Unintended Consequences

The law of unintended consequences is at work always and everywhere

by Rob Norton

The law of unintended consequences, often cited but rarely defined, is that actions of people—and especially of government—always have effects that are unanticipated or unintended. Economists and other social scientists have heeded its power for centuries; for just as long, politicians and popular opinion have largely ignored it.

The concept of unintended consequences is one of the building blocks of economics. Adam Smith’s “invisible hand,” the most famous metaphor in social science, is an example of a positive unintended consequence. Smith maintained that each individual, seeking only his own gain, “is led by an invisible hand to promote an end which was no part of his intention,” that end being the public interest. “It is not from the benevolence of the butcher, or the baker, that we expect our dinner,” Smith wrote, “but from regard to their own self interest.”

Most often, however, the law of unintended consequences illuminates the perverse unanticipated effects of legislation and regulation. In 1692 the English philosopher John Locke, a forerunner of modern economists, urged the defeat of a parliamentary bill designed to cut the maximum permissible rate of interest from 6 percent to 4 percent. Locke argued that instead of benefiting borrowers, as intended, it would hurt them. People would find ways to circumvent the law, with the costs of circumvention borne by borrowers. To the extent the law was obeyed, Locke concluded, the chief results would be less available credit and a redistribution of income away from “widows, orphans and all those who have their estates in money.”

In the first half of the nineteenth century, the famous French economic journalist Frédéric Bastiat often distinguished in his writing between the “seen” and the “unseen.” The seen were the obvious visible consequences of an action or policy. The unseen were the less obvious, and often unintended, consequences. In his famous essay “What Is Seen and What Is Not Seen,” Bastiat wrote:

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.(1)

Bastiat applied his analysis to a wide range of issues, including trade barriers, taxes, and government spending.

The first and most complete analysis of the concept of unintended consequences was done in 1936 by the American sociologist Robert K. Merton. In an influential article titled “The Unanticipated Consequences of Purposive Social Action,” Merton identified five sources of unanticipated consequences. The first two—and the most pervasive—were “ignorance” and “error.”

Is Germany Really a ‘Weight on the World’?

Martin Wolf Complains About Germany

By Pater Tenebrarum

Few writers produce erudite-sounding nonsense with such unwavering regularity as Martin Wolf, an establishment-approved scribbler for the Financial Times. When he is not screeching for more money printing, he is belly-aching about 'trade imbalances', which allegedly condemn the world to economic hell. The latest example is his article 'Germany is a Weight on the World'.

This was written after the misguided Mercantilists apparently still populating the US treasury department (after decades of US trade deficits that have somehow completely failed to matter all this time) decided to complain about Germany's allegedly unconscionable trade surplus.

So here we are, more than a century after the fallacies of Mercantilism have been disproved by a plethora of economists, and people still allege that there is something evil in trade that requires even more government intervention than there already is.

Wolf writes: 

“The criticisms that hurt are those one suspects might be fair. This might explain the outrage from Berlin last week over the criticism by the US Treasury of Germany’s huge and vaunted trade surplus. But the Treasury is to be commended for stating what Germany’s partners dare not: “Germany has maintained a large current account surplus throughout the euro area financial crisis.” This “hampered rebalancing” for other eurozone countries and created “a deflationary bias for the euro area, as well as for the world economy”. The International Monetary Fund has expressed similar worries.” 

(emphasis added)

It took him just one paragraph to mention the tiresome deflation bogey again, but allow us to point out that all these 'worries' about 'Germany's surplus' implicitly and quite wrongly assume that countries are somehow equivalent to acting human beings. This is not the case.

If, say, an American spends $50,000 to buy a car from BMW, then what this trade tells tells us that an individual residing in the US valued a German-built BMW more than $50,000, while the managers of the company BMW valued the $50,000 more than the car they offered in exchange. Both parties to the exchange have gained, otherwise no trade would have taken place. Win-win!

But no, says Martin Wolf, wagging his finger, accompanied by a chorus of bureaucrats from the US treasury to the IMF, something evil has occurred! See, due to this misguided American individual buying a car that the misguided Germans have built so well that he prefers it not only over his $50,000 but also to cars built by others elsewhere, the US now has a $50,000 deficit with Germany! This is terrible! Someone must do something!

A cosmic Stockholm syndrome

What the State Fears Most - Revelations of the Truth about the State

By Robert Higgs   

Why does the U.S. government go to such extraordinary lengths to discredit, punish, and ruin persons such as Daniel Ellsberg, Julian Assange, and—next in line, no doubt—Edward Snowden? The government alleges that these persons give aid and comfort to the nation’s enemies and endanger national security. In truth, however, these persons only “crime” is to tell the truth to the public about what the U.S. government is doing. By telling the truth about especially important matters, they endanger only the state, by exposing its lies and its hidden crimes for the world to see.

The rulers can continue to plunder and bully the great mass of people only as long as the people believe the Biggest of All Big Lies, which is that the government seeks to be, and is, their essential protector and general benefactor. The Ellsbergs, Assanges, and Snowdens, rare as they are, demonstrate that the government’s pose as protector and benefactor is nothing but a ruse to hide its essential nature and functioning. The only protection the rulers aim to provide us is the kind that a shepherd provides his sheep—protection from anything that interferes with his exclusive ability to determine how and when the sheep will be sheared and slaughtered.

The ultimate scholar

Free people are net producers

By Donald J. Boudreaux

Last Friday, marked the 10th anniversary of the death of the great economist Julian Simon. Although he never received the professional or popular acclaim of economists such as Milton Friedman, Paul Samuelson or F.A. Hayek, Simon's insights and work rank with those of history's greatest social scientists.

Simon's most important contribution was to crystallize and explain an insight that even the best economists before him only glimpsed -- namely, that human beings in free societies are "the ultimate resource." Nothing -- not oil, not land, not gold, not microchips, nothing -- is as valuable to the material well-being of people as is human creativity and effort.

Indeed, there are no resources without human creativity to figure out how to use them and human effort actually to do so. Recognizing the truth of this insight renders silly the familiar term "natural resources."

No resources are "natural."

Take petroleum. What makes it a "resource". It's certainly not a resource naturally. If it were, American Indians would long ago have put it to good use. But they didn't. I suspect that for Pennsylvania's native population in, say, the year 1300, the dark, thick, smelly stuff that bubbled up in watering holes was regarded as a nuisance.

Petroleum didn't become a resource until human beings creatively figured out how to use it to satisfy some human desires and other human beings figured out how to extract it cost-effectively from the ground.

Or take land. For at least 80 percent of Homo sapiens' time on earth, land was merely something to trod and hunt upon. Land had no special value as a resource until about 10,000 years ago when someone figured out how to cultivate soil and to plant, tend and harvest crops. Only then did land achieve the kind of status and value that we associate with a resource.

The same, of course, is true for magnesium, iron ore, bauxite, feldspar, trees, New York harbor -- you name the "natural resource" and you'll realize that it is a resource only because human beings creatively determined how to use it productively.

An important implication of this realization that humans are "the ultimate resource" is that high and growing population -- in societies with sufficient freedom to allow individuals to experiment and create -- is desirable. If human creativity and effort are not only resources, but also the ultimate resource, surely it's foolish to lament large and growing supplies of it.

Helicopter Money and Stone-Age Banking

Half baked truths and fully baked lies

by Anthony de Jasay

Teaching aids can be treacherous instruments. Images, metaphors and little tales, addressed to all and by no means only to children, are designed to convey some truth in an easy to grasp and hard to forget. Some of these aids however, also contain half-truths and falsehoods. Worse still, some of them do this by design, deliberately implanting lies in people's minds. They are easier to plant than to eradicate once they have taken root.

A classic example is the representation of the national product as society's "cake". Some good fairy flies in overnight, deposits the cake on the communal table, ready for "society" to slice it and hand out the slices to its members. The next step is unsaid, but suggested almost irresistibly: everyone is entitled to the same size of slice as everyone else. Unequal shares would be "socially unjust"—which it presumably would be if the cake really fell from heaven, unaided by human hand. Once it waits on the table, ready to be sliced, it is all too easy too ignore that human hands had first to bake it.

Helicopter money is a less insidious, but no less misleading example of the wrong sort of teaching aid. When the economy is producing at less than a comfortable rate, with capacity utilisation at less than 90 and unemployment at more than 5 or 6 per cent, it stands to reason that easy remedies must be available to put this right and only a government of retarded half-wits will fail to reach for one. It needs nothing more clever and complicated than using helicopter money. It can print a few hundred tons of banknotes, load them into helicopters and have then fly up and down the country, letting the money pour down like blissful rain in a drought. People will pick up the money, quickly spend most of it, and add the rest to their savings. Consumption, investment and the production to match them will rise to the desired capacity level and, like the pump once it has been primed, will carry on at that level. Should it fall short, the government can always dispatch a few more helicopters with cargoes of fresh money. Admittedly, some of the money would be spent on extra imports and may also absorb goods that would otherwise been exported, but these leakages will only siphon off a small part of the beneficial irrigation of the economy.

However, for much of the non-economist public, all this is a little too good to be true. The graphic image of the "velocity of circulation" of money, drawn by Irving Fisher as a teaching aid to his quantity theory, is still lurking in the sub-conscious.(1) Money, of course, has no "velocity" in the physical sense; it may stay with the same owner for a long time, or it can pass from one owner to the next at the speed of light, as the history of great depressions and great inflations has shown. Nevertheless, the idea of money moving around with a velocity of its own lives on in the mind of the lay public. It mistrusts helicopter money as blissful rain. Instead, it sees it as a fuse that will trigger off inflation before we know where we are. Fear of it might well nullify the good the spraying of the parched land with banknotes could be hoped to do. Teaching aid would be working against teaching aid.

He who sees that "helicopter money" has the symbolic form of "quantitative easing" uses it to explain how it works. In fact, it works quite differently. Instead of spraying with banknotes, the traders of the Federal Reserve Bank in New York are buying securities, primarily U.S. Treasury bonds, at an annual rate of one trillion dollars or about 6 or 7 per cent of U.S. national income. The sellers are paid by credits added to their balances at the Federal Reserve System. In plain language, this is the Fed "printing money". What the lay public overlooks and the commentators fail to mention, however, is that while the Fed is issuing a trillion dollars of new money, it also takes out of the economy a trillion dollar's worth of securities that are the closest thing to money in the spectrum of assets. Both the assets and the liabilities of the Fed increase by a trillion, but those of the economy do not change. Only their composition is altered a little, holders of securities that yield them interest of between near-zero and 2 per cent willingly sell them to the Fed in exchange for money yielding zero. Manifestly, they are not rushing to spend this money, nor even a significant part of it, on consumer goods. Judging by how the stock markets are rising, some of it is invested in shares in industry and commerce, and the indirect effect is a potential stimulus to both consumption and investment. How the stimulus works out depends on many things. One of them, alas, is the instinctive mistrust and fear that the poorly understood "quantitative easing" is the same as helicopter money and must come to some dire end. London and Tokyo are copying the Fed and Frankfurt differs more in form than in substance, so that if a dire end must come, it will come to us all. It need not come, unless by our mistrust and lack of clear thought we bring about its coming.

By quantitative easing, the authorities gently press the accelerator. By partially dismantling the banking system to punish it for its post-2007 misbehaviour, they are standing on the brake pedal. They seem surprised and disappointed that the banks are shrinking their balance sheets, pulling in their horns, and starving small business of credit. Except for household names, non-bank sources of credit in Europe are embryonic and the withdrawal of bank credit from medium and small firms is one of the chief reasons for Europe's present stagnation.

The Fantasy World of the Statist

Fantasies explode on contact with reality

by james holmes

Democrats are now requesting, nay expecting, nay demanding that Republicans cooperate with them to save ObamaCare by reforming it. For example, President Obama's former economic advisor Larry Summers blames the failure of ObamaCare on "the systematic effort of the president’s opponents to delegitimize and undermine the project."

"It is disingenuous for those who stood ready to turn any regulatory detail into an attack ad to profess outrage when guidance was not provided during an election campaign. It is hypocritical for those who held up confirmations of key officials with responsibility for managing federal health-care programs and whose behavior deterred many people from coming into government to lash out at the incompetence of government management. And it is indefensible to refuse to appropriate money to carry out a program and then attack it for being under-resourced.

"There is a line that must be respected between political opposition and conscious subversion. Everyone understands that when the country is at war, even a war a person may oppose, vigorous oversight is essential, but, in the end, there is an obligation to support American troops. In the same way, history will not judge kindly those who, having lost political debates over policy, go beyond vigorous oversight and seek to subvert enacted programs."

Let's leave aside the dishonesty of blaming a "refusal to appropriate money" for the fact that the administration couldn't build a website after spending between $175 and $300 million. Consider the overall message: that political opposition to ObamaCare as the equivalent of wartime subversion.

This is the consequence of supporting a major piece of legislation with a lie. When things go wrong, you have to keep on maintaining that lie through attempts to suppress the truth by suppressing the political opposition.

This is a vile argument, but it's also a bluff. It comes, not from a position of power, but from a position of desperation.

Did Summers mention funding and cooperation from the states? Consider what has happened in Oregon.

"With a reputation as a pacesetter in health care, Oregon laid out bold plans for complying with the federal overhaul.

"The state wouldn’t just create a health insurance exchange, a complicated undertaking in its own right. Oregon officials set out to build one of the biggest and best in the nation—a model that other states would want to copy.

"But more than a month after Cover Oregon’s online enrollment was supposed to launch, reality is lagging far behind Gov. John Kitzhaber’s grand ideas. The online system still doesn’t work, and the exchange has yet to enroll a single person in health insurance."

Oregon has spent more then $300 million so far to accomplish, basically, nothing.

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.”