Tuesday, 11 September 2012

Financial tsunami heading for China

Australasia has relied for its insulation from the global financial crisis on continuing Chinese growth.

But where did China’s growth come from

From the beginning of 2009 to the end of June this year, Chinese banks have issued roughly 35 trillion yuan ($5.4 trillion) in new loans, equal to 73 percent of China's GDP in 2011.

Put that another way: Nearly three-quarters one-quarter* of the Chinese GDP (if that figure can be relied on) was produced directly from loans created out of thin air by its banks.

!

How could that possibly be sustainable? 

This was not organic growth—growth paid for by real savings  and real demand. It was growth propped up by raiding the pool of real savings, phony growth pumped up in the stages and sectors of the economic structure which are particularly susceptible not to long-term sustainable growth but instead to credit-fuelled expansion. It went

to fueling a property bubble, funding the profligacy of state-owned enterprises, and underwriting ill-conceived infrastructure investments by local governments.  The result is predictable: years of painstaking efforts to strengthen the Chinese banking system [and to build up the pool of real savings] were undone by a spate of careless lending as new bad loans began to build up inside the financial sector.

The result now is predictable.

Local governments had taken advantage of loose credit to amass a mountain of debt, most of it squandered on prestige projects or economically wasteful investments… Professor Victor Shih of Northwestern University has estimated that the real amount of local government debt was between 15.4 and 20.1 trillion yuan, or between 40 and 50% of China’s GDP… Chinese local government financing vehicles (LGFVs) are known mainly for their unique ability to sink perfectly good money into bottomless holes in the ground.  So taking on such a huge mountain of debt can mean only one thing — a future wave of default when the projects into which LGFVs have piled funds fail to yield viable returns to service the debt…. Chinese banks [could] have to write down 2 to 2.8 trillion yuan, a move sure to destroy their balance sheets.

And:

Over-leveraged real estate developers… are struggling to stay a step ahead of bankruptcy. The Chinese media has reported several instances of suicides of bankrupt real estate developers.…

And:

Chinese manufacturing companies, state-owned and private alike, could be next in line… a slowdown in economic growth will result in a rapid build-up of inventory and a glut of unsold goods in all industries.  Getting rid of their inventories at a discount will wipe out their slim profits and incur financial losses.  Some of the loans extended to them in good times will surely go bad.

And:

But the potential risk for a financial tsunami is greatest in China's shadow banking system.  Because of very low-yield for savings by Chinese banks (since deposit rates are regulated) and competition among banks for deposits and new fee-generating businesses, a complex, unregulated shadow banking system has emerged and grown significantly in China in the last few years… Borrowers that use funds provided by [China's shadow banking system] tend to be private entrepreneurs and real estate developers denied access to the official banking system… To evade regulatory oversight, [their loans] do not appear on a bank's balance sheet … [but] according to a recent report in the Wall Street Journal, [they could] account for 43 percent of total outstanding loans, 70 percent higher than at the end of 2009.
   Disturbingly, none of these huge risks are reflected in the financial statements of Chinese banks…
    Either we should not believe our "lying eyes" or Chinese banks are trying to hide the mother of all debt bombs.

China's massive bank-financed stimulus was intended to keep the economy moving. It may instead lead to economic disaster.

For them, and for those like us who’ve relied on their growth—almost all of which was built up by a debt bomb.

[Hat tip Russell W.]

Monday, 10 September 2012

“Ban profits!”

Peter Schiff went to the Democrat’s National Convention to see how many how quickly he could get to support banning corporate profits. It was disappointingly easy.

Why do journalists get economics so wrong?

Guest post by Vedran Vuk of Casey Daily Dispatch 

Over the years, I've heard many people gripe about the media. It's always so anti-free market and economically illiterate. When there is some favorable mention of markets, it's usually a trained economist or financial person. Insightful commentary from a journalist on economic matters is, sadly, a rare commodity. In my opinion, the root of the problem comes from the sort of person who wants to become a writer.

As an analyst and a financial writer, I meet a lot of people who want to be writers. It's quite a strange aspiration. Personally, I enjoyed studying economics and finance and kept having ideas which I wanted to share with others. Hence, I started writing about them. A few twists and turns later, and here I am.

The problem with journalism is that most journalists come from the exact opposite approach. They decided to write long before having any background knowledge to write about. The vast majority of college freshman enter their first journalism or English class without anything important to say on the matters of economics and politics. Despite their ignorance in the ways of the world, they still want to write about it anyway. Reflect for a second on what an odd concept that is.

It's kind of like wanting to open an art gallery just so that you can sip wine with artsy people. Shouldn't the point be to use your art as medium to express an idea or emotion or something else significant?

Call me biased, but I'm of the persuasion that one should know something about a topic before writing on it. Otherwise, writing is just screaming at a mountain to hear one's own voice. There's no point to it.

Unfortunately, after four years of reading poetry and the classics, the young aspiring writer is no better prepared for his or her future role of commenting on economics, politics, and science. After college, you've got a very dangerous weapon on your hands – a person who can write persuasively but doesn't really know much about anything. It's quite irresponsible of colleges to let such people loose on society.

These journalists aren't spending their waking hours studying economics to compose the best-informed articles. Instead, they'll just formulate some half-baked idea from the top of their heads with little background knowledge to defend their assertions. Their goal is not to become the most knowledgeable economist, physicist, or historian. It is not the search for truth or important ideas which motivates most. Their goal is simply to write – and the bigger publication, the better. With this as the inspiration for many writers, why are we surprised to see so many economically illiterate articles in the media?

Vedran Vuk is an analyst at Casey Research and the author of the ‘Casey Daily Report.’

Bugger off Graham

imageLet me say quickly, I have no problem with World-Cup winning coach Graham Henry helping to coach the Argies.

Why should anyone object? Crikey, it says “coach” in the occupation section of his passport—what did you think he was going to to do once he stepped down from this country’s stop coaching spot: take up knitting?  

How long did you really think retirement would hold Henry’s interest? With two coaching contracts already under his belt—one with the light-blue and whites helping them build, and the other team wearing darker-blue and white with a team sure to test the senior coach’s well-documented tendency to depression—you’ve had your answer now: not long.

Why be surprised? This is what he does. This is his job. He coaches. So the only complaint about his coaching a team opposing the All Blacks can be based on nationalism. And nationalism, as they say, is the last refuge of the scoundrel. So forget this bollocks about him “selling his soul” or selling out the country. That’s all it is: just bollocks.

The best thing you can do if you support the All Blacks is to wish your old coach well, while hoping he doesn’t do too well.

That said, why would he or anyone else be surprised to hear after Saturday nights game in Wellington he wouldn’t be welcome back in the All Blacks’ rooms. You’d have to be a loony to let him in to gain any knowledge about what ails players, or how things are set up these days.

As it happens, there was a parallel in the AFL only last week. Sydney Swans legend Brett Kirk, currently a comments man with Channel 7, was banned from Sydney’s dressing room at last week’s game against Geelong because news had emerged he’d signed to help coach Fremantle next year—a team the Swans could have easily met in the finals series if games had gone that way. 

Why give someone with changed loyalties access to anything that might help them, was the call—and the right one.

And now, having got that off my chest with a paragraph joining Geelong and Fremantle in the same sentence, I have to announce that I am going into mourning—and it’s got nothing at all to do with Graham Henry.

In fact, I was distracted from Saturday night’s rugby test by a much, much bigger game going on in Melbourne—an elimination final played between Fremantle and Geelong in which my team—the Geelong Cats—the 2011 premiers—winners of three of the last five AFL premierships--the greatest club of the modern era—were blown off the park by a Fremantle team who have had only won one final before in their club’s life. So that’s my team. Smashed. Out. Eliminated. Humiliated.

So be gentle on me. I’m in mourning.

The Herald goes tabloid

This morning the Herald goes tabloid, and editor Shayne Currie was on State Radio explaining, and demonstrating in one clause, why.

_Quote_Idiot The reason why we’ve gone compact [he said] is to make it much more easier and convenient for readers…

And perhaps to make it a better fit for an editor unable to master the standard of English expected in a quality daily. Observe:

  • ‘The reason why …’  - “Reason why”? Using both words “reason why” is as redundant as Currie should be. It’s a redundancy because if you say “the reason why” it’s like saying the word “reason” twice; that is to say the reason is already the why.  So that’s one.
  • “…to make it much more easier…” – Lord love us, and this is an editor speaking. He couldn’t have made it much more worserer, really, could he.  He could have said “make it much easier,” which would be correct. He might have said “make it more easy,” which is also correct. Instead he said both, which is neither. So that’s two.

Currie says this morning the Herald is going tabloid. And that’s three: He got the tense wrong.

Because the Herald went tabloid a long time ago.  The format is just catching up with the content.

ECONOMICS FOR REAL PEOPLE: Great Myths of the (First) Great Depression

Here’s the message about tonight’s meeting, from our friends at the Auckland Uni Econ Group:

Hello all,
Sadly, the history of The Great Depression continues to grow more relevant by the day, yet today very little is known about--at least, very little that is true.

This week, we look at a few of the many myths around the Great Depression, and ask:

  • Was the Depression really a Crisis of Capitalism?
  • Did margin trading on the share market truly bring on the Crash?
  • Which great economist lost his shirt in the Crash he never saw coming?
  • Did the Fed really do too little to help?
  • Did Herbert Hoover just sit back and watch things get worse?
  • Were Franklin Roosevelt there, and Michael Savage here, chiefly responsible for getting things back on track?
  • Was it World War II that finally brought about the Recovery?

Join us tonight as we examine these stories and many more about the FIRST Great Depression.

All welcome!

    Date: Monday, September 10
    Location: Room 215, Level 2, Business School, Auckland University
   Time: 6pm – 7pm

And check us out on the web at Facebook & our blog.

Friday, 7 September 2012

The world is about to be showered with more of what already ails it

The European Central Bank (ECB) announced this morning it intends to print money to pay the debts of over-spending governments—as Bundesbank head Jen Weidmann objected, “tantamount to financing governments by printing banknotes.” This cannot be sustainable.  Not that ECB head Mario Draghi cares.

The Japanese government, having tried and failed with every other option for two decades—easy money, zero interest rates, printing money to pay its debts—is finally ready to “abandon its Keynesian consensus”. That is, to try to spend close to what they receive in taxation. But with govt debt at an unsustainable 225% of GDP, it’s too little too late.

And in Jackson Hole, Wyoming, the world’s central bankers met, to be told by a Ben Bernanke oblivious to what has happened in Japan, and in denial about the results of his earlier monetary interventions (i.e., the hole we’re in now) that he is ready to unleash the American printing presses again to shower the world with more paper, and take the value of the currency he has sworn to uphold ever further into the basement.

As Jeffrey Tucker observes, “There is reality and there is Ben Bernanke. The two are ever more disconnected…

Never mind the elevated unemployment rate and worst economic recovery since the Great Depression. Never mind that the credit system is entirely broken down. The reality that we've lost a decade of growth to these policies is in the headlines. And at this very time, Bernanke figures that QE1 and 2 went so well, it's time for a third.
    One wonders if the Fed chair's plan is to create enough money from nowhere to buy all the government's debt, reducing the deficit and debt to virtually zero.
    Nobody in his right mind would think the value of the dollar could withstand that onslaught of printing, except maybe Bernanke.

Mr. Bernanke keeps alluding to some magic trick he will perform. But the audience is full of skeptics. He is pushing for more bond purchases (debt and money creation), plus what's being called jawboning. The latter is particularly ridiculous. He thinks that promising low interest rates further and further into the future is going to somehow cause a re-boom.
   
Why not just say we've abolished interest rates forever? Will that do it?
    Our economic problems are structural and can't be solved by the bearded banker. The central bank caused the boom, and then the bust of 2008 was not permitted to liquidate bad investments.
   The many attempts at stimulus only sucked resources from the private sector. They prolonged the agony. Moreover, the adjustment is being hindered by a costly regulatory thicket that discourages business expansion.
    Put it all together and you have the great recession, courtesy of the central bank and the government that created it one hundred years ago. But the arrogance and self-interest of the central bank mitigate against admitting error, even when it is more than obvious to the multitudes.
    Even if Ben and his friends aren't admitting error, the truth is coming out. And it's not just about economic fallacy.  It's about graft, financial irresponsibility, and bureaucratic bungling on an unimaginable scale. It's the age of information. Much to the ruling elite's regret, you can't keep the rackets secret anymore.

Meanwhile, in China, they’ve been so busy building bridges to nowhere—paid for by money printed out of nowhere--they haven’t noticed the incredible malinvestment time-bomb they’ve been racking up.

Bernanke, Jackson Hole, Politics, QE, Debt … I wonder what Peter Schiff would say about it all.

Doug Casey on the Fourth Estate

Guest interview with Doug Casey, interviewed by Louis James, Editor, “International Speculator.”

L: Hola Doug. What's on your mind this week?

Doug: The color yellow. As in "yellow journalism" - which seems almost the only kind we have these days. Of course, to be fair, inflammatory, shamelessly dishonest "man bites dog" journalism has always been the dominant kind, simply because it sells papers. But we'll see more than the usual amount in the next couple of months, simply because elections lend themselves to it; politics seems to stimulate the reptilian part of the brain, the most primitive part. Both politics and the reptilian brain relate well to the yellow press.
    Anyway, like many people, I watched snippets of the Republican National Convention in Tampa. Maybe, since I'm engaging in punditry, I should have watched the whole damn thing. But I simply couldn't force myself to watch even all the parts that were broadcast, because it was just too boring and degrading. I can't imagine how the people who were there for the whole four days were able to remain awake for the whole thing. Perhaps this is proof that zombies really do exist. What kind of people could take such a charade seriously? It was all canned speeches and scripted events that were basically dishonest. Politics has always been dishonest, of course, but at least it used to be unscripted and mildly entertaining...

L: Wait a minute - what about the now much-discussed Eastwood incident? By all accounts, that was unscripted and perhaps even unwelcome among the convention organizers.

Doug: I did watch Clint and enjoyed his speech, which appeared to be unscripted. He's a skilled actor and entertainer, so I've got to believe it was really off the cuff. I've read in the papers - which means I don't really know anything except some reporter's guess - but I've read that Clint was only supposed to give a five-minute, canned speech. Romney and the convention organizers were caught off guard when Eastwood asked for a chair to be brought on stage; it was thought he wanted to use it to sit down. But he then proceeded to have a very funny conversation with an invisible Obama. One reason I liked it is that he treated Obama with the respect he deserved. It's about time people stopped treating presidents as if they were Roman emperors.

L: I've watched that segment on YouTube and noticed that he used the word "libertarian," which I doubt the RNC would have approved in advance. So I can believe that "Dirty Harry" was shooting from the hip, as it were.

Doug: I agree - I'm sure they would not have approved of that. I expect the Republicans will do everything they can to discount, denigrate, and destroy the Libertarian Party candidacy of Gary Johnson for president. They know Johnson is likely to draw more votes from them than from the Democrats. And of course, Ron Paul was made a veritable nonperson. The only mention he got at the convention didn't include any acknowledgment of some of his most important propositions, like ending the drug war, ending foreign interventions and wars, and abolishing the Fed. These people are dishonest and manipulative through and through.
    The other thing Clint did, as I recall, was only to mention Romney twice, and not in way that was a particularly strong endorsement. It took courage on Clint's part in that forum.

L: I noticed that too; his focus was on the people, not the candidate. The biggest cheer he got was when he spoke of the people and said, "We own this country... politicians are employees of ours."

Doug: Yes. I'm sure that also rankled the suits running the show. But the fact that Clint's sincere, unscripted comments are so exceptional tells us a lot about the rest of the drivel at such events. It's like he came up with the idea shortly before he went on stage and was truly speaking extemporaneously. It wasn't approved by the Politburo, like absolutely everything else emanating from the convention was.
    The press coverage of the incident is a good example of the sort of thing that makes me despise reporters. In a way, it's a litmus test of the psychology of the average journalist, how they reacted to that thing... It says more about them than it does about Eastwood, how they reported on it and what they said about it. So many of them focused on how he hesitated, fumbled, repeated himself, and so forth, scoffing at his remarks as being just an old man's rant. The snide comments of Michael Moore, the Evil Party's answer to Jabba the Hutt, are fairly typical.
    It was clear to me that Clint spoke from the heart, mistakes and all. I believe that 300 million Americans out there are starving for straight talk from the heart of someone they like - and everyone loves Clint. My guess is that most everybody who isn't an ideologue of either the Stupid Party or the Evil Party really resonated with his sentiments. The only downside is they'll wind up helping the feckless Romney.
    It was night-and-day different from the slick speeches by the horrible politicians. They all sounded like they'd rehearsed their speeches dozens of times. Every one of them sounded phony - which they are. I preferred the old days when you never knew what the outcome of the convention would be, and the speeches could actually tell you something about the men giving them - or at least have entertainment value. When did all this change? My guess is in the '50s, with broadcast TV and the invention of the teleprompter. The whole convention was a flavorless, odorless, sanitized bore - except for Clint.

L: I was struck by those criticisms of Eastwood's delivery as well. Clint Eastwood was born in 1930 - give the guy a break! These critics will be lucky to be half as eloquent when they are in their 80s. But even that's beside the point; what should matter most is what he said, not how he said it. These same media hacks would never speak so disrespectfully of a venerable statesman they agreed with.

Doug: I have nothing but contempt for these blow-dried airheads on TV news shows. They pontificate and tell you what you're supposed to think - but they're really not journalists. They just read the establishment press releases, thereby helping to prop it up. Instead of being the Fourth Estate - a private-sector watchdog and counterbalance to state power - they just make themselves lapdogs of politicians.
    If you watch something like The Daily Show, Jon Stewart will often show clips of different so-called journalists in juxtaposition to each other - he did this regarding the Republican Convention - and you can see that the reporters all use the same words. It's like they are all reading the same script or keying off each other - it's a herd mentality. This is one reason print journalism has gone downhill, as well. In the era before the TV, a journalist had to witness things in person and draw an independent conclusion. It wasn't technically feasible to know what everybody else was group-thinking in real time. The noble, lone journalist in the mold of H. L. Mencken is completely gone from the scene today.

L: I know what you mean, but a TV news anchor isn't really a reporter. He or she is an attractive actor hired to read the news others research, because their faces increase ratings. Is it fair to criticize such people for not being investigative journalists?

Doug: No, I guess it's not. They are hired to look sincere and look good. I believe it's well established that people in general are prone to like and believe people they find attractive - that's the basis for hiring TV news anchors - that and having completely unremarkable, predictable, "mainstream" views. But it's still not a good thing. To have a system that relies on attractive but ignorant or misinformed people regurgitating reporting written by others is dangerous. The so-called Fourth Estate is dying.
    You know, that very term - Fourth Estate - is being used more now, at the very time that the institution itself is changing its essence. The idea of a Fourth Estate arose with the Industrial Revolution and the inception of capitalism - the first three basically being the church, the "nobles," and everyone else - the 99%. The Fourth Estate has historically been a bit outside all that, but certainly outside the church and the state. Their purpose was to tell it like it is, keep things in balance, and be impartial truth-tellers. Major cities each had dozens of papers. But now the Fourth Estate has truly been captured by the ruling classes.
    That's the bad news. The good news is that we have the Internet. The stuff people report there may not always be anymore accurate than the mass media, but at least it's independent - it's not a mouthpiece for the Establishment. As far as I'm concerned, the Fourth Estate has betrayed its basic raison d'ĂȘtre, and no longer serves much of a useful purpose.

L: Which brings us back to the people who write the stories or compose the video coverage - the kind of investigators who are supposed to make a show like 60 Minutes deliver hidden truth to a population that needs to know...

Doug: Unfortunately, they seem to be cut from pretty much the same cloth as the reporters who write for outfits like the New York Times or, God forbid, USA Today - something I feel sheepish about reading in public. They all went to the same universities, where they were taught the same ideas and values by the same teachers - who are all statists of one stripe or another. They are all so deeply inculcated in this worldview, they don't even know they are in it...

L: Which is why journalists who don't work for right-wing rags never admit that there is such a thing as "liberal media bias." Their colored glasses have been on for so long, they don't even realize they wear them.

Doug: Exactly. The 60 Minutes guys fell flat on their faces when they didn't call Ben Bernanke out for contradicting himself on their show, first saying the Fed was printing money, then saying it wasn't. If these guys are the toughest watchdogs we have, we're in big trouble. The best sources of news on TV are probably The Daily Show and The Colbert Report. As comedians, they serve the role of the court jester and can say things to the king that nobody else dares to. It's a sad testimony.

L: But there are exceptions, like John Stossel.

Doug: Of course, but again, it's the exception that tests the rule; the fact that Stossel is so extraordinary tells us a lot about what is ordinary. You can see this clearly when you get a bunch of reporters together on an impromptu talk show, like Meet the Press or whatever; what you see is a bunch of opinionated people, some somewhat to the left, some somewhat to the right of center, yelling at each other. It's never an intelligent discussion of ideas and principles at all. For instance, there's never a discussion of whether Social Security, Medicare, or Medicaid are correct areas for government involvement - that's completely accepted and a given. Even with Obamacare or Romneycare the discussion is only one of whether it's affordable or efficient, not whether it's ethically defensible. It's just glib one-liners and catch phrases.

L: Whoever has the best sound bite wins.

Doug: Just so. Political talk shows are frustrating and embarrassing to watch. I just want to wash my hands of the whole mess, but I guess I'll have to watch at least a little of the Democrat's Convention, just to see what kind of charade they put on. I expect it will be more enthusiastic than that of the Republicans, because at least the Democrats actually have some principles... even if they're completely bent, destructive, and statist principles. It should be some show, maybe like the Nuremburg rally.

L: Morbid curiosity?

Doug: Yes, and very unappealing. It's literally like watching something die. The capacity of the masses to sit on their sofas and watch endless hours of canned drivel on TV is increasingly convincing me that libertarians and other free-thinkers are actually genetic mutants. We can mate with Boobus americanus intellectually about as well as a human can mate physically with a chimpanzee.

L: Mutants... or at least an uncommon personality type.

Doug: Either way, we are so few - it's hard to have any hope of reason ever winning the day. My friend Jeff Berwick was caught in a spate of optimism the other day, which started with him guessing that maybe 10,000 new people become libertarians every day - a great-sounding number. Then he took out his calculator and realized that even if the population of earth was stable that, even at that rate, it would take something like 2,000 years before everyone stopped thinking like a criminal.
    Communication is critical, of course. But while that's become easier, in some ways, like the Internet, it may be increasingly difficult in others. The masses are addled by the mind-numbing rays from their TVs, and there are scores of millions more addled by psychiatric drugs, and hundreds of millions more by generations of government miseducation.
    On the bright side - you know I like to always look on the bright side - the Internet could be bigger than all those things. The big media corporations no longer have a stranglehold on the news. These days, anyone with a phone has audio- and video-recording capability and can be a reporter. With the Internet, any of these people can get word of what they see out to the entire world.

L: A new, 21st century version of the Fourth Estate?

Doug: Yes; the truth is out there. But as with everything else, it's subject to Pareto's Law. So, 80% of what's out there is crap, and 80% of what's left is merely okay. But that remaining 4% of quality, uncensored, free information flow is extremely valuable. More good news: because people increasingly realize that 80% of everything is crap, they're becoming evermore discriminating - which is a very good thing. People used to slavishly believe everything in the newspapers just because it was written; now they're necessarily more skeptical, which means they're forced to be more thoughtful.
    But as great as this is, it's like Jesus of Nazareth said: "He who has ears, let him hear." For the distributed and free reporting we now have via the Internet to do much good, people need to question what they're told and look for the truth - that's not going to happen if they only use the 'Net for social media and porn. After generations of government schooling, where critical thinking is the last thing they want to teach, people willing to do this are few and far between.

L: You're an atheist quoting the Bible?

Doug: Why not? I can read. Everyone should read the Bible, along with Richard Dawkins, of course.

L: Indeed. Investment implications?

Doug: Nothing I haven't said before, but that doesn't make it any less true. The terminal corruption of the major news corporations and the lack of interest in seeking the truth among the general population augurs very poorly for the prospects of the US and the current world order. This creates speculative opportunities, which we work hard on uncovering in our publications, but prospects for mainstream investments are not good. Western civilization is truly in decline and far down the slippery slope.

L: You wrote an article some years ago on how to profit from the coming collapse of Western civilization...

Doug: Yes - which brings me back to the color yellow, but in a positive context this time: the yellow metal. Now the collapse is beginning, my advice is the same: accumulate gold - not as an investment, but for safety. For profit, speculate on the various bubbles and other trends government interventions in response to the unfolding crisis bring about. Rational investment is not an option in this context (remembering that investment is deploying capital to create more capital). Hopefully, investment will again be a viable option after the ongoing crisis bottoms; it depends in good degree how most people view the role of government. We all have to be speculators now, if we want to make money, and we have to be "gold bugs" if we want to come through the storm with minimal loss of wealth.

L: And for more on that, readers could hardly do better than to come to our conference on "Navigating the Politicized Economy" this week in southern California.

Doug: Or - while we're plugging our own products - they could read your newsletter for our best speculative guidance.

L: Okay, but enough with the crass commercial messages. More soon from California!

Doug: Looking forward to it.

Louis James concludes: The American economy has never been as centralized as it is today... and Doug's warning that this centralization has made mainstream investing everywhere a poor bet has never been more true….

(This interview first appeared at the Casey Daily Dispatch. It appears here by permission.)

David Lloyd Wright Home, by Frank Lloyd Wright (updated)

This is the concrete blog home for the Arizona desert designed by Frank Lloyd Wright for his son, David, and recently sold to, shall we say, an unsympathetic buyer. So it may not be with us for much longer.

These were two recent tours through the home…

…and a sun study.

Thursday, 6 September 2012

Helen Kelly is right and wrong.

The president of the Council of Trade Unions says the Government has broken a pledge to create more jobs.”

What rot.

Look, its clear that political opponents are going to use rising, nagging, seemingly incurable unemployment as a club to beat incumbent political leaders around the head. It’s always the economy, stupid.

That’s why even Obama cheerleaders are embarrassed by the fact admitted by their luminaries that in answer to the question:“Are you better off now than you were four years ago?” the only factual response is “No, we’re not.”

Same here.

But as Jonah Goldberg points out, the idea that politicians and presidents ‘run’ the economy is both ludicrous and fairly novel

As much as it pains me to say it, Ronald Reagan deserves some of the blame for the notion that our individual successes and failures are wholly contingent upon the whim of the guy in the Oval Office. He was the one who popularized “Are you better off now than you were four years ago?” to such devastating effect against Jimmy Carter. Since then, Democrats have made their own use of this crude reductionism. It has always struck me as a secular form of medieval thinking. My crops will not prosper unless the high priest wills it so.
   
At least Reagan argued that the economy would prosper if he were allowed to liberate it from the scheming of self-styled experts. Clinton ran out in front of a parade of free-market successes and, like Ferris Bueller, acted as if he was leading the parade.
   
In his manifest hubris, Obama believed it was just that easy. He, too, could simply will a vibrant economy into being through sheer intellectual force.

In New Zealand, the hubristic fantasy probably began with Muldoon—with the expansion of government activity under his stewardship, the excessive regulation of everything in which government itself was not already active, and the idea that if he just pulled the right levers we’d enter Nirvana with just a tinker or two needed on the Think Big handle.

In the eyes of Helen Kelly and many others (John Key not excluded), we are still in those days in which the government is the largest employer in the land, and it can “pledge” to “create” more jobs. 

But this is bollocks.

Government can certainly stop the creation of new jobs by over-taxing investors and excessive regulation on businesses and capital formation. And it has. It can crowd out the creation of new private employment (which actually grows production) by excessive spending on its own behalf (which is just consumption spending growing nothing more than beneficiaries with a bad case of entitle-itis (the likes of Fletcher Building not excluded). And it has.  It can stop the shaking out after the crash of malinvestments by bailing out failures, and it has; and it can hinder the rebalancing of investment into more profitable lines by offering “stimulus” for things profitable only because of the injection of Other People’s Money. And it does.

Which is why Helen Kelly is right to recognise “the economy is collapsing.”

It is.

But not for a lack of government activity, but a surfeit.

The only way new jobs can be created under a government’s watch—the only thing a government can actually pledge to do that would have any effect—is to get the hell out of the way.

But I doubt the hidebound ideologically straitjacketed president of the Council of Trade Unions would endorse that any time soon.

QUOTE OF THE DAY: “We have ways of making you do what's right”

As an apostle of altruism, Barack is going to give you what you deserve:
your neighbor's money.
    Barack feels your pain. Well, not pain, since you're not really struggling.
[Not in the sense, say, of the pioneers who built the country actually went
out seeking struggle—new places to explore, new lands to claim and conquer.
And all they asked was that, if they succeeded, they would own what they
created.] So let's say Barack hears your whining—and he's galvanized into
action. He's going to help you out—at somebody else's expense.
    Why is this something Democrats approve of? Simple: the expense will
be borne by someone better off. The strong must help the weak, and if they
won't help voluntarily, we have ways of making them do what's right.
- Harry Binswanger, “It's all about morality, ” Harry Binswanger List

Building revolution: contour crafting

There are several revolutions in building on the horizon*.

Here’s one:

[Hat tip Julian P.]

* * * * *

* Presuming any of them can sneak through the bureaucracy…

Kronish House, by Richard & Dion Neutra

image
Painting by Carrie Graber

The appeal of modernism can be easily felt in this striking image of Richard Neutra’s Kronish House. The dynamism is much more evident in the perspective than it is in the plan, however.

  image

Wednesday, 5 September 2012

QUOTE OF THE DAY: “The government's account is overdrawn…”

“Today, people are beginning to understand that the government's
account is overdrawn, that a piece of paper is not the equivalent
of a gold coin, or an automobile, or a loaf of bread—and that if you
attempt to falsify monetary values, you do not achieve abundance,
you merely debase the currency and go bankrupt.”

—Ayn Rand, “Moral Inflation,” The Ayn Rand Letter

2 ecologists on the facts and fictions of climate change

imageThere’s a great two-part interview on climate change and environmentalism with the co-founder of Greenpeace, Patrick Moore, that appeared in this week’s Washington Times:

The interviews themselves are interesting enough…

  • “People should realize that intensive agriculture, using science and technology, chemistry (fertilizers and pesticides), genetics and biotechnology (GMOs) is one of the best ways to reduce the conversion of natural ecosystems into food production.”
  • “If it is the aim of ‘environmentalists’ to stop fossil fuel production and use, end fracking, end coal mining, end the use of oil, then they are promoting a policy that would have disastrous consequences for human civilization and the environment. If we stopped using fossil fuel today, or by 2020 as Al Gore proposes, at least half the human population would perish…”
  • “Today Greenpeace's efforts are largely counter-productive and parasitical on political agendas such as trade disputes. Their vision of a world run on wind and solar energy is a green dream that is actually a green fantasy that is rapidly turning into a green nightmare for ratepayers in the countries that have provided exorbitant subsidies for these technologies which don't even work most of the time…”
  • “Q: During the years ahead, what do you think that the greatest challenge will be to environmental sustainability?
    Dr. Moore: The elimination of poverty and the slowing of population growth and its eventual stabilization. The key to this is the mechanization of agriculture in the developing countries that still depend on subsistence agriculture. When agriculture is mechanized people have smaller families, the majority of the population can do other things besides growing food, wealth increases…”
  • "Environmentalism" is an ‘ism’ like capitalism and socialism. In that sense it connotes an ideology or shared set of beliefs, not necessarily based on scientific proof or evidence. An environmentalist is therefore distinct from and ecologist, as ecology is a science.
        “If someone claims to be an environmentalist, I assume they care about nature and about our impact on it. But one must dig deeper to find if they are misanthropic or accepting of humans as part of the environment. This is really a question of attitude rather than facts.”
  • “I explain in my presentations that as a scientist who is fully qualified to understand climate change, I seem dumber than the people who say they "know" the answers because I do not profess to know the future, especially of something so complicated as the global climate.
        “One thing is certain, there is no "scientific proof" as the term is generally understood, that human emissions are the main cause of climate change today. Even the IPCC only claims that it is "very likely" (a judgement, in their own words, not a proof) that human emissions are responsible for "most" of the warming "since the mid-20th century" (1950). Therefore they are not claiming that humans caused the 0.4C warming between 1910-1940, but they are claiming that we are the main cause of the 0.4C warming between 1970 and 2000. Yet they provide no opinion as to what did cause the warming between 1910-1940. There is a logical inconsistency here that has never been addressed. It is also important to note that the IPCC does not speak of "catastrophe", that is left to the fanatics and perpetual doom-sayers.”
  • “What most people don't realize, partly because the media never explains it, is that there is no dispute over whether CO2 is a greenhouse gas, and all else being equal would result in a warming of the climate. The fundamental dispute is about water in the atmosphere, either in the form of water vapour (a gas) or clouds (water in liquid form).”
  • “The global average temperature has now been flat for the past 15 years, as all the while CO2 emissions have continued to increase. There are only 2 possible explanations for, either there is some equally powerful natural factor that is suppressing the warming that should be caused by CO2, or CO2 is only a minor contributor to warming in the first place.”
  • “No. I do not believe alarmism and fear are the correct responses even if our emissions are causing some warming. In particular I do not believe it makes sense to adopt policies that would obviously cause more harm that the supposed ‘catastrophe’ that might be caused by warming…
        ‘I fear the irrational policies of extreme environmentalists far more that a warmer climate on this relatively cold planet (14.5 C global average temperature today compared with 25C during the Greenhouse Ages.”

…but even more fascinating was the exchange that followed between Patrick Moore, PhD, ecologist, scientist and co-founder of Greenpeace and John Mason, “author, minister, speaker and founder and president of Insight International, dedicated to helping people reach their God-given dreams...”, which you can read here: “A Reply to John Mason”:

  • “It is now fashionable to oppose all coal, all oil pipelines, all tankers, all fracking for gas, all offshore oil, all oilsands, all shale oil, and oil in general. The fossil fuel industry is vilified as a criminal element pushing a toxic product, while nuclear is said by opponents to be unsafe and uneconomic. Gore does not actually propose any alternative but simply generalizes as if it is a wish rather that anything substantive. So even if you take out ‘or by 2020 as Al Gore proposes’ my statement is true. I make it to emphasize how dependent we are on fossil fuels, and that a rapid end to their use would have far more catastrophic results than the wildest climate scare scenario. (see:http://www.guardian.co.uk/environment/blog/2009/mar/16/climate-change-al-gore).”
  • “Humans have evolved in the most fluctuating period of global climate since the mass extinction caused by a meteor impact 65 million years ago. Humans have survived as the major glaciations have come and gone during this Ice Age. When hominids first appeared the world was warmer, and they were all in the tropics where it has been warm even during the major glaciations. There is a reason there are 24 million people in Sao Paulo, Brazil and only 800 in Barrow, Alaska. It is a testament to the adaptability of humans that they have survived the Ice Age when from an evolutionary perspective we clearly favor a climate where it does not freeze. Even during the more recent times, during the 10,000 years since the development of agriculture, the climate has varied. It was warm during the Egyptian and Roman eras, cool in the Dark Ages, warm in the Medieval Period, cool during the Little Ice Age, and warmer now. Still, the world is considerably colder now than it was before the onset of the present Ice Age.”
  • “I do not believe that a warming of 2-3C in this century would have catastrophic consequences. Most of the warming would be in the temperate and arctic regions, places where it freezes now. If you count the species in a tropical forest compared to the arctic tundra it is obvious that far more species prefer warm climates to cold climates, including humans.”
  • “The polar bear population has actually increased dramatically since unregulated hunting was ended in the 1960s. If the world climate, over the next thousands of years, returned to a Greenhouse Age, it may not be hospitable to polar bears, but the arctic regions would be hospitable to hundreds of thousands of species that can’t survive there today. And I would not adopt policies that would threaten our entire civilization just to protect polar bears.”
  • “Mason cites the reduced extent of summer Arctic sea ice as evidence that the world is gaining heat. He, like other warmists, belittles the fact that Antarctic ice has been growing in extent:
  • “In the same year, 2007, that Arctic Ice was at a minimum, Antarctic ice was at a maximum. This should at least be recognized.”

  • “[Oceans are accumulating energy, says Mason, which explains why temperatures have been flat for 15 years.] “In 2003, 3000 Argo Bouys were deployed into the world’s oceans. This has given us, for the first time, an accurate measure of global ocean temperatures. The bouys float free, alternately sinking to 700 meters depth and then rising slowly while taking a profile of the temperature. When the bouys surface they send the temperature record to a satellite. Here is the actual record of global average ocean temperature (heat content) vs. the prediction made by the climate models:
  • “Clearly, there has been no upward trend in ocean temperatures since 2003.”

  • “Sea-level has been relatively stable for the past 5,000 years or more.. It is extremely unlikely that the Greenland and Antarctic ice caps could melt in less than thousands of years. It took millions of years for them to accumulate. And we are quite capable of adapting to sea level rise, look at what the Dutch have done, reclaiming the seabed for farmland. After devastating wars whole cities are rebuilt in a matter of a few years. And if the warming is natural, it seems we would be better served by focusing on adaptation rather than holding back natural trends which are inevitable.”
  • “It is ironic, and sad, that the EPA has declared CO2 to be a toxic pollutant when it is the most important nutrient (food) for all life on earth. Through the miracle of photosynthesis, green plants turn CO2, water, nitrogen, and a pinch of minerals from the soil into the food that we and all other animals, insects and invertebrates use as our means of survival. To vilify CO2 is to vilify life itself. Carbon is the currency of life and we are part of that life so we should pay homage to CO2 and the carbon it provides.”

Patrick Moore’s websites are www.greenspiritstrategies.com and www.greenspirit.com.

Meanwhile, while the increasingly impressive Moore was taking on an alleged scientist, Bjorn Lomborg was taking on an alleged economist, challenging Paul Krugman on his climate science in “How "Policy By Panic" Can Backfire for Environmentalists.”

“Saying that droughts are caused by global warming leads to public distrust and disengagement when the rain starts to fall,” points out Lomborg—something calamatists like Australian Tim Flannery must surely be aware of by now. Krugman, apparently not:

Paul Krugman, writing breathlessly in the New York Times about the “rising incidence of extreme events” and how “large-scale damage from climate change is … happening now.” He claims that global warming caused the current drought in America’s Midwest, and that supposedly record-high corn prices could cause a global food crisis.
    But the United Nations climate panel’s
latest assessment tells us precisely the opposite: For “North America, there is medium confidence that there has been an overall slight tendency toward less dryness (wetting trend with more soil moisture and runoff).” Moreover, there is no way that Krugman could have identified this drought as being caused by global warming without a time machine: Climate models estimate that such detection will be possible by 2048, at the earliest.
    And, fortunately, this year’s drought appears unlikely to cause a food crisis. According to the Economist, “price increases in corn and soybeans are not thought likely to trigger a food crisis, as they did in 2007-08, as global rice and wheat supplies remain plentiful.” Moreover, Krugman overlooks inflation: Prices have increased six-fold since 1969, so, while corn futures did set a record of about $8 per bushel in late July, the inflation-adjusted price of corn was higher throughout most of the 1970s, reaching a whopping $16 in 1974.
    Finally, Krugman conveniently forgets that concerns about global warming are the main reason that corn prices have skyrocketed since 2005. Nowadays 40 percent of corn grown in the United States is used to produce ethanol, which does absolutely nothing for the climate, but certainly distorts the price of corn—at the expense of many of the world’s poorest people.

Global warming is already hurting people. That is to say, policies based on fears about catastrophic global warming are already hurting people. That hurt will get worse if misanthropic green fantasies and breathless misinformation continue to increase.

[Hat tip Cafe Hayek & Climate Depot]

Tuesday, 4 September 2012

QUOTE OF THE DAY: A reminder from Thomas Jefferson

image

 

Whenever a man has cast a longing eye on [political]
offices, a rottenness begins in his conduct.

- Thomas Jefferson

[Hat tip Robert Wenzel]

Debunking Keen

Australian economist Steve Keen visits New Zealand this week, which for some reason has some of my readers excited.

Like several others outside the mainstream, Keen famously predicted the 20o7 crash—but as others have said Keen has successfully predicted 6 of the last 2 recessions. And his penchant for predictions was confounded soon afterwards with his premature prediction of the collapse of the Australian housing market.

Mr Keen made a bet with Macquarie Group interest rate strategist Rory Robertson after claiming that house prices would dive by 40% when the GFC was at its worst.
Fortunately his predictions didn’t eventuate, and now Mr Keen will deliver on his promise to walk 224km from Canberra to the top of Australia’s highest mountain, Mt Kosciuszko. It remains to be seen whether he will wear a t-shirt saying “I was hopelessly wrong on home prices! Ask me how.”

He did.

Keen is right to criticise neoclassical economics—the mainstream economics taught at universities based on third-rate maths and second-rate models of human behaviour—but while he can very good at explaining why things don’t work as the mainstream theories say they do, he is very bad at the opposite. And he is also very good at creating straw men to rail against. Hence, about Keen's book Debunking Economics Arnold Kling wrote:

I agree with his view that heterodox economists have something to offer, particularly in the area of macroeconomics. His discussion of a debt bubble and Minsky reminds me that PSST* includes the word "sustainable" for a reason. Patterns of specialization and trade that depend on ever-increasing debt loads are not sustainable. I think that Keen would agree with that one. But I also think that patterns of trade that depend on the government spending money it does not have are equally unsustainable. I do not get the sense that Keen is on board with that one.
    If I were a zero-tolerance reader, I would have put the book down at page 7…

But if he had, he would have missed seeing Keen, an alleged economist, railing against laws of supply and demand.

Sinclair Davidson’s review was more direct:

Keen has drawn several conclusions by the end of his book. These are as follows: Neoclassical economics should not and cannot be used for public policy purposes. This is because neoclassical economics is theoretically and logically inconsistent. Even if neoclassical economics were not wrong, the underlying conditions required for its application could never be met in reality. Keen oversteps the boundary of knowledge, however, when he also argues that market solutions to societal problems are likely to reduce human welfare, and that society is greater than the sum of its parts. Keen either lacks understanding of economics, or how economists actually go about their art, or— more likely— is somewhat disingenuous. All in all, Keen has done an excellent hatchet job. Most of this hatchet job occurs through misrepresentation…
    To be blunt, Debunking Economics is yet another tome dressed up in academic respectability that preaches left-wing views and opinion. It must be considered as one of many books critical of ‘economic rationalism.’ This is most unfortunate and disappointing. Keen is capable of better. The issues he raises are important and should be discussed. Keen, however, has given up the argument, as he indicates in the first chapter, ‘No More Mr Nice Guy.’ It is not good enough to argue that economics is wrong because hooligans protest outside Nike stores and the World Bank. Something is wrong with how undergraduate economics is taught. The quality of economic analysis in Australia is poor. It is too easy to be seduced into empty slogans and dogma. But that does not mean that the dogma is wrong.
   
Keen believes that markets do not work well. It is possible that they don’t work well relative to a mathematical ideal, but do they work in practice? Consider a simple thought experiment: Take an economy and arbitrarily divide it into two pieces. Allow the market to operate in one piece, and government to run the economy in the other piece. Fast forward by fifty years and observe what has happened. It turns out that West Germany and South Korea prospered relative to East Germany and North Korea when this experiment was actually conducted. If market economics is wrong, Keen needs to explain this ‘anomaly’.
   
Keen’s book will get the attention it deserves, on average. Those who are already predisposed to his views will quote it [and interview him on state radio]. Those who are not so predisposed will not read it. To that extent, Keen has not contributed to a debate, but rather to a tirade

Keen is rightly concerned about what undergraduates are taught, but what he proposes is little better, or even different. He rails against modelling and over-mathematicisation—but works himself on mathematical models. He opposes economic forecasting, but bases his own reputation on the forecasts he so frequently issues.  He is rightly engaged about unsustainable debt-to-GDP-ratios, but wrongly concerned about the deleveraging necessary to reduce debt, and quite wrong about deflation—for which falling prices are actually the antidote.  He criticises central banks for allowing the unsustainable expansion of credit by fractional reserve banks, yet like all so-called "Post-Keynesians" lets the central bank itself off completely off the hook.  He attacks economists who base their theories on failed ideology and inadequate theories of human behaviour, yet bases his own on Marx’s wholly unsound and thoroughly debunked labour theory of value.

Still, if you insist on paying through the nose to hear him talk, why not take along a couple of curly questions along with you.

* * * *

* Patterns of Sustainable Specialization and Trade

Monday, 3 September 2012

Charter schools are bad

Here’s a way some people have been criticising charter schools lately: that because they’re so successful, they’re dragging back into the taxpayer-funded school system students who would otherwise have gone to private fee-paying schools.

It’s not really a criticism, is it. It’s an endorsement. And it appeared in the LA Times, which reported a study that found “more than 190,000 students nationwide had left a private school for a charter by the end of the 2008 school year, the most recent year for which data was available. And charter schools have exploded in number since that time.”

Students are leaving fee-paying American private schools for public charter schools in such numbers because their parents like what they’re seeing.  The growth of charter schools, a charter school advocate told The Times,

i a testament to their academic success and popularity with families, and the movement should be nurtured and emulated.

Hard to argue with that.

Sure, it can be rough on some private schools when the government’s factory schools are made better. And there is certainly going to be firestorm of rent-seekers looking to pull down big bundles of taxpayers’ money to run a school.  But as the Practice Good Theory blog argues:

The solution, of course, is to privatize the entire system. Short of that, one has to decide who should be sacrificed: the owner of the private school, or the kid who is forced to attend a school that's so bad that parents would rather have him in a private school.
Schools should be privately-funded. I think the criticism from private school owners is valid. Nevertheless, if schools are going to remain largely tax-funded, charter schools are one way of getting better quality.

ECONOMICS FOR REAL PEOPLE: ‘When Ideas Have Sex’

Since students are away again on holiday this week, I’m told there is no ‘Economics for Real People’ session tonight.

So to keep your brain active until next week, when uni students finally return, have a think about this 16-minute talk by Matt Ridley, author of The Rational Optimist (a great companion to discussions of spontaneous order).

What he is talking about here is the Division of Labour—as talked about earlier in the year—particularly the importance of the Multiplication of Knowledge that is only possible in a division-of-labour society.

Not a lot to choose from [updated]

Unlike so many of the folk I follow on the net, I managed to avoid watching any of the Republican convention over the last few days. But I couldn’t avoid all their commentary. I liked this from Myrhaf at the New Clarion:

Had H.L. Mencken been revived from his grave to watch the last night of the Republican National Convention, he would have recognized the scene. He would have heard the anecdotal, folksy speeches, the paeans to family and God, and he would have understood that the booboisie [def’n: “stupid people as a class; class consisting of all those who are considered boobs”] is alive and well in America. He would have said something wittier than even Mark Steyn or James Wolcott could come up with and then asked to be killed and returned to his grave…
    Listening to speech after speech I wondered, “Is this the best the Republicans can do?”

That’s what I wondered too as I read the commentaries .

Romney should win in November. With the economy as bad as it is, in the worst recovery since the Great Depression, the election should not even be close.

That it probably will be be close demonstrates there is no confidence that Romney will be any better at bringing about recovery (or keeping out of the way of it) than either Obama or his Republican predecessor George Bush.

This is an important election, but no-one important from which to choose. The left are intellectually bankrupt.

I understand that the Obama campaign and their Democrat PAC’s have spent, according to one number I read, $120 million attacking Mitt Romney. (Obama has outspent Romney three to one so far, but that does not stop him from whining because Romney now has more money.) I understand that the American people, in our dumbed-down age, are susceptible to such an idiotic argument as Romney is mean because he ran a company that, in the course of restructuring businesses, fired people. (And that attack is the Democrats at their most intellectual. When you descend below that, you get nonsense about Romney being mean to his dog. Seriously. This is what the left has become.)

And the Republicans?

I still wonder why they had to devote so much precious airtime to “humanizing” Mitt Romney. And I laugh at right-wing pundits joyously proclaiming, “He’s human! He’s human!” Great. So glad the GOP didn’t nominate an alien from space. Can you imagine Goldwater succeeding in today’s milquetoast Republican Party?

The Republicans neither understand nor stand for capitalism—and  if they don't stand for capitalism they stand for and are nothing. Which is why they spend so much time apologising for it, and trying to “humanise” those issuing the apologies.

With the Greater Depression about to get serious (you think it’s been bad since 2007? you ain’t seen nothin’ yet!) whoever occupies the White House in the next four years will be the one making it worse in an attempt to make it better.  So this election does matter.

Except the difference between what the two will do is minimal.

When things finally do get too bad to bury any longer and all the deficits finally do hit the fan, the occupant then will act according to his lights—and not according to his election promises, which wouldn’t have included the possibility of catastrophe.

And what will each do? My guess would be that in trying to protect America’s unaffordable social-welfare programmes and his own socialist “rescue” programmes from bankruptcy, Obama will succeed only in burying America. Whereas Romney will perhaps tinker with the programmes that are burying America in deficits, but bring in the sort of protectionism that could begin burying the whole world.

From this perspective at the bottom of the South Pacific, that’s not a lot to choose from.

Undiscovered resources do not constitute wealth [updated]

The Waitangi Tribunal says that Maori can own water and do own water—and the government should “negotiate” before selling shares in power generators.

I argue that water can be owned, that water rights can be proven, and that anyone who is able to prove suitable attachment to a resource is entitled to lay a claim to it under common law. Which is a good thing.

Strange however that the Maori Council’s claim that iwi own river water only came about when a Waitangi windfall was in the offing. Before that the resource lay unclaimed.

That is telling.

Because not only was the resource not being used both continuously (as proof of ownership) and unchallenged (as if it were owned)—both conditions being requirements for recognising property rights under common law—the fact water could be a resource to iwi for power generation had not even been recognised. And nor could it.

And as Gary Judd argues, undiscovered resources like this do not constitute wealth.

UPDATE: John Key’s only programme for this term involved half-selling a small number of assets. And now they won’t be..

Friday, 31 August 2012

FRIDAY MORNING RAMBLE: The Conscience Edition

With two conscience votes this week recognising the right of consenting adults to choose for themselves, it turns out MPs do have a conscience.

Bravo!

Yes, that’s me saying “Bravo!” to politicians.  It happens. Rarely.

Make the most of it.

“Just when you start to lose hope in Representative Democracy and write the lot of them off as a bunch of out-of-touch buzzword-infested den of compromised sluts, along comes a couple of old-fashioned conscience bills to clear the air.”
Same -sex marriage and the age of alcohol – Will de Cleene, GONZO FREAKPOWER BRAINS TRUST

Canterbury Uni economist Eric Crampton would like to remind you that problem drinking among 15-24 year olds was no different in 2006/2007 than in 1996/1997 before the change in the alcohol purchase age; that per capita alcohol consumption is down substantially since 1991; and light drinkers have about a 14% reduction in their chance of dying from any cause than people who never drink.
And along with that evidence there’s evidence of some very serious figure-fudging by wowsers, and some seriously unintended consequences in the US of raising their drinking age.  “Be skeptical of the moral crisis around alcohol,” he concludes.
Alcohol purchase age – Eric Crampton, OFFSETTING BEHAVIOUR
Alcohol stats– Eric Crampton, OFFSETTING BEHAVIOUR

Oh, by the way, widely-quoted state-funded anti-alcohol wowser Doug Sellman is dishonest.
Disclosures – Eric Crampton, OFFSETTING BEHAVIOUR

There is good reason for the advocates of individual liberty to be rejoicing tonight, as the alcohol purchase age stays at 18 for both on and off license purchases.
Act Party Fails to Increase Off-License Purchase Age – Stephen Berry, SOLO

It’s not often you can enjoy a speech by a Green MP.  Now is such a time.

“This morning Recovery Minister Gerry Brownlee gave a comprehensive and wide ranging "State of the Recovery" speech to selected business people, media and others.
The speech was carefully crafted by the bureaucrats, with extensive statistical information, illustrating the recovery "performance" to date. Most importantly, it was carefully drafted, to persuade the public to support the Minister and his officials’ "vision" ("nightmare" to the rest of us) for the future of Christchurch.
But when the dreary hype and cherry-picked information is considered alongside the realities and the train of events - it is not a rosy picture…
Brownlee;s long winded "Kremlin Style" speech to the compliant and cowering adherents to the Party Line, could most kindly be described as "bureaucratic bull.”
Brownlee’s “State of the Non-Recovery” Speech
- Hugh Pavletich, CANTABRIANS UNITE [scroll down to story and click “read more.”]

Land prices are exploding across Australia for the same reason they have ben here: because the planners having been locking up the land.
The Land Bubble – Leith Van Onselen, MACROBUSINESS

Sadly…
Ryan’s Economic Plans Aren’t as Ayn Rand-Based as You Think – Harry Binswanger, YAHOO NEWS

Obama says, “Honey, you didn’t build that.”

Sure, it’ll all be okay as long as we all go down together.
Chicago Fed President Wants Global Money Printing – ECONOMIC POLICY JOURNAL

While know-nothings continue to fiddle, American capital is being burned up just staying afloat. “Enterprises are consuming themselves to report rising profits while revenues fall and costs rise.”
CHART OF THE DAY: The Historic Decline In The US Capital Stock Is A Bad Sign For The Economy – BUSINESS INSIDER

Making the point that there’s a very big difference between productivity and profitability
Gross and net product – Toby Baxendale, COBDEN CENTRE

So repeat after me:
The Key To Escaping Poverty Is Productivity – PETER SCHIFF BLOG

America, however, is becoming a nation of moochers.
The Rot Runs Deep 2: Don't Call Out My Scam and I Won't Call Out Yours 
– Charles Hugh Smith, OF TWO MINDS

“The United States has produced one of the most successful economic stories in human history…Each advance built upon the innovations of the previous ones, along the way boosting productivity and revving the American economy, which in turn made American consumers richer and more able to buy stuff.
Well, guess what? Future growth in consumption per capita — the main engine of the consumer-based US economy — could fall below 0.5 percent a year for an extended period of decades."
The US Economy and the Future of Growth: Well This Is Depressing – CNBC

In Europe meanwhile, the next stage begins: moves to initiate the European Federalist state are being demanded.
With Vacation Over, Europe Is Back To Square Minus One: Merkel Backs Weidmann, Demands Federalist State – Tyler Durden, ZERO HEDGE

“Today billionaire Eric Sprott spoke with King World News about one of his frightening predictions, “I always postulated that the financial system would go bankrupt, and it has, save for one thing, it got bailed out.” 
Sprott - We Are Staring At Chaos & Collapse In Front Of Us – KING WORLD NEWS BLOG

“Economic wizard Harry Schultz stated back in the early 2000's that what he anticipated was "ten years down and ten years up." At the time, many thought that his projection was extremely prolonged…”
After the Storm - The 11 Stages of the Crash – Jeff Thomas, CASEY RESEARCH

The perfect analogy for the “heavy lifting” of the central bankers, wonders Tyler Durden, and an illustration of the likely outcome?

For many years, says the BBC, calling for "a return to the gold standard" in the United States put you in the company of economic eccentrics and libertarian Congressman Ron Paul. But this week, the Republican Party agreed to set up a commission to look into fixing the gold value of the dollar. Why?
Gold standard: Could it return in the US? – BBC MAGAZINE
The Gold Standard Goes Mainstream – Seth Lipsky, WALL STREET JOURNAL
The Gold Commission 2, Don't Make Me Laugh – Gary North, ECONOMIC POLICY JOURNAL
Ron Paul's Platform Victory on the Federal Reserve and A (Sort of) Gold Commission – HIT & RUN
Could the US Republican Party take gold seriously? – Steve Baker, COBDEN CENTRE
Republicans Consider Returning To Gold Standard: Real Or Red Herring? – Tyler Durden, ZERO HEDGE

“Gold reveals governments’ deceitful actions in destroying the value of paper money and the wealth of nations. This is why most Western governments dislike gold. Because gold tells the truth and the truth is that since August 1971 the US dollar has declined 98% in real terms.”
Gold & Silver off to the races – Egon Von Greyerz

A pretty good history of the various gold standard flavours and subsequent monetary system changes from 1821 to today in a series of well put-together infographics that explode a few of the myths about gold standards. [Click the strip pic to enlarge it.]
A history of excahange rate regimes – GOLD MONEY

You know, there was a time when Alan Greenspan was not a know-nothing. That time was 1967…
Gold and Economic Freedom – Alan Greenspan, USA GOLD

Meanwhile, the money printing continues.
More QE is on the way – The central banks are digging themselves a deeper hole 
– Detlev Schlicter, PAPER MONEY COLLAPSE

A market economy is indescribably vast and complex—its success
depends on so many intricate, changing details all somehow being
made to work smoothly together that the “facts” that are essential
to its thriving cannot be catalogued with anywhere near the
completeness that can be achieved by a 21st-century scientist
studying and cataloging the “facts” that enable sparrows to fly. A
sparrow is complex compared, say, to a limestone rock. Compared
to the modern market economy, however, a sparrow is extremely simple.
- Don Boudreaux, “Deep and Unobservable Complexity,” CAFE HAYEK

Never has economic education been so important. Time then for a new super-blog at Sci Blogs “picking posts from our country’s top economics blogs.” This blog wishes that blog well. Here’s it’s first po:
The Dismal Science – THE DISMAL SCIENCE

Astonishingly, there are even alleged economists who insist the Nazi economy was an example of “intelligent central planning.”  They can’t do that after the release of British historian Adam Tooze’s book on the Nazi economy, The Wages of Destruction. “He shows that, far from illustrating the success of intelligent central planning, the German economy of the Third Reich was a disaster.”
Central Planning: The Failings of a Nazi Economy – Bill Bonner, DAILY RECKONING

New film, Fraud: Why the Great Recession, a crowd-funded Spanish documentary, argues free markets are not to be blamed for the Great Recession. “On the contrary, its origins rest upon the deep government and central bank intervention in the economy. Through fraudulent mechanisms, this causes recurrent boom and bust cycles: bad policies create phases of irrational exuberance, which are then followed by economic recessions, a result from which every citizen ends up suffering.”  The truth is we do not live in an age of free markets. We live in an age of monetary socialism.
Here’s the three-minute trailer (and here’s the full 66 minutes):

Everybody talks about gun control. But nobody talks about controlling the government’s guns. Yet the threat of deadly force is implicitly present in every law, regulation, ruling, or decree that emanates from any government office, at any level.
Gun Control — on the Government's Guns – George Reisman, MISES DAILY

“I contend that the developing world has been betrayed. Emerging from colonialism, they sought the best ideas to advance and develop, for the best reasons. But they were betrayed. Instead of the ideas that made the West great, they were offered the evil nonsense of socialism and communism by our intellectuals. In comparison, the faith healers who convince their duped followers to forgo scientific medicine in favour of faith are clean and wholesome. This is the crime for which I can never, ever forgive our intellectuals.”
Capitalist Internationalism and How Objectivist Victory Will Become Inevitable. 
– Hugo Schmidt, SOLO

“It should be clear that any governmental interference with the
depression process can only prolong it, thus making things worse
from almost everyone’s point of view. Since the depression process
is the recovery process, any halting or slowing down of the process
impedes the advent of recovery. The depression readjustments must
work themselves out before recovery can be complete. The more
these readjustments are delayed, the longer the depression will have
to last, and the longer complete recovery is postponed.”

- Murray Rothbard

Marc Morano takes a reality check on the 1970s: “Fears of a coming ice age, showed up in peer-reviewed literature, at scientific conferences, by prominent scientists and throughout the media.”
Don't Miss it! Climate Depot's Factsheet on 1970s Coming 'Ice Age' Claims 
– Marc Morano, CLIMATE DEPOT

Flashback to 1974, and Der Spiegel says: “Temperatures Over Last 20 Years Have Dropped Faster Than At Anytime In The Last 1000 Years,” blaming expanding deserts on man-made cooling.
Spiegel 1974: “Temperatures Over Last 20 Years Have Dropped Faster Than At Anytime In The Last 1000 Years” – NO TRICKS ZONE

A new study finds man-made CO2 can not be a driver of global warming. The study concludesCO2 released from use of fossil fuels have little influence on the observed changes in amount of atmospheric CO2.”  The paper finds “overall global temperature change sequence of events appears to be from 1) ocean surface to 2) land surface to 3) lower troposphere.”
In plain English then, the very opposite of what warmists claim.
New blockbuster paper finds man-made CO2 is not the driver of global warming – THE HOCKEY SCHTICK

Another new film, The Boy Who Cried Warming… (watch the full thing here).

In 95% of cases natural talent does not determine who will be an expert at something. So what does it take to become the best?
What does it take to become an expert at anything? – BARKING UP THE WRONG TREE

imageWant to see the top-15 most spectacular logo failures ever? Like this one on the right, an actual award-winning logo designed in 1973 for the Catholic Church’s Archdiocesan Youth Commission.
Top 15 Worst Logo FAILS Ever – BORED PANDA

It can be easier than you think. Just get out there and start making money.
4 Myths About Starting a Side Business- MONEY CRUSH

It very nearly fall right off the keyboard through lack of use. And then it met the internet age!
The accidental history of the @ symbol – 3 QUARKS DAILY

Just when you thought it was safe to go back in the water, along comes a drunk Serb.
Sharks Wary of Drunk Serbs – MACEDONIA ONLINE

Free Apps make more money. Apparently.
How Free Apps Can Make More Money Than Paid Apps – TECH CRUNCH

Don’t laugh. We have a bar at the Auckland waterfront named after another mass-murderer.
In India, Businesses Named After Hitler Defend Their Decision – NY TIMES

Bowing to pressure from U.S. Muslim groups, actor Kevin Bacon announced he will be formally changing his “offensive” last name.
Actor Kevin Bacon Changing Last Name To Appease Muslims – DUH PROGRESSIVE

Not so fast, folks. The world’s first porn cartoon--from the 1920s!--has been uncovered. And it’s even more NSFW than anything you’d find today.
One of the earliest adult cartoons was gonzo even by today’s standards (NSFW) – iO9.COM

Rare footage of an aging but still tuneful Coleman Hawkins playing his classic interpretation of Body and Soul. Compare it here with him at the peak of his powers.

Barry Adamson gets a special guest on vocals. But it’s not Dana Andrews…

Here’s the guest again, with the great Warren Ellis on violin. Some band starting with a ‘G.’

Try though she might, Verdi’s Lady Macbeth just can’t wash her hands clean of the blood…

[Hat tip Julian D., Gennady S., Bosch Fawstin, Keith W., Great Opera Videos, Noodle Food, Amanda Morrall, Climate Depot, Humble Libertarian, Chris Martenson, Erosophia, Thrutch]

Thanks for reading,
have a  great weekend! 
PC

PS: A very fine gentleman just walked in and handed me these attractive looking wares to sample over the weekend. My weekend will now be starting earlier than previously planned.

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