A Very Real Argument That We As A People Are….

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Posted on 31st May 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Karl Denninger

That’s done.  As in baked, cooked, finis.

Let’s just look at the charges and specifications of late, shall we?

  • Big US and Global Banks have admitted (that is, have been convicted) of multiple criminal offenses over the last several years.  partial list can be found here; let me remind everyone that an ordinary person who commits three felonies, even if some of them are very minor in comparison to any of the listed ones here in impact and they take place over a period of decades, goes away for life under long-existing three strikes laws.  All four of the banks listed in that dissent have three or more “convictions” and thus all of them should be dissolved as they are obviously incapable of modifying their behavior.  Nonetheless literally tens of millions of Americans and American corporations not only refuse to stand and demand that these charters be revoked they voluntarily do business with one or more of these firms!
  • We have a medical and insurance industry in this country that routinely, on a daily basis, engages in behavior that can easily be described as meeting the criteria for fraud, bid-rigging, racketeering and routinely uses the threat of both bankruptcy and violence by government goons to get what it wants.  This “industry” routinely, for example, bills for things they didn’t actually do, sends people bills for hundreds or thousands of dollars for someone sticking their head in a door and saying “Hello”, allows “off-plan” doctors to treat people without their consent exposing them to thousands (or tens of thousands!) in unauthorized charges and then enforces those “charges”, takes drugs off the market that they produce so that the only remaining options are those made by the same company but are under patent and more.  The single most-common cause of bankruptcy in this country is medical debt incurred as a direct result of these practices and these practices are where the so-called “need” for Obamacare, that is now resulting in demands for 50% premium hikes in some markets for the next year, came from.  Yet we, as a nation and as a people, routinely consent to this crap and allow these corporations, institutions and individuals to continue their outrageous acts of pillage daily.

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Thoughts from the Frontline: The Last Argument of Central Banks

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Posted on 11th November 2014 by Administrator in Economy |Politics |Social Issues

Thoughts from the Frontline: The Last Argument of Central Banks

By John Mauldin

 

For a central banker, deflation is one of the Four Horsemen of the Apocalypse: Death, Famine, Disease, and Deflation. (We will address later in this letter why War, in the form of a currency war, is not in a central banker’s Apocalypse mix.) It is helpful to understand that, before a person is allowed to join the staff or board of a central bank, he or she is taken into a back room and given DNA replacement therapy, inserting a gene that is viscerally opposed to deflation. Of course, in fairness, it must be noted that central bankers don’t like high inflation, either (although, looking around the world, we see that the definition of high inflation can vary). In the developed world, 2% inflation seems to be the common goal. You wouldn’t think that 2% a year is a significant change in the overall price structure, but the panic among economists that would ensue with a 2% price deflation would border on hysteria.

Inflation and deflation are often topics of discussions as I travel, but I find that there is general confusion about what inflation and deflation actually are. This is understandable, since many economists don’t agree on the definitions, so they are often talking about totally different phenomena. In this week’s letter I have for you a brief essay on the topic of deflation. Depending on your view, you might find some of my thoughts controversial, but I will try to make my case clear, at least. Please note this is the 30,000-foot view and is nowhere close to definitive. If you want great detail, I suggest you get my good friend Gary Shilling’s latest book on deflation (of four that I know of), called The Age of Deleveraging. (It’s only $11.49 on Kindle.)

Definitions of Inflation and Deflation

Generally speaking, there are two schools of thought about inflation. The Austrian school of economic theory, founded by Ludwig von Mises, sees inflation as an increase in the money supply and deflation as a contraction in the money supply. Somewhat similarly (but not entirely!), the monetarist school of economic theory tends to see money supply as the chief determinant of GDP in the short run and of the price level over the long run.

Mainstream economics (generally Keynesian) tend to refer to rising or falling prices as inflation or deflation. They tend to see deflation as a general price decline, often brought about by reductions in available credit, money, or reserves or by the government’s restraint of spending programs.

So when we talk about inflation/deflation, it is important to know whether we’re talking about monetary inflation or price inflation. As we have seen recently, a rising money supply is not necessarily accompanied by rising prices (although there is a certain long-term rhythm to the two different measures).

When I talk to the general public about deflation being something to be avoided, I get confused looks. Don’t we like it when the price of something goes down? Who doesn’t love a sale on something they want to buy? Since the beginning of the First Industrial Revolution, the general tendency for the prices of manufactured goods (in real inflation-adjusted terms) has been to go down as productivity has gone up. This is what Gary Shilling and others refer to as “good deflation.”

You can actually have solid productivity, GDP growth, wealth creation, a general increase in the standard of living, and a buoyant economy during a period of overall price deflation such as we had in the late 1800s – if it is the good kind of deflation.

What is the difference between good deflation and bad deflation? Good deflation is the general fall in prices that comes from an excess supply of goods due to increased productivity and product improvement. From 1870 to 1897 wheat prices fell from $1.06 to 63¢ a bushel, corn from 43¢ to 30¢ a bushel, and cotton from 15¢ to 6¢ a pound. Most of the time farmers received even less for their crops.

While farmers blamed all sorts of people for their falling prices, the primary cause of their problem was overproduction resulting from increases in the acreage of farms and increased yields per acre due to improved farming methods, as well as the advent of railroads that made it easy to get produce to Eastern markets. A farmer had to produce more just to stay even. It didn’t help that global competition from Argentina, Russia, and Canada was added into the mix, as increasingly large oceangoing steamboats made international transportation cheaper and ended an era of American agricultural export advantages.

This period of time saw one-third of farmers move to the cities for other work as they lost their employment on small family farms. That trend in falling farm employment continued until recent years, and farming has seen even greater increases in productivity (yield per acre) in recent decades. Farm and ranch families are just 2% of the US population today. Only 15% of the US workforce produces, processes, and sells the nation food and fiber. Today’s farmers produce almost three times more food with 2% lower inputs than farmers did 60 years ago. A third of American agriculture is strictly for exports.

The late 1800s was a particularly contentious period of history in the United States as farmers blamed railroads, bankers, and industrialists for their problems – a situation not unlike the income inequality debate we have today. And while falling prices weren’t fun for the farmers, the general public enjoyed lower food costs and higher-quality food.

The easiest way to illustrate this trend in the modern area is by looking at the cost of a gigabyte of storage. You can see an interactive version of this chart here. Prices for a gigabyte of storage dropped from $500-700,000 in the early 1980s (depending on what you were buying) to about $0.03 today. Put another way, a gigabyte cost about 2 million times more 35 years ago than it does today. And it has fallen by 50% every few years. The good deflationary fall in prices for data storage has enabled all sorts of industries and products, creating millions of jobs. And we could find dozens of other, similar products whose prices have been falling dramatically.

Measuring Inflation/Deflation

Each month we are greeted by the announcement of the Consumer Price Index (CPI), telling us what the level of general price inflation has been for the previous month and year. I’ve written about CPI extensively in past letters, but basically we need to understand that the CPI is an artificial amalgamation of the prices of various products and services. The composition of the CPI has changed significantly over the last 40 years. As John Williams at Shadow Stats demonstrates, if we used the same measurement methodology that was in force during the Reagan years or the early Clinton years, inflation would be almost 4 percentage points higher now than it is currently calculated to be.

Contrary to some commentators, I do not see this is a conspiracy to mislead investors or consumers, or to slow down the rise in Social Security payments. We should all be grateful that there is a small band of economists who are consumed by the details of what inflation actually is. They go to conferences and vehemently argue with each other (well, vehemently for academic economists) over arcane topics that would bore 99%-plus of the population. They are passionate about trying to find the proper measure of inflation.

My personal feeling is that the adjustments that have been made in the calculation of inflation are generally quite reasonable, if somewhat controversial. With the prices of electronics and many other manufactured goods falling over the decades, how do you measure inflation in those items? Or rather deflation? I still spend about the same amount for a new phone today as I did 10 years ago, but my new iPhone 6+ is a major improvement over the Motorola flip phone I had 10 years ago, by any standard you want to apply. Both could make phone calls, but that is about where the similarity ends. Am I getting better value for my money? More bang for the buck? Absolutely.

Currently, the economists who determine inflation see that increase in value as an actual drop in inflation, and they use a somewhat controversial methodology called hedonics to adjust the prices of a myriad of products for quality. If anti-lock brake systems are now standard whereas before they were optional, then by this doctrine the price of your car went down. (Those who are interested can google hedonics and get a wealth of information on the definition and the controversy.)

Housing is a big component of our spending. Should we use actual housing prices or what the inflation economists call “owner’s equivalent rent prices” as our measure of housing cost increases? If we had used actual housing prices during the 2000s, the inflation figures would have gone through the roof, suggesting to the Federal Reserve that they should be raising interest rates rather than lowering them or keeping them too low. And again, if we had been using actual house prices to calculate inflation during the Great Recession, the economy would have been seen as being swamped by serious deflation. There would’ve been even more weeping and wailing and gnashing of teeth.

To continue reading this article from Thoughts from the Frontline – a free weekly publication by John Mauldin, renowned financial expert, best-selling author, and Chairman of Mauldin Economics – please click here.

Important Disclosures

Armed Drones

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Posted on 27th August 2015 by harry p. in Politics |Social Issues

So ND police will be able to administer pepper spray and tasers via flying drone, how far off is a drone from packing a Sig?

 

North Dakota is the first state in the US to legalize police use of drones with tasers and pepper spray

Mike Murphy

North Dakota, known for its vast frackable oil reserves and being in a Coen brothers film once, is the first state in the US that will allow its police to fly drones equipped with tasers and other “non-lethal weapons,” The Daily Beast reported.

According to The Daily Beast, the bill, originally proposed by Republican state representative Rick Becker, was actually meant to outlaw the potential for police in the state to add weapons to drones. Amendments to the bill were then suggested by a lobbyist for the North Dakota Peace Officer’s Association (NDPOA), Bruce Burkett, which allowed for weapons like tasers and bean-bag guns to be included in drones used for policing.

Mike Reitan, the president of the NDPOA, told Quartz that, originally, the bill would’ve required police to get a search warrant to fly a drone in a police operation, whereas that’s not required for something like a helicopter. “If you’re walking down the street and you see a handgun in someone’s yard, you’re not prohibited from looking at it,” Reitan said, regarding privacy concerns. He added that the discussion to add non-lethal weaponry into the bill was based around “future developments” in drone technology. He outlined a future scenario where a SWAT team could call for a drone to be sent in that can deploy pepper spray.

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On the Road in Mexico

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Posted on 27th August 2015 by Administrator in Economy |Politics |Social Issues

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Trip-Mazatlan

The cathredral in Mazatlan. Not much Baptist influence.

Vi and I had been talking of taking a couple of weeks to cruise Mexico and in particular Baja California, but hadn’t, for all the reasons and tribulations that afflict humanity. Finally we just hopped into the CRV and went. Wing it, figure it out when we got there, wherever “there” was. Reason, planning, and common sense are much overrated. Too much to describe here: Arandas, Zacatecas, Aguas Calientes, León, Durango, Mazatlan, and finally Baja. A few notes, though.

Zacatecas is an old, old city built on what is almost a universal Mexican plan—central plaza with a government building and a church. Mexico is not yet a mass consumerist society with everything decided at corporate in New Jersey, and may never be, so town centers are distinctive and the churches all different and often lovely. It is a touristy city (Mexicans tourist: I think we saw three gringos, including me) and so has loud, bad music blaring from every bar and restaurant.

Will2Tits

These signs, common in Mexico, indicate a topless beach.

On a side street, however, we found a cantina of the old school from the turn of the previous century, small, convincingly itself, and homey. We ordered shots of Centenario Reposado, planning to stay half an hour. But then a few regulars came in—it was that sort of place—with guitars and we ended up leaving maybe four hours later. I am persuaded that Violeta knows the words of every song ever written and the melodies of the rest, so she happily sang along and there were many toasts.

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Krugman’s Dopey Diatribe Deifying The Public Debt

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Posted on 23rd August 2015 by Administrator in Economy |Politics |Social Issues

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Actually, dopey does not even begin to describe Paul Krugman’s latest spot of tommyrot. But least it appear that the good professor is being caricaturized, here are his own words. In a world drowning in government debt what we desperately need, by golly, is more of  the same:

That is, there’s a reasonable argument to be made that part of what ails the world economy right now is that governments aren’t deep enough in debt.

Yes, indeed. There is currently about $60 trillion of public debt outstanding on a worldwide basis compared to less than $20 trillion at the turn of the century. But somehow this isn’t enough, even though the gain in public debt——-from the US to Europe, Japan, China, Brazil and the rest of the debt-saturated EM world—–actually exceeds the $35 billion growth of global GDP during the last 15 years.

But rather than explain why economic growth in most of the world is slowing to a crawl despite this unprecedented eruption of public debt, Krugman chose to smack down one of his patented strawmen. Noting that Rand Paul had lamented that 1835 was the last time the US was “debt free”, the Nobel prize winner offered up a big fat non sequitir:

Wags quickly noted that the U.S. economy has, on the whole, done pretty well these past 180 years, suggesting that having the government owe the private sector money might not be all that bad a thing. The British government, by the way, has been in debt for more than three centuries, an era spanning the Industrial Revolution, victory over Napoleon, and more.

Neither Rand Paul nor any other fiscal conservative ever said that public debt per se would freeze economic growth or technological progress hard in the horse and boggy age. The question is one of degree and of whether at today’s unprecedented public debt levels we get economic growth—–even at a tepid rate—–in spite of rather than because of soaring government debt.

A brief recounting of US fiscal history leaves little doubt about Krugman’s strawman argument.  During the eighty years after President Andrew Jackson paid off the public debt until the eve of WWI, the US economy grew like gangbusters. Yet the nation essentially had no debt, as shown in the chart below, except for temporary modest amounts owing to wars that were quickly paid down.

In fact, between 1870 and 1914, the US economy grew at an average rate of 4% per year——the highest and longest sustained growth of real output and living standards ever achieved in America either before or since. But during that entire 45 year golden age of prosperity, the ratio of US public debt relative to national income was falling like a stone.

In fact, on the eve of World War I, the US had only $1.4 billion of debt. That is the same figure that had been reached before the Battle of Gettysburg in 1863.

That’s right. During the course of four decades, the nominal level of peak Civil War debt was steadily whittled down; the Federal  budget was in balance or surplus most of the time; and at the end of the period a booming US economy had debt of less than 5% of GDP or about $11 per capita!

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Dow 5,000? Yes, it could happen

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Posted on 22nd August 2015 by Administrator in Economy |Politics |Social Issues

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Such a scenario can’t be completely ruled out

Don’t be surprised if stock markets stabilize or bounce back in the next couple of days. Markets are due at least a short-term rally after this week’s dramatic plunge. This usually happens after a sell-off, no matter what the next big move is going to be. It doesn’t mean anything.

But anyone who automatically assumes this is another easy “buying opportunity” is talking nonsense.

For the past couple of years, Wall Street’s perma-bulls have had it their way. They’ve been gloating openly as stocks went up and up and up, seemingly without pause.

It got to the point that those warning about valuations and danger signs had been mocked into silence — or were simply ignored.

Not now.

I don’t mean to be alarmist or to induce panic, but someone needs to tell the public that there is a plausible scenario in which the U.S. stock market now collapses by another 70% until the Dow Jones Industrial Average falls to about 5,000. The index tumbled more than 3% to 16,460 on Friday.

Dow 5,000? Really?

For 30 years, stock prices have been increasingly boosted by financial factors: collapsing interest rates and Federal Reserve manipulation, culminating most recently in ‘quantitative easing.’

I’m not predicting that will happen, but contrary to what the bulls tell you, it cannot be completely ruled out.

And even if that ranks as an outlier and a worst-case scenario, there are other, more likely scenarios where the Dow falls to somewhere between 10,000 and 12,000.

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Why Does the Number 7 Keep Showing Up??

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Posted on 20th August 2015 by Administrator in Economy |Politics |Social Issues

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Via The Silicon Graybeard

What’s so important about the number 7?  Why does it keep coming up? This is the question posed by Peter Degraaf in a commentary on Kitco, posted last Thursday.

Reaching back to forty nine years ago (7 x 7), in 1966 the USA experienced a ‘credit crunch’.   In August of that year the US bond market suffered a serious ‘liquidity crisis’.

Seven years later in 1973, the world experienced an ‘oil embargo’ followed by a dramatic rise in the price of oil. There were long lines of cars at gas stations.

Move forward by 7 years and in 1980 Wall Street avoided the collapse of some of its banks and brokerage houses by forcing the Hunt Brothers to stop accumulating silver.

Another seven years passed and in the fall of 1987 stock markets crashed around the world. ‘Black Monday’ of October 1987 saw the Dow lose 22% in one day.

Then seven years later, in 1994, the bond markets crashed.

Seven years passed and in 2001 Wall Street was closed for 5 days due to the militant Islamists attack on the World Trade Center in New York.  The DOW lost 684 points on Sept 17th 2001. Banks received billions of dollars of newly created money from the Federal Reserve, to keep the system afloat.

The seven year cycle moved on and in 2008 we saw the Subprime Housing Market Collapse, along with the overnight bankruptcy of Lehman Brothers. The Lehman investment bank fell so fast, none of the employees had any idea their jobs were disappearing. The DOW lost 777 points on Sept 29th 2008. The banking system almost collapsed, (banks refused to cash checks except after a three day ‘hold’, for fear that the issuing bank might fail), but the US FED saved the day, by massive injections of newly created cash, not only into US banks, but also some Canadian and foreign banks. The debt problem was ‘solved’ with more debt!

On the 7th straight of 7 year cycles, the Dow lost 777 points??  I think if I was into numerology I’d be saying, “you’ve got to be kidding me!” and “are you trying for style points?”

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We Are the Government: Tactics for Taking Down the Police State

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Posted on 18th August 2015 by Administrator in Economy |Politics |Social Issues

Guest Post by John W. Whitehead

“The people have the power, all we have to do is awaken that power in the people. The people are unaware. They’re not educated to realize that they have power. The system is so geared that everyone believes the government will fix everything. We are the government.”John Lennon

Saddled with a corporate media that marches in lockstep with the government, elected officials who dance to the tune of their corporate benefactors, and a court system that serves to maintain order rather than mete out justice, Americans often feel as if they have no voice, no authority and no recourse when it comes to holding government officials accountable and combatting rampant corruption and injustice.

We’re impotent in the face of SWAT teams that break down doors and leave toddlers scarred for life. We’re helpless to prevent police shootings that leave unarmed citizens dead for no other reason than the police officer involved felt “threatened.” We shrug dismissively over the plight of fellow citizens who have their heads cracked, their bodies broken and their rights violated for failing to jump to attention when a police officer issues an order. And we fail to care about the thousands of individuals who have been punished with extreme sentences for nonviolent offenses and are forced to spend their lives as modern-day slaves in bondage to private prisons and the profit-driven corporations they serve.

Make no mistake about it: virtually anything and everything is a crime nowadays (feeding the birds, growing vegetables in your front yard, etc.) to such an extent that if a prosecutor, police officer and judge were so inclined, you could be locked up for any inane reason.

This is tyranny dressed up in the official garb of the police state. It is the self-righteous, heavy-handed arm of the law being used as a decoy to divert your attention to the so-called criminals in your midst (the fisherman who threw back small fish into the ocean, the mother who let her child walk to the playground alone, the pastor holding Bible studies in his backyard) so that you don’t focus on the criminal behavior being perpetrated by the government (bribery, cronyism, electoral fraud, slush funds, graft, pork, theft, and on and on).

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WHY IS AUTISM SKYROCKETING?

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Posted on 18th August 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Lonely Libertarian

Teen Queen was born in 1995, diagnosed in 1998.
Baby Queen was born in 1997, diagnosed in 1999.

BQ was easier to diagnose quickly because she never hit the verbal markers of neurotypical kids and we’d just gone through it with TQ. TQ went from talking at 18 months to completely silent and withdrawn at 22 months. Like a switch was flipped in her brain. I know from experience how violent the discussion of vaccines and autism can get. On one side is a group of parents wanting answers and on the other side are a group of people who’ve never lived our lives screaming at us that we’re ignorant, negligent, horrible people who just need to shut the fuck up. The more they scream at us, the more we hate them.

It all hinges on one research project by Andrew Wakefield. Too many years and too many millions of dollars have been spent by the pro-vaccine groups to discredit (repeatedly) this research. Instead of hammering the same nail over and over to protect vaccine interests, why didn’t any of them branch out into research on tangents: vaccines and genetic susceptibility, vaccines and Tylenol toxicity, vaccines and a million other environmental factors. Way back when, the tobacco industry did the exact same thing to us that the vaccine industry (and trust me, vaccines are an incredibly lucrative business) is doing. Stonewalling, gaslighting. The same “if vaccines caused Autism, then every child who was vaccinated would be autistic” echoes the tobacco industry’s favorite argument, “If smoking caused lung cancer, then every smoker would have lung cancer.” What did we later learn? Genetics plays a factor, definitely. Some people who smoke are more genetically predisposed to lung cancer. Some people can smoke 8 packs a day and never get lung cancer. So that argument doesn’t float. There are also people genetically predisposed to lung cancer who never smoke and get it anyway. Does that mean tobacco doesn’t cause lung cancer? No, no it doesn’t.

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Still Using AT&T? Why?

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Posted on 16th August 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Karl Denninger

 

I often ask myself why I should bother with continuing to do the work I do in the area of writing on the various outrages that our government — and various other entities — engage in.  It is very hard to make the argument that anyone in material numbers gives a damn when this sort of thing doesn’t result in the instantaneous destruction of the customer base of any business involved in such an act.

WASHINGTON (AP) — Under a decades-old program with the government, telecom giant AT&T in 2003 led the way on a new collection capability that the National Security Agency said amounted to a “‘live’ presence on the global net” and would forward 400 billion Internet metadata records in one of its first months of operation, The New York Times reported.

The Fairview program was forwarding more than 1 million emails a day to the NSA’s headquarters in Fort Meade, Maryland, the newspaper reported. Meanwhile, the separate Stormbrew program, linked to Verizon and the former company MCI, was still gearing up to use the new technology, which appeared to process foreign-to-foreign traffic.

Got it folks?

It was often claimed that these records were “mostly” wireline (that is, old-fashioned phone-on-the-kitchen-wall) records.  This is now known to have been a lie.

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FRIDAY FAIL

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Posted on 14th August 2015 by Administrator in Economy |Politics |Social Issues

When You're Friend's Pissed You Pissed On Top Of Where You Should Have Pissed

facepalm,really,phones

trolling-glitch-matrix

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How Do You Spell ‘Desperation’?

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Posted on 12th August 2015 by Administrator in Economy |Politics |Social Issues

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Guest Post by Karl Denninger


So China thinks that devaluing its currency, allegedly as a “one time” move, will help them eh?  They also promise to make the currency market-based (in exchange rate) going forward?

Then why not just drop the crap and allow it to be freely convertible — and quotable?

See, it’s not so simple as China would have you believe,  China’s so-called economic miracle is in no small part predicated on outright fraudulent reporting — bogus GDP claims and even worse, claims that you could defend on a definition basis but that make no sense, such as “counting” as GDP a city built with no inhabitants in it.

The truth is something different entirely.  China has a smattering of very wealthy people and a whole phalanx of not-very-wealthy.  The latter, like here, grossly outnumber the former.  China may be the world’s second-largest economy but they damn well should be given their population; they have roughly four United States in terms of persons!

Unfortunately you need to be more than a slave-labor marketplace and thus an exporter of goods made using same to nations where those labor and environmental practices would get you imprisoned to be successful in the long term.

Remember that much of the so-called “miracle” of “growth” that our firms have touted is expansion into China.  This move in the currency peg is designed to boost their exporters but will make everything made abroad more expensive.

Poof — there goes the argument that you will find your “growth” over there……

Buckle up folks; this is going to get interesting… and for our next act we will see a few amusing blowups in the energy sector among the grossly over-levered in the fracking-n-shale play department.