Japan and Europe are Killing Themselves

They will tax themselves to death

by Steve Forbes

The global economy is lurching toward the cliff. Twice before over the last 75 years Washington took the necessary action, and after November, with a new President and Congress, there will be the opportunity--and imperative--to do so again.

The 1970s were a decade of economic turmoil and stagnation. The 1930s were far worse. And now the world is headed to the brink again.

After the Great Depression and the Second World War the U.S. helped create and nurture the institutions that enabled war-torn Europe and Japan to make rapid recoveries. The gold-based Bretton Woods monetary system provided the currency stability necessary for the resumption of international trade. The General Agreement on Tariffs & Trade (and then its successor, the World Trade Organization) systematically reduced trade barriers. At home we ended wartime controls and rationing, cut taxes and slashed government spending. Almost seamlessly, millions of veterans came home to productive civilian employment. For the next 25 years Japan and Germany repeatedly reduced their tax burdens and became economic global giants.

The destruction of Bretton Woods in the early 1970s led to a horrific, inflation-wracked decade. The U.S. experienced a stagnant economy and rising inflation and was seen as a malaise-ridden nation in irreversible decline.

About Bears and Hamsters

'No biting the bear's sensitive parts' 

By John Helmer 

In the Kremlin corridors under the new management, it is generally acknowledged that one of the stupidest things former president (now premier) Dmitry Medvedev ever did was to order Russia's representative on the United Nations Security Council to abstain from the vote and veto of the no-fly zone resolution aimed at the Muammar Gaddafi regime in Libya. 

That was on March 17, 2010. Russian intelligence services already knew that United States and British submarines were in place under the surface of the Mediterranean, ready to fire missiles to start a war that was intended to end in Gaddafi's death. It did. 

A year later in 2011, when the campaign for Russia's parliamentary elections and the presidential succession was underway, that abstention almost ended in the death of
Medvedev's chances to stay under now President Vladimir Putin's protection. 

He didn't get the nod for a second term as president, but as prime minister he has survived in more lively shape than Gaddafi. 

However, Russian officials are now unanimous that the ill-fated effort by a Russian leader to allow a war of military intervention and regime change by the US and the North Atlantic Treaty Organization (NATO) alliance, funded by Arab sheikhdoms, should never be repeated. 

It's all about Pensions

Reframe the 'Growth vs. Austerity' Debate

By MICHAEL HODIN

From Athens, Greece, to Madison, Wisconsin, the common theme today is said to be “austerity versus growth.” In reality, we’re hearing little about what’s driving the growth side and a great deal about the disasters to come from cutting benefits. This dichotomy is perhaps most pronounced in Europe, where the “austerity versus growth” headlines rage. The terms “austerity” and “growth” have appeared within ten words of each other 380 times in major world publications in the past week alone, according to a Lexis Nexis search.

The discussion of these concepts continues to be framed as an either/or. There are the tight-fisted Germans led by Angela Merkel – and Mediterranean Europe that’s holding onto 20th-century ideas of work, life, and aging. The debate has become so entrenched that one can be forgiven for thinking it is either austerity or growth.

But there’s an alternative to this bifurcated rhetorical gridlock. If aging populations can break out of traditional roles of dependency to contribute to social and economic life, societies can find the magical balance of growth and what is now called austerity. Sound fantastical? It shouldn’t. It’s actually straightforward arithmetic and can be summarized in a 21st-century model of working life that connects to the fact we’re regularly living into our 90s.

Keynesianism is in a death spiral

The Case for Austerity

By Gary North

The Keynesians and declared anti-Keynesians have joined hands in order to promote an intensely Keynesian error: European fiscal austerity as a negative factor. One contributor in Forbes refers to austerity as a death spiral.

The word “austerity,” beginning with the Greek government’s debt crisis two years ago, has been used by the financial media in one sense, and only one sense: reductions in spending by national governments. The word is not used with respect to the economy as a whole.

More than this: the word has been used to explain the contracting economies of Europe. The reductions in government spending are said to have caused the contracting economies. This explanation is based on textbook Keynesianism.

Keynesians call for increased government spending. This is the heart of Keynesianism. Keynesianism rests on a mantra: “Government spending overcomes recessions.” All else is peripheral: monetary inflation, graduated taxation, and free trade. These peripheral issues will always be sacrificed to the supreme economic premise: “Government spending overcomes recessions.”

‘The real enemy is humanity itself’

At Rio+20, the world’s elites will meet with the aim of holding back human progress

by Ben Pile 

Forty years ago, two ideas about humanity’s relationship with the natural world caught the imagination of the richest and most influential people. The first was that the demands of a growing population were taking more from the planet than could be replaced by natural processes. The second, related idea was that there exist natural ‘limits to growth’. These two reinventions of Malthusianism became the basis of a new form of global politics, which has sought to contain human industrial and economic development ever since.

Fears about the possibility of global environmental catastrophe and its human consequences, as depicted by neo-Malthusians like Paul Ehrlich - author of the 1968 prophecy, The Population Bomb - and the Club of Rome - a talking shop for high-level politicians, diplomats and researchers - became the ground on which a number of organisations established under the United Nations were formed. In 1972, the UN held its Conference on the Human Environment, and began its environment programme, UNEP. In 1983, the World Commission on Environment and Development (WCED, aka The Brundtland Commission, after its chair, Norwegian politician Gro Harlem Brundtland) was formed, leading to the publication of its findings in 1987 in Our Common Future. Also known as the Brundtland Report, it became the bible of ‘sustainable development’.

Who Needs War for Oil?

Popular Illusions

By ROBERT P. MURPHY

For decades Americans have endured a steady drumbeat urging the need to wean the U.S. from its “addiction” to oil. The specific reasons differ, depending on the critic: leftists stress the environment and the social joys of a European-style mass transit system, while right-wingers worry about oil from a national-security standpoint. Yet both camps agree: left to its own devices, the laissez-faire American economy would rely too heavily on oil, and therefore there is an important role for federal intervention.

For a specific and recent example, let us turn to the group named SAFE, which stands for “Securing America’s Future Energy.” Its newly released report titled “The New American Oil Boom” explains:

The Future Is More Than Facebook

America's innovation engine is now focused on transportation, energy and manufacturing

By RICH KARLGAARD

In March 1986, Microsoft ended its first day as a public company with a market capitalization of $780 million. Its value grew more than 700 times that over the next 13 years and made Bill Gates, in 1999, the richest man ever with a net worth of $101 billion. When Facebook goes public this Friday its market cap could easily hit $100 billion, bringing founder Mark Zuckerberg's net worth to more than $18 billion. That's about 50 times what Mr. Gates was worth after Microsoft's IPO.

Facebook's big payday should be cause for celebration in a liberal democracy. Instead it has provoked two kinds of anxiety. Both imply America's best days are over.

Greece Will Reset

Think “Argentina” and you will see the same path for Greece

By Jeff Harding

There is no real solution for Greece. They are bankrupt and their economic foundation is rotten. They have bred a society that wants generous benefits on the one hand, and on the other, cynical producers who don’t want to pay taxes. They are similar to Eastern Bloc countries post-Soviet collapse. They need a similar revolution to shake off the socialists and forge a new government based on free market principles. They need a complete reformation of their economy. Anything else will just delay the inevitable.

The eurozone would be better off by jettisoning Greece and letting them fail. The money spent to save them will be wasted. One can only hope against hope that they will re-emerge without their social burdens and with a free market economy. Otherwise, and probable, will be a prolonged depression for Greece.

I haven’t been writing much about the eurozone, and especially Greece, lately because I don’t think I have much more to say than I already have, other than to report what “progress” has been made. Which is to say, none. And which is what I had expected.

That Which Is Unsustainable Will Go Away

Take a closer look at Pensions

Publicly funded pensions are examples of unsustainable systems that will go away in the decade ahead. 

by Charles Hugh Smith

One of the few things we know with certainty is that which is unsustainable will go away and be replaced by another more sustainable arrangement. Whether we like it or not, or are willing to accept reality or not, unsustainable public pensions will go away.

What makes "defined benefit" pensions unsustainable? 
1) Promised cash/benefits packages that are not aligned with the fiscal realities of what can be contributed annually to the pension funds 
2) New Normal low yields on low-risk investments and 
3) skyrocketing costs of healthcare benefits.

The breakdown of the Greek civil society

The Wisdom of Thucydides

Thucydides was probably born about 460 BC and was for a time a General on the side of democratic Athens against aristocratic Sparta in what is known as the Peloponnesian War in which most of Greece took a side. After being exiled he wrote his famous history. The passage that I’ve quoted in full below is, in my opinion, one of the finest passages of classical antiquity. I was somewhat surprised not to be able to find it elsewhere quoted online. 

It describes the breakdown of civil society and in doing so it perfectly describes every civil war and revolution that has taken place in the almost two and half thousands years since it was written including the English Civil War, French Revolution, American Civil War, Russian Revolution, and Spanish Civil War. Human nature, it seems is immutable.

I bring it to attention in the vain hope that those who have blindly pursued the policies which have brought Greece to the brink and risks plunging the whole of Europe into the abyss, might consider more keenly the consequences of their actions and change course before it’s too late.

There's No Gentle Way for Greece to Exit the Euro

There's No Gentle Way for Greece to Stay in the Euro either

By Cristina Lindblad

Those who favor Greece’s exit from the euro like to argue that the transition from Europe’s single currency back to the drachma, or some newfangled scrip, need not devolve into chaos. In a 53-page paper titled “A Primer on the Euro Breakup: Default, Exit and Devaluation as the Optimal Solution,” Jonathan Tepper says that “during the past century 69 countries have exited currency areas with little downward economic volatility.” Tepper, the chief economist at the London-based research firm Variant Perception, cites the partition of India and Pakistan in 1947 and the dissolution of the Soviet Union in the 1990s among examples. He also refers to Argentina’s default and devaluation in 2001-2002, which has become a preferred case study on how a nation can not just survive the process of exiting a currency union, but also prosper from it.

What is the real cost of "free" stuff

Economics 101

By Walter E. Williams

Economic ignorance allows us to fall easy prey to political charlatans and demagogues, so how about a little Economics 101?

How many times have we heard "free tuition," "free health care," and free you-name-it? If a particular good or service is truly free, we can have as much of it as we want without the sacrifice of other goods or services. Take a "free" library; is it really free? The answer is no. Had the library not been built, that $50 million could have purchased something else. That something else sacrificed is the cost of the library. While users of the library might pay a zero price, zero price and free are not one and the same. So when politicians talk about providing something free, ask them to identify the beneficent Santa Claus or tooth fairy.

It's popular to condemn greed, but it's greed that gets wonderful things done. When I say greed, I don't mean stealing, fraud, misrepresentation or other forms of dishonesty. 

Sorry, but SYRIZA won’t save Europe

A babel of different languages and objectives gathered under one “anti” banner’

The radical Greek leftists, along with Hollande in France, pose as anti-austerity yet promote ideas which will condemn Europe to long-term penury.

by Brendan O’Neill 

SYRIZA, the radical left-wing coalition that came second in the recent Greek elections, is being talked about as the spearhead of a new European movement against austerity. These edgy young Greeks, whose offices are apparently covered in Communist posters and stickers saying ‘Revolution!’, are reportedly leading a ‘great revolt’ against austerity. Where Angela Merkel and her dwindling minions want to immiserate the workers by forcing struggling Euro countries to cut public expenditure and live more austerely, SYRIZA is at the ‘forefront of the anti-austerity backlash’, commentators tell us.

The Wheels Are Coming Off The Wagon Again

Spain, Greece and The Union of Hopers

By Pater Tenebrarum

The evolving situation and growing uncertainty over Greece's future and the recent fourth attempt to right the floundering ship of Spain's banking industry predictably has markets on edge.

As to Spain's banking plan, it is already ridiculed for the way too low cost estimates mentioned by finance minister Louis de Guindos, who opined that   less than €15 billion in public funds will be required and that 'no effect on the public debt is to be expected'. In some other universe perhaps, but not in this one.

Embracing progress

No thanks to fearmongers, life is good on planet Earth

By Marian L. Tupy

“The battle to feed all of humanity is over. In the 1970s, hundreds of millions of people will starve to death in spite of any crash programs embarked upon now. At this late date nothing can prevent a substantial increase in the world death rate.” Thus began “The Population Bomb,” a 1968 book by Stanford University professor Paul Ehrlich. Since those now infamous words were written, world population has doubled from 3.5 billion to 7 billion, inflation-adjusted average annual income per person has risen from $3,147 to $5,997, and life expectancy at birth has increased from 59 years to 69 years.

The Arrival of Peak Government

The down slope of Peak Government will be disorderly and rife with unintended consequences

by charles hugh smith

Most informed people are familiar with the concept of Peak Oil, but fewer are aware that we’re also entering the era of Peak Government. The central misconception of Peak Oil -- that it’s not about “running out of oil,” it’s about running out of cheap, easy-to-access oil -- can also be applied to Peak Government: It’s not about government disappearing, it’s about government shrinking.

Central government -- the Central State -- has been in the expansion mode for so long that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State. Thus we have little recent historical experience of Peak Government and few if any conceptual guideposts to help us understand this contraction.

Monti warns of tears in Italy's social fabric

In Italy, the economic crisis is transformed into a "cultural" one

By Reuters

Italy's social fabric is being torn by recession and tensions are growing among its citizens, Prime Minister Mario Monti said on Sunday.

Speaking to a group of students in the central Italian town of Arezzo, Monti urged Italians to stick together and "not give up" in the face of a shrinking economy and rising unemployment.

Chameleon Nation

The Noble Lie

by Victor Hanson

Sometimes a trivial embarrassment can become a teachable moment. It was recently revealed that Harvard professor and U.S. Senate candidate Elizabeth Warren had self-identified as a Native American for nearly a decade -- apparently to enhance her academic career by claiming minority status. Warren, a blond multimillionaire, could not substantiate her claim of 1/32 Cherokee heritage. (And would it have reflected any better on her if she could have?) Instead, she fell back on the stereotyped caricature that she had "high cheekbones."

Not long ago, University of Colorado academic Ward Churchill was likewise exposed as a fraud in his claims of Native American ancestry. This racial con artist was able to fabricate an entire minority identity and parlay it into an activist professorship otherwise not possible for a white male of his limited talent.

Greece Should Adopt The US Dollar

A Crazy Idea That Might Just Work

By Charles Hugh Smith

Before you dismiss my crazy idea out of hand, hear me out. 
It might not be as crazy as it seems on first blush.
I have a straightforward three-point plan to set Greece on a sustainable, positive pathway. But before we can understand how the plan resolves Greece's no-win situation (yet another Kobayashi Maru scenario), we first need to understand very clearly why the euro currency failed.

I have covered this many times before: 

Why The European Union Is Doomed (March 28, 2011)
Why the Eurozone and the Euro Are Both Doomed (June 23, 2011)
Three More Reasons the Eurozone Is Doomed (September 22, 2011)
Yet Another Reason Why the Euro Is Doomed (October 17, 2011)

If we had to distill the dynamic down to a single paragraph, it would be this: By accepting the "strong currency" euro that was supported by promises of fiscal prudence, Greece and the other weaker economies of Europe artificially raised market willingness to lend them money and lowered the interest rate they would pay. At the same time, the euro also lowered the cost of goods from Germany by eliminating the market arbitrage of currencies. I know this may sound complicated, but we can grasp the core dynamics using household analogies.

Ain't Gonna Work On Angie's Farm No More

A grand experiment gone bad

“The wind is rushing after us, and the clouds are flying after us, and the moon is plunging after us, and the whole wild night is in pursuit of us; but, so far we are pursued by nothing else.”

                 -Charles Dickens, The Tale of Two Cities

By Mark Grant

I have left St. John’s Newfoundland and I will be three days at sea now heading for Reykjavik, Iceland. The seas are up, the wind is cold and icy, the sky is that grey color of mid-winter in the arctic north and it is all reminiscent of what is taking place in Europe as the seams come undone and as bleak depression is the mood on the Continent.