Sunday, October 30, 2011

Death by regulation


Anti-drilling hysteria

New York state just announced another delay in what has become a more-than-four-year process to approve widespread natural-gas drilling. Over that time, the state has lost tens of thousands of jobs and millions of dollars of business -- and the opposition to drilling has only gotten more entrenched and radical.
Gov. Cuomo should not be swayed by such hysteria.
An Oct. 6 New York Policy Forum panel on gas drilling is a case in point. At it, Binghamton Mayor Matthew Ryan participated in a discussion of hydro--fracking, the process of extracting natural gas from shale rock. He argued that New York doesn’t need natural gas to power its economic future.
“You can do other things ... You can save so much energy just by switching to wood pellets,” Ryan claimed. “If you combine that with retrofitting all the rural properties ... you’ll produce thousands of jobs.”
Wood pellets.What century does Ryan think this is?
Cuomo has pursued a slow and steady approach to natural-gas development. Department of Environmental Conservation Commissioner Joe Martens issued draft drilling-permit rules in September. The industry is now assessing the draft regulations, with the public-comment period open for 90 days. Martens also announced on Oct. 25 that a procedural change would postpone permitting indefinitely.
But as soon as the draft regulations were published, green groups began complaining, and they haven’t stopped -- criticizing everything from a lack of health and flood-plain protections to insufficient waste-water disposal. Cities including Albany and Buffalo, meanwhile, have banned fracking. Opponents of gas drilling are hoping that a groundswell of opposition will sway Cuomo to reject hydrofracking.
That seems unlikely. But the obstructionists may push the administration to write such stringent regulations that large-scale drilling never materializes.
The New York Policy Forum chose panel participants to represent both sides of the hydrofracking debate: those who support extraction with proper regulation and oversight and those who have serious environmental concerns. What they got was one reasonable set of arguments and then a lot of irresponsible rhetoric.
Ryan wasn’t even the most extreme voice. Former New York City Department of Environmental Protection Commissioner Albert Appleton put it simply: “Gas fracking is the mortal enemy of green energy.”
Mortal enemy? Natural gas is a green energy. Burning cleaner and more efficiently than oil or coal, it doesn’t emit as much greenhouse gases and is cheaper. Now that we can cost effectively extract natural gas from the Marcellus shale, which sits under West Virginia, Ohio, Pennsylvania and New York’s Southern Tier, it is plentiful. So plentiful, in fact, that the federal government estimates that natural gas could provide all of the nation’s energy needs for more than 100 years -- maybe more.
Appleton’s argument that fracking materials could spill into the environment and cause “some public-health emergencies” has been refuted by US Environmental Protection Agency chief Lisa Jackson, who told Congress that no such contamination has occurred because of fracking, which has been going on for decades.
Marcellus shale expert Terry Engelder and Stuart Gruskin, a former executive director of New York’s Department of Environmental Conservation, tried to counter Appleton calmly, stating, in Gruskin’s words, that “the fact that there can be those impacts doesn’t mean that there will be those impacts” and that “the regulator’s responsibility is to do an objective and comprehensive review to assess the impacts.”
That’s exactly what the Cuomo administration has been doing. But even a meticulous approach isn’t enough for drilling opponents.
Meanwhile, New York is losing business because of the years of delay. S. Dennis Holbrook, executive VP of Buffalo’s Norse Energy Corp., said recently that his firm’s plans “to double [its] staffing and employ more than 100 people directly with hundreds more indirect jobs” are on hold.
Lamented Holbrook: “Now, instead of additions, we have been forced to subtract -- reducing our workforce by more than half since the beginning of the year -- because expected opportunities went unrealized.” Great.

Saturday, October 29, 2011

A turn for the worse


Reflections on Education
by Albert Jay Nock
Albert Jay NockI was greatly interested in seeing that our system of free popular instruction was producing results, both negative and positive, which were quite different from those which its original designers expected it to produce. As Herbert Spencer has shown, no man or body of men has ever been wise enough to foresee and take account of all the factors affecting blanket measures designed for the improvement of incorporated humanity. Some contingency unnoticed, unlooked-for, perhaps even unforeknown, has always come in to give the measure a turn entirely foreign to its original intention; almost always a turn for the worse, sometimes for the better, but invariably different. It is this which predestines to ultimate failure every collectivist scheme of "economic planning," "social security" and the like, even if it were ever so honestly conceived and incorruptibly administered — which as long as Epstean's law remains in force, no such scheme can be.
Our system was founded in all good faith that universal elementary education would make a citizenry more intelligent; whereas most obviously it has done nothing of the kind. The general level of intelligence in our citizenry stands exactly where it stood when the system was established. The promoters of our system, Mr. Jefferson among them, did not know, and could not know, because the fact had not been determined, that the average age at which the development of intelligence is arrested lies somewhere between twelve and thirteen years. It is with intelligence as it is with eyesight. No oculist can give one any more eyesight than one has; he can only regulate what one has. So education can regulate what intelligence one has, but it can not give one any more. It was this unforeseen provision in nature's economy which wrecked the expectations put upon our system. As for raising the general level of intelligence, the sluicing-out of any amount of education on our citizenry would simply be pouring water on a duck's back.
Aside from this negative result, I saw that our system had achieved a positive result. If it had done nothing to raise the general level of intelligence, it had succeeded in making our citizenry much more easily gullible. It tended powerfully to focus the credulousness of Homo sapiens upon the printed word, and to confirm him in the crude authoritarian or fetishistic spirit which one sees most highly developed, perhaps, in the habitual reader of newspapers. By being inured to taking as true whatever he read in his schoolbooks and whatever his teachers told him, he is bred to a habit of unthinking acquiescence, rather than to an exercise of such intelligence as he may have. In later life he puts this habit at the unreasoning service of his prejudices. Having not the slightest sense of what constitutes a competent authority, he tends to take as authoritative whatever best falls in with his own disorderly imaginings.
Thus a system of State-controlled compulsory popular instruction is a great aid in making Homo sapiens an easy mark for whatever deleterious nonsense may be presented to him under the appearance of authority. One does not have to go farther than the account which the Pickwick Papers give of the great election at Eatanswill to see how this is so. The spread of literacy enabled Mr. Pott of the Gazette and Mr. Slurk of the Independent to approach the credulousness of a greater number of people than they could otherwise reach, and to debauch their credulousness much more effectively. It enabled Mr. Pott to play upon the meanest prejudices of the Blues, and Mr. Slurk to inflame the worst passions of the Buffs; and thus to keep alive the feud of ignorant partisanship, like the feud of the Greens and Blues in Rome and Byzantium so long ago, or the feud of Whigs and Tories, Democrats and Republicans, Black Shirts and Red Shirts, in more recent years.
Mr. Pott and Mr. Slurk knew as well as the editor of today's newspaper knows, that what best holds people together in pursuance of a common purpose is a spirit of concentrated hate and fear. They knew that their constituents, Blue and Buff alike, were a mere mob, intellectually as irresponsible as the wild dogs of Algiers, and that an appeal to intelligence would be vain, nay, embarrassing. "Mere reason and good sense," said Lord Chesterfield, "is never to be talked to a mob. Their passions, their sentiments, their senses and their seeming interests are alone to be applied to. Understanding, they have collectively none." I am reminded here of an acute French critic's remark made almost a century ago, that this observation of Lord Chesterfield constitutes one of the most serious arguments against representative government. In my opinion it is by far the most serious argument; indeed, I believe a century of experience has shown that it is the only argument needed. One may confidently rest one's case on it.
I observed that the course of our educational revolution had followed the regular pattern common to all revolutions; but knowing the inflexible laws which prescribe that pattern, I was not disappointed or taken aback. "The sense of the inevitable" which Mr. van Loon speaks of had warned me that the inevitable upshot of other revolutions would be the inevitable upshot of this one. As soon as the system was on its way to become a going concern with the taxing power of the State behind it, the path of least resistance lay open to a rapidly increasing flow of persons whose interest in education was secondary. These were careerists of sorts, impelled by the fundamental law of conduct, that man tends always to satisfy his needs and desires with the least possible exertion.
Then the general estimate, the currency value, of education — the generally-accepted idea of what education is and ought to be — was set by the worst form in circulation, a form which had virtually nothing to do with education, but only with training; and those forms which had more to do with education were forced out. Then finally, after the system had passed a certain point of development in size, power, and prestige, the percentage of net profit (putting the matter in commercial terms) began to show a steady decline.
Furthermore, the curiously composite public character of the system, as I observed it in the late '20s, interested me as having likewise come out inevitably according to pattern; the pattern set in earlier times by the Church, and now by the State. As a State-controlled enterprise maintained by taxation, virtually a part of the civil service (like organised Christianity in England and in certain European countries) the system had become an association de propaganda fide for the extreme of a hidebound nationalism and of a superstitious servile reverence for a sacrosanct State.
In another view one saw it functioning as a sort of sanhedrim, a levelling agency, prescribing uniform modes of thought, belief, conduct, social deportment, diet, recreation, hygiene; and as an inquisitional body for the enforcement of these prescriptions, for nosing out heresies and irregularities and suppressing them. In still another view one saw it functioning as a trade-unionist body, intent on maintaining and augmenting a set of vested interests; and one noticed that in this capacity it occasionally took shape as an extremely well-disciplined and powerful political-pressure group.
During my brief and unserviceable career as an instructor of youth I had a good many hearty laughs whenever I thought of the quiet fun one might have with Mr. Jefferson if he could return to the Republic and see what his pet project of universal popular instruction had come to. I had studied his character rather carefully, and could not make out that the great and good old man had been blessed with an over-keen sense of humour. Apparently he had enough to go on with, but not much more, and what he had was of a dry type. I think, however, he would have risked a wry smile at the spectacle of our colleges annually turning out whole battalions of bachelors in the liberal arts who could no more read their diplomas than they could decipher the Minoan linear script.
He might also find something to amuse him in the appearance of eminent shysters, jobholders, politicians, and other unscholarly and unsavoury characters, on parade in gowns and hoods of the honorary doctorate. Yet it would probably occur to him that academic misdemeanours of evil example were not unknown even in his own day. Only some half-dozen years after Mr. Jefferson's death, Harvard College admitted to its doctorate a man whom John Quincy Adams very properly described as a barbarian, incapable of putting a grammatical sentence together, and barely able to spell his own name—Andrew Jackson.
One can not be sure that Mr. Jefferson would look with the eye of humour upon certain other results of the system's working. I suppose that in the whole country today one would have to go a good long way to find a boy or girl of 20 who does not automatically take for granted that the citizen exists for the State, not the State for the citizen; that the individual has no rights which the State is bound to respect; that all rights are State-created; that the State is morally irresponsible; that personal government is quite consistent with democracy, provided, of course, it be exercised in the right country and by the right kind of person; that collectivism changes character according to the acceptability of the peoples who practice it. Such is the power of conditioning inherent in a State-controlled system of compulsory popular instruction.
When it came to matters like these, Mr. Jefferson was an extremely serious and outspoken person. I doubt that he would be in the least amused by the turn which his pet project has given them since his time; and not only in his own country, but in all countries where his project has taken root. On the contrary, I believe he would regard the entire exhibit with unstinted disgust and contempt.

Europe runs out of money


Forgive Us Our Debts
By Christopher Caldwell
As they do every few weeks, the leaders of the European Union met in Brussels on Wednesday, October 26, to solve their finance problems once and for all. As the sun rose on Thursday they emerged with a document that resembled an Obama budget—crystal-clear about its aims and aspirations, opaque about how it intends to achieve them. There is a reason for that. It is that these aims and aspirations are growing less and less realistic.
Back in 2010, when the crisis seemed confined to the Greek government’s inability to repay its lenders, the Europeans thought they could fix things by having its various neighbor countries chip in 45 billion euros ($65 billion) to throw at the problem. Eighteen months later, the crisis is as complicated as a Rube Goldberg machine and more dangerous. The particular corner of it they dealt with last week has three intertwined aspects, and to solve one of them is to exacerbate the other two:
(1) Greece is so totally bust that it required not only a fresh bailout totaling $185 billion but also a 50 percent “haircut” imposed on its creditors. In other words, if you lent the Greeks money by buying their government’s bonds, you lost half of it. (But don’t feel too bad—a lot of Greeks got to retire at 60 with pensions you paid for.) That “solves” the Greek solvency problem for a time, but it is a dangerous remedy.
(2) It is dangerous because it means that loss of confidence in Europe’s institutions moves from the periphery (Greece and Portugal, say) towards the core (France and Italy, say). If Greece can stiff its creditors and stay in the euro, might that not be a tempting option for other countries? Consider Italy, the third-largest economy in the eurozone, with a debt-to-GDP ratio over 100 percent. “Contagion” is the word for the presence of nervous thoughts like these in bondholders’ heads, and the only way to protect against its spread is to build a “wall of money” around the least reliable-looking debtors. Unfortunately, Europe is out of money. The only “wall of money” it can erect is a virtual wall of borrowed money.
(3) And that adds to a danger that is already present in the Greek bailouts. European banks hold a lot more sovereign debt (government bonds) than U.S. banks do. If some of that is going to get paid back at 50 centimes on the euro, then these banks are neither as wealthy nor as stable as they appear to be. That means banks are going to have to revise their business models. What European authorities insisted on this week was that they raise their capital ratios to 9 percent. There are two ways banks can do this. They can either hold more money or lend less. Europe’s leaders pretend they’re going to hold more. But since Europeans have already tapped every domestic source of capital, there is no place to get more. That means banks are going to lend less. Which in turn means the risk of recession has just risen significantly.
A lot about this deal makes it likely that Europe’s leaders will be back at the negotiating table before their seats have cooled.
For one, the debt of Greeks and others seems to be, as the Germans grumble, a “barrel without a bottom.” A European economist told me in the summer of 2010 that a Greek default was inevitable, and that the European bailout was designed to keep the country afloat until it could get back into “primary balance”—i.e., paying its bills except for its interest payments—in 2013. But this new bailout, haircuts and all, does not envision Greece reaching primary balance for a decade, and then only with the help of the most grinding austerity program enacted in our lifetime. At that point, in the 2020s, the country will be back to a situation where its debts are “only” 120 percent of GDP. Is that politically sustainable in a riot-prone democracy like Greece’s? One suspects not.
Another problem is that the deal is not having the desired effect in Italy, the primary candidate for contagion. Bond yields in most European countries fell in the immediate aftermath of the agreement, but not in Italy. Italy has the third-largest bond market in the world—almost $3 trillion—and over the summer the European Central Bank bought tens of billions’ worth of Italian bonds to keep Italy’s borrowing costs down.
Working up an austerity plan for the Italians was a top priority at last week’s summit. Silvio Berlusconi’s coalition partners have resisted it, and in one sense they are right to see the demand as unfair—at about 4 percent, Italy’s budget deficits are low by comparison to the rest of the European Union (and far lower than the United States). And there is one boast that Italians can make that few other countries can—its finances are roughly in the same shape they were a decade ago. Under Berlusconi, Finance Minister Giulio Tremonti was a highly capable economic steward. His reputation in Italy has something in common with that of Paul Volcker in the United States. What spooked bond markets over the summer was Berlusconi’s quarreling with Tremonti, not the “bunga-bunga” (to use his term) that he indulged in with young women.
At last week’s meetings, Europe invited a new player into its finance crisis: China. Europeans have talked about “levering up” their $625 billion European Financial Stability Facility (EFSF), established last year to prevent a Greek contagion. It has been topped up and tapped into since and now has only about half its original lending power. In order to obtain the funds necessary to shore up Italy’s bond market, the Europeans reckon they need to more than double the size of the EFSF. Levering up means using the money they have in the EFSF as security to raise even more on the capital markets. In the present depressed state of the world economy, “the capital markets” means China. With an astonishing lack of sangfroid, Klaus Regeling, the head of the EFSF, landed in Beijing on Thursday afternoon to press his case. He must have headed straight for the airport the moment the agreement was signed.
Years ago, China might have fallen for the trick that Europe intends to pull, basically trying to get money for Greece and Italy by waving around the triple-A credit rating of Germany and other countries that have stocked the EFSF. But today it is likely that China will insist on guarantees that it be paid before European taxpayers in any default scenario. In an interview with the Financial Times the day after the agreement, Li Daokui, a member of the central bank monetary policy committee, gave evidence of a real canniness. “The last thing China wants,” he said, “is to throw away the country’s wealth and be seen as just a source of dumb money.” Li indicated that the Chinese might ask European leaders to refrain from criticizing Chinese economic policy as part of the deal.
Perhaps Europe has reached the point where its only route out of bankruptcy is this kind of vassalage. To escape a debt crisis, an economy needs to be capable of growing. It is far from clear that Europe can do that. It has two problems. One is technological. Much of Europe lacks the technological wherewithal to claim an ever-increasing share of the world economy. Spain, for instance, during its long, construction-based boom, developed a good deal of national expertise in .  .  . what? Pouring concrete? 
A second problem is demographic. Italians have one of the lowest birthrates known in any society since the dawn of time; what it will look like in 40 years is anybody’s guess, but one fairly conservative demographic projection shows its population decreasing by 10 percent, to 54 million, at midcentury. Debt, alas, is contracted on a per-country, not a per capita basis, and this kind of population loss (especially when accompanied by rapid aging) can render debt impossible to pay down. 
Europe’s leaders are welcome to congratulate each other on finally resolving their debt crisis. They will likely have many more opportunities to come up with such “final resolutions” in the months and years ahead.

We are about to find out


Can America survive without its backbone, the middle class?
 
As the gaps within the classes widen, American society is starting to fracture.
By Anne Applebaum
My friend J grew up in Chicago, but spent his summers in a small town on a Michigan lake. His family, because they came from the city and because they were “summer” visitors, were slightly more privileged than those who lived in the town. Nevertheless, the town considered itself “middle class” and the children observed no social distinctions playing together. J told me recently that he had been back to that town and found it utterly changed: shops were boarded up, houses were being repossessed, cars were old. He no longer had much in common with people he had known as children, some of whom were now unemployed, all of whom had far lower incomes than he.
J isn’t a hedge-fund manager or a plutocrat, but he is a member of the American upper-middle class, a group which is now sociologically and economically very distinct from the lower-middle class, with different politics, different ambitions and different levels of optimism. Thirty years ago, this wasn’t the case. A worker in a Detroit car factory earned about the same as, say, a small-town dentist, and although they might have different taste in films or furniture, their purchasing power wasn’t radically different. Their children would have been able to play together without feeling as if they came from different planets.
Now they couldn’t. Despite all the loud talk of the “1 per cent” of Americans who, according to a recent study, receive about 17 per cent of the income, a percentage which has more than doubled since 1979, the existence of a very small group of very rich people has never bothered Americans. But the fact that some 20 per cent of Americans now receive some 53 per cent of the income is devastating.
I would argue that the growing divisions within the American middle class are far more important than the gap between the very richest and everybody else. They are important because to be “middle class”, in America, has such positive connotations, and because most Americans think they belong in it. The middle class is the “heartland”, the middle class is the “backbone of the country”. In 1970, Time magazine described middle America as people who “sing the national anthem at football games – and mean it”.
“Middle America” also once implied the existence of a broad group of people who had similar values and a similar lifestyle. If you had a small suburban home, a car, a child at a state university, an annual holiday on a Michigan lake, you were part of it. But, at some point in the past 20 years, a family living at that level lost the sense that it was doing “well”, and probably struggled even to stay there. Now it seems you need a McMansion, children at private universities, two cars, a ski trip in the winter and a summer vacation in Europe in order to feel as if you are doing minimally “well”. You also need a decent retirement fund, since what the state pays is so risible, as well as an employer who can give you a generous health-care plan, since health care is so expensive.
I’m not going to argue about the economics of this shift in definition of “middle”, or the morality (of course, no one with a small suburban home and a car is “poor” by global standards). The point is that people’s perceptions have changed. Many who used to feel secure in “middle America” now feel, rightly or wrongly, left behind, and they don’t think they will ever catch up. Meanwhile, many of those who used to feel proud of coming from “middle America” now feel, like my friend, that they have little in common with their “heartland”. If this turns out to be a permanent change, the implications for American politics, even for Western politics, will be profound. For the past 50 years, Western democracy has flourished alongside the assumption of upward mobility: everyone could participate in the political system; everyone had a chance at improving his status; and everyone could hope, at least, that his children would live better than his parents had, in Britain, France and Germany as well as America. But if Americans are no longer “all in the same boat”, if some of them are now destined to live better than others, then will they continue to feel like political equals? If Britons, Frenchmen and Germans no longer have much in common with their countrymen, will they still want to take part in the same national debates? We don’t know yet – we’ve never lived without a “middle middle class” before – and we are about to find out.

Poetry staff


Amazing NASA Video of a Decade of Earth's Fires


By Mark Perry
"NASA has released a series of new satellite data visualizations that show tens of millions of fires detected worldwide from space since 2002. The visualizations show fire observations made by the MODerate Resolution Imaging Spectroradiometer, or MODIS, instruments onboard NASA's Terra and Aqua satellites.

NASA maintains a comprehensive research program using satellites, aircraft and ground resources to observe and analyze fires around the world. The research helps scientists understand how fire affects our environment on local, regional and global scales."

It’s a mess and it’s not over


A Brief Guide To The Euro Crisis
By Jeff Harding
There are several things that you need to know about the eurozone crisis and Wednesday’s Summit agreement:
     1.   It isn’t over.
     2.   The European Monetary Union’s (EMU) “architecture” is a failure.
     3.   They spent too much and can’t possibly repay the debt.
     4.   Banks will need to be bailed out.
     5.   They will print money.
In order to understand the EU summit “breakthrough” we need to understand how the players in eurozone look at it. Last week a leaked confidential assessment of the problem that was prepared by the IMF was published by Linkiesta’s Fabrizio Goria. The document revealed the IMF’s private assessment of Greece and the requirements for a bailout. We were tipped off to the document by our friends at TrumanFactor.com. The complete document can be found here.
Here is a summary of how the IMF sees the problem:
1.   [T]he Greek economy is increasingly adjusting through recession and related wage-price channels, rather than through structural reform-driven increases in productivity. This is due to “administrative capacity limitations in the Greek government” which is a diplomatic way of saying that the Greek government can’t pull off the reforms.
2.   In keeping with experience to date under the program, it is assumed that Greece will take longer to implement structural reforms, and that a longer timeframe is necessary for them to yield “macroeconomic dividends” (i.e., economic growth). They paint a dismal picture as Greece falls into a severe recession.
3.   Greece won’t raise as much money as projected through privatization of public assets. Through 2020, total privatization proceeds would amount to €46 billion, instead of the €66 billion assumed.
4.   They assume that Greece will run fiscal surpluses starting in 2013 but note that  it requires “sustained and unwavering commitment to fiscal prudence by the Greek authorities.”
5.   They won’t be able to return to private markets to finance their debt until after 2020. This will require “official financing” (i.e., a bailout from the solvent eurozone members) of €252 billion through 2020.
6.   They are very concerned that Greece will not meet these targets because their economy and government is not robust enough to withstand economic shocks (low growth, high interest rates), thus throwing off the entire projection on which the bailout is based. If this occurs, then Greece may not be able to go back to the markets to refinance its debt until 2027.
7.   In order for Greece to have “sustainable” debt levels, the following needs to happen:
1.   Generous official support (up to €440 billion under the worst case scenario), and
2.   At least a 50% haircut to their debt, which requires cooperation from its private bank creditors. This would get Greece down to a debt level of 120% of GDP by 2020. Under the worst case scenarios, they see the debt level rising to 208% of GDP.
8.   Another requirement is €30 billion of support for creditor banks to recapitalize.
As you can see, these policy conclusions are based on assumptions that someone in the IMF just made up (they understand this). Like all projections, especially ones going out more than a few years, they are fictions and are impossible to verify or have any confidence in.  Yet … if you look at these assumptions, this is what the Summit participants are basing their agreement on.
Here is what happened Wednesday at the Summit.

No way out

The Eurocratic Agreement Explained, and Related Observations
By DoctoRx
I have been trying to find a good description of what actually was accomplished in the Brussels all-nighter, and am happy to pass along a link to an on-line summary of a print piece from Britain’s The Economist, which provides a good summary of many of the main points, plus commentary.  This is a very mainstream publication, so what it says what it says, it says it not lightly.  Here is a quote and a link to the entire (brief) summary piece: 
As it is, this deal at best fails to solve the euro crisis; at worst it may even make it worse. As the shortcomings of each component become clear, investors’ fears will surely return, bond yields will rise and banks’ funding problems will worsen.Yet again, disaster will loom. And yet again, the ECB will end up staving it off. . .
No one is always correct, but if the above represents the considered point of view of such an august pillar of the Establishment, it supports the idea that the knee-jerk market reaction that followed the dramatic 4 A. M. announcement in Brussels should not be viewed as representing an important and durable view of matters that will have any predictive value for the markets in the future.
In support of the above, the financial columnist Ambrose Evans-Pritchard wants to scare us about Portugal.  He says that monetary contraction there has intensified and mimics that of Greece before its crisis intensified. Portugal has nearly as many people as Greece and carries a large debt load.
Finally, Mish makes a persuasive case today for an imminent real estate-led economic hard landing in China  and concludes as follows:
The property bust is underway in China and will spread from city to city just as it did in the US.  No city will be immune and commodity prices will be smashed in the downturn.
Perhaps the most explainable market move yesterday was the move up in the euro not only against the U. S. dollar but also against gold.  After all, they eurocrats did not “print”.  Instead of Greece going to its own currency (which I jokingly think of as the “drama” rather than the old “drachma”), Greece is being forced to deflate its prices internally in order to compete within the eurozone.  The same is true for Ireland and Portugal.  Spanish unemployment rose in the last quarter to 21.5%.  The ECB’s policy rate is well above that of the Fed’s.  If Mish is correct on trend, then the clear driver of the global commodities boom for the last several years, China, is about to lead a change of fortune in those assets.  We could see oil much lower, easily into the $60s for WTI, and copper lose at least another dollar per pound.  At least on a trading basis, the easiest way for most people to profit from that trend, if it occurs, is with easily tradable high quality bonds, or at least bonds that for now are agreed by market participants to be of high quality, as fears of “inflation” temporarily give way to fears of “deflation”.  If that happens, please be comforted:  the Fed never believes that it is out of bullets.  There is more ”shock and awe” that could come our way from the Fed.     

Watch out


The Welfare Tipping Point
By Jeff Harding
This article from the Wall Street Journal is something to worry about:
Nearly half, 48.5%, of the population lived in a household that received some type of government benefit in the first quarter of 2010, according to Census data. Those numbers have risen since the middle of the recession when 44.4% lived households receiving benefits in the third quarter of 2008.
We are quickly approaching a tipping point where the have not are equal to the haves. That is bad for a democracy where voters can vote themselves benefits from the government. This is something that Mises and Hayek warned us about, rightly so. What we are seeing is the result of Keynesian economics and the welfare state. As the Fed and the government continue to destroy capital and destroy incentive through foolish regulations, we all become poorer, especially those on the bottom quintiles. 
The share of people relying on government benefits has reached a historic high, in large part from the deep recession and meager recovery, but also because of the expansion of government programs over the years. (See a timeline on the history of government benefits programs here.)
Means-tested programs, designed to help the needy, accounted for the largest share of recipients last year. Some 34.2% of Americans lived in a household that received benefits such as food stamps, subsidized housing, cash welfare or Medicaid (the federal-state health care program for the poor).Another 14.5% lived in homes where someone was on Medicare (the health care program for the elderly). Nearly 16% lived in households receiving Social Security.High unemployment and increased reliance on government programs has also shrunk the nation’s share of taxpayers. Some 46.4% of households will pay no federal income tax this year, according to the nonpartisan Tax Policy Center. That’s up from 39.9% in 2007, the year the recession began.
What is really happening is a redistribution of wealth brought about the by the poverty inflicted on Americans as the result of bad economic policy.

Is everyone entitled to his own facts?

50 Amazing Numbers About the Economy

By Morgan Housel
Here's some easy reading for your Friday afternoon. 
Did you know that:
50. From 1948 until 2007, the average duration of unemployment was 13.5 weeks. Today, it's 40.5 weeks.
49. In 1982, a 30-year mortgage carried an interest rate of 17.6%. Today, it's 4.1%. On a $250,000 loan, that's the difference between a monthly payment of $3,686 versus $1,210.
48. In 2000, 69% of businesses offered workers health insurance. By 2009, just 60% did, according to the Kaiser Family Foundation.
47. In 1952, corporate taxes were 6.1% of GDP, and employment taxes were 1.8% of GDP. In 2009, corporate taxes were 1% of GDP, and employment taxes were 6.3% of GDP.
46. The day after Standard & Poor's downgraded U.S. Treasuries was the second best day for Treasuries in modern history.
45. "Just 1 in 7 U.S. workers is of normal weight without a chronic health problem," according to The Wall Street Journal, citing Gallup data.
44. Adjusted for inflation, nationwide home prices have dropped 8.5% since 1979. Unrelated: 60% of homeowners say a major reason they bought a home is because they think it will make a good retirement investment.
43. The markup AT&T (NYSE: T  ) charges for a single text message ($0.20) compared with a standard mobile data package ($25 for 2 gigs) is roughly 10 million percent.
42. Tax evasion has added an estimated $3 trillion to the national debt over the past decade, according to David Callahan of Demos, citing Internal Revenue Service data.
41. According to The Wall Street Journal, "every year 17,000 American-trained masters and doctoral students leave the U.S. to find work elsewhere."
40. Over the past 25 years, college tuition has increased at nearly four times the rate of broader inflation.
39. Health care for an average family now runs $19,393 a year, according to the Milliman Medical Index. It was about half that much in 2002.
38. Power to the people! According to The Los Angeles Times: "Some 75% of respondents said they were following the [California] budget debate, yet only 16% were aware that state spending has shrunk by billions of dollars over the last three years."
37. California will spend $5.7 billion on its main public universities this year, and $9.6 billion on prisons, according to The Bay Citizen.
36. The labor force participation rate for men has dropped from 87% in 1948 to 71% today.         
35. The personal savings rate in August was 4.5%. Since 1959, it has averaged 7%. Returning to that level would divert more than $200 billion a year from consumer spending into saving.
34. 5.5 million Americans are unemployed and not receiving unemployment benefits. Last year, that number was 1.4 million.
33. The U.S. government provides health care for a minority of its population (elderly and poor) at a greater cost per citizen than many European countries spend on universal coverage.
32. As a percentage of GDP, federal taxes in 2010 were the lowest since 1950.
31. Between 2007 and 2009, those with a bachelor's degree saw the employment-to-population ratio fall by just 0.5%. For those without a bachelor's degree, it fell by more than 2%.
30. Household debt payments as a percentage of income are now at the lowest level since 1994.
29. Despite record federal deficits, total debt throughout the economy -- public plus private -- as a percentage of GDP has been dropping since 2008. Households are shedding debt faster than the government can go into it.
28. Just not student debt: Total student loans outstanding are expected to reach $1 trillion this year. The average student now leaves college with nearly $23,000 of debt. As Time pointed out, "Students today are borrowing double the amount they did ten years ago -- after adjusting for inflation.