Gentlemen, Choose Your Disaster

Staring into the Abyss

By John Mauldin

"If we want everything to stay as it is, everything will have to change."

– from The Leopard by Giuseppe Tomasi di Lamedusa

"The crisis takes a much longer time coming than you think, and then it happens much faster than you would have thought, and that's sort of exactly the Mexican story. It took forever and then it took a night."

– Rudiger Dornbusch

Europe's leaders are committed to keeping both the euro and the eurozone as it is. But for it to do so, everything must change, as the wonderful quote from the 1958 Italian novel suggests. This is no easy task, as no one wants a change that will impact them negatively; and there is no change that will allow things to stay the same that does not impact all severely, as we will see. 

Choices, Debt, and the Endgame

The choices we make today are constrained by the choices we made in the past, and the choices we make in the future will be limited by the choices we make today. Europe chose to create a free trade

Making investments that actually make sense

Shifting Capital From the Productive to the Sexy

By Warren Meyer

Sexy black hole for money.
But did we mention it was sexy? 

What is it about intellectuals that seem to, generation after generation, fall in love with totalitarian regimes because of their grand and triumphal projects?  Whether it was the trains running on time in Italy, or the Moscow subways, or now high-speed rail lines in China, western dupes constantly fall for the lure of the great pyramid without seeing the diversion of resources and loss of liberty that went into building it.

Writers like Thomas Friedman and Joel Epstein in the Huffington Post have eulogized China and its monumental spending projects.    These are the same folks who, generations ago, tried disastrously to emulate Mussolini’s “forward-thinking” economic regime in the National Industrial Recovery Act.  These are the same folks who wanted to emulate MITI’s management of the Japanese economy (which drove them right into a 20-year recession).  These are the same folks who oohed and ahhed over the multi-billion dollar Beijing

The fragility of civilization

The Sinking of the West By Mark Steyn Abe Greenwald of Commentary magazine tweets: "Is there any chance that Mark Steyn won’t use the Italian captain fleeing the sinking ship as the lead metaphor in a column on EU collapse?" Oh, dear. You’ve got to get up early in the morning to beat me to civilizational-collapse metaphors. Been there, done that. See page 185 of my most recent book, where I contrast the orderly, dignified, and moving behavior of those on the Titanic (the ship, not the mendacious Hollywood blockbuster) with that manifested in more recent disasters. There was no orderly evacuation from the Costa Concordia, just chaos punctuated by individual acts of courage from, for example, an Hungarian violinist in the orchestra and a ship’s entertainer in a Spiderman costume, both of whom helped children to safety, the former paying with his life. The miserable Captain Schettino, by contrast, is presently under house arrest, charged with manslaughter and abandoning ship. His explanation is that, when the vessel listed suddenly, he fell into a lifeboat and was unable to climb out. Seriously. Could happen to anyone, slippery decks and all that. Next thing you know, he was safe on shore, leaving his passengers all at sea. On the other hand, the audio of him being ordered by Coast Guard officers to return to his ship and refusing to do so is not helpful to this version of events.

The murder of Wilmar Villar Mendoza

A brief moment of clarity

By Alberto de la Cruz

When I found out the Castro regime had accomplished their mission of ending the life of Wilmar Villar Mendoza, I was once again unprepared for the nausea and the painful knot in the pit of my stomach. It is a sensation that I have never been able to get used to no matter how many times I endure the painful experience. It is the same severe and unpleasant reaction I experienced when I learned of Orlando Zapata Tamayo's horrid assassination, and that caustic malaise returned upon hearing the news of the violent murder of Juan Wilfredo Soto and again when the Castro regime finally silenced Laura Pollan. Nevertheless, I cannot get used to it. Each and every time, it hits me like a ton of bricks. Another Cuban life extinguished, another Cuban family destroyed, another Cuban voice in chains crying out for freedom violently silenced.

But within all this pain of loss, amongst the injustice and brutality of a vile dictatorship and its indiscriminate and unforgivable taking of yet another life, a brief moment of clarity emerges. As it happened upon the murders of Zapata Tamayo, Soto, and Pollan, for a brief moment, the assassination of Wilmar Villar Mendoza tore down the facade and the lies of the Castro dictatorship that has as acted as their shield for so many decades. For that brief moment, as the light of life in Wilmar extinguished and his soul slipped out of his body, the Castro regime was exposed to the world for what it is: A brutal, merciless, and murderous dictatorship.

It may not last long -- perhaps hours, maybe days -- but for the moment, the Castro dictatorship is exposed. This brief moment of clarity brought about by the murder of Villar Mendoza has ripped away the shroud they hide behind and the light of truth has pierced the lies that have kept the entire island of Cuba in a diabolical darkness for more than a half-century. For a brief moment, the murderous Castro dictatorship finds itself with no crevice to crawl into and no place to hide. Today, hours after the death of Wilmar, the decades of Castro lies and propaganda have no power to defend  Fidel and Raul. For a brief moment, there is sufficient clarity to expose them for the brutal and murderous dictators that they are.

But alas, it is only for a brief moment.

Perhaps as early as tomorrow, this moment of clarity will dissolve and the lies will return to subjugate the truth. Not because this clarity is too weak or a fleeting moment, but because the world will close its eyes and turn away from the unpleasant truth. Unfortunately, there are too many people in this world who strive for the same darkness the Castro regime strives for, albeit for different reasons. The Castro brothers seek darkness in Cuba to cover and hide their crimes and murders, while the world seeks darkness in Cuba to cover their indifference and apathy towards the enslaved Cuban people.

Nevertheless, for now, Wilmar Villar Mendoza's death is not in vain: for a brief moment, there is clarity in Cuba.

The cynicism is breathtaking.

Keystone Madness

By Robert Samuelson

President Obama's rejection of the Keystone XL pipeline from Canada to the Gulf of Mexico is an act of national insanity. It isn't often that a president makes a decision that has no redeeming virtues and -- beyond the symbolism -- won't even advance the goals of the groups that demanded it. All it tells us is that Obama is so obsessed with his re-election that, through some sort of political calculus, he believes that placating his environmental supporters will improve his chances.

Aside from the political and public relations victory, environmentalists won't get much. Stopping the pipeline won't halt the development of tar sands, to which the Canadian government is committed; therefore, there will be little effect on global warming emissions. Indeed, Obama's decision might add to them. If Canada builds a pipeline from Alberta to the Pacific for export to Asia, moving all that oil across the ocean by tanker will create extra emissions. There will also be the risk of added spills.

From Munich to Istanbul

Civilization in Reverse

By Victor Davis Hanson

In Greek mythology, the prophetess Cassandra was doomed both to tell the truth and to be ignored. Our modern version is a bankrupt Greece that we seem to discount.

News accounts abound now of impoverished Athens residents scrounging pharmacies for scarce medicine — as Greece is squeezed to make interest payments to the supposedly euro-pinching German banks.

Such accounts may be exaggerations, but they should warn us that yearly progress is never assured. Instead, history offers plenty of examples of life becoming far worse than it had been centuries earlier. The biographer Plutarch, writing 500 years after the glories of classical Greece, lamented that in his time weeds grew amid the empty colonnades of the once-impressive Greek city-states. In America, most would prefer to live in the Detroit of 1941 than the Detroit of 2011. The quality of today’s air travel has regressed to the climate of yesterday’s bus service.

In 2000, Greeks apparently assumed that they had struck it rich with their newfound money-laden European Union lenders — even though they certainly had not earned their new riches through increased productivity, the discovery of more natural resources, or greater collective investment and savings.

When yesterday had a future

40 ways to lose your future

by Stoneleigh

Imagine that at a certain point the US, the EU or the Global economy reach the point where:

1.   Deflation is inevitable due to Ponzi dynamics (see http://theautomaticearth.blogspot.com/2008/11/debt-rattle-november-26-2008-from-top.html)

2.   The collapse of credit will crash the money supply as credit is the vast majority of the effective money supply

3.   Cash will be king for a long time

4.   Printing one's way out of deflation is impossible as printing cannot keep pace with credit destruction (the net effect is contraction)

You Can't Fool Mother Nature For Long

The Substitution of Debt for Productivity

The "big story" of the U.S. economy is that we have substituted expansion of debt for meaningful increases in productivity.

By Charles Hugh Smith

For the past 30 years, the U.S. economy has become increasingly dependent on explosive debt expansion for its "growth" rather than on meaningful rises in meaningful productivity. Growth is in quotes because growth based on secular increases in productivity--that is, the same investment of labor and capital produces goods and services of greater value--is qualitatively different from "growth" based on a pyramiding of debt.

The Road to Nirvana

Capitalism Loses Against Chimera

Store for locals on an island across Florida

by Chidem Kurdas

Gripes about capitalism go back 150 years and more. In the Communist Manifesto of 1848 Marx and Engels thundered that the specter of revolution haunted Europe, that the periodic reappearance of commercial crises “put on its trial, each time more threateningly, the existence of the entire bourgeois society.” They were not the first to assail the system and were followed by numerous others spanning the political spectrum.

Thus the Financial Times recently started a series on  “The Crisis of Capitalism.”  Europe suffers from a sovereign debt crisis due to over-spending by governments—why is that the crisis of capitalism?

Siding with the Angels

The Eternal Peril of the Simple Answer

History is harder to untangle than politicians would lead us to believe.

By Thomas Sowell

Anyone who has ever been in a Third World country, or even in a slum neighborhood at home, is likely to wonder why there can be such dire poverty among some people while others are prospering.

Both politicians and intellectuals have tended to have simple answers to that question, even if these simple answers have been different in different eras.

A hundred years ago, the prevailing answer was that some people are innately and genetically inferior. Not only was this answer

Ultimately, the political establishment wins

DESTROYING AMERICA, BILL BY BILL

by SIMON BLACK 

As you’re probably aware, yesterday was the much ballyhooed blackout of several popular web sites in protest of new legislation that threatens the Internet as we know it.

The United States Congress has teed up two separate bills which give government agencies sweeping new powers to punish millions of innocent users, criminalize harmless activities, and effectively make entire web sites disappear at their sole discretion without any judicial oversight.

In a nutshell, these bills would create the online equivalent of Nazi Germany.

But what can we really expect from these people? It’s not the first time that Congress has gone out of its way to destroy freedom and prosperity, and it certainly won’t be the last. Just look at the last decade for a plethora of examples:

USA PATRIOT Act, 2001. The US Constitution officially became toilet paper when this bill of over 60,000 words just happened to be introduced only a few weeks after 9/11. Roving wiretaps, suspension of due process, and a complete loss of privacy became the norm.

Freedom of speech is the basis for all other freedoms

Speech crimes and France

Denying genocide may be ignorant, but the French government shouldn't criminalize it.

by LA Times Editorial

On Monday, the French Senate is scheduled to debate and possibly vote on a bill that would criminalize denial of the Armenian genocide of 1915, along with any other events recognized as genocide in French law. The bill has passed the lower house of Parliament. The Senate should reject it, in the name of free speech, the freedom of historical inquiry and Article 11 of France's pathbreaking 1789 Declaration of the Rights of Man and Citizen ("The free communication of ideas and opinions is one of the most precious rights.…").

The question is not whether the atrocities committed against the Armenians by the Ottoman Empire were terrible, or whether they should be acknowledged in Turkish and European memory. They were and they should be. The question is: Should it be a crime under the law of France, or other countries, to dispute whether those terrible events constituted a genocide, a term used in international law? And is the French Parliament equipped and entitled to set itself up as a tribunal on world history, handing down verdicts on the past conduct of other nations? The answer: No and no.

The construction of a massive, post-Tito Yugoslavia

The European Crack-Up

BY THEODORE DALRYMPLE

A Belgian journalist who interviewed me recently about the European debt crisis asked me whether I believed in the European Project. I replied that I would answer her question—if she would tell me what the European Project actually was. By revealing my doubts, I proved to her that I suffered from the strange kind of mental debility known as Euroskepticism, a condition supposedly compounded of low intelligence and aggressive xenophobia. The low intelligence manifests itself in the patient’s view of European institutions as a gravy train for a transnational nomenklatura, rather than as the beginning of a new, generous, and free-spirited type of postnational identity. The xenophobia manifests itself as a secret desire for conflict and war, the European Union and its predecessors supposedly having been responsible for the avoidance of war on the Continent over the last 65 years.

Reflections

The Final Countdown

by  Tim Price  

“Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach.” Debt talks “have not produced a constructive response.”               

           - The Institute of International Finance, January 13, 2012

“The war situation has developed not necessarily to Japan’s advantage..”             

            - Japanese Emperor Hirohito after the atomic bombing of Hiroshima and Nagasaki, announcing Japan’s surrender to the Allies.

There is a terrible hubris at the heart of mankind. Like every other living thing on the planet we are products of nature, but we consider ourselves to be well above it. We are beset by regular reminders of our vulnerability, but quickly dismiss them off-handedly to a spiritual plane, calling them “acts of God” as if to show that we could never have prevented them.

In a significant essay for Foreign Affairs, “The Black Swan of Cairo,” Nassim Taleb shows how the efforts of our authorities to suppress volatility actually end up making the world less predictable and more dangerous.

“Although the stated intention of political leaders and economic policy makers is to stabilize the system by inhibiting fluctuations, the result tends to be the opposite. These artificially constrained systems become prone to “Black Swans” – that is, they become extremely vulnerable to large-scale events that lie far from the statistical norm and were largely unpredictable to a given set of observers.”

An Advise to Young People

GET READY TO GRAB YOUR ANKLES
by SIMON BLACK

If you’re reading this and under 30, let me be absolutely clear about one indubitable point: your government is going to sacrifice your future in order to pay for its own mistakes from the past.

To give you an example, students in London came out to the streets in droves last Friday to protest the British parliament’s most recent austerity measures which tripled the cap on their university tuition to $15,000.

Sure, Britain is imposing all sorts of austerity measures on its citizens… and while I won’t get into a discussion about the absurdity of government controlled education, I will point out that students are having their benefits cut far more drastically than any other segment of the population.

Are pensioners seeing their costs triple? No. Are middle-aged workers seeing 50% tax hikes? No. Aside from the very small segment of high-income earners who will be forever robbed and pillaged of their wealth, the younger generation is next in line to receive the butt end of the crisis fallout.

Younger folks have comparatively lower incomes, benefits, job opportunities, and political clout than their seniors, yet they are increasingly expected to assume a disproportionately larger burden of the consequences of government folly.

Black Swans

Quotes and paraphrases from Nassim Nicholas Taleb

10. Mother Nature is robust. Large modern corporations are fragile.

9. When the big bridge collapses, the “news” interest will be in the last truck that made it over, when the real story should be about the fragility of the bridge.

8. Somewhere in every Black Swan story there’s a turkey. The turkey has a clear understanding of history, and of growth. The nice farmer feeds him every day, and the turkey keeps getting fatter. Then comes Thanksgiving. It’s a Black Swan for the turkey. But not for the butcher.

7. We can say safely that the Black Swan started entering society with agriculture, with the fact that we started settling. Complexification started then… In my tableau of what’s fragile and what’s robust, the nation-state is a fragile entity, whereas city-states are more robust. So the creation of the nation-state created this big unpredictable event, that First War. Even those who saw it coming didn’t see the damage it was about to cause. So the First War probably is the most consequential one, and it came in two volumes…

6. I think that today we are entering a different world of Black Swans because of the Internet.

5. Newspapers make us stupid. They overexplain with “causes” of things that can’t be checked. And because they are driven by the sensational, they misrepresent risk. I prefer the social filter of news, over dinner or lunch. Anything that draws me away from face-to-face contact is harmful to my health.

4. Grandmothers had a rule of thumb after the Great Depression: work and save for a few years before you get into risk… Unpredictability and debt are not friends.

3. On bailouts: My analogy is to the gambler who is now gambling with the trust fund of his unborn great-great-granchildren… Prudence should be the first thing on the agenda of governments, not speculation. Stimulus packages are speculation… We are gambling on a massive recovery. It’s too big a gamble, and besides it’s immoral.

2. In the economic crisis, and in the Gulf of Mexico, what we should be discovering is not who made what mistake, but the fact of fragility. Alas, what we don’t learn is… that we don’t learn.

1. No government can fortify something that’s inherently fragile.

On Greek PSI

Headlines And Reality

The Greek PSI is once again (still) hitting the headlines.Here is what I think the most likely scenario is (80% likelihood).

by Peter Tchir

Some form of an agreement will be announced.  The IIF will announce that the “creditor committee has agreed in principle to a plan.”  That plan will need to be “formalized” and final agreement from the individual institutions on the committee and those that weren’t part of the committee will need to be obtained.  The headline will sound good, but will leave a month or so for details to come out.  In the meantime every European and EU leader (or employee) with a  press contact will say what a great deal it is.  That it confirms that Europe is on the path of progress and that they are doing what they committed to at their summits.

That will be the hype that will drive the market higher.  They will do it because they have to.  They cannot afford an uncontrolled default, so they will have to push forward as though they have fixed something.

Boosting the concentration of moral authority and political power in the hands of a tyrannical few

Let’s have a proper debate about the welfare state

Hooked on poverty porn, getting the unelected Lords to do their dirty work... there’s little progressive about today’s welfare-defenders.

by Brendan O’Neill 

What is worse: elected politicians proposing to reform the welfare state, or unelected Lords, cheered on by liberals, unilaterally shooting down such reform? It’s the latter. Even if you aren’t a fan of Lib-Con plans to trim the welfare bill (I think it’s daft to imagine such trimming will reverse the economic downturn), you should be far more concerned by the patronising and profoundly undemocratic turn that the so-called radical side in this debate has taken. Today, the defenders of welfare are doing far more harm to what we might term progressive politics than the right-wingers seeking to rethink welfarism.

The history of mankind is the history of ideas

The Liberation of the Demons

By Ludwig von Mises
The history of mankind is the history of ideas. For it is ideas, theories and doctrines that guide human action, determine the ultimate ends men aim at, and the choice of the means employed for the attainment of these ends. The sensational events which stir the emotions and catch the interest of superficial observers are merely the consummation of ideological changes. There are no such things as abrupt sweeping transformations of human affairs. What is called, in rather misleading terms, a "turning point in history" is the coming on the scene of forces which were already for a long time at work behind the scene. New ideologies, which had already long since superseded the old ones, throw off their last veil and even the dullest people become aware of the changes which they did not notice before.

Selling the Wrong Idea

India's Hiccup
By JAGDISH BHAGWATI

Adam Smith, writing in The Wealth of Nations, was probably the first to call England a nation of shopkeepers. But few remember that Smith used the phrase to argue that England was a “nation whose government is influenced by shopkeepers”. And that influence was malign. Thus, he blamed the founding of the British Empire on the desire of shopkeepers to secure monopoly of trade in colonial commodities.

India’s shopkeepers today invite a similar, if different, opprobrium. By opposing retail sector reform, they and their political supporters in the BJP, Trianmool Congress and the communists, are not merely sabotaging this important reform. They are also throwing up roadblocks to the deepening and broadening of the post-1991 reforms that is so badly needed today.