Unlike Obama, Ryan has a plan

Obama’s Gotta Go

by Niall Ferguson  

I was a good loser four years ago. “In the grand scheme of history,” I wrote the day after Barack Obama’s election as president, “four decades is not an especially long time. Yet in that brief period America has gone from the assassination of Martin Luther King Jr. to the apotheosis of Barack Obama. You would not be human if you failed to acknowledge this as a cause for great rejoicing.”

Despite having been—full disclosure—an adviser to John McCain, I acknowledged his opponent’s remarkable qualities: his soaring oratory, his cool, hard-to-ruffle temperament, and his near faultless campaign organization.

Yet the question confronting the country nearly four years later is not who was the better candidate four years ago. It is whether the winner has delivered on his promises. And the sad truth is that he has not.

In his inaugural address, Obama promised “not only to create new jobs, but to lay a new foundation for growth.” He promised to “build the roads and bridges, the electric grids, and digital lines that feed our commerce and bind us together.” He promised to “restore science to its rightful place and wield technology’s wonders to raise health care’s quality and lower its cost.” And he promised to “transform our schools and colleges and universities to meet the demands of a new age.” Unfortunately the president’s scorecard on every single one of those bold pledges is pitiful.

The Sovietization of the West

Are People Being Thrown In Psychiatric Wards For Their Political Views?

by George Washington

Many psychologists and psychiatrists are good people, who are only trying to help their patients.

But the Nazi government substantially supported psychologists … many of whom, in turn, espoused extermination of the people they considered to be “racially and cognitively compromised”.

Soviet psychiatrists famously aided Stalin in applying fake insanity diagnoses to political dissenters.

American psychologists created the American program of torture which was specially-crafted to produce false confessions to justify U.S. military policy. And see this.

And authoritarian American psychologists are eager to label anyone “taking a cynical stance toward politics, mistrusting authority, endorsing democratic practices, … and displaying an inquisitive, imaginative outlook” as worthy of a trip to the insane asylum. (Those traits may also get one labeled as a potential terrorist.)

Why a collapse of the Eurozone must be avoided

The main concern should be whether small, wealthy northern countries want to abandon the Eurozone

By Anders Åslund

It has become increasingly fashionable to talk about Europe without the euro. But this column points out that in the last century Europe has seen the collapse of three multi-nation currency zones: the Habsburg Empire, the Soviet Union, and Yugoslavia – and they all ended with disastrous hyperinflation. The lesson for the Eurozone is clear: avoid break up at almost any cost.

Articles on a possible breakup of Eurozone either see it as a mere devaluation (Lachman 2010, Roubini 2011) or reckon that its collapse would amount to a major economic disaster (Buiter 2011, Cliffe et al. 2010, Normand and Sandilya 2011). It seems the latter is more likely. Large imbalances have accumulated between southern debtor countries and northern creditor countries. Any capping of these balances would disrupt the payments mechanism between the Eurozone countries and impede all economic activity (Åslund 2012).

In the last century, Europe saw the collapse of three multi-nation currency zones, the Habsburg Empire, the Soviet Union, and Yugoslavia. They all ended in major disasters with hyperinflation. In the Habsburg Empire, Austria and Hungary faced hyperinflation. Yugoslavia experienced hyperinflation twice. In the former Soviet Union, ten out of 15 republics had hyperinflation (e.g. Pasvolsky 1928, Dornbusch 1992, Pleskovic and Sachs 1994, and Åslund 1995).

Egypt thumbs the nose at US

No return to Mubarak era

By M K Bhadrakumar

The gloom in Washington must be deepening. Egypt is careering away from the alliance with the United States - and the bitter truth cannot be hidden or obfuscated anymore.

This is not how Washington expected the "right side of history" to play out. The Arab Spring has borne a strange fruit in Egypt - a pure breed, unlike the hybrids in Tunisia, Libya or Yemen.

Consider the following. President Barack Obama was one of the first statesmen to greet Mohammed Morsi on his election victory in May. Obama broke protocol and phoned to congratulate him, signifying the anxiety in Washington to have a splendid chemistry with him.

Disaster in Iraq, disaster at home

If a few well-connected contractors profit along the way, more power to them

By Peter Van Buren

Some images remain like scars on my memory. One of the last things I saw in Iraq, where I spent a year with the Department of State helping squander some of the US$44 billion American taxpayers put up to "reconstruct" that country, were horses living semi-wild among the muck and garbage of Baghdad.

Those horses had once raced for Iraqi autocrat Saddam Hussein, and seven years after their "liberation" by the American invasion of 2003 they were still wandering that unraveling, unreconstructed urban landscape looking, like many other Iraqis, for food.

I flew home that same day, a too-rapid change of worlds, to a country in which the schools of my hometown in Ohio could not  afford to pay teachers a decent wage. Once-great cities were rotting away as certainly as if they were in Iraq, where those horses were scrabbling to get by. To this day I'm left pondering these questions: Why has the United States spent so much money and time so disastrously trying to rebuild occupied nations abroad, while allowing its own infrastructure to crumble untended? Why do we even think of that as "policy"?

The good war(s)

With the success of the post-World War II Marshall Plan in Europe and the economic miracle in Japan, rebuilding other countries gained a certain imperial patina. Both took relatively little money and time. The reconstruction of Germany and Japan cost only $32 billion and $17 billion, respectively (in 2010 dollars), in large part because both had been highly educated, industrialized powerhouses before their wartime destruction.

The euro break up

What future currency unions might emerge from the wreckage ? 

By Martin Hutchinson 

When even the strongly europhile Economist (August 11-17, pp 19-22) publishes a lengthy piece on how the euro might break up, the question must be worth addressing again. For one thing, we should think about how many pieces the euro Humpty Dumpty egg might form when it hits the ground, and what future currency unions might emerge from the wreckage. 

The question of costs and benefits in a break-up, which The Economist addressed in detail but not necessarily accurately, is another that's well worth consideration. 

The Economist begins by asserting that a Greek exit from the euro is more or less inevitable, absent gigantic subsidies. Here I Agree; it is not just inevitable, but two years overdue. Had Greece been shoved out of the euro in March 2010, when it first came begging for handouts, announcing that its national accounts had been fraudulent for a decade, the effect on other misbehaving Mediterraneans would have been highly salutary. 

The Economist also overstates the bill for Greece's exit, putting it at 320 billion euros, about US$380 billion. First it assumes the European Union would need to give Greece yet another 50 billion euros to tide it over on its exit - an absurd assumption, throwing good money after bad (though as Greece would remain a member of the EU and its gross domestic product per capita would be sharply reduced, no doubt it would gain some of the slush-funds for poorer members that prop up the likes of Bulgaria and Romania). 

"Too Small To Matter" Greece Once Again Requests More Money

We may end up with a euro zone that is perpetually on the brink

By now it should be painfully clear to involved that the Greek economy is nothing but a zombie, whose funding shortfalls and other deficit needs are sustained each month only courtesy of constantly new and improved "financial engineering" ponzi creations out of the ECB, the ELA, and other interlinked funding mechanisms which are merely a transfer of German cash into empty peripheral coffers. And while the attention of the world has moved on, at least for the time being, from the small country which has been left for dead with the assumption that Europe will do the bare minimum to keep it alive, but not more, Greece once again reminds us that not only does it still pretend to be alive, but that the zombie is getting hungry, and want to eat.

The latest news out of Athens is that ahead of the Samaras’ meeting with Juncker tomorrow and Merkel on Friday, the Troika is said to have found that Greece’s funding shortfall could be as high as EUR14bn, or 20% more than previously "agreed upon."

The Panic Over Fukushima

The reactor at Fukushima wasn't designed to withstand a 9.0 earthquake or a 50-foot tsunami

Japan's nuclear accident was a great human tragedy, but its long-term health effects have been exaggerated—and the virtues of nuclear power remain.

By RICHARD MULLER

Denver has particularly high natural radioactivity. It comes primarily from radioactive radon gas, emitted from tiny concentrations of uranium found in local granite. If you live there, you get, on average, an extra dose of .3 rem of radiation per year (on top of the .62 rem that the average American absorbs annually from various sources). A rem is the unit of measure used to gauge radiation damage to human tissue.

The International Commission on Radiological Protection recommends evacuation of a locality whenever the excess radiation dose exceeds .1 rem per year. But that's one-third of what I call the "Denver dose." Applied strictly, the ICRP standard would seem to require the immediate evacuation of Denver.

It is worth noting that, despite its high radiation levels, Denver generally has a lower cancer rate than the rest of the United States. Some scientists interpret this as evidence that low levels of radiation induce cancer resistance; I think it is more likely that lifestyle differences account for the disparity.

When the Weakest Critical Part Fails, the Machine Breaks Down

The assets are still phantom, the collateral nonexistent, the guarantees empty and the power illusory

Consumer spending is the bedrock of the global economy, and consumer spending depends on expanding debt and leverage. Once that subsystem fails, consumerism and the global economy grind to a halt.

by Charles Hugh Smith

The failure of any critical subsystem in an organism triggers a catastrophic, fatal decline. It doesn't matter if the rest of the critical subsystems are functioning at optimum levels; the failure of even one essential "part" leads to death.

The metaphor is easily extended to machines, where a perfectly sound engine will fail once the oil pump ceases functioning.

The cliche is that a chain is only as strong as its weakest link. The conventional wisdom is that the U.S. economy is so large and diverse that the failure of any one part will have only limited consequences on the economy as a whole.

But this belief was undermined by the financial crisis of 2008, in which the apparently "limited" implosion of subprime mortgage debt dominoed into a full-blown global financial crisis.

Conventional wisdom confuses redundancy and complexity. The implicit foundation of the conventional view (that the U.S. economy is so large and diverse that the failure of any one subsystem will have limited negative effects) is a belief that the system's complexity offers intrinsic redundancy: that is, if one part of the economy underperforms or even vanishes, it will quickly be replaced by the expansion or emergence of some other part.

Empire Games

Reading Gibbon with an eye on the Olympics

BY THEODORE DALRYMPLE

As London prepared for the Olympics, the most that my friends there hoped was that they would not suffer inconvenience, at least not beyond the increased taxation that will no doubt soon be exacted in order to pay for the games. The worst report I have heard so far about the games’ impact on daily life is of the severe overcrowding at the Underground station at Earls Court, frantically busy at the best of times. But in the matter of the games, Gibbon’s Decline and Fall has some lessons. Writing of the Emperor Philip, “the minister of a violent government, elected for the private benefit of the soldiers,” he observes: “On his return from the East to Rome, Philip, desirous of obliterating the memory of his crimes, and of captivating the affections of the people, solemnized the secular games with infinite pomp and magnificence.”

History does not repeat itself except by analogy—and here, it is hard not to see an analogy between Philip and former prime minister Anthony Blair. Of course, we live, as Gibbon might have put it, in a politer age, when crimes have to be muted, untruths disguised by rhetoric, and the ruination of states performed by stealth rather than by personal extravagance and outright defalcation. Still, Blair’s regime benefited only those who worked for it, and the Olympics, for which he lobbied hard, were his parting gift to the nation he had betrayed, a fitting memorial to a man with a soul of tinsel. In this connection, one cannot help but note Gibbon’s account of the Emperor Caracalla’s legacy: “The prodigality of Caracalla had left behind it a long train of ruin and disorder; and if that worthless tyrant had been capable of reflecting on the sure consequences of his own conduct, he would perhaps have enjoyed the dark prospect of the distress and calamities which he bequeathed to his successors.” Caracalla, of course, was killed; ours being an altogether gentler age, Blair is thinking of making a comeback.

Shhhh…It’s Even Worse Than The Great Depression

The path we’re on ends with mountains of corpses when the great experiment fails

by Mark McHugh

According to Wikipedia, Narcissistic personality disorder (NPD) affects one percent of the population and has little to do with looking at yourself in the mirror.  It has a lot to do with unrealistic fantasies of success, power and intelligence.   Some NPD sufferers become cult leaders or mass murderers, the rest become  economists and policy-makers.   Despite having a highly elevated sense of self-worth, narcissists have fragile self-esteem and handle criticism unpredictably, so let’s keep this to ourselves….

Velocity of money is the frequency with which a unit of money is spent on new goods and services.   It is a far better indicator of economic activity than GDP, consumer prices, the stock market, or sales of men’s underwear (which Greenspan was fond of ogling).  In a healthy economy, the same dollar is collected as payment and subsequently spent many times over.  In a depression, the velocity of money goes catatonic.  Velocity of money is calculated by simply dividing GDP by a given money supply.  This VoM chart using monetary base  should end any discussion of what ”this” is and whether or not anybody should be using the word “recovery” with a straight face:

Turning the Games into a political podium

Another kind of Britain

by Brendan O’Neill 

While the likes of Blake, Bolt and Farah thrilled global audiences by going for gold at London 2012, Britain’s less fit opinion-forming classes were pursuing a less glorious goal: the use of the Olympics as a podium from which to crow about their victory in the Culture Wars.

From the flurry of fanboy commentary that followed Danny Boyle’s am-dram opening ceremony to the insistence that the Games represented the coming to fruition of the post-Diana dream of a new, less stuffy Britain, the urge to politicise the Games has been intense. That the political classes have sought so shamelessly to usher in ‘another kind of Britain’ on the back of the Games speaks volumes about their desperate need for a new national narrative, and their disillusionment with the democratic route to social overhaul.

Kill Private Capital, Kill Civilization

The Haitian state strikes only when there is something to loot

by Jeffrey Tucker Capitalism and entrepreneurship make the difference in the world. Whether a country is rich or poor depends on both. The evidence is all around us, and the explanations are a click away. An example is the video above. Anthony Bourdain is a fascinating person, a great chef and also world traveller. He has his own show called “No Reservations,” and one of my favorite episodes is the one he did on Haiti. He draws attention to some remarkable realities of the poverty in this country. It does not result from lack of imagination, from lack of trade, from lack of work. The problem is more fundamental. A Travel Channel episode of No Reservations, a cooking-focused show narrated by Anthony Bourdain, took viewers to Port-au-Prince, Haiti. I had heard that the show offered unique insight into the country and its troubles. I couldn't imagine how. But it turns out to be true. Through the lens of food, we can gain an insight into culture, and from culture to economy, and from economy to politics and finally to what's wrong in this country and what can be done about it. Through this micro lens, we gain more insight than we would have if the program were entirely focused on economic issues. Such an episode on economics would have featured dull interviews with treasury officials and IMF experts and lots of talk about trade balances and other macroeconomic aggregates that miss the point entirely.

America's Demographic Cliff

The Real Issue In The Coming, And All Future Presidential Elections

By Tyler Durden

In four months the debate over America's Fiscal cliff will come to a crescendo, and if Goldman is correct (and in this case it likely is), it will probably be resolved in some sort of compromise, but not before the market swoons in a replica of the August 2011 pre- and post-debt ceiling fiasco: after all politicians only act when they (and their more influential, read richer, voters and lobbyists) see one or two 0's in their 401(k)s get chopped off. But while the Fiscal cliff is unlikely to be a key point of contention far past December, another cliff is only starting to be appreciated, let alone priced in: America's Demographic cliff, which in a decade or two will put Japan's ongoing demographic crunch to shame, and with barely 2 US workers for every retired person in 2035, we can see why both presidential candidates are doing their darnedest to skirt around the key issue that is at stake not only now, be every day hence.

Sadly, the market which due to central-planner meddling, has long lost its discounting capabilities, and is now merely a reactive mechanism, will ignore this biggest threat to the US financial system until it is far too late. After all it is the unsustainability of America's $100+ trillion in underfunded welfare liabilities that is the biggest danger to preserving the American way of life, and will be the sticking point in the presidential election in 80 days. However, don't expect either candidate to have a resolution to the demographic catastrophe into which America is headed for one simple reason. There is none. 

Was There an American Revolution?

A revolution did indeed occur in America, one involving social structures and values

By ROBERT NISBET

Was there in fact an American Revolution at the end of the eighteenth century? By this, I mean a revolution involving sudden, decisive, and irreversible changes in social institutions, groups, and traditions, in addition to the war of liberation from England that we are more likely to celebrate.

Clearly, this is a question that generates much controversy. There are scholars whose answer to the question is strongly negative. Indeed, ever since Edmund Burke’s time there have been students to declare that revolution in any precise sense of the word did not take place—that in substance the American Revolution was no more than a group of Englishmen fighting on distant shores for traditionally English political rights against a government that had sought to exploit and tyrannize. According to this argument, it was a war of restitution and liberation, not revolution; the outcome, one set of political governors replacing another. This view is widespread in our time and is found as often among ideological conservatives as among liberals and radicals.

“Confidence” is the only thing that separates that house of cards from collapse.

A Cacophony Of Discord, Defaults, And Visions Of Impossibility

By Wolf Richter   

The Eurozone wasn’t supposed to be a house of cards. And as long as there was “confidence” that it would work, it worked: the financial markets offered cheap no-questions-asked loans to the most profligate governments, and even tiny countries like Cyprus were able to suck up and disperse in record time phenomenal amounts of money. The elites got immensely rich, and even other members of society were able to pick up some crumbs. But all that remains from this drunken frenzy are mountains of decomposing debt—and a cacophony of discord, shouting matches about defaults, and visions of impossibility. Former taboos are violated, sacred cows are slaughtered, and the euro has been tossed on the chopping block.

There was billionaire Frank Stronach who’d announced he’d start an anti-euro political party in Austria. While the European Union should guarantee peace and the free movement of goods, people, services, and capital, he said, it could only function “if every country has its own currency.” He called the ESM, the not yet existing bailout fund that is supposed to save the Eurozone but is still hung up in the German Constitutional Court, “insolvency procrastination.” And he exhorted Austrians to ditch the euro [read.... The Euro Revolt Spreads To Austria].

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.