other researchers had already scheduled the mice to die, so it is only the experimental participants who could in fact save the mice from certain death.

There are two market treatments, one with a single buyer and a single seller and another with 7 buyers and 9 sellers. Buyers submit bids and sellers offers in continuous time for three minutes. A trade is finalized if a buyer accepts a seller's offer or a seller accepts a buyer's bid. The buyer's payoff is €20 minus the price paid, and the seller's payoff is the transaction price. The instructions state that "[i]n the market described above, a mouse is traded. This mouse is alive. It gets killed as soon as the trade, i.e., the selling, is finalized."

The authors hypothesize that the two market treatments will "display a tendency to erode moral standards" relative to the quiz treatment for three reasons. First, by trading with each other a buyer and seller share the responsibility for the death of the mouse, which partially mitigates any moral guilt of the individual. Second, the existence of a market and observed participation of others in it legitimizes the killing of mice for profit. Finally, money and the competition for money overtake working access memory to crowd out the moral reasoning of imposing harm. In short, the last reason plays off the folk notion that money corrupts people, where the corruption in this case is gassing a mouse for more money.

Before reporting the results, I find it curious that gassing a mouse for money indicates a moral lapse for the participants, but that it is morally permissible for the authors in the pursuit of science to conduct such an experiment. A rejoinder might be that any moral corruption on the part of the authors equally legitimizes the erosion of morals in all treatments, so the question remains whether the market treatments comparatively erode morals. But this misses the point. If it is morally permissible for the authors to share the guilt of killing mice with others in the scientific community who kill mice, then it isn't a peculiar feature of markets that causes people to mitigate moral guilt and legitimize "lower" moral standards. It is rather a human propensity to share moral guilt and agree with other humans when it is legitimate to harm other animals.

Goldman Sachs Is A Small Fish

The Fed Is The Vampire Squid

By Monty Pelerin 

The gap between the reputation of the Federal Reserve and its actual value to the economy is perhaps greater than any other institution extant. It is a myth that the Fed is necessary and an even greater myth that it is beneficial to society. As Charles Hugh Smith observed:

In a system that depends on lies and the credulity of the citizenry, the greatest lie is that the Federal Reserve’s “quantitative easing” bailouts of the banks somehow help our citizens and communities.

Operating under the meme that it is necessary for a healthy economy, the Fed and its cronies in the financial system have exploited the wealth of the nation, systematically transferring earned wealth by ordinary citizens into the hands of the financial elite. The story behind its creation, see The Creature From Jekyll Island, should shock any American.

After 100 years of exploitation, the Federal Reserve (and other central banks) have placed all modern economies in risk of collapse. At this point, there is likely no way to avoid such an outcome. It is only a question of when matters spin out of control.

Wealth will continue to be destroyed (actually shifted) via inflation). This shift will continue to enrich the financial and monied class at the expense of ordinary citizens. The middle class is slowly being destroyed. The process has been a slow-motion version of Weimar Germany. At some point, control will be lost and fast-speed Weimar will emerge.

No one knows when the system will spin out of control. It could commence tomorrow or it could take another decade or two. The fact that the economy can no longer grow is a sign that we may be nearing that point. The trillions of dollars created to “save” the economy has not done anything to create jobs. Job creation appears to have reversed. Standards of living for the middle class are not rising and have not for decade or more. These are signs of the damage inflicted by dishonest money.

If anything has been accomplished by the Fed, it has been a deferral of the inevitable. This deferral has been purchased at great costs to be incurred in the future.

Matt Taibbi, in a famous article in Rolling Stone, unforgettably referred to Goldman Sachs as a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” His colorful description has haunted Goldman since.

In reality, Mr. Taibbi blamed a low-level officer for the sins of the general staff. Goldman Sachs behaved rationally based on the policies they were provided by the Federal Reserve and the political hacks in Washington. So did the rest of the financial industry. These generals at the Fed deliberately made the rules by which lower level officers like Goldman, Lehman, Merrill Lynch and the like could get rich as the expense of the rest of society. They made it legal to prey on the productive.

The following comments by Anthony Wile reflect on the true vampire squid — the Federal Reserve (emboldening by me):

Warren ett has just come out with the statement, about which I tweeted [@HACPWile] earlier today when I first stumbled on it, that the “Fed Is [the] Greatest Hedge Fund in History.” According to Bloomberg, he elaborated with the statement that the Fed‘s “generating ‘$80 billion or $90 billion a year probably’ in revenue for the U.S. government.” Here’s more:

Buffett compared the U.S. Federal Reserve to a hedge fund because of the central bank‘s ability to profit from bond purchases while accumulating a balance sheet of more than $3 trillion.

The central bank has been buying $85 billion of bonds a month to help the U.S. recover as it emerges from the deepest slump since the Great Depression. Chairman Ben S. Bernanke and other Fed policy makers unexpectedly opted this week to sustain that pace of asset purchases instead of tapering it, saying they need to see more signs of lasting improvement in the economy.

Have We Lost Our Common-Sense?

The only way to keep the status quo from imploding is to banish common-sense

by charles smith

I was surprised to find that many people took my satire/parody last month seriously:  Obama Administration Proposes 2,300-Page "New Constitution"  (October 10, 2013). A number of people wrote me asking for the source of the story, and others chastized me for not labeling the essay "satire/parody," as so many others didn't seem to get the joke. (The permanent link was constitution-parody 10-13.)

I thought the absurdity of hundreds of pages of the "New Constitution" being too secret for the public to read (i.e. redacted) would make the joke obvious, but I was wrong: apparently we are collectively ready to believe that an American administration would propose a law of the land that was too secret for the citizenry to read.

Even readers who suspected the post was satirical felt the need to confirm this was indeed the case. Other readers reported the essay had unleashed a torrent of vitriol on other sites' forums.

My first thought was that we may be losing our collective sense of humor. Readers of the zany satirical zine The Onion still appreciate that a good satire takes an element of truth and exaggerates it for humorous effect: for example, today's Onion headline Man Who Drinks 5 Diet Cokes Per Day Hoping Doctors Working On Cure For Whatever He’s Getting.

But as the gulf between the official state-cartel-Empire narrative ("everything is going great, but we will all die if Central Bankers don't run the world") and reality widens, people are losing their ability to separate satire from reality and truth from officially sanctioned fiction ("unemployment rate declines to 7%.")

The strains created by this cognitive dissonance (or perhaps more accurately, a double-bind that leads to alienation and a form of induced madness, as per psychiatrist R.D. Laing's extension of Gregory Bateson's concept) lead to short tempers, loss of perspective, emotional hair-trigger reactions and a host of other unhealthy responses.

The target of my mockery was not the Obama Administration per se but the nonsensical belief that a 1,300-page piece of legislation can possibly accomplish anything but strip us of the ability to actually solve critical problems.

Sex at Sunset

By 2020, in the Land of the Rising Sun, adult diapers will outsell baby diapers

by mark steyn
To Western eyes, contemporary Japan has a kind of earnest childlike wackiness, all karaoke machines and manga cartoons and nuttily sadistic game shows. But, to us demography bores, it's a sad place that seems to be turning into a theme park of P. D. James's great dystopian novel The Children of Men. As readers may recall from earlier citations in this space, Baroness James's tale is set in Britain in the near future, in a world that is infertile: The last newborn babe emerged from the womb in 1995, and since then nothing. The Hollywood director Alfonso Cuarón took this broad theme and made a rather ordinary little film out of it. But the Japanese seem determined to live up to the book's every telling detail.

In Lady James's speculative fiction, pets are doted on as child-substitutes, and churches hold christening ceremonies for cats. In contemporary Japanese reality, Tokyo has some 40 "cat cafés" where lonely solitary citizens can while away an afternoon by renting a feline to touch and pet for a couple of companiable hours. In Lady James's speculative fiction, all the unneeded toys are burned, except for the dolls, which childless women seize on as the nearest thing to a baby and wheel through the streets. In contemporary Japanese reality, toy makers, their children's market dwindling, have instead developed dolls for seniors to be the grandchildren they'll never have: You can dress them up, and put them in a baby carriage, and the computer chip in the back has several dozen phrases of the kind a real grandchild might use to enable them to engage in rudimentary social pleasantries.

P. D. James's most audacious fancy is that in a barren land sex itself becomes a bit of a chore. The authorities frantically sponsor state porn emporia promoting ever more recherché forms of erotic activity in an effort to reverse the populace's flagging sexual desire just in case man's seed should recover its potency. Alas, to no avail. As Lady James writes, "Women complain increasingly of what they describe as painful orgasms: the spasm achieved but not the pleasure. Pages are devoted to this common phenomenon in the women's magazines."

As I said, a bold conceit, at least to those who believe that shorn of all those boring procreation hang-ups we can finally be free to indulge our sexual appetites to the full. But it seems the Japanese have embraced the no-sex-please-we're-dystopian-Brits plot angle, too. In October, Abigail Haworth of the Observer in London filed a story headlined "Why Have Young People in Japan Stopped Having Sex?" Not all young people but a whopping percentage: A survey by the Japan Family Planning Association reported that over a quarter of men aged 16–24 "were not interested in or despised sexual contact." For women, it was 45 percent.

France clueless on Iran

Arak and Gallic Posturing

By Pepe Escobar 
Here is definitive proof - if any was needed - that the Gallic fit-throwing that burned the possibility of an interim Iranian nuclear deal last week in Geneva was completely pointless. 

The key "concern" expressed by Israel-firster French Foreign Minister Laurent Fabius to derail an interim deal was about the Arak heavy-water reactor. 

Well, UN inspectors this week reported that they had detected no new developments in Arak over the three months since August. [1] 

The head of the International Atomic Energy Agency (IAEA), Yukiya Amano, was also in Tehran on Monday, and - unusually for his trademark paperboy role for Washington - had nothing to complain about. 

Fabius used the Arak gambit at the last minute in Geneva to derail the talks, provoking the ire of even fellow European diplomats. That was out of pure disinformation; Tehran was already doing what Fabius insisted they were not doing. 

A EU diplomat (non-French) confirmed that Iranian Foreign Minister Mohammad Javad Zarif had already informed US Secretary of State John Kerry about these euphemistically defined "confidence-building measures". Kerry was fully aware before he landed in Geneva on his way to sign an interim deal. 

But guess what: the French were clueless. Kerry did not tell anybody else on the P5+1 table (comprising the United States, Britain, France, China, Russia and Germany) because he feared any leaks. This proves once again that this infinitely complex negotiation is really between Washington and Tehran. Russia and China are behaving - so far - as sort of quiet (and wary) observers. Yet Kerry, Francophile that he is, should have know better about Gallic peacock instincts. 

North Korea Executes Citizens for Having Bibles, Watching TV

Socialism in Action

by  Dave Bohon

One of South Korea's largest newspapers has reported that North Korea executed around 80 people in early November, some for such prohibited activities as viewing South Korean television shows and possessing Bibles. According to South Korea's daily JoongAng newspaper, the coordinated executions occurred in seven North Korean cities, with an estimated ten people killed at each locale.

An unidentified source reported that officials in the port city of Wonsan, on North Korea's eastern coast, gathered more than ten thousand residents into a local stadium and forced them to watch the firing squad executions. The source, who reportedly is familiar with North Korean internal affairs, said victims were lashed to poles, hooded, and then mowed down with machine gun fire. “I heard from the residents that they watched in terror as the corpses were so riddled by machine-gun fire that they were hard to identify afterwards,” the source told the newspaper.

“The Wonsan victims were mostly charged with watching or illegally trafficking South Korean videos, being involved in prostitution, or being in possession of a Bible,” reported the JoongAng newspaper. “Accomplices or relatives of the executed people who were implicated in their alleged crimes were sent to prison camps. The reason for the executions wasn’t immediately clear. They seem to have occurred in cities that are centers of economic development, according to a government official.”

While the newspaper cited only one source, other Korean news agencies appeared to corroborate the executions.

Ruthless Tyrants Win Seats on UN “Human Rights” Council

China, Cuba, and Vietnam, along with the hardline Islamic tyrants will enforce "Human Rights" to the rest of the World as well

by  Alex Newman

A motley assortment of the planet’s most ruthless Islamist and communist autocracies were appointed on November 12 to sit on the increasingly discredited United Nations “Human Rights” Council (UN HRC), drawing swift condemnation and ridicule from around the world. The week before, the mass-murdering dictatorship ruling over mainland China had its “education vice-minister” elected to lead the UN Educational, Scientific and Cultural Organization (UNESCO), adding more fuel to the fire for critics who advocate an immediate American withdrawal from the scandal-plagued planetary outfits.    
Among the mass-murdering regimes selected to sit on the UN’s self-styled “human rights” entity were the brutal communist dictatorships enslaving the people of China, Cuba, and Vietnam, along with the hardline Islamic tyrants ruling over Algeria and Saudi Arabia. Of course, numerous critics have pointed out that those are some of the most repressive tyrannies on earth. Vladimir Putin’s Russian government, widely criticized as a gangster regime, was also chosen to sit on the global body supposedly charged with upholding “human rights” around the world. Other brutal autocrats were already on the council prior to the most recent additions.  
There were a number of other controversial selections this week for three-year terms on the disgraced UN “human rights” outfit as well: the radical South African government, for example, which has been implicated in genocidal machinations by the world’s top expert on genocide, along with the socialist regime in Namibia. Rulers from Morocco and Macedonia were also appointed. Finally, among the least controversial of the 14 new selections for the council were the governments of France and the United Kingdom.As the dubious UN institution cements its status as a planetary laughing stock by adding even more of the world’s worst human-rights abusers to its leadership, more than a few analysts and human rights activists were left scratching their heads. However, when considering the composition of the 193-member UN General Assembly, the vote to add the planet’s leading communist and Islamist autocracies to an entity in charge of human rights — as defined by the UN: revocable privileges — makes perfect sense. There is a reason that the UN is regularly blasted by critics as the “dictators' club,” and the recent vote illustrated that perfectly. 
Still, outrage was being expressed around the world. “This is a black day for human rights,” noted Executive Director Hillel Neuer with the Geneva-based UN Watch, a non-governmental human rights group that monitors the global body and its activities. “Today the UN sent a message that politics trumps human rights, and it let down millions of victims worldwide who look to the world body for protection.”

World’s No. 1 Jailer

No other country on the planet puts more of its citizens in cages for life for nonviolent drug offenses than the USA

by Mark J. Perry

It’s been well-documented that the US is the World’s No. 1 Jailer, and imprisons far more of its people than any other country on the planet (716 per 100,000 population), including countries generally thought to be repressive like Myanmar (120 per 100,000), Iran (284 per 100,000), Syria (58 per 100,000), or Cuba (510 per 100,000). It’s also been documented that America’s cruel and failed War on Drugs, launched by President Nixon in 1971, is largely responsible for the country’s shameful status as the World’s No. 1 Incarcerator, see chart above.

A new report released this week from the American Civil Liberties Union ”A Living Death: Life without Parole for Nonviolent Offenses” examines a very disturbing trend that contributes to America’s notoriety as the World’s No. 1 Jailer – the increasing number of nonviolent offenders in the US who are being sentenced to life in prison without parole. As Reason.comreported “The ACLU found, perhaps unsurprisingly, that the War on Drugs, mandatory minimums, and “tough-on-crime” policies are to blame” for the more than 3,000 prisoners in America serving life sentences without parole (LWOP) for nonviolent drug and property crimes.

Here are some highlights of the ACLU report:

This report documents the thousands of lives ruined and families destroyed by sentencing people to die behind bars for nonviolent offenses, and includes detailed case studies of 110 such people. It also includes a detailed fiscal analysis tallying the $1.78 billion cost to taxpayers to keep the 3,278 prisoners currently serving LWOP for nonviolent offenses incarcerated for the rest of their lives.

Using data obtained from the Bureau of Prisons and state Departments of Corrections, the ACLU calculates that as of 2012, there were 3,278 prisoners serving Life without parole (LWOP) for nonviolent drug and property crimes in the federal system and in nine states that provided such statistics (there may well be more such prisoners in other states). About 79% of these 3,278 prisoners are serving LWOP for nonviolent drug crimes. Nearly two-thirds of prisoners serving LWOP for nonviolent offenses nationwide are in the federal system; of these, 96% are serving LWOP for drug crimes. More than 18% of federal prisoners surveyed by the ACLU are serving LWOP for their first offenses. Of the states that sentence nonviolent offenders to LWOP, Louisiana, Florida, Alabama, Mississippi, South Carolina, and Oklahoma have the highest numbers of prisoners serving LWOP for nonviolent crimes, largely due to three-strikes and other kinds of habitual offender laws that mandate an LWOP sentence for the commission of a nonviolent crime.

The incompetence of our neo-monarchy

Thus Spake Obama 

By Mark Steyn

It is a condition of my admission to this great land that I am not allowed to foment the overthrow of the United States government. Oh, I signed it airily enough, but you’d be surprised, as the years go by, how often the urge to foment starts to rise in one’s gullet. Fortunately, at least as far as constitutional government goes, the president of the United States is doing a grand job of overthrowing it all by himself.

On Thursday, he passed a new law at a press conference. George III never did that. But, having ordered America’s insurance companies to comply with Obamacare, the president announced that he is now ordering them not to comply with Obamacare. The legislative branch (as it’s still quaintly known) passed a law purporting to grandfather your existing health plan. The regulatory bureaucracy then interpreted the law so as to un-grandfather your health plan. So His Most Excellent Majesty has commanded that your health plan be de-un-grandfathered. That seems likely to work. The insurance industry had three years to prepare for the introduction of Obamacare. Now the King has given them six weeks to de-introduce Obamacare.

“I wonder if he has the legal authority to do this,” mused former Vermont governor Howard Dean. But he’s obviously some kind of right-wing wacko. Later that day, anxious to help him out, Congress offered to “pass” a “law” allowing people to keep their health plans. The same president who had unilaterally commanded that people be allowed to keep their health plans indignantly threatened to veto any such law to that effect: It only counts if he does it — geddit? As his court eunuchs at the Associated Press obligingly put it: “Obama Will Allow Old Plans.” It’s Barry’s world; we just live in it.

The reason for the benign Sovereign’s exercise of the Royal Prerogative is that millions of his subjects — or “folks,” as he prefers to call us, no fewer than 27 times during his press conference — have had their lives upended by Obamacare. Your traditional hard-core statist, surveying the mountain of human wreckage he has wrought, usually says, “Well, you can’t make an omelet without breaking a few eggs.” But Obama is the first to order that his omelet be unscrambled and the eggs put back in their original shells. Is this even doable? No. That’s the point. When it doesn’t work, he’ll be able to give another press conference blaming the insurance companies, or the state commissioners, or George W. Bush . . . 

Generation Wait

Share of young adults who move hits 50-year low

By HOPE YEN

U.S. mobility for young adults has fallen to the lowest level in more than 50 years as cash-strapped 20-somethings shun home-buying and refrain from major moves in a weak job market. 

The new 2013 figures from the Census Bureau, which reversed earlier signs of recovery, underscore the impact of the sluggish economy on young people, many of them college graduates, whom demographers sometimes refer to as "Generation Wait." 

Burdened with college debt or toiling in low-wage jobs, they are delaying careers, marriage and having children. Waiting anxiously for their lucky break, they are staying put and doubling up with roommates or living with Mom and dad, unable to make long-term plans or commit to buying a home — let alone pay a mortgage. 

Many understood after the 2007-2009 recession that times would be tough. But few say they expected to be in economic limbo more than four years later. 

"I'm constantly looking for other jobs," says Jeremy Bills, 27, of Nashville, Tenn., who graduated from Vanderbilt University in May 2011 with a master's degree in human and organizational development. Originally from Tampa, Fla., Bills has stayed put in his college town in hopes of finding a job in management consulting or human resources. Instead, he has mostly found odd jobs like pulling weeds and dog-sitting. 

Bills says he pursued a master's degree to bolster his credentials after getting his college diploma in 2008, shortly before the financial meltdown. Instead, he finds himself still struggling financially and worrying that the skills he learned in school — where he incurred $20,000 in student loan debt — are "kind of atrophying right now." 

"It's not like riding a bicycle. You can't just jump into a career position so many years after training," said Bills, who now works at a nonprofit organization making $12 an hour and is looking for a second job. 

Among adults ages 25-29, just 4.9 million, or 23.3 percent, moved in the 12 months ending March 2013. That's down from 24.6 percent in the same period the year before. It was the lowest level since at least 1963. The peak of 36.7 percent came in 1965, during the nation's youth counterculture movement. 

Defining bubbles

Psychology and economics

Dr. Frank Shostak

According to the popular way of thinking, bubbles are an important cause of economic recessions. The main question posed by experts is how one knows when a bubble is forming. It is held that if the central bankers knew the answer to this question they might be able to prevent bubble formations and thus prevent recessions.

On this, at the World Economic Forum in Davos Switzerland on January 27, 2010, Nobel Laureate in Economics Robert Shiller argued that bubbles could be diagnosed using the same methodology psychologists use to diagnose mental illness. Shiller is of the view that a bubble is a form of psychological malfunction. Hence the solution could be to prepare a checklist similar to what psychologists do to determine if someone is suffering from, say, depression. The key identifying points of a typical bubble according to Shiller, are,

1.      Sharp increase in the price of an asset.

2.    Great public excitement about these price increases.

3.    An accompanying media frenzy.

4.    Stories of people earning a lot of money, causing envy among people who aren’t.

5.     Growing interest in the asset class among the general public.

6.    New era “theories” to justify unprecedented price increases.

7.     A decline in lending standards.

What Shiller outlines here are various factors that he holds are observed during the formation of bubbles. To describe a thing is, however, not always sufficient to understand the key factors that caused its emergence. In order to understand the causes one needs to establish a proper definition of the object in question. The purpose of a definition is to present the essence, the distinguishing characteristic of the object we are trying to identify. A definition is meant to tell us what the fundamentals or the origins of a particular entity are. On this, the seven points outlined by Shiller tell us nothing about the origins of a typical bubble. They tell us nothing as to why bubbles are bad for economic growth. All that these points do is to provide a possible description of a bubble. To describe an event, however, is not the same thing as to explain it. Without an understanding of the causes of an event it is not possible to counter its emergence.

Now if a price of an asset is the amount of money paid for the asset it follows that for a given amount of a given asset an increase in the price can only come about as a result of an increase in the flow of money to this asset.

China Eases One-Child Policy

Concession Comes as Labor Shortage Looms

By LAURIE BURKITT

China is tempering its controversial one-child policy, allowing more couples to have a second child in a surprise concession over a much-disliked control that comes as the country faces a looming worker shortage.

Couples will be able to have two children if one spouse is an only child, according to a wide-ranging Communist Party reform blueprint issued Friday, the most significant adjustment in a policy that has defined Chinese family life for more than three decades and perhaps the most dramatic policy change out of leaders' recent party conclave.

Previous exemptions mainly allowed some rural couples to have a second child and ethnic minorities to have more. Couples consisting of two only children were also exempt. The new move expands exemptions to many more couples, chiefly urban ones who have seen their living standards improve and increasingly chafed under social controls.

The shift comes after years of high-level debates and was greeted by those who have been pushing Beijing for change as game-changing.

"It's a historic moment in the life of this infamous policy," said Wang Feng, a demographer at Fudan University in Shanghai.

He and other experts said Chinese leaders also realized that this reform—which comes amid increasingly vocal criticism of Beijing's handling of a number of social issues—was easier to deliver than concrete change on problems such as poor medical care and pollution that have developed amid the country's breakneck growth.

"This is the only concrete policy change," said Cheng Li, an expert on China's elite politics at the Brookings Institution. For the authorities, he said, "It's a very good story."

However, demographers say the shift, in the document charting China's economic course for the next decade,t comes too late to solve a looming labor crisis in a rapidly aging society.

The document didn't say when the new policy will start, saying only that it would "gradually adjust and improve family planning, promoting the development of balanced population."

Venezuela Declares Economic Laws Abolished

It's Been Tried Before …

President Maduro of Venezuela. He reminds us faintly of a bouncer or some other type of enforcer. We wouldn't hesitate to cast him in a movie about the mob. Getting 'protection' from this dude sounds like a slightly scary prospect.

By Pater Tenebrarum

Mish already wrote about the latest escapades in the ongoing Venezuelan crack-up boom/hyper-inflation catastrophe. In the meantime, Bloomberg has updated its original report, noting inter alia that the latest news have provoked a mini-crash in the country's bonds. 

“Venezuelan bonds tumbled, sending yields to a 22-month high, after President Nicolas Maduro dispatched the military to take over a retail chain as part of his effort to quell inflation that’s soared above 50 percent.

The country’s benchmark bonds due 2027 fell 3.9 cents to 72.1 cents on the dollar as Maduro’s seizure of electronics retailer Daka and his warnings to other businesses to cut prices to “fair” levels deepened investor concern that growth is being choked off by government controls. Yields on the bonds soared 0.79 percentage point to 13.82 percent, the highest since January 2012, at 3:19 p.m. in New York.

Maduro, who took over as president this year after his socialist mentor Hugo Chavez died of cancer, is stiffening government-imposed price controls that have contributed to food and goods shortages across the South American country. Maduro blamed the “parasitic bourgeoisie” and said he’d impose limits on profit margins throughout the economy after inflation surged to 54 percent in October, the fastest pace in 16 years.

“In the 20 years that I’ve been managing emerging markets, I have never seen the mismanagement of the scale that I’m seeing in Venezuela today,” Ray Zucaro, who oversees $375 million of emerging-market debt at SW Asset Management LLC in Newport Beach,California, wrote in an e-mailed response to questions. “The government effectively is promoting anarchy. This disconnect with reality, I’ve never seen it bigger than it is now.”