Angry Young Men

Men end up dominating not only the top of society but also the bottom

by Nima Sanandaji

“'Angry young men' lack optimism.” This was the title of a BBC News story earlier this year, exploring the deeply pessimistic views that some young working class British hold about their own future. Two-thirds of the young men from families of skilled or semi-skilled workers, for example, never expect to own their own home. Angry young men, this time of immigrant origin, were also recently identified as the group causing riots in Swedish suburbs such as Husby. As Swedish Prime Minister Fredrik Reinfeldt noted, the riots were started by a core of “angry young men who think they can change society with violence”.

The social unrest occurring in Western Europe is often ascribed to the lack of integration into society among immigrants. It is true that dependency of public handouts rather than self-reliance has become endemic in Europe’s well‑entrenched and extensive welfare states. In Norway for example, the employment rate of immigrants from Asia is only 55 percent, compared to 70 percent for the non-immigrant population. Amongst African immigrants the figure is merely 43 percent.  In neighboring Sweden, a recent government report noted that the employment rate of Somalians was merely 21 percent. This can be compared to 46 percent in Canada and 54 percent in the US for the same group. The low incentives for transitioning from welfare to work in Sweden and Norway compared to in Canada and the US explain at least part of this difference.

But a failure of integration is hardly the sole explanation for the social unrest which extends well beyond immigrant youth. Why not add another relevant perspective to the puzzle, namely the increasing marginalization that some young men feel across the continent? This frustration is hardly an excuse for violence, but relates to important social phenomena which deserve to be explored, and targeted with the right policies.

A Light Fails In Egypt

Tyranny relies on despair

by WALTER RUSSELL MEAD

Is Egypt’s revolution falling apart? Clashes between anti-government protestors and Muslim Brotherhood supporters turned deadly yesterday, leaving at least three—including an American college student—dead. These clashes come ahead of massive country-wide demonstrations against President Morsi scheduled for Sunday. The NYT reports that on-the-ground forces are even speaking of a civil war:

The use of firearms is becoming more common on all sides. Secular activists who once chanted, “peaceful, peaceful,” now joke darkly about the inevitability of violence: “Peaceful is dead.”

…Egypt’s most respected Muslim cleric warned in a statement this weekend of potential “civil war.”

It’s hard for the American press to wrap its head around what’s happening in Egypt. The Western media instinctively wants to view the conflict as Islamists vs. secularists or liberals, with the future of democracy at stake. The reality is both darker and more complicated, but at best only a handful of journalists have the intellectual chops to make sense of this picture, or the writing ability to help American readers understand a reality so different from our own experience here at home.

Leslie Chang gets closer than most in this piece in the New Yorker, but the problems are even deeper than the ones she puts her finger on. Based on interviews with leaders in the anti-Morsi movement, Chang correctly points out that Egypt’s opposition is neither particularly coherent nor interested in governing. The looming protests were organized by a movement known as Tamarod, or “rebellion” in Arabic—a movement founded mostly by young Egyptians whose sole goal is to drive Morsi from power. ”I have yet to meet a politician with a substantive plan to overhaul a system of food and fuel subsidies that eats up almost one third of the budget, or to reform the education sector, or to stimulate foreign investment.”

She continues:

After two years of watching politicians on both sides of the fence squabble and prevaricate and fail to improve their lives, Egyptians appear to be rejecting representative democracy, without having had much of a chance to participate in it. In a country with an increasingly repressive regime and no democratic culture to draw on, protest has become an end in itself—more satisfying than the hard work of governance, organizing, and negotiation. This is politics as emotional catharsis, a way to register rage and frustration without getting involved in the system.

It would be a mistake to attribute the ineffectiveness of Egypt’s opposition to the purely personal failings and intellectual blind spots of the people currently prominent in its ranks. We are looking at something more deeply rooted and harder to fix. An intense rage and dissatisfaction with the status quo without any idea in the world how to make anything better: this is the typical condition of revolutionary movements in countries without a history of effective governance or successful development. It is also often typical of political movements in countries dominated by a youth bulge. The unhappiest countries are the places where this large youth bulge comes up against failed governance and curdled hope. Think Pakistan, where a comprehensive failure of civil and military leadership is turning one of the world’s most beautiful countries into one of its most miserable ones.

Inexperienced 18 years olds who have grown up in corrupt, poorly governed societies, and been educated in trashy schools by incompetent hacks know very well that the status quo is unacceptable. Young people who know they are being ripped off and abused are typically not very patient. Throw in healthy doses of sexual frustration and contempt for an establishment that has lost confidence in its own capacity to lead, and you have a cocktail much more explosive than anything Molotov knew.

The Stories Germans Tell Themselves

Things you can hear in Berlin

By  RAYMOND ZHONG

You hear a pretty consistent story about Europe's economic troubles from people in the German capital. Aspects of this story are fair—the cloistered but earnest perspective of a country removed from the worst of the crisis. The rest is self-pleasing bunk.

You hear, for instance, that the crisis originated in Southern countries and is therefore those countries' to solve. The sense of the crisis as somebody else's problem has been palpable in German policy makers' utterances since 2010, but it's worrisome that it persists even in this election year. European governments that haven't been voted away by the economic awfulness have at least had to address it to get re-elected.

Ahead of September's German vote, by contrast, it's hard to find many politicians talking publicly about the euro zone at all. "Germany is on a different planet in this debate," Klaus Deutsch, the head of Deutsche Bank research in Berlin, told me recently.

You also hear in Germany that Berlin can't lead Europe, putting aside the fact that it already does. You hear—or I do at least, in Germany more often than anywhere else in Europe—that the Continent imported its financial woes from the U.S., that America's housing bust is truly and deeply to blame.

You hear that Germany has benefited from the euro, without the slightest acknowledgment that this might be obvious—an export-dependent nation will always benefit from an undervalued currency—and hence a smug thing to say. You hear that Germany has prospered because it sells more than it buys, and because it earns more than it spends.

Fallacies die hard, if ever.

With the Environment, Paul Krugman Forgets the Poor

By Jeffrey Dorfman

President Obama gave a major environmental speech this week, laying out proposals to force more environmental regulation on the U.S. economy in order to allegedly save the world from the dangers of climate change. Essentially admitting that no environmental proposal is going to pass the Republican-controlled House, Obama has apparently decided that he will take action on his own. Given that he does not face any future elections, this presumably makes some sense from his point of view. The question is: will it be good for either the economy or the environment?

The environmental question is somewhat trickier than people think. Even if one accepts that human-related greenhouse gas emissions are causing global warming, this is not all bad for all people. More people die of cold-related causes than heat-related ones every year. Colder regions will gain longer growing seasons, lower heating costs in the winter, and fewer cold-related deaths. Advocates for action in response to global warming should at least acknowledge that even according to their own models there are some people and places in the world that would be winners from climate change. When we combat it, we harm those groups.

Then there is the question of whether new technologies designed to replace fossil fuel as energy sources are really better for the environment. For example, everybody except American presidential candidates knows that corn ethanol does not generate a gain for the environment. It is really a slight negative in terms of total energy balance, and then adds major negative effects on land use patterns and global food prices that are bad for the environment and burdensome on poor people. Electric cars are not zero-emission vehicles. They just separate the emissions from the car, moving them to the power plant used to generate the electricity that goes into charging the car. Whether a hybrid car is really better for the environment over its entire lifecycle is still a matter of debate. Wind power causes additional bird deaths, noise that impinges on the lifestyles of nearby residents, and certainly changes the viewscapes in many beautiful natural areas that just happen to be windy.

Plutocrat Protection Act

A different set of rules

by David Conway     

Hot on the heels of the latest annual Bilderberg get-together in Berkshire, England, political leaders at the just-concluded G8 summit in Lough Erne, Northern Ireland, announced that the EU and US intend to broker a free-trade agreement between them by the end of next year, with talks towards one due to begin next month.

How should supporters of free-markets respond to the news of such an agreement – with jubilation, indifference, or dismay? Prima facie, such a deal can only be good news. The removal or lowering of tariffs fosters trade and thereby supposedly facilitates mutually beneficial international division of labour which in turn, by fostering a greater interdependency between nations, reduces the chances of war between them.

In reality, however, the prospect of such an agreement is anything but a cause for celebration for freedom lovers. The problem is that so called international ‘free-trade’ deals are invariably anything but truly such. They formalize highly managed trade in ways that are often deeply detrimental to the interests of ordinary citizens of the countries which are parties to them.

Why is that so?

Well, along with the reduction and elimination of tariffs on goods imported between participating states, such agreements involve mutual acceptance of common regulations and standards in the name of the harmonization of trade and creation of a level playing-field. In reality, such regulations invariably stifle genuine competition between producers and potential producers, favoring larger, already established corporations over new entrants, since compliance costs invariably favor bigger units and not smaller new entrants. As was observed about the impending deal by the libertarian-minded Conservative MP Douglas Carswell:

Simply allowing willing buyers and sellers to trade freely with one another is not quite what the architects of this trade deal have in mind… [W]hat is envisaged might be better described as a mercantilist arrangement, drawn up by officialdom on both sides of the Atlantic. Far from free trade with mutual standard recognition, the small print is all about common standards, which define under what conditions transatlantic trade is permitted….  If that was not complicated enough, all kinds of vested interests are already lobbying to make sure the rules get written a certain way – preferably one that favors them, but shuts out their rivals. 

What's Really 'Immoral' About Student Loans

It's not so much the interest rates but rather the principal of the thing

By GLENN HARLAN REYNOLDS

Unless Congress acts, interest rates for government subsidized student loans will double to 6.8% from 3.4% on July 1. In May, House Republicans passed a bill that would index rates on new loans to the rate on 10-year Treasurys (currently about 2.6%), plus 2.5 percentage points, with an 8.5% cap. But with little Democratic support in the Senate, that bill is dead in the water.

Most Democrats want to lock the current 3.4% rate in place for two more years while Congress debates a "fairer" solution. Massachusetts Sen. Elizabeth Warren has even proposed letting students borrow directly from the government at the same ultra-low rate that banks currently get on short-term loans from the Federal Reserve—0.75%. She calls the Republican proposal "immoral."

In the student-loan world, there's immorality to spare—not in the still historically low interest rates, but in the principal of the thing. Student debt, which recently surpassed the trillion-dollar level in the U.S., is now a major burden on graduates, a burden that is often not offset by increased earnings from a college degree in say, race and gender issues, rather than engineering.

According to an extensive 2012 analysis by the Associated Press of college graduates 25 and younger, 50% are either unemployed or in jobs that don't require a college degree. Then there are the large numbers who don't graduate at all. According to the National Student Clearinghouse Research Center, more than 40% of full-time students at four-year institutions fail to graduate within six years. The National Center for Education Statistics reports that almost 75% of community-college students fail to graduate within three years. Those students don't have degrees, but they often still have debt.

Promises of a free lunch are as old as politics

Paul Krugman: A broken window equals economic strength

By Benjamin Zycher

It truly is amazing. That a Nobel prize-winning economist can believe utter nonsense, write utter nonsense, and defend utter nonsense, all in the service of a “climate” policy agenda that is remarkably weak in terms of the underlying peer-reviewed science, and that would have virtually no effect on temperatures under any set of mainstream assumptions. I refer to thelatest from Professor Paul Krugman, who actually argues, presumably with a straight face, that a forced closure of some coal-fired electric generating plants would force new investment in power plants and increase average power prices, thus yielding “an increase in spending” and a “positive effect” on the economy.

Wow. Remember the broken window fallacy? If a window is broken, the result is more employment and economic activity, because, obviously, someone has to pay someone else to replace the window. Sadly, this story leaves out the spending on something else that the first someone would have undertaken had the window not been broken in the first place. The broken window results in a reallocation of resources and not an increase in aggregate wealth; that is a reality that any student in Economics 101 should learn. The spending forgone on something else offsets the dollars spent replacing the window, but in Mr. Krugman’s world, the investments in new power plants and the higher spending on electricity represent new spending that otherwise would not have been made, because without the climate rules the dollars would have remained hidden in mattresses. Or something.

That the promulgation of new rules imposing large costs but yielding no benefits might have the indirect effect of increasing uncertainty and decreasing “spending” is a possibility not considered by Mr. Krugman. Nor is the larger effect of wealth destruction by regulation a parameter that he considers. One wonders why there is any “spending” at all in the absence of federal actions. What is clear, however, is that promises of a free lunch are as old as politics. And it is politics rather than economics that Mr. Krugman is practicing. Would the economy suffer if people spent less for access to the New York Times? 

The question answers itself.

Free Speech And America

California man faces 13 years in jail for scribbling anti-bank messages in chalk

By RT

Jeff Olson, the 40-year-old man who is being prosecuted for scrawling anti-megabank messages on sidewalks in water-soluble chalk last year now faces a 13-year jail sentence. A judge has barred his attorney from mentioning freedom of speech during trial.

According to the San Diego Reader, which reported on Tuesday that a judge had opted to prevent Olson’s attorney from 

"mentioning the First Amendment, free speech, free expression, public forum, expressive conduct, or political speech during the trial,” Olson must now stand trial for on 13 counts of vandalism. 

In addition to possibly spending years in jail, Olson will also be held liable for fines of up to $13,000 over the anti-big-bank slogans that were left using washable children's chalk on a sidewalk outside of three San Diego, California branches of Bank of America, the massive conglomerate that received $45 billion in interest-free loans from the US government in 2008-2009 in a bid to keep it solvent after bad bets went south. 

The Reader reports that Olson’s hearing had gone as poorly as his attorney might have expected, with Judge Howard Shore, who is presiding over the case, granting Deputy City Attorney Paige Hazard's motion to prohibit attorney Tom Tosdal from mentioning the United States' fundamental First Amendment rights. 

"The State's Vandalism Statute does not mention First Amendment rights,"ruled Judge Shore on Tuesday. 

Upon exiting the courtroom Olson seemed to be in disbelief. 

"Oh my gosh," he said. "I can't believe this is happening." 

Tosdal, who exited the courtroom shortly after his client, seemed equally bewildered. 

"I've never heard that before, that a court can prohibit an argument of First Amendment rights," said Tosdal. 

The Effects Of Real Austerity

Facts Versus Ideology

By Joseph Calhoun

Matthew Melchiorre of the Competitive Enterprise Institute has a new paper, The True Story of European Austerity. The gist of the paper is that cutting both taxes and spending - true austerity - leads to higher growth. 

Austerity in Europe takes many different forms. While countries label their policies with the common term "austerity," their actions are far from similar. Only four countries in Europe have engaged in what can truly be considered austerity-cutting both spending and taxes-Bulgaria, Ireland, Latvia, and Lithuania. Instead, more countries have followed the opposite path-increasing both spending and taxes-than any other option. This does not qualify as austerity in any reasonable sense of the term. Businesses bear all the burden of fiscal consolidation while governments bear none. Contrary to popular belief, austerity is largely absent from Western Europe.

The paper breaks down austerity as practiced in Europe into 9 categories:

The results for the categories with at least 4 countries:

Well, knock me over with a feather. All this does is confirm reams of research on the multiplier effects of spending and tax changes. It also at least partially confirms the research that correlates smaller government with higher rates of economic growth. The vast majority of the research shows that tax changes have a much greater impact than spending changes and this data supports that view. Raising taxes and cutting spending or even holding spending constant is doomed to fail because they both have negative multipliers. The only way governments can raise economic growth and address their deficit problems is to cut both taxes and spending.

What’s So Scary About Deflation?

Growth lowers prices and that is a good thing

by Frank Hollenbeck

When it comes to deflation, mainstream economics becomes not the science of common sense, but the science of nonsense. Most economists today are quick to say, “a little inflation is a good thing,” and they fear deflation. Of course, in their personal lives, these same economists hunt the newspapers for the latest sales.

The person who epitomizes this fear of deflation best is Ben Bernanke, chairman of the Federal Reserve. His interpretation of the Great Depression has greatly biased his view against deflation. It is true that the Great Depression and deflation went hand in hand in some countries; but, we must be careful to distinguish between association and causation, and to correctly assess the direction of causation. A recent study by Atkeson and Kehoe spanning a period of 180 years for 17 countres found no relationship between deflation and depressions. The study actually found a greater number of episodes of depression with inflation than with deflation. Over this period, 65 out of 73 deflation episodes had no depression, and 21 out of 29 depressions had no deflation.

The main argument against deflation is that when prices are falling, consumers will postpone their purchases to take advantage of even lower prices in the future. Of course, this is supposed to reduce current demand, which will cause prices to fall even further, and so on, and so on, until we have a deflation-depression spiral of the economy. The direction of causation is clear: deflation causes depressions. You can find this argument in almost all introductory economics textbooks. The St. Louis Fed recently wrote:

“While the idea of lower prices may sound attractive, deflation is a real concern for several reasons. Deflation discourages spending and investment because consumers, expecting prices to fall further, delay purchases, preferring instead to save and wait for even lower prices. Decreased spending, in turn, lowers company sales and profits, which eventually increases unemployment.”

There are several problems with this argument.

The first is that, regardless of how low prices of consumer goods are expected to fall, people will always consume some quantity in the present and in order to do so, they therefore need to spend in the present on investment to ensure the flow of consumer goods into the future. We can see that many high technology products have had brisk demand despite living in a deflationary environment. Apple has been able to sell its latest version of the iPhone, although most people expect the same phone to be much cheaper in six months.

The second mistake with this argument is that it assumes that we base our expectations only on the past. Falling prices makes us anticipate prices to continue to fall. Of course, our expectations are based on a multitude of factors, of which past prices is just one. I am sure that the economists at the Fed are surprised that we did not react to lower interest rates as we did after the dot com bubble of 2001. Human actions simply cannot be modeled as you would the reactions of lab rats in a biology experiment.

More Solyndras in the making

Obama is driving a green dagger into the heart of the American dream

By James Delingpole

When it comes to pinpointing the nadir of the Obama administration, future historians are going to suffer a serious case of option paralysis. Was it Benghazi? The NSA? His use of the IRS to harass the Tea party? The various scandals involving his black ops department, the EPA? Obamacare?

Personally, though, I think the one they will eventually plump for is Obama's Climate Action Plan of June 25 2013. The economy, after all, is everything. Without an economy you can't afford a domestic policy, let alone a foreign policy. So you'd think the very last thing any president would do as his country began to show the first vague signs of slow – and quite possibly illusory – recovery after a long recession would be to jeopardise it with a whole new raft of utterly pointless regulation and wasteful government expenditure. Why it would be like seeing a man drowning and, instead of throwing him a life line tossing him a lead weight.

But that's just what President Obama has done with today's Climate Action Plan whose gory details you can read here.

It promises another $2.7 billion for "Actionable Climate Science" (whatever that is) – almost all of which, we know from bitter previous experience, is going to end up in the sweaty palms of junk-science troughers in the tradition of Michael Mann and NASA's James Hansen rather than seekers-after-truth who genuinely care about the scientific method.

It promises to accelerate Clean Energy permitting: so that's going to make it harder for people to oppose the ruination of their local landscape, their favourite views, their health and their sleep with all the hideous new wind factories which will now spring up – at massive taxpayer expense – on federal owned land.

What we can learn from the cockroach

Just emulate the cockroach - and relax

By Tim Price

Today I want to talk about cockroaches. Cockroaches are truly amazing creatures. They can go without air for 45 minutes, survive underwater for half an hour, and endure freezing temperatures. They are between six and 15 times as resistant to radiation as humans. If we ever have a nuclear war, cockroaches will rule the planet.

So, cockroaches are resilient. That’s why they’re awesomely long-lived as a species. The oldest cockroach fossil is 350 million years old – humans have been around for only 200,000 years or so. Cockroaches first appeared, according to the fossil record, after the second of the earth’s five mass extinctions to date.

They survived, in other words, the third, fourth and fifth mass extinctions (defined as an event that wipes out 75% of all species on our planet). That last, fifth extinction is the one that did for the dinosaurs. Their ‘system’ seems to be able to survive anything this planet can throw at it.

And that system is wonderfully unsophisticated. Richard Bookstaber points out that the cockroach behaves according to a crude but elegant algorithm: “Singularly simple and seemingly sub-optimal: it moves in the opposite direction of gusts of wind that might signal an approaching predator.”

But according to a recent report by Dylan Grice, one of the best financial commentators I know, there is a lot we can learn from this ultimate survivor. Let me explain exactly what I mean…

20 years of boom and bust

I began my career in the financial markets in 1991. At that time the economy was in recession, so the bond markets were booming. And then when the Fed started raising rates in 1994, the bond markets collapsed. Later that decade, equity markets surged higher as investors discovered the internet. And then the Asian crisis hit.

Russia defaulted and long-term capital management imploded, triggering a freeze in the capital markets that turned out to be an eerie premonition of 2008. Then we had the attacks on the twin towers in 2001, causing US stock markets to close for a week. In the week that they reopened, US stock markets lost $1.4trn in value.

Sleep Easy

The Waterboard Team

By  Mark Steyn

I’ve written before about the psychologically unhealthy need of every tinpot makework bureaucracy to run around pretending to be Seal Team Six. In a free society, a law-abiding citizen strolling the streets of her community has a reasonable expectation of occasionally encountering a uniformed constable, but plain-clothes, undercover “agents” from the Department of “Alcoholic Beverage Control” who want to examine her bottled water?

When a half-dozen men and a woman in street clothes closed in on University of Virginia student Elizabeth Daly, 20, she and two roommates panicked.

That led to Daly spending a night and an afternoon in the Albemarle-Charlottesville Regional Jail. Her initial offense? Walking to her car with bottled water, cookie dough and ice cream just purchased from the Harris Teeter in the Barracks Road Shopping Center for a sorority benefit fundraiser. 

A group of state Alcoholic Beverage Control agents clad in plainclothes approached her, suspecting the blue carton of LaCroix sparkling water to be a 12-pack of beer. Police say one of the agents jumped on the hood of her car. She says one drew a gun. Unsure of who they were, Daly tried to flee the darkened parking lot.

“They were showing unidentifiable badges after they approached us, but we became frightened, as they were not in anything close to a uniform,” she recalled Thursday in a written account of the April 11 incident.

“I couldn’t put my windows down unless I started my car, and when I started my car they began yelling to not move the car, not to start the car. They began trying to break the windows. My roommates and I were … terrified,” Daly stated.

Good. Next time you’ll know not to walk around with a blue cardboard box. If that’s not probable cause, I don’t know what is.

Prosecutors say she apologized profusely when she realized who the agents were. But that wasn’t good enough for ABC agents, who charged her with three felonies. Prosecutors withdrew those charges Thursday in Charlottesville General District Court, but Daly still can’t understand why she sat in jail.

She was facing potentially $7,500 in fines and 15 years in the slammer, but hey, what’s the big deal? As the Commonwealth’s Attorney says, “no one was hurt in the exchange” – which is always a possibility in sparkling-water stand-offs. This detail is choice:

The woman was on edge after spending the night listening to stories from dozens of sexual assault survivors at an annual “Take Back the Night” vigil on Grounds, said Daly’s defense attorney, Francis Lawrence.

Well, now she knows better. In an age of Big Government, when a strange man jumps on the hood of your car late at night and draws a gun on you, he’s almost certain, statistically speaking, to be a safety inspector from the Bureau of Compliance rather than the local rapist. So sleep easy! 

Young and Isolated

The Great Divide

By JENNIFER M. SILVA

In a working-class neighborhood in Lowell, Mass., in early 2009, I sat across the table from Diana, then 24, in the kitchen of her mother’s house. Diana had planned to graduate from college, marry, buy a home in the suburbs and have kids, a dog and a cat by the time she was 30. But she had recently dropped out of a nearby private university after two years of study and with nearly $80,000 in student loans. Now she worked at Dunkin’ Donuts.

“With college,” she explained, “I would have had to wait five years to get a degree, and once I get that, who knows if I will be working and if I would find something I wanted to do. I don’t want to be a cop or anything. I don’t know what to do with it. My manager says some people are born to make coffee, and I guess I was born to make coffee.”

Young working-class men and women like Diana are trying to figure out what it means to be an adult in a world of disappearing jobs, soaring education costs and shrinking social support networks. Today, only 20 percent of men and women between 18 and 29 are married. They live at home longer, spend more years in college, change jobs more frequently and start families later.

For more affluent young adults, this may look a lot like freedom. But for the hundred-some working-class 20- and 30-somethings I interviewed between 2008 and 2010 in Lowell and Richmond, Va., at gas stations, fast-food chains, community colleges and temp agencies, the view is very different.

Lowell and Richmond embody many of the structural forces, like deindustrialization and declining blue-collar jobs, that frame working-class young people’s attempts to come of age in America today. The economic hardships of these men and women, both white and black, have been well documented. But often overlooked are what the sociologists Richard Sennett and Jonathan Cobb in 1972 called their “hidden injuries” — the difficult-to-measure social costs borne by working-class youths as they struggle to forge stable and meaningful adult lives.

Drug addicts rarely just decide to recover

No recovery, not without ‘hitting bottom’

By Bill Bonner

The Dow continues its bounce – up another 114 points yesterday.

Gold dropped another $18 – Mr Market, working his devious magic, scaring away the Johnny-come-latelies, putting the fear of God into the rest of us.

Hazarding a guess, the price of gold has about another $100 to fall. Then, it will probably rebound a bit, as the serious money takes advantage of the opportunity.

But the fireworks in the gold market are still, probably, far ahead. You’ll hear the explosions when consumer prices begin to rise. And that won’t happen for a while.

And here is where the story gets very interesting, and hard to follow: the bond market has turned. This will push the economy into a deeper funk, but it could be years before the new trend is firmly established. We remember the last turn, in the early 80s. Paul Volcker announced it in 1979, but it was almost four years later before investors fully absorbed the news.

In the meantime, there is no pressure on consumer prices, because there is no real recovery. The news media was confused on the subject yesterday – some sources reported big improvements in various leading and trailing indicators, others focused on the fact that GDP growth in the first quarter was weaker than expected.

You can believe anything you want. But on this we are certain: there will be no real recovery.

We are unsure of practically everything. Ask us our phone number, we will hesitate and check twice. Ask us who won WWI, we will have a whole barge-load of equivocations. Ask us which way the stock market is going, we will chuckle.

But ask us about a recovery and we have a ready answer: there will be none.

Why? How can we be so sure?

A recovery needs something solid to recover to. And the period 2003-2007 was just the opposite. It was the feverish end to a long ailment that has plagued the US economy since the early 80s. That was when America’s economy shifted from real growth to phoney, debt-driven pseudo growth. Before then, the ratio of debt to GDP had been about 150% for decades. Americans went about their business, saving, borrowing, spending, creating, producing in a reasonable way. Growth came from where it was supposed to come from – increases in productivity which were shared between workers, lenders, investors and businesses.

A Reconstructed South Under Fire

Is the Second Reconstruction over?

By PATRICK J. BUCHANAN

The first ended with the withdrawal of Union troops from the Southern states as part of a deal that gave Rutherford B. Hayes the presidency after the disputed election of 1876.

The second began with the Voting Rights Act of 1965, a century after Appomattox. Under the VRA, Southern states seeking to make even minor changes in voting laws had to come to Washington to plead their case before the Justice Department and such lions of the law as Eric Holder.

Southern states were required to get this pre-clearance for any alterations in voting laws because of systematic violations of the 14th and 15th amendment constitutional rights of black Americans to equal access to polling places and voting booths.

The South had discriminated by using poll taxes, gerrymandering, and literacy tests, among other tactics. Dixie was in the penalty box because it had earned a place there.

What the Supreme Court did Tuesday, in letting the South out of the box, is to declare that, as this is not 1965, you cannot use abuses that date to 1965, but have long since disappeared, to justify indefinite federal discrimination against the American South.

You cannot impose burdens on Southern states, five of which recorded higher voting percentages among their black populations in 2012 than among their white populations, based on practices of 50 years ago that were repudiated and abandoned in another era.

You cannot punish Southern leaders in 2013 for the sins of their grandfathers. As Chief Justice John Roberts noted, black turnout in 2012 was higher in Mississippi than in Massachusetts.

Does this mean the South is now free to discriminate again?

By no means. State action that discriminates against minority voters can still be brought before the Department of Justice.