Do We Have What It Takes To Get From Here To There? Part 1: Japan

The Japanese model of incrementally perfecting consumer technologies may well have have reached marginal returns

by Charles Hugh-Smith

Do we have what it takes to get from here to there?

This apparently simple question offers profound insights into the dynamics of individuals, households, enterprises and nation-states. If we answer this question honestly, it establishes a "road map" of what must be in place before a progression from here to a more sustainable future ("there") can take place.

Individuals, households, enterprises and nations can have goals--where they want to be in the future--but to get there, they need to construct the necessary foundation of values, processes, skillsets, networks, practical experience and capital.

Since my partner and I built about 100 houses back in the mid-1980s, I see building a house as a useful analogy for getting from here to there: each step requires different tools, skills, experience and sufficient capital invested to get to the next phase. If you don't have all of these in hand for each step, the goal of completing the house will remain a fantasy.

As correspondent Mark G. recently observed in an email, "hyper-centralized entities are institutionally incapable of adopting decentralized solutions." I immediately thought of the Federal Reserve, which has responded to a crisis of centralized "too big to fail" banks holding phantom collateral to support massive leverage and debt with increasingly centralized actions to recapitalize those same centralized banks.

Rolling Over The Fiscal Cliff

The Next Four Years Won't be as Good as the Last

BY LANCE ROBERTS

The people have spoken and President Obama will serve another four years presiding over the United States. Furthermore, there is very little change to the makeup of the House and the Senate, which leaves the Administration in the same battle for control as it was prior to the election. The question now is what will the next four years look like economically?

One thing that has been overlooked on many fronts is that Obama had control of the House and the Senate when he first entered office in 2009. This control lead to the passing of ObamaCare, successive bailout programs for housing, automobiles, and the financial industry which flooded the economy, and financial markets, with dollars - a lot of dollars. Those injections, combined with a massively bombed out economy from the financial crisis, led to a sharp rebound in economic growth which was almost entirely centered around inventory restocking and a resumption of exported goods and services.

However, in 2010, Obama lost control of the House to the Republicans which has led to two subsequent years of political gridlock. That gridlock has resulted in very little progress in providing the fiscal policies necessary to support economic growth.

This lack of progress, which has clouded the planning ability for small businesses, combined with the recession in Europe and slowdown in China, has reduced the need for continued buildup of inventories as the exportation of goods and services has been slowing. The chart below shows the boom in both exports and imports post the recessionary bottom as stimulus impacted the economy and the subsequent fade as economic strength has waned.

Desperate times for Cristina Fernandez

Argentina Cuts Voting Age as Fernandez Aims to Boost Support

By Eliana Raszewski

Argentine lawmakers approved a bill lowering the country’s voting age, a move that could rally youth support as President Cristina Fernandez de Kirchner tries to revert a slide in her popularity ahead of congressional elections next year.

The lower house approved the bill in a 131-2 vote yesterday, converting Argentina into one of only a handful of nations where 16-year-olds can vote. The government-backed bill, which passed the Senate in early October, allows young people to cast ballots two years before voting becomes mandatory at age 18.

Fernandez has courted young voters since being elected in 2007, naming members of the government-aligned “La Campora” youth group to top positions and tapping funds from the social security agency to provide students with free laptops. Expanding the suffrage may help build support for the government even further as the opposition tries to capitalize on growing frustration with Fernandez’s handling of the economy, political analyst Carlos Fara said.

“The government believes that the more politically active young people will vote for the ruling party,” said Fara, who runs Carlos Fara & Asociados in Buenos Aires.

3 Myths You Still Believe About Automotive Manufacturing

The idea of buying "American cars" is in several ways a myth that is used to sell cars

By Tyler Crowe

Last year's "Halftime in America" ad from Chrysler was probably meant to inspire patriotism and allude to the resurgence of American automotive manufacturing. What this ad failed to mention, though, was that it was brought to you by an Italian company.

The idea of buying "American cars" is in several ways a myth that is used to sell cars -- and it's not the only one.

Myth 1: Buying "American" cars
When Americans hear the term "American car," our knee-jerk association is the American brands. While it is true that General Motors (NYSE: GM  ) , Ford (NYSE: F  ) , and Chrysler originated in the United States, it doesn't necessarily mean the cars they manufacture are more American than the foreign brands. Every year, Cars.com puts out a list of the most "made in USA" cars on the road. This list measures whether the car is assembled in the U.S., and the percentage of parts that originate here. Of the 2012 models, five of the top seven come from Japanese manufacturers.

Car Make and Model	Assembly Plant	Percent "Made in U.S."
Toyota Camry	Georgetown, Ky.	80%
Ford F-150	Dearborn, Mich.	60%
Honda Accord	Marysville, Ohio	80%
Toyota Siena	Princeton, Idaho	75%
Honda Pilot	Lincoln, Ala.	70%
Chevrolet Traverse	Lansing, Mich.	75%
Toyota Tundra	San Antonio, Texas	80%

Sources: Cars.com and abcnews.go.com.

Fiscal Suicide as Recovery Strategy

Only solution: a return to markets

BY DETLEV S SCHLICHTER

I do not want to waste your time and my energy with shooting down misguided Keynesian schemes all the time, schemes that have been refuted long ago and should by now be instantly laughed out of town whenever put forward. But arch-Keynesian Richard Koo’s latest attempt in the commentary section of the Financial Times to justify out-of-control deficit spending in the United States as a smartly designed and necessary policy that will keep ‘aggregate demand’ up and lead to recovery, is making the rounds on the internet. Koo’s article is a mechanical and naïve exposition of the 101 of Keynesian stimulus doctrine, clearly aimed at those who still perceive the economy as a simple equation with Y, C, I and lots of G in it. If private demand falls out from under the bottom of the economy, it can be replaced with the government’s demand. Simple.

And wrong, of course.

But the piece is not without some educational value. I promise this will be shorter than my attack on the new money mysticism at the IMF.

Fiscal suicide as recovery strategy

I am not sure if even in Washington there is anybody left who still seriously claims that $1 trillion-plus deficits year-in and year-out are anything but a sure-fire sign of a public sector out of control – a public sector that despite generous and growing staffing levels is simply running out of fingers to put into the many holes from which the money is leaking. Yet Richard Koo wants us to believe there is a method to the recklessness, that this is a finely calibrated strategy to save the economy.

Koo’s story goes like this: The private sector has overdosed on credit in the preceding boom and is now in the process of balance sheet repair. Households and corporations are not borrowing, investing and spending but instead saving and paying down debt. This is sensible and unavoidable, and not even artificially low rates of zero percent can persuade them to change their ways and rather borrow and spend. This is where the government has to step in. It has to borrow the funds that corporations and households save and pay back to their original creditors, and spend these funds for the greater good so that ‘aggregate demand’ is kept from collapsing and the economy from tanking.

The Keynesians’ New Clothes

Après nous, le déluge

BY JOHN BUTLER
Since early 2010 I have been arguing against the core neo-Keynesian precepts of the economic and monetary policy mainstream. In general I have not been optimistic that, notwithstanding their abject failure to foresee the global financial crisis, and their ongoing, failed responses thereto, the mainstream would reconsider its views. But some interesting developments on multiple fronts indicate that they are doing just that. So does this represent the beginning of the end of the flawed neo-Keynesian policies that treat debt rather than savings as real wealth; consumption rather than investment as sustainable growth; and money as something to be manipulated to ‘manage’ the economy? Sadly, no. While they may realise that their policies are failing, what they are now contemplating is an even more radical programme of outright debt monetisation, wealth confiscation and vastly expanded central planning. Investors must take appropriate actions to protect themselves now, before such policies are implemented.

A Brief Word on the US Elections

Naturally there is all manner of comment out there at present about the investment implications of the US elections. My thoughts have already been expressed in the past. I will reprint two excerpts here and leave it at that. The first is from November 2010, when I briefly discussed the impact of a divided Congress, which will remain so divided for at least the next two years:

[G]ridlock, it would seem, makes it all the more likely that the government is going to go right on doing more or less as it has done during the past few years. This is made all the simpler by the fact that the vast bulk of the US federal budget is non-discretionary. Yes, that’s right: All the time and money spent lobbying and lawmaking in Washington may keep the local economy booming and fill the newspapers with all manner of suspenseful headlines but, in reality, it is increasingly irrelevant with respect to the overwhelming portion of the federal budget, which grows automatically and is no longer just chronically in deficit, but amidst weak economic growth, exponentially so.

So for all those out there who believe that somehow gridlock is good, think again. The US is on the path to economic ruin... Après nous, le déluge.¹

And more recently, during the just-concluded campaign, I had this to say:

President v Congress, Republicans v Democrats, left v right: If there is anything the post-WWII history of US monetary and fiscal policy should teach us, it should be that when it comes to growing the money supply and the federal debt, Washington DC is run by a single branch of government, a single party and a single point on the left-right spectrum. And this branch, the party that controls it and its political orientation is not something that changes with elections. It is a national political pathology.²

So now, with the US elections settled, let’s step back and take in the larger, global picture. It isn’t pretty.

The Era Of Big Government Is Back!

It’s more than just the nanny state, it’s the sugar daddy state

By Merrill Matthews

In his State of the Union speech on January 23, 1996, President Bill Clinton famously proclaimed, “The era of big government is over.”  If anything is clear from the Obama victory, it is that the era of big government is back.

While the pundits pour over the voter turnout results and parse their meaning for Republicans and future elections, there is at least one common thread uniting all of those who voted for President Obama: They all believe in big-government handouts and bailouts.

It’s more than just the nanny state, it’s the sugar daddy state.

More so than race or gender, the biggest divide in the country may be those who embrace the government as sugar daddy, versus those who don’t.  Obama’s whole campaign was based on handouts and bailouts.  While Governor Mitt Romney tried to maintain his focus on the economy, Obama stressed how much he had given away—and would give away if reelected.

In Michigan and Ohio the president wanted voters to know that he came to the rescue of the auto industry—though for some reason he didn’t blame George W. Bush, who actually initiated the first bailouts.

While Romney tried to talk about getting the government out of health care, Obama wanted to make sure women knew that he provided them with free contraceptives.

Four More Years

Get ready for real trouble

by Andrew P. Napolitano

Only in America can a president who inherits a deep recession and whose policies have actually made the effects of that recession worse get re-elected. Only in America can a president who wants the bureaucrats who can't run the Post Office to micromanage the administration of every American's health care get re-elected. Only in America can a president who kills Americans overseas who have never been charged or convicted of a crime get re-elected. And only in America can a president who borrowed and spent more than $5 trillion in fewer than four years, plans to repay none of it and promises to borrow another $5 trillion in his second term get re-elected.

What's going on here?

What is going on is the present-day proof of the truism observed by Thomas Jefferson and Alexander Hamilton, who rarely agreed on anything in public: When the voters recognize that the public treasury has become a public trough, they will send to Washington not persons who will promote self-reliance and foster an atmosphere of prosperity, but rather those who will give away the most cash and thereby create dependency. This is an attitude that, though present in some localities in the colonial era, was created at the federal level by Woodrow Wilson and Theodore Roosevelt, magnified by FDR, enhanced by LBJ, and eventually joined in by all modern-day Democrats and most contemporary Republicans.

Mitt Romney is one of those Republicans. He is no opponent of federal entitlements, and he basically promised to keep them where they are. Where they are is a cost to taxpayers of about $1.7 trillion a year. Under President Obama, however, the costs have actually increased, and so have the numbers of those who now receive them. Half of the country knows this, and so it has gleefully sent Obama back to office so he can send them more federal cash taken from the other half.

Bad Ideas Never Die

Gaga Over Galbraith

by Joseph T. Salerno

Based on his book sales, John Kenneth Galbraith was probably the most read economist of the 20th century. From the publication of his first bestselling book The Great Crash in 1954 through the 1980s, the American left-liberal intelligentsia and media breathlessly anticipated and wildly celebrated the publication of each new book. Nonetheless, most technical economists, regardless of their political orientation, did not take his work seriously. By the 1990s Galbraith's work had been thoroughly discredited among professional economists. Indeed, in his 1994 book, Peddling Prosperity, leftist economist Paul Krugman held up Galbraith as the prototype of a left-wing "policy entrepreneur" who, like his supply-sider counterparts on the Right, sought an audience among policymakers and the educated public, outside the cozy circle of academic economists.

In his book, Krugman ridiculed The New Industrial State, Galbraith's magnum opus. He pointed out its wildly erroneous predictions regarding the evolution of the US economy toward greater dominations by giant corporations that were insulated from market forces, manipulated consumer preferences at will through advertising, and whose interlocking managerial and technological elites (the ominously labeled "Technostructure") could make decisions without regard to the interests of stockholders. With rhetorical understatement, Krugman concurred with the sentiments of earlier academic critics, characterizing the book as one that "could safely be ignored."

The far-right-sounding ideas of Swiss greens EcoPop display the misanthropy of Malthusian thought

The greens showing their true colours

by Patrick Hayes 

For greens, the ends will always justify the means when it comes to saving the planet. In the UK, they have opportunistically latched themselves on to left-wing movements to try to gain purchase with a broader public. But, as Swiss campaign group Ecology and Population (EcoPop) has demonstrated, in an attempt to pursue their Malthusian goals, greens can be equally happy tapping into the anti-immigrant rhetoric of the far right.

In a stunt last week, members of EcoPop carried dozens of cardboard boxes into the Swiss chancellery which contained 120,700 certified signatures calling for immigration into Switzerland to be capped at 0.2 per cent of the resident population. Under Swiss law, this means that a referendum will now be held on the proposal. Such a move trumps even the efforts of the far-right Swiss People’s Party, which has long lobbied for greater immigration controls.

But these greens aren’t mobilising for an immigration clampdown with banners claiming ‘keep the darkies out’ as right-wing groups have done in the past. Nor are they using dodgy, discredited scientific arguments to justify racial superiority, wielding books like Madison Grant’s The Passing of The Great Race for evidence.

No, instead EcoPop delivers its demands for immigration curbs carrying a banner asking: ‘How many people can the Earth tolerate?’ The group’s members use the (equally dodgy and discredited) Malthusian science of population growth and babble on about our ‘finite planet’. And they have reportedly been strongly influenced by the theories of US Malthusian Paul Ehrlich, author of The Population Bomb.

EcoPop bends over backwards to claim that it is not singling out particular races when advocating its policies. According to the BBC, it claims to be ‘opposed to all forms of xenophobia and racism’. But, the group says, ‘Switzerland must limit immigration to avoid urbanisation and to preserve agricultural land’.

Defending the press as an unruly mess

The myth that the UK press is too free

by Mick Hume 

As the debate about press regulation warms up with the reportedly imminent publication of Lord Justice Leveson’s report, there seem to be some important misconceptions around.

On one side, those demanding regulation backed by statute appear to be either deluding themselves or attempting to delude the rest of us that this is not the same thing as state interference in the press. But it is.

On the other, some of those resisting such a regulatory system seem to assume that anything short of statutory-backed regulation would be a victory for press freedom. But it would not necessarily be so.

These issues came into focus at two events I spoke at recently, involving both sides of the debate. One was the first event of the Free Speech Network (FSN), a loose alliance of media-industry groups. The other speakers were Professor Tim Luckhurst, whose important pamphlet against statutory regulation, Responsibility Without Power, was launched at the meeting, and Conservative MP John Whittingdale, chair of the House of Commons Culture, Media and Sport committee. The audience included a lot of media people and various journalism lecturers and professors from the Hacked Off lobby – hackademics, the poachers-turned-gamekeepers of this whole debate. They were given plenty of scope to argue for statutory-backed press regulation by the chair, John Humphrys, in his best the-BBC-really-is-neutral mode (he even allowed them the last word, from the floor). Hacked Off’s celebrity voiceover artists were also there, but made less of a contribution: Hugh Grant went off in a huff after his Channel 4 film crew was refused entry, while Steve Coogan stood at the back looking grumpy throughout and at the end gave a half-hearted ‘boo’.

Russia's Socialist Heritage

Why is such a rich country so poor?

By Anthony de Jasay

Why should Russia lag so far behind other industrial countries, why is it unable to make more of its obvious economic potential?

Admittedly, the country is penalised by a number of initial structural handicaps. Culturally, it is neither fish nor fowl, being neither wholly European nor wholly Oriental on personal characteristics and traditions, suspicious of and suspected by both worlds. It extends over too large an area compared to its population, saddling both the production and the distribution of its output with heavier transport costs than countries of denser population have to bear. Perhaps most important, it has an unfriendly climate. Some historians, tongue in cheek, explain the expansionary drive of Russia over the last three centuries by the longing of its people to escape from the climate of their homeland and settle under a sunnier, less humid, healthier sky, yet still their own empire. As for cultivating the land, the saying goes that there are four natural catastrophes in Russia every year, Spring, Summer, Autumn and Winter.

All in all, however, the endowments almost certainly outweigh the handicaps. Russia, even after the secession of the Ukraine, has enough high-quality farmland. It has inexhaustible resources of timber and vast deposits of every kind of ore from iron and bauxite to gold, much of it low cost. Using these resources, there is a reasonably educated work force of mixed quality, working 1,900 hours a year that compares with about 1,500 in Western Europe. Russian workers are mostly obedient and bow to authority, they have weak unions, strikes are rare and wages are settled on the level of the enterprise rather than of the nationwide industry, an advantage the Russian labour market has over the West and that keeps unemployment at just over 5 per cent, close to the level of practically full employment. Skill from shop floor to middle management level is adequate. Far more decisive than any of these more or less commonplace advantages is Russia's exceptional oil and gas wealth, of which more below. Taking a rough-and-ready account of both the obvious helps and hindrances, the visitor from Mars would expect Russians to be no less prosperous than Englishmen, Frenchmen or Germans. His expectation would be legitimate, but very far out.

Who Killed Rudy Giuliani?

How Ron Paul won the war for conservatism’s future

By W. JAMES ANTLE III

When Ron Paul leaves office in January, he will have been more successful than many of the legislators who spent decades maligning him. Paul’s ideas have gradually gone from marginal to mainstream, and his record shows how much even a single determined man of principle can do to change a movement. In foreign policy especially, the Texas congressman leaves behind a new generation of leaders, both libertarian and conservative, who challenge the disastrous bipartisan consensus.

A decade ago, only seven Republican members of Congress voted against the Iraq War—six congressmen and one senator. The number of conservative legislators who opposed the war was even smaller still, the redoubtable trio of Jimmy Duncan, John Hostettler, and Paul.

The other dissenters were moderate to liberal Republicans representing districts where George W. Bush and any policy he proposed—much less sending young Americans to die in a war of choice—would have been deeply unpopular. Lincoln Chafee, the only GOP senator to vote against the authorization of force, was the son of the last great Rockefeller Republican and easily his party’s most liberal member of Congress. Connie Morella of Montgomery County, Maryland represented the most Democratic congressional district held by a Republican.

Rounding out this group was the unpredictable Iowan Jim Leach and Amo Houghton, a New Yorker who voted with Democrats on many issues. While Paul, Duncan, and Hostettler all opposed the war from the right, the bare majority of antiwar Republicans opposed it from the left.

Small as this group was, its ranks would soon grow thinner. Morella was defeated in 2002, right after voting against the war, the victim of redistricting by Maryland Democrats. Houghton retired after the 2004 elections. Chafee, Hostettler, and Leach were all defeated in the Democratic tidal wave of 2006.

Barack Obama’s new ethnic majority

An irresistible political force is about to meet an immovable economic object — on the edge of a vertiginous fiscal cliff

By John O'Sullivan

‘I’ve come back to Iowa one more time to ask for your vote,’ said President Obama at an emotional ‘last ever’ campaign meeting. ‘Because this is where our movement for change began, right here. Right here.’ And his eyes briefly moistened. The nostalgia was doubtless sincere, and the address correct, but it was misleading to describe his 2012 election campaign as a continuation of his earlier ‘movement for change’. In reality, it has been a smoothly ruthless operation to distract attention from a record that has been disappointingly bereft of change. He triumphed over himself as much as over the hapless Mitt Romney.

Until it produced a glossy economic leaflet so that the President could wave it as evidence that, like Romney, he too had a ‘plan’, the Obama campaign had concentrated on blaming George W. Bush for America’s continuing troubles. It denounced Romney as a vulture capitalist murderously hostile to ordinary people, and promised to protect women against the GOP’s supposed plan to abolish both contraception and abortion. Both sides ran relentlessly negative adverts but, as the result showed, the Democrats did it better. Obama will be President for another four years.

To win in circumstances that seemed ripe for his defeat is a remarkable achievement — but the victory can scarcely be described as glorious. The President almost tied with Romney (whom he reportedly despises) in the popular vote. The loss of Senate seats had little to do with his coattails but was largely due to the individual follies or bad luck of Republican candidates. Republicans retained control of the House and now control 30 governorships, the highest number since 2000. The President will have to deal with a hostile half of Congress in an atmosphere poisoned by the extraordinarily ruthless partisanship of this ‘post-partisan’. And in one vital particular, the campaign almost foundered.

The Case For A Constitutional Convention In 2016

That which is unsustainable will go away, and the Status Quo is unsustainable on multiple levels

by Charles Hugh Smith

Now that the billion-dollar theatrics between various vested interests have finally concluded, it's time to ask if there is an end-game to Imperial over-reach and corporatocracy.

The Status Quo won--no surprise there, as there was no other choice offered.

The Imperial Presidency won, too, of course; anyone anywhere can still be assassinated by order of the Imperial President, regardless of their citizenship. Anyone can be labeled "an enemy of the State" and either liquidated (high fives all around!) or crushed by the Espionage Act (transparency is a crime), Patriot Act (dissent is also criminal), the NDAA, or maybe another Executive Order.

The neofeudal Aristocracy also won, as vested interests were free to buy "free speech" in unlimited quantities.

Everyone at the trough of the Central State won, as the welfare state--personal transfers and corporate welfare, there's something for everyone--has created its own Id Monster, the tyranny of the majority: Tyranny of the Majority, Corporate Welfare and Complicity (April 9, 2010).

This pursuit of self-interest guarantees that the Savior State will lurch off the fiscal cliff at some point, much to the dismay of everyone feeding off it; it was supposed to be permanent, right? Alas, as the Buddha taught, permanence is illusory, even for global Empires.

Unfortunately for the Status Quo, this is the apogee of "extend and pretend." When the wheels finally come off the global economy in 2013, the Status Quo will not be able to "save the day" by lowering interest rates to zero--interest rates have already been zero for four years.

Obama Wins A Second Term

Now What?

By Ron Holland

I'm certainly glad the election is finally over. While I have loved politics my entire life, this presidential election has gone on for over three years, including the GOP primaries, and I've had my fill of meaningless slogans and counter-slogans, lies and counter-lies. I had to quit watching political news the last few weeks, as I thought I would become physically sick if I watched any more establishment political "experts" give their required opinions and propaganda bites.

The 2012 presidential election has been like a ballgame hyped and built up over three years. We are programed to cheer and act out our sheep-like roles in partisan politics when, like the game, unless we have money bet on the outcome the actual winner will have absolutely no impact on our lives.

This was destined to be a close, statistically tied election, as get out the vote efforts included repetitive harping on its life-changing importance and the evils of the opposition candidates and party. The bottom line is that voting percentages generate credibility for the failed American political system.

"There's not a dime's worth of difference between the Democrat and Republican parties." George Wallace, 1966 Alabama governor and presidential candidate.

Note it now takes 71 cents to equal the purchasing power of a dime in 1966 – if you believe the false inflation statistics out of Washington. Actually, I could buy a soft drink for a dime in 1966 whereas today it is closer to $1.50. Check house prices even with the pullback or college tuition if you want an accurate inflation estimate.

The Elections, Gridlock and Foreign Policy

The elections will paralyze Obama domestically and reality will limit his foreign policy latitude

By George Friedman

The United States held elections last night, and nothing changed. Barack Obama remains president. The Democrats remain in control of the Senate with a non-filibuster-proof majority. The Republicans remain in control of the House of Representatives.

The national political dynamic has resulted in an extended immobilization of the government. With the House -- a body where party discipline is the norm -- under Republican control, passing legislation will be difficult and require compromise. Since the Senate is in Democratic hands, the probability of it overriding any unilateral administrative actions is small. Nevertheless, Obama does not have enough congressional support for dramatic new initiatives, and getting appointments through the Senate that Republicans oppose will be difficult.

There is a quote often attributed to Thomas Jefferson: "That government is best which governs the least because its people discipline themselves." I am not sure that the current political climate is what was meant by the people disciplining themselves, but it is clear that the people have imposed profound limits on this government. Its ability to continue what is already being done has not been curbed, but its ability to do much that is new has been blocked.

The Plan for American Power

The gridlock sets the stage for a shift in foreign policy that has been under way since the U.S.-led intervention in Libya in 2011. I have argued that presidents do not make strategies but that those strategies are imposed on them by reality. Nevertheless, it is always helpful that the subjective wishes of a president and necessity coincide, even if the intent is not the same.