Living In A Land Beyond Belief

Money for Nothing and Chicks for Free

By Mark Grant

Europe has taken to making comments and engaging in either great promises of future events or the denials of any epitaphs on any gravestones in the days that separate Friday from Monday. The markets are closed these days and it has become an obvious strategy to swing the various banners of national interests or to offer such schemes and plans as would suit the people who live and die based upon bold faced headlines and who give no thought as to their meaning. The propaganda machines spew sweet cakes and sweet meats and hope that no one recognizes that someone must clean up after the retching that will invariably take place. I suggest to each of you that your concentration should not be placed upon offers of Nirvana but squarely and solidly upon what is actually implemented for it is there that the truth is found and it is from there that future events may be predicted.

The Spanish Finance Minister calls for unlimited bond buying by the ECB and schemes are floated of tying the yields of all of the periphery debt to that of Germany and each is heralded as brilliant in its conception and without consequence in the real world as if the blue fairies in some Elfin Kingdom are going to pick up the tab. Please notify me, contact me immediately day or night, when this Kingdom is discovered because it will be at that precise moment when I change my view on Europe and come to the conclusion that all can be righted without consequence and that the ECB is an institution outside of the boundaries of this universe as many people seem to think these days. When this Magical Land is found I will also believe, along with so many others, that the capital of Europe is unlimited, that Germany receives money from the mines of the Dwarves beneath Stuttgart and that the proprietors of all of the restaurants in Europe always pick up the bill and free lunches have been brought back to our world in a flurry of pixie dust and wizard’s incantations.   I am in France now; send me the Hobbits, Peter Pan is invited to any meal, I will go to any body of water and converse with Merlin and the Lady of the Lake, I will meet with anyone from Harry Potter’s Ministry of Magic upon a moment’s notice and having seen the proof of “Money for Nothing and Chicks for Free” I will recant at any Inquisition, Spanish or otherwise, and confess the errors of my ways.

How Change Happens

Risk and Uncertainty

By John Mauldin

"To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear …"

                                                – Friedrich Nietzsche

"Any explanation is better than none." And the simpler, it seems, in the investment game, the better. "The markets went up because oil went down," we are told. Then the next day the opposite relationship occurs, and there is another reason for the movement of the markets. But we all intuitively know that things are far more complicated than that. As Nietzsche noted, dealing with the unknown can be disturbing, so we look for the simple explanation.

"Ah," we tell ourselves, "I know why that happened." With an explanation firmly in mind, we now feel we know something. And the behavioral psychologists note that this state actually releases chemicals in our brain that make us feel good. We literally become addicted to the simple explanation. The fact that what we "know" (the explanation for the unknowable) is irrelevant or even wrong is not important for the chemical release. And thus we look eagerly for reasons.

And that is also why some people get so angry when you challenge their beliefs. You are literally taking away the source of their good feeling, like drugs from a junkie or a boyfriend from a teenage girl.

Thus we reason that the NASDAQ bubble happened because of Greenspan. Or that it was a collective mania. Or any number of things. Just as the proverbial butterfly flapping its wings in the Amazon triggers a storm in Europe, we may conclude that a borrower in Las Vegas triggered the subprime crash.

Crazy? Maybe not. Today we will look at what complexity theory tells us about the reasons for phenomena as apparently diverse as earthquakes and the movement of markets. Then we’ll look at how New Zealand, Fed policy, gold, oil, and that lone investor in St. Louis are all tied together in a critical state. Of course, how critical and which state are the issues.

The Natural Map of the Middle East

A Forecast of Things to Come

by Patrick J. Buchanan

“Apart from political maps of mankind, there are natural maps of mankind. ... One of the first laws of political stability is to draw your political boundaries along the lines of the natural map of mankind.”

So wrote H.G. Wells in What Is Coming: A Forecast of Things to Come After the War in the year of Verdun and the Somme Offensive.In redrawing the map of Europe, however, the statesmen of Versailles ignored Wells and parceled out Austrians, Hungarians, Germans and other nationalities to alien lands to divide, punish and weaken the defeated peoples.

So doing they set the table for a second world war.

The Middle East was sliced up along lines set down in the secret Sykes-Picot agreement. But with the Islamic awakening and Arab Spring toppling regimes, the natural map of the Middle East seems now to be asserting itself.

Sunni and Shia align with Sunni and Shia, as Protestants and Catholics did in 17th-century Europe. Ethiopia and Sudan split. Mali and Nigeria may be next. While world attention is focused on Aleppo and when Bashar Assad might fall, Syria itself may be about to disintegrate.

In Syria’s northeast, a Kurdish minority of 2 to 3 million with ethnic ties to Iraqi Kurdistan and 15 million Kurds in Turkey seems to be dissolving its ties to Damascus. A Kurdish nation carved out of Syria, Iraq, Turkey and Iran would appear to be a casus belli for all four nations. Yet in any natural map of the world, there would be a Kurdistan.

The Sunni four-fifths of the Syrian population seems fated to rise and the Muslim Brotherhood to rule, as happened in Egypt. The fall of Assad and his Shia Alawite minority would be celebrated by the Sunni across the border in Iraq’s Anbar province, who would then have a powerful new ally in any campaign to recapture Sunni lands lost to Iraqi Shia.

With its recent murderous attacks inside Iraq, al-Qaida seems to be instigating a new Sunni-Shia war to tear Iraq apart.

The fall of the Alawites in Damascus would end the dream of a Shia crescent—Iran, Iraq, Syria and Hezbollah—leave Hezbollah isolated, and conceivably lead to a renewal of Lebanon’s sectarian and civil war.

The Real Problem of Solar Subsidies

Misdirecting Industry and Consumers

By David Bergeron

In a recent Economist on-line debate, the affirmative motion “This house believes that subsidizing renewable energy is a good way to wean the world off fossil fuels” was surprisingly defeated.

In his closing remarks, the moderator softened his strident opposition to the negative case, even admitting that “subsidizing renewable energy, is wasteful and perhaps inadequate to address climate-change concerns.”

Beyond the Climate Debate

The debate, indeed, reopened the question whether anthropogenic greenhouse-gas forcing was a serious planetary environmental concern. But such focus short-changed what I think is the more important question for the Economist. Not only are the renewable-energy subsidies (such as for solar) wasteful and potentially insufficient, they are outright diabolical if indeed there is a looming environmental crisis.

I am not evaluating whether anthropogenic global warming is real and potentially cataclysmic; I’m arguing that if there is a valid concern about the enhanced greenhouse gas effect, not only will the subsidies not solve the problem, but may very well prevent or postpone a legitimate solution.

Grid Solar: Radically Uneconomic, Intermittent

I’ve written before about why on-grid solar power is absurdly uneconomic and has almost no hope of becoming a viable alternative to current generation technology — or even competitive with other more viable renewable technologies. I’m asking the reader to accept this position for the sake of understanding the potential implication of my claim.

Have We Become Accustomed To Dirt?

Keeping clean is expensive and complicated

by Yoani Sánchez 

A teenager writes — with his index finger — the words “Wash me” in the dust on the window of the bus. A mother asks her son what the school bathroom is like and he confirms that “it stinks so much you can’t go in there.” A dentist eats a french fry in front of her patient and with unwashed hands proceeds to extract a tooth. A passerby lets his pizza — just out of the oven — drip cheese over the sidewalk, where it accumulates in a pool of fat. A waitress cleans the tables at Coppelia Ice Cream with a smelly rag, and puts out glasses sticky with successive layers of badly scrubbed milk. A spellbound tourist drinks a mojito in which several ice cubes made from tap water are floating. A sewer overflows a few yards from the kitchen of a recreation center for kids and teens. A cockroach quickly darts along the clinic wall while the doctor listens to a patient’s chest.

An Orgy of Self-Congratulation

Good riddance to the London Olympics

by THEODORE DALRYMPLE

If there were a gold medal for vulgarity and kitsch, the closing ceremony of the London Olympics would have won it hands down. And if proof were required that modern British culture is cheap, tawdry, and relentlessly, ideologically demotic and frivolous, the ceremony certainly provided it. At least it had the merit, in its flashy and garish worthlessness, of being truly representative of the nation in which it took place, of its dreams and aspirations if not its everyday reality. Observing it for as long as was bearable, one could not help but think of the title of the late Neil Postman’s most famous book, Amusing Ourselves to Death.

When the Olympics were finally over, Britain went in for an orgy of self-congratulation. Dissenting voices were almost as few as in a totalitarian dictatorship. It seemed to escape the notice of nearly all commentators that the ceremony combined aesthetic cheapness with the utmost financial extravagance. The only aspect of the proceeding that drew widespread unfavorable comment was that George Michael, one of the aging pop singers who are now, in the view of the ceremony’s organizers, the country’s chief glory—we are, after all, approaching the era of the geriatric adolescent, or adolescent geriatric—used the opportunity to plug his new song. You would have thought from the outcry that the Olympics had previously been commercially virginal.

Who Really Benefited From The Euro ?

Hint: NOT Germany

With austerity supposedly destroying standards of living (that no real austerity has actually been implemented is a different matter entirely) across Europe's insolvent periphery, the only recourse said broke countries (here's looking at you Mario Monti and Mariano Rajoy) have is to desperately attempt to shame those countries who have money such as Germany, Austria, Finland and the Netherlands, aka Europe's AAA club, into shoveling more and more and more cash into the bottomless pit that are the PIIGS. After all, precisely this was the basis for the "hostage and extortion" strategy that Monti employed at the June 29 summit, and which has resulted in a surge in European stocks on hopes Germany will indeed bail everyone out. The reason for this is that, at least according to conventional wisdom, it was these countries that benefited the most from a decade of EUR-facilitated mercantilism, and exported inflation to their spend thrift (and 'debt-thrift') southern neighbors. 

So it is only "fair" that these countries now give back a little (or a whole lot) back (just as it is only "fair" that Germany give a helping hand in Obama's reelection chances, which as everyone knows would be negligible if the global capital markets were to tumble just before November if reality in Europe were to come back with a vengeance). Well, as virtually always happens, conventional wisdom is wrong, and as the following chart from UBS demonstrates, when one analyzes the only relevant metric that compares changes in standards of living across various income deciles- namely changes in real disposable household income - it is precisely the PIIGS that benefited, while countries such as Germany and Austria were left in the dust.

From UBS:

If we look across the larger and longer established Euro membership we can see these two patterns being replicated according to country type. Each country shows the cumulative real disposable household income growth for each of its income deciles. The lowest income decile is to the left of each country’s selection, and the highest to the right.

Austria looks to be alarmingly weak – what this actually represents is very little change in nominal disposable income growth, coupled with inflation. Germany, Ireland, most of Italy and the French middle class all experience a decline in their standards of living. In most of these countries, the highest income groups do relatively well.

In A Paper Money System, All Assets Are Backed by the Treasury Bond

It is circular, self-referential, and it is a Ponzi scheme

By Keith Weiner

What backs the money in the present irredeemable paper system?  Start by considering this brief anecdote.  Joe buys some equipment from John, to be paid Net 30.  We say that Joe owes John $10,000.  Next month, Joe comes back and gives the money to John.  Joe is out of debt, but has the debt been extinguished? No.  The debt has been transferred.  Now the Federal Reserve owes John the money. Surprised?  Don’t be. 

In a gold-based monetary system, every asset is ultimately backed by gold.  This does not mean that every debtor (including banks) keeps the full amount of its liability in gold coin just lying around.  Why would one bother to borrow if one did not need the money?

It means that every asset generates a gold income and every asset could be liquidated for gold, if necessary.  If a debtor declares bankruptcy, the creditor may take losses.  But he can rely on the gold income stream for each asset or if need be he can sell the asset for gold.

In a gold-based monetary system, money is gold and gold is money.  Money cannot disappear; it does not go “poof”.  Bad credit can be defaulted and must be written off.  But money merely changes hands.

When Putin's Thugs Came for Me

This was a medieval show trial with no connection to the criminal code

By Garry Kasparov

The only surprise to come out of Friday's guilty verdict in the trial here of the Russian punk band Pussy Riot was how many people acted surprised. Three young women were sentenced to two years in prison for the prank of singing an anti-Putin "prayer" in the Cathedral of Christ the Savior. Their jailing was the next logical step for Vladimir Putin's steady crackdown on "acts against the social order," the Kremlin's expansive term for any public display of resistance.

In the 100 days since Mr. Putin's re-election as president, severe new laws against public protest have been passed and the homes of opposition leaders have been raided. These are not the actions of a regime prepared to grant leniency to anyone who offends Mr. Putin's latest ally, the Orthodox Church and its patriarch.

Unfortunately, I was not there to hear the judge's decision, which she took several hours to read. The crowds outside the court building made entry nearly impossible, so I stood in a doorway and took questions from journalists. Suddenly, I was dragged away by a group of police—in fact carried away with one policeman on each arm and leg.

The Generation that Lost America

Baby Boomers

by Robert J. Cristiano

Tom Brokaw named our parents The Greatest Generation. They came of age during The Great Depression and defeated Fascism, Nazism and Communism. They built the Interstate Highway System and landed a man on the moon. They built the great American middle class with safe communities and public schools that were the envy of the world. They deserve the title of The Greatest Generation. One of their few criticisms is that they spoiled us boomers, adhering to the teaching of Dr. Benjamin Spock.

I am 59 years old and a child of perhaps the most indulged and impatient generation in history. I fear we may also become known as the generation that lost the American Dream. The Baby Boomers have rejected personal responsibility and exhibited a lack of mental discipline that could have enormous implications for the future.

The United States House of Representatives, now overwhelmingly controlled by the Boomers, signed a $787 billion legislative “stimulus” package comprised of 1,071 pages and a hefty 8 pounds. Not one legislator read the bill before signing it. Months later, the same House members publicly screamed at the corrupt executives of AIG who received bonuses in 2008 – bonuses specifically allowed in the very legislation they passed without reading.

Revolution is just the beginning

‘Change’, and even full blown revolution only brings you back to where you started

By Simon Black 

rev-o-lu-tion (n)

1. a forcible overthrow of a government or social order in favor of a new system.

2. the single completion of an orbit or rotation.

On the morning of December 17, 2010, Mohamed Bouazizi started his workday like any other. The 26-year old street merchant laid out the day’s produce on his cart, greeted his colleagues, and passed the first few hours of the day without consequence.

Then the police showed up.

Is California the new Detroit?

The signs are everywhere

by Robert J. Cristiano

Most Californians live within miles of its majestic coastline – for good reason. The California coastline is blessed with arguably the most desirable climate on Earth, magnificent beaches, a backdrop of snow-capped mountains, and natural harbors in San Diego and San Francisco. The Golden State was aptly named. Its Gold Rush of 1849 was followed a century later by massive post-war growth.

There is no mystery why California’s population and economy boomed after the Second World War. Education in California became the envy of the world. California’s public school system led the nation in innovation with brand new schools and classrooms. The Community College system that fed its universities was free for its students. A college education at the UC and Cal State systems was inexpensive. UC-Berkeley, with its graduate schools, was arguably the greatest in the world while Stanford developed into the Harvard of the West. An efficient highway system moved California’s automobile driven commerce while fertile soil of the Central Valley became the fruit and vegetable basket of the world.

What went wrong?

On the 40th Anniversary of the "Limits to Growth"

by Mark Perry

It's the 40th anniversary this year of the 1972 release of the book "The Limits to Growth" from the Club of Rome, which used computer models to predict that world population growth and economic expansion would cause the Earth to "overshoot" its carrying capacity of finite resources, and eventually lead to overpopulation, mass starvation, smog disasters, pesticide-induced cancers, oceans devoid of fish, massive species extinction, and significant reductions in life expectancy among other inevitable calamities, disasters, and catastrophes.   

As George Will explains in his latest column ("Why Doom Has Not Materialized"), "We were supposed to be pretty much extinct by now, or at least miserable. We are neither."  He then asks, "So, what went wrong?" And responds (in the tradition of resource economist Julian Simon), "The modelers missed something — human ingenuity in discovering, extracting and innovating. Which did not just appear after 1972." 

The pagan god of token environmentalism

Why doom has not materialized

By George F. Will

Sometimes the news is that something was not newsworthy. The United Nations’ Rio+20 conference — 50,000 participants from 188 nations — occurred in June without consequences. A generation has passed since the 1992 Earth Summit in Rio, which begat other conferences and protocols (e.g., Kyoto). And, by now, apocalypse fatigue — boredom from being repeatedly told the end is nigh.

This began two generations ago, in 1972, when we were warned (by computer models developed at MIT) that we were doomed. We were supposed to be pretty much extinct by now, or at least miserable. We are neither. So, what went wrong?

That year begat “The Limits to Growth,” a book from the Club of Rome, which called itself “a project on the predicament of mankind.” It sold 12 million copies, staggered the New York Times (“one of the most important documents of our age”) and argued that economic growth was doomed by intractable scarcities. Bjorn Lomborg, the Danish academic and “skeptical environmentalist,” writing in Foreign Affairs, says it “helped send the world down a path of worrying obsessively about misguided remedies for minor problems while ignoring much greater concerns,” such as poverty, which only economic growth can ameliorate.

The west has just become a giant banana republic

Anyone in the west who honestly thinks he’s still living in a free society is either a fool or completely out of touch

By Simon Black 

Wikileaks founder Julian Assange has made an admirable habit of enraging western governments over the last few years, particularly the United States.

Most notably, his release of classified diplomatic documents in 2010 proved ruthlessly embarrassing, shining a spotlight on the absurd, petty little world of international relations.

Ever since, the US government has done everything it can to stop him. Short of assassination. They shut down his website, but mirror sites instantly popped up. They sought legal action, but their efforts have been impeded by the bureaucratic deftness of his attorneys. They froze his bank accounts… but donations have poured in from all over the world.

Along the way, Uncle Sam co-opted a number of allied nations to set aside their principles for the sake of US interests– Switzerland rolled over immediately and shuttered Assange’s bank accounts.

Assange Or Corzine?

Priorities are a bitch

by John Aziz

The United States won’t prosecute Corzine for raiding segregated customer accounts, but will happily convene a Grand Jury in preparation for prosecuting Julian Assange for exposing the truth about war crimes.

From the New York Times:

A criminal investigation into the collapse of the brokerage firm MF Global and the disappearance of about $1 billion in customer money is now heading into its final stage without charges expected against any top executives. After 10 months of stitching together evidence on the firm’s demise, criminal investigators are concluding that chaos and porous risk controls at the firm, rather than fraud, allowed the money to disappear, according to people involved in the case.

One Thing Romney and Obama Agree On

Big Government

By Brendan Greeley 

 “We need to stop spending money we don’t have,” said Paul Ryan at the Iowa State Fair on Monday. “President Obama has given us four years of trillion dollar-plus deficits. He is making matters worse, and he is spending our children into a diminished future.”

It’s a slippery word, “spending.” As Paul Ryan understands it—as do almost all of the Republicans in office—”spending” means writing a check. The federal government takes in money through taxes, then spends it on programs. This makes intuitive sense. It’s also wrong.

It’s been wrong since 2002, when the United States, after a one-year dip into the black, began running deficits again. You might argue that the Bush tax cuts, extended by the Obama administration, caused these deficits. Or that the wars in Iraq and Afghanistan did, or Medicare Part D, or reduced revenue from the dot-com bust or the Great Recession, or Barack Obama’s check-writing and tax-cutting stimulus passed in 2009. You would be right about all of these things. Once in deficit, if the federal government takes in less money, it makes up the difference by borrowing money. If it writes bigger checks, it does the same. Until the budget is balanced, it’s all Treasury bills. It’s all spending.

Did the free market ruin British railways?

Squeezing the debate about Britain’s railways into the tired free market vs nationalisation script makes no sense

by Tim Black 

Britain’s privatised railways are once again in the public firing line. It’s not hard to see why.

On Monday, it was announced that our already relatively expensive train fares would rise by up to 11 per cent next year. And then, to add a wallet-shaped insult to each consumer’s injury, it was revealed that the rail operator FirstGroup, the object of a high level of customer complaints, was to take over the running of the lucrative West Coast Main Line franchise from Virgin Trains – a feat it had achieved by bidding £5.5 billion for the 14-year contract compared to Virgin’s £4.8 billion. Quite how FirstGroup was to pay for its outlay without cutting back on services and staff has been open to question. Virgin chief Sir Richard Branson called the bid ‘insane’.

In Search of 'Why'

The lone-wolf sociopath returns

By mark steyn

The media conventions are pretty much chiseled in concrete by now. If a guy guns down large numbers of people while shouting "Allahu akbar!" don't worry, it's a one-off, part of no broader pattern, just a "lone wolf" who succumbed to "workplace violence" (Major Hasan at Fort Hood) or worries about impending foreclosure (the Times Square bomber) or any of the other highly specific, individual, customized circumstances to which card-carrying members of the Amalgamated Union of Lone Wolves are prone. But if a genuine "lone wolf" guns down large numbers of people without shouting "Allahu akbar!" the media herd stampedes to ask the obvious question:

Why?

Be Careful What You Wish For

The Game is Rigged

By Mark E. Grant

Rick Santelli at CNBC asked the question and he asked me for a simple answer so I gave it to him. Rick wanted to know how Greece had raised almost $5 billion in a Treasury Bill auction and I explained; simply. The debt was almost entirely bought by the Greek banks, who are bankrupt and funded by the government of Greece through the EU and the ECB in various ways, and they pledged the Bills right back to the ECB and they got their money back. It was a Ponzi scheme of sorts, which I stated, which allowed the ECB to lend money to Greece through the Greek banks. Greece is out of money and Germany is deciding what to do about Greece so in the meantime the ECB funded the country. Rick went on to state that “the game was rigged” and he is one thousand percent correct; the game was rigged.

At least we didn’t have to listen to the Greek Prime Minister calling it a great victory for Europe like we did with the Spanish one but that may be the best thing that can be said for the situation. The ECB violated their rules and strictures and did it at the behest of the European Union you may be sure which only proves, once again, that the ECB is about as independent as a three year old is of his mother. You can say the three year old is his own person but I assure you that each and every mother on the planet would roll her eyes at you. This then is one of the main problems with Europe these days; there are laws and regulations that are defined to be exactly what the EU wants them to mean at any point in time so that there are in effect no laws and no regulations and just political expediency.