Friday 29 November 2013

Friday Morning Ramble: Thanksgiving Edition

No, New Zealand hasn’t succumbed to yet another American holiday. But the real story of Thanksgiving is such a fantastic story, even the pope couldn’t help but learn something from it.
How Private Property Saved the Pilgrims – Tom Bethell, HOOVER DIGEST
Some thoughts on Thanksgiving, from Ayn Rand – Tom Bowden, VOICES FOR REASON
Pope Francis shouldn't bite the hand that feeds the Catholic Church – Shikha Dalmia, WASHINGTON EXAMINER


“It happens every Thanksgiving: leftists crawl out from under their rocks and tell us that the holiday is a shameful celebration of ‘genocide.’ These days, their preferred medium is Twitter…”
Happy Genocide Day

Yes, the pope is a cock.
Pope Francis Blasts America – DR MICHAEL HURD
Pontificis Ignorantia – Peter Cresswell, NOT PC

Father Sirico talks about the value of free markets. “In this wide-ranging interview, he explains how he came to understand the value of the free market, realizing for instance how the radical redistribution of wealth could eviscerate the infrastructure of economic productivity.” Perhaps he could tell his boss.
Religion and Liberty – feat. Father Robert Sirico, LIBERTARIANISM.ORG

Graphs to be thankful for: Global poverty is plummeting.
23 charts to be thankful for this Thanksgiving – Dylan Matthews, WONK BLOG

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Colon Craig and property rights are strangers.
Even Conservatively Speaking, Colin Craig is a Disappointment. – Mark Hubbard, LIFE BEHIND THE IRON DRAPE

“Working for Families” and “helping families out of poverty” are strangers.
Lindsay Mitchell on Working for Families – Lindsay Mitchell, WHALE OIL

When it’s alcohol and tobacco, costs are measured and manufactured, while benefits are largely ignored. Large sporting events,just the opposite.
Olympics don't pay – Paul Walker, ANTI DISMAL

There are worse things than driving hungover.
Driving while.... – Eric Crampton, OFFSETTING BEHAVIOUR

Well, that’s a little awkward for local Nannies.
No fall in smoking since plain packaging – VELVET GLOVE, IRON FIST

I tell you, nothing escapes researchers at top New Zealand universities, does it.
Blogs have become more influential and prominent in New Zealand – report – A.U.T., SCOOP

What do you do if you’re spending other people’s money on yourself? You spend $1.2 million on a "cafe-style space" in a building with a lease that expires next year.
Seven Sharp on Transpower's $1.2million cafe/reception – NZ TAXPAYER’S UNION
Waste Watch: Transpower spend $1.2million on a cafe and reception – NZ TAXPAYER’S UNION

The article and comments suggest some Cantabrians at least are beginning to realise that top-down central planning is not just failing to give them back their city, it’s also immoral.
This is theft, it's not right – Johnny Moore, STUFF

“Innovation does not appear to be a depleting resource but
an expanding, open-ended one. Instead of encountering
diminishing returns, new advances appear to be
expanding the horizon of new possibilities.”
- Robert Bradley, Julian Simon and the Triumph of Energy Sustainability

Technology creates supply. The mind creates technology. So the Ultimate Resource is … ?
Julian Simon and the Triumph of Energy Sustainability” Revisited: Part I – Sandy Liddy Bourne, MASTER RESOURCE
Julian Simon and the Triumph of Energy Sustainability” Revisited: Part II - Sandy Liddy Bourne, MASTER RESOURCE

Why we should be thankful to the innovators.
Thank Inventors and Innovators for a Better Life – Doug Bandow, CATO

How often have warmists peddled the starvation scare?
Warmists preach hunger, but crops grow and grow (above) – ANDREW BOLT

“Frankly, for me,” Carter said, “it is utterly astonishing that on the basis of five data points the world has been talked into revolutionizing its energy economy . . . .” Bob Carter, Fred Singer et al visit the Ayn Rand Institute to talk climate science.
Putting climate change in context: A Heartland Institute panel – Amanda Maxham, VOICES OF REASON

So, if CO2 causes more extreme weather, why aren't we seeing more extreme weather?
New report published today by the Global Warming Policy Foundation concludes that weather events are not increasing – GLOBAL WARMING POLICY FOUNDATION

And…
NOAA: 2013 had fewest hurricanes since 1982 and no major hurricanes formed – THE HOCKEY SCHTICK

It’s not warming that kills people en masse. It’s cold.
Far unfit to bear the bitter cold – BISHOP HILL

The truth about the global warming agenda, by former NASA climatologist Roy Spencer…

Has Krugman recognised The Fed is forever blowing bubble?
So, Are Summers and Krugman Now Confirming That The Austrians Have Been Right About Bubbles? – Bob Murphy FREE ADVICE

Does Australia violate supply and demand?
The Minimum Wage: Are Economic Laws Valid in Australia? – Ben O’Neill, CIRCLE BASTIAT

Not a lot of people know this.
A (Visual) Tale of 25 Cities (And Half The World's GDP) – ZERO HEDGE

Students complain about their economics courses, but are not too sure what they’re complaining about.
Mathematical economics ≠ free market, heterodox economics should ≠ Marxism – Philip Booth, IEA.ORG

“If we send our brightest thru same dull texts, doing nothing but statistics the chance of better economists is remote.”
Making economists better economists – Steven Kates, CATALLAXY FILES

“The great thing about a bubble in a virtual currency is that there are so many nerds producing sexy charts to track it.”
Bitcoin is a global “tulip” – Houses and Holes, MACROBUSINESS

“Forget the Turing Test, I want the Trolling Test: an AI is intelligent
if it can have a conversation with a troll and not take the bait.”

- Neuroskeptic

Well, it’s not like ObamaCare came totally out of the blue, is it.
I guess I should’ve seen this Roosevelt-Roosevelt-Truman-Kennedy-Johnson-Nixon-Carter-Reagan-Clinton-Bush-Obama-care thing coming – Amanda Maxham, VOICES OF REASON

“Peace in Our Time,” said Neville Chamberlain after striking his deal at Munich that led inevitably to war. Is Obama’s deal with Iran worse?
Worse Than Munich – Ben Shapiro, BREITBART

So, Time’s Person of the Year 2013: Edward Snowden, or Miley Cyrus?
Vote Now: Who Should Be TIME’s Person of the Year? – TIME MAGAZINE

And Time’s Person of the Year, 2012? He could hardly be more clear:

Is there a worldwide backlash against hysteria and moral alarmism?
Monty Python's Terry Gilliam: ‘Operation Yewtree is a witch-hunt’ – SPIKED
Chris Trotter on Radio NZ’s Panel [from 8:00] – RADIO NZ AUDIO
Twitter Reaction to Chris Trotter on Radio NZ – TWITTER

The "Brixton slaves" story: it's bullshit, why won't anyone admit that?
The half-truths and wild claims of the Brixton slave story – Brendan O’Neill, SPIKED

Pat Condell: “A female convert to Islam is like a person who knocks on the door of a prison asking to be let in.”
New Muslim women honored in Jeddah – ARAB NEWS

Noam Chomsky seemed to have a handle on postmodernism.
Chomsky on postmodernism – STEPHEN HICKS

Aren’t pomowankers fun when they get a rant on. (Quick, shave your legs before the Feminazis come.)
Why Movember isn't all it's cracked up to be – NEW STATESMAN

Cuba with your eyes open.
Welcome to Cuba – Michael Totten, WORLD AFFAIRS

You wonder why youngsters emerge from school with munted brains? Take a random trawl through the “sustainability” modules they have to endure. Go on, dip in.
Describe world views, their expression through practices and activities and the consequences for a sustainable future – Standard 90812, NZQA

Should everyone have the vote? America’s founding fathers didn’t think so.
Madison: Who should vote? – Gene Callahan, LA BOCCA DELLA VERITA

Time to update the UK’s Bill of Rights.
How Britain invented freedom - and why we need to save it now – Daniel Hannan, SPECTATOR

AR_TalbotPortraitSo why’s everyone taking pot shots at Ayn Rand all of a sudden?
Shooting Ayn Rand – Steve Simpson, VOICES OF REASON

“My dear architects. This is why Starbucks designed round tables in their stores. They were strategically created ‘in an effort to protect self-esteem for those coffee drinkers flying solo.’ They were not round because the architect felt it looked better that way, they were not round because they were cheaper, they were round because as the article concludes ‘there are no empty seats at a round table.’”
What Starbucks Gets that Architects Don’t – ARCHITECTURE LAB

“Fantastic” meaning: a thing of fantasy…
Top 25 Fantastic Soviet Buildings

So maybe feminists are wrong about “the body standard”?
The extremely wide variety of body types among top-tier athletes – 22 WORDS

Two young men to keep an eye on: Two homegrown NZers taken in the AFL’s rooky draft, and now with everything to play for.
Tatupu and Heatherley flying high with the Hawks – AFL NZ

The World’s Most Libertarian Sport: Catch the local version, the Grand Final and Plate Final thereof, tomorrow on Auckland’s North Shore. (Carn the Raiders!)
Waitakere Magpies, Mt Roskill Saints in Auckland Grand Final – AFL NZ

Remember when Iron Mike could box?
Joyce Carol Oates on Mike Tyson – 3 QUARKS DAILY

It’s science, dummy.
Shocking Study Confirms Men Love Looking at Boobs - TIME

The cult of sour beers?
Sour beers: Not just a cult thing anymore – apparently – Neil Miller, MALTHOUSE

These guys are a hell of a lot of fun live.
Fill up the Tin – The MurderChord, BANDCAMP

The King’s Arms is busy these days. Neutral Milk Hotel last weekend…

…Otago Uni’s head of music on December 14…

…and here’s C.D himself, having been so intensely moved by his first sight of the sea.

[Hat tips Mark T.,  Ryan's Rantings, Morgan Godfery, Benjamin Pelc, Steve Milloy, Tom Nelson, David Lucas, Greig McGill, Pat Condell, Christopher Snowdon, TakingHayekSeriously, Ryan Mearns, Virginia Murr, nick, JWSpry, Ezra Klein, Rick Gator]

Thanks for reading,
Have a great weekend.
PC

Thursday 28 November 2013

Yes, we have no inflation

Isn’t it great how central banks have preserved “price stability” and the purchasing power of money?

image

Pontificis Ignorantia [updated]

“When you are talking about matters determining whether we eat or
starve it's a moral disgrace to be as intellectually flabby as Pope Francis.”
- Taking Hayek Seriously

“Pope Francis has denounced ‘trickle down economics.’ "It's not based on
facts," says man in giant hat who talks to invisible Sky Person.”

David Lucas

The new pope understands neither capitalism nor the Quran.

This is abundantly clear from his first manifesto, Evangelii Gaudium ("The Joy of the Gospel"), praised by his followers as “a new Magna Carta” for his reign over the world’s umpty-tum billion Catholics, whose release achieved overnight headlines worldwide for its rants about the "new tyranny" of "unfettered capitalism," and how Islam and the Quran “are opposed to every form of violence.”

The Pontifex is wrong on both counts.

As Todd Zywicki says at the Volokh Conspiracy about the pontiff’s “wrongheaded economics”:

Ever since the Galileo incident, the Catholic Church has generally tried to be careful to get its science right before it opines on ethical matters related to science. It takes seriously questions of bioethics and has developed internal expertise on those issues. Yet when it comes to economics, the Church seems to have no qualms about opining on issues of economics without even the slightest idea of what it is talking about.

Or about the Quran…

The pope is ignorant about the Quran

The bloke in a dress says Islam and the Quran “are opposed to every form of violence.” Courtesy of the Dwindling in Unbelief blog, “here are some verses from the Quran that the pope assures us are completely nonviolent”:

  1. Slay them wherever ye find them, and drive them out of the places  whence they drove you out ... If  they attack you (there) then slay them. Such is the reward of disbelievers. Quran 2:191
  2. Fight them until persecution is no more, and religion is for Allah. 2:193
  3. We shall cast terror into the hearts of those who disbelieve. 3:151
  4. Men are in charge of women, because Allah hath made the one of them to excel the other. ... So good women are the obedient. ... As for those from whom ye fear rebellion, admonish them and banish them to beds  apart, and scourge them. 4:34
  5. Those who disbelieve Our revelations, We shall expose them to the Fire. As often as their skins are consumed We shall exchange them for fresh skins that they may taste the torment. 4:56
  6. Those who believe do battle for the cause of Allah; and those who disbelieve do battle for the cause of idols. So fight the minions of the devil. 4:76
  7. Choose not friends from them [unbelievers]. ... Take them and kill them  wherever ye find them. 4:89
  8. Take them [unbelievers] and kill them wherever ye find them. Against such We have given you clear warrant. 4:91
  9. The disbelievers are an open enemy to you. 4:101
  10. Choose not disbelievers for (your) friends in place of  believers. Would ye give Allah a clear warrant against you? 4:144
  11. The only reward of those who make war upon Allah and His messenger ... will be that they will be killed or crucified, or have their hands and feet on alternate sides cut off, or will be expelled out of the land. Such  will be their degradation in the world, and in the Hereafter theirs will be an awful doom.5:33
  12. As for the thief, both male and female, cut off their hands. ... An exemplary punishment from Allah.5:38
  13. Take not the Jews and the Christians for friends. ... He among you who taketh them for friends is (one) of them. 5:51
  14. The Jews ... We have cast among them enmity and hatred till the Day of Resurrection. 5:64
  15. I will throw fear into the hearts of those who disbelieve. Then smite the necks and smite of them each finger. 8:12
  16. Fight them until persecution is no more, and religion is all for Allah. 8:39
  17. It is not for any prophet to have captives until he hath made slaughter in the land. 8:67
  18. Slay the idolaters wherever ye  find them, and take them (captive), and besiege them, and prepare for them each ambush. 9:5
  19. Choose not your fathers nor your brethren for friends if they take pleasure in disbelief rather than faith. Whoso of you taketh them for friends, such are wrong-doers. 9:23
  20. The Jews ... and the Christians ... Allah (Himself) fighteth against them. How  perverse are they! 9:30
  21. O Prophet! Strive against the disbelievers and the hypocrites! Be harsh with  them. Their ultimate abode is hell, a hapless journey's end. 9:73
  22. O ye who believe! Fight those of the disbelievers who are near to you, and  let them find harshness in you. 9:123
  23. But as for those who disbelieve, garments of fire will  be cut out for them; boiling fluid will be poured down on their heads, Whereby that which is in their bellies, and their skins too, will be melted; And for them are hooked rods of iron. 22:19-21
  24. Muhammad is the messenger of Allah. And those with him are hard against the disbelievers and merciful among themselves. 48:29
  25. Those who take for friends a folk with whom Allah is wroth ... Allah hath prepared for them a dreadful doom. 58:14
  26. Tell their  brethren who disbelieve among the People of the Scripture ... that they verily are liars.59:11
  27. O ye who believe! Choose not My enemy and your enemy for allies. Do ye give them friendship when they disbelieve? 60:1
  28. O Prophet! Strive against the disbelievers and the hypocrites, and be stern with them. Hell will be their home, a hapless journey's end. 66:9

Even the popes’ predecessor knew better. Islam, said Ratzinger, was violent and “spread by the sword.” As does Pope Francis’s fellow Jesuit Samir Khalil Samir who, writing in his 111 Questions on Islam,  argues Westerners like his boss who assert that groups like the Taliban are acting in a manner contrary to the spirit of Islam “usually know little about Islam.” In the Egyptian-born Jesuit’s view, “On the sociohistorical level, from the Qur’an onward, the ordinary meaning of jihad is unequivocal. [It] indicates the Muslim war in the name of God to defend Islam.”

So perhaps this pope should read Mr Samir. Or Ratzinger’s early speeches. Or just survey the litany of recent history.

The pope is ignorant about capitalism

The pope thinks the world is awash with “unfettered capitalism”—which is news to those who actually can distinguish between free markets and phony crony capitalism.

But even his “analysis” of market activities themselves is so bad it would embarrass a choir boy. (Much of his mush is so bad it is literally indistinguishable from the rants of Karl Marx.) Robert Wenzel marks the pope’s paper, adding a few important corrections:

Says the pope: “Today everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.”
Robert Wenzel comments: The powerful feed upon the powerless only when there is a government to protect the operations of the powerful. Under a free market system, businesses that do not provide goods consumers desire will fail.

Says the pope: “In this context, some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world…”
Robert Wenzel comments: Free markets are not about "trickle down" economics. It is about businesses providing products that consumers desire. The Pope is deeply confused about the difference between free markets and fascist economics. He has a very pedestrian view, not supported by analysis [nor by
the facts of the astonishing improvements markets have delivered in improving the human environment which have “seen us banish starvation and famine from a large part of the Earth.”]

Says the pope: “While the earnings of a minority are growing exponentially, so too is the gap separating the majority from the prosperity enjoyed by those happy few. This imbalance is the result of ideologies which defend the absolute autonomy of the marketplace and financial speculation. Consequently, they reject the right of states, charged with vigilance for the common good, to exercise any form of control…”
Robert Wenzel comments: Incredibly, the Pope does not understand that it is government regulations that protect the major corporations from start ups and suffocate the process of growth and innovation. [In other words,
it is the very controls he espouses that make monopoly and cronyism possible.] Calling for government to  exercise more control is not much different than inviting the devil to deliver the Sunday sermon.

Waiting in the wings at Reason magazine, Matt Welch lets rip:

I don't wish to stand in the way of people enjoying other people's prejudices, but Francis's hyperbolic rants about the role and allegedly dictatorial power of free markets are embarrassing in their wrongness. Cheering them on is like donating money to a Creationist Museum, only with more potential impact. To take one papal passage out of dozens:

_Quote_IdiotToday everything comes under the laws of competition and the survival of the fittest, where the powerful feed upon the powerless. As a consequence, masses of people find themselves excluded and marginalized: without work, without possibilities, without any means of escape.

"Without any means of escape," the man said. ||| The EconomistMore people have escaped poverty the past 25 years than were alive on the planet in 1800. Their "means of escape" was largely the introduction of at least some "laws of comp etition" in endeavors that had long been the exclusive domain of authoritarian, monopolistic governments. Here's The Economist:

In 1990, 43% of the population of developing countries lived in extreme poverty (then defined as subsisting on $1 a day); the absolute number was 1.9 billion people. By 2000 the proportion was down to a third. By 2010 it was 21% (or 1.2 billion; the poverty line was then $1.25, the average of the 15 poorest countries’ own poverty lines in 2005 prices, adjusted for differences in purchasing power). The global poverty rate had been cut in half in 20 years.

The country that cut poverty the most was China, which in 1980 had the largest number of poor people anywhere. China saw a huge increase in income inequality—but even more growth. Between 1981 and 2010 it lifted a stunning 680m people out poverty—more than the entire current population of Latin America. This cut its poverty rate from 84% in 1980 to about 10% now. China alone accounts for around three quarters of the world’s total decline in extreme poverty over the past 30 years.

And don't forget Africa and India!

In Africa, inflation-adjusted per capita incomes rose by an astonishing 97 percent between 1999 and 2010. Hunger in India shrank by 90 percent after the country replaced 40 years’ worth of socialist stagnation with capitalist reforms in 1991.

To look upon the miracles of this world and lament the lack of "means of escape" is to advertise your own ignorance. To call it a "tyranny" is to do violence to any meaningful sense of that important word

To see real grinding poverty, and understand how wrong he is, this pope simply needs to visit with his eyes open those countries whose leaders actually do value tyranny over markets, from many of which there is literally no escape. Like Cuba. Or Zimbabwe. Or Burma. Or North Korea...

There is no reason to believe this pope has a clue what he is talking about

By virtue of tradition, the pope demands unthinking obedience from his followers, offering solace to too many people weak enough to have to seek answers from pedlars of hope.

But those answers are bilge, which if taken seriously are deadly.

Here’s The Damned:

RELATED READING from around the traps:

  • “It seems the official position of Pope Francis is that the free market is a wicked enemy that must be restrained. With all due respect, he's mistaken. The free market has been a heavenly blessing... Actually, no economic system has brought more prosperity to more people than free-market capitalism. Neither socialism nor communism has increased prosperity, and are themselves ruled by tyrants.
        “Both have certainly brought more equality, which Francis believes is important. But it's an equality of misery.”
     Pope Francis Is Wrong: Free Market Is Not A Tyrant - I.B.D. EDITORIAL
  • Brain-teaser: Who said it…
    Karl Marx or Pope Francis? – Kieran Healy, CROOKED TIMBER
  • Thomas Sowell on the history of the rhetoric & economics of ‘trickle down economics’” “No such theory has been found in even the most voluminous and  learned histories of economic theories…”
    “Trickle Down” Theory and "Tax Cuts for the Rich" – Thomas Sowell, HOOVER INSTITUTE [19-page PDF]
  • “The economic reflections that loom large throughout the Pope's Evangelii Gaudium are very hard to defend.”
    Pope Francis and Poverty – Samuel Gregg, NATIONAL REVIEW
  • “It would make for some pretty amazing headlines if Pope Francis turned out to be a Marxist. Between his hints at rehabilitating liberation theology—condemned by his predecessors—and talk about casting off "the economic and social structures that enslave us," Marxism isn't totally out of the question… But you know whom he might plausibly be matched with, though?”
    Pope Francis's Theory of Economics – Heather Horn, ATLANTIC
  • The Pope doesn't understand the difference between truly free markets and Crony Corporatist Capitalism.
    Welcome to the New Corporatism – Samuel Greeg, ACTON COMMENTARY
  • “In Francis we see a charismatic advocate for Econ policies of type that have failed & failed & failed again.”
    The Pope, Again – Andrew Stuttaford, NATIONAL REVIEW

Wednesday 27 November 2013

What’s a “narcissist,” doctor?

No, it’s not just my imagination. The word “narcissist” is being used more and more…

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… even as fewer people seem to understand what the word means—often being confused in being used to describe someone with a healthy self-esteem. Psychologist Michael Hurd explains the distinction is based on difference between a focus solely on “the inner, subjective ‘me’” of the true narcissist, and the focus on the “objective ‘out there’ (aka, reality)” of someone with a healthy self-esteem.

In other words, it’s the difference between being a “doer” and being a second-hander:

Two researchers recently concluded that narcissism involves a conviction of superiority over others, while genuine self-esteem has more to do with a positive self-image without reference to others. They hit on an important truth: There’s a difference between using others as your standard, and using a rational, objective definition (such as competence and performance) as a standard.
    Neurotic people look at what others are doing and try to beat them, and the mental health profession labels them “narcissists.” Healthy people determine what constitutes competence or excellence in a certain context and then they aim for it. They spend little time looking at what others are doing. Narcissists often come across as confident, but if you scratch beneath the psychological surface you’ll find nothing more than a compulsive concern for besting others. Genuinely confident individuals might enjoy beating others, but their primary goal is to live up to their own standard of excellence.
    For example, a study showed that college freshmen who based their self-regard primarily on academic victory over peers spent more time on their studies than other students but did not perform any better in their classes. Interestingly, those same students had more conflict with teachers and focused more on grades than on actual learning, suggesting that improving one’s mind and knowledge is superior to trying to get the best grade and beat everyone else out. And it supports what I’ve been telling people for years: If you simply concentrate on enjoying and excelling at your work, success will almost always follow.

[Hat tip Gus Van Horn]

World’s first “climate refugee” refused entry to NZ [updated]

Back in 2005, the United Nations Environment Programme (UNEP) predicted that climate change would create 50 million climate refugees by 2010.

In 2006, Al Gore’s film An Inconvenient Truth claimed "New Zealand may be refuge as rising sea levels displace hundred of millions of people." (John Key, for one, blithely sat through Gore’s presentation of this bunkum, leaving the Goracle’s Auckland presentation saying it had “pressed all his buttons”—presumably the ones that only function when his critical faculty is turned off.)

Yet by 2009, even the BBC were admitting “fears of millions of "climate refugees" crossing national borders are not supported by evidence on the ground.”

And by 2011, it was becoming clear “that the places identified by the UNEP as most at risk of having climate refugees are not only not losing people, they are actually among the fastest growing regions in the world,” and the UNEP was backpedalling as fast as it could. Which was not very fast.

Fast forward now to this morning, when Radio New Zealand and many other news services worldwide led news bulletins with news that New Zealand had received the world’s very first application for climate refugee status, and it has been declined.

A Kiribati man who argues he should be given refugee status in New Zealand because of the effects of global warming on the island, has been refused permission to challenge a decision denying him asylum.
    Ioane Teitiota, who is facing deportation after overstaying his visa, sought leave to appeal against an Immigration and Protection Tribunal decision, at the High Court in Auckland on 26 October.
    His lawyer spelled out how high tides breach sea walls on the island and said the ocean is contaminating drinking water, killing crops and flooding homes.

But the reason for drinking water in Kiribati being contaminated is not that Kiribati is sinking. It is that Kiribati has too many people, and too little rain.

Indeed, as Auckland University scientists established earlier this year, Kiribati is one of several Micronesian Islands that is not sinking, but growing.

"Eighty per cent of the islands we've looked at have either remained about the same or, in fact, gotten larger," said [Auckland University's Associate Professor Paul Kench, a member of the team of scientists].
    "Some of those islands have gotten dramatically larger, by 20 or 30 per cent.
    "We've now got evidence the physical foundations of these islands will still be there in 100 years."
    Dr Kench says the growth of the islands can keep pace with rising sea levels.

You can check for yourself the curious claim of disappearing islands with this time-lapse satellite photography of one of the Kiribati islands and this of another. [Hat tip Andrew Bolt] And compare them, and the evidence above and below, with claims still blithely recycled on Radio New Zealand this morning, that Kiribati is sinking.

Because if Kiribati does have a problem, it is emphatically not that it is sinking.

It is, perhaps, that it is becoming too overpopulated for the people it can support at its present state of industry. And its people seeking to emigrate are being persuaded to use spurious reasons to justify their emigration before tribunals indisposed to accept any reason at all to grant their wish.

UPDATE: Paul Van D. has sent me this animated Gif, toggling between the satellite photos of Kiribati island in 1984 (when satellite monitoring began) and 2012.

Kiribati_1984_2012

‘Aurea,’ by Steven DaLuz

Artist Steven DaLuz recounts the story from his gallery opening last weekend of

a young, 6 year old boy [below, who] sat down at the end of the bench to study my painting, "Aurea" (which in this shot looks quite small...but is actually 48" x 60"). He sat there for the longest time...I had to sneak up behind the bench and catch this shot. 95% of adults do not take this kind of time when looking at art...he really brought a smile to my face.

That’s how to engage with art.

Tuesday 26 November 2013

“Make me a German”

As Russell W. said in sending me this hour-long BBC doco about a British family “learning to be German” in order to discover why it is so productive, “some good insights here.” [And also from one of the “made Germans’” blogs here.]

There are many. One of the early ones comes from a visit to Nuremberg’s former rally grounds, and the German reaction to losing the War. It seems to give support to historian John David Lewis’s thesis.

Another is how the culture values productivity. Highly. Along with going home early.

How Mittelstand companies reflect those values.

How German capital if used more for investment than consumption.

The all-pervasive ethic of duty. The continuing influence of Kinder-Küche-Kirche.

Oh, and immigrants…and pretending you’re not living next door to a racist.

They knew how to make cough syrup in 1888

[Hat tip Capitalism]

Fossil fuels improve the planet [updated]

There are plenty of protestors around—many off Raglan today—wanting to tell you that fossil fuels are bad.

But too few folk who benefit from them wanting to tell you how fossil fuels improve the planet.

So thank goodness for Alex Epstein from the Center for Industrial Progress.

UPDATE: Greenpeace’s Mike Szabo debates this point and others, bless him, at StephenBerry’s Facebook post

Referendum: Can’t vote, won’t vote

The question asks:

image

My answer is, “No I don’t.” Which would no doubt please David Cunliffe, Russel Norman et al if I voted that way, which is the only alternative the voting paper allows me.

But my full answer is “No I don’t, because I support the Government selling off 100%…”

The 49% is a pathetic and destructive halfway house, offering none of the benefits of removing businesses from government management, and all of the problems. It maintains the fiction that government is a good manager of real assets. It maintains all the monopolistic nastiness associated with government control of a market in which it dominates. It disallows the possibility of entrepreneurial management of the assets controlled, finding maximum value out of some very important assets. It sucks away what would have been real investment capital and uses it instead to bolster the teeming red ink in government accounts—more welfarism, in other words, instead of more investment.

It is, in short, worse than selling nothing or everything, which my voting paper doesn’t allow me to say.

Which is the main reason it has just landed in the bin.

Exit one cricketer

A firestorm of sledging erupted in the first Ashes test between England and Australian, and now England batsman Jonathan Trott is heading home, citing a mental illness.

These things may be related, or they may not. But Trott’s public statement will hardly help him.

A weakness of character, Ian Chappell once said memorably, is like a weakness around off stump. Something to exploit.

However long it takes him to recover, Trott can look forward to being well exploited next time he appears at the crease.

Quote of the Day: On the Iranian ‘breakthrough’ [update 2]

"We are in essence paying Iran $5 billion to $10 billion, which it can use
to continue enriching and of course sponsoring terrorists. The communist 
adage that capitalists would sell them the rope to hang the capitalist is turned
on its head; we are now paying our enemies to manufacture the rope.”

- Jennifer Rubin, “The Iran deal makes clear it pays to enrich,” WASHINGTON POST

[Hat tip Terry V.]

UPDATE 1:

On the other hand:

“The principal benefit of the negotiations between Iran and the P5+1 nations on November 23 is that Iran and the United States were able to down to talk and reach an agreement on something
“[However,] the United States and its partners appeared tough and got very little. Iran appeared tough and gave up very little.”

- William Beeman, “The Iran Accord -- Profoundly, and Primarily, Symbolic,” HUFFINGTON POST

[Hat tip David McGregor]

UPDATE 2: Robert Tracinski on the alleged “breakthrough”:

It is important to understand that the Iran deal is not itself an actual agreement. It is an agreement to negotiate an agreement…
    I'm not sure whether any of this agreement is going to end up binding the Iranians, but I'll bet that it will bind the Western powers. It will set up exactly the kind of diplomatic regime that has prevailed with North Korea for the past few decades. It is an endless dance in which they break the agreement and we ratchet up the sanctions, and then we pull back the sanctions to induce them to come back for another round of negotiations, which look like they're going somewhere until they don't, and the whole cycle starts over again. As North Korea shows, none of this needs to stop when the Iranians actually manage to develop an atomic bomb. It just enters a new stage.
    Yet I can see why President Obama likes it…

Monday 25 November 2013

A song for the (barely) defeated

Here’s John Lennon on this morning’s result:

Fraudsters

Fraudsters can be very convincing, and very charming.

Allan Titford was not at all charming, but he did convince a lot of people he was genuine in saying he’d been wronged by the Government and the Waitangi Tribunal.  Turns out however, on the judgement of the courts, that much of what he said was made up—that he himself was responsible for the arsons he clamed had been committed by local Maori, Te Roroa—that their campaign to drive him off his land by violence and intimidation, in which he claimed the government and police colluded, was fiction and not fact.  Or, in the judgement of the court, fraud.

Turns out that instead of being wronged himself he had instead wronged not only those he accused but also all those who did believe in him and his stories--especially his wife, against whom he was found guilty last week of two decades of violence and sexual offences.

There are many who look askance at the 24-year sentence handed down to Titford, wondering if its relative length—compared to many lesser sentences for similar or greater crimes—might make him some sort of political criminal “fitted up by the state.”

On the other hand, those who generally argue for longer sentences, many of whom still appear to be Titford’s supporters, can hardly complain about a lengthy sentence handed down for conviction on 39 charges, including 14 of assault with a weapon, seven of assault, four of male assaults female, three of assault on a child, three of sexual violation, two of arson, and one charge each of using a document with intention to defraud, threatening to kill, assault using a weapon, perjury, attempting to pervert the course of justice and discharging a firearm.

Janet Yellen, Bubble Blowing, and a Coming Economic Nightmare

Guest post by Joseph Salerno

On Monday last week, former US Federal Reserve  official Andrew Huszar publicly apologized to the American public for his seminal role in executing the Quantitative Easing (QE) programme, a programme he characterises as “the greatest backdoor Wall Street bailout of all time,” and “the largest financial-markets intervention by any government in world history.”

While this is a momentous admission from an insider (Mr. Huszar is also a former Wall Street banker), perhaps Mr. Huszar’s most revealing statement concerned the results of QE’s “relentlessly pumping money into the financial markets during the past five years.” He referred to the spectacular rally in financial markets and expressed agreement with the growing belief among expert observers that market conditions had become “bubble-like.”

In a paper just released by the American Enterprise Institute, another former policymaker, resident fellow Desmond Lachman, formerly deputy director of the International Monetary Fund’s Policy Development and Review Department, warns that QE and other “unorthodox monetary policies” are having “unintended consequences.” Among other consequences, Lachman sees signs of incipient bubbles forming throughout the world:

An important aim of the QE policies pursued in the United States, the United Kingdom, and Japan has been to encourage risk taking and to raise asset prices as the means to stimulate aggregate demand. The question that now needs to be asked is whether these policies may have given rise to excessive risk taking, overleveraging, and bubbles in asset and credit markets. In this context, one has to wonder whether historically low yields on junk bonds in the industrialized countries now understate the risk of owning those bonds. . . . One also has to wonder whether yields on sovereign bonds in the European periphery have become disassociated from those countries’ underlying economic fundamentals and whether global equity valuations have not become excessively rich.

The markets for gems and for collectibles have also become very frothy of late. Yesterday, new records were set for a gemstone and for an Andy Warhol piece of art sold at auction. The “Pink Dream,” is a 59.60 carat vivid pink diamond, which is the highest colour grade for diamonds, and the purity of its crystals is ranked among the top 2 percent in the world. The record setting price was $83 million. Not coincidentally, the DJIA set an intraday record shortly before the auction. The new record price for the Andy Warhol piece was $105.4 million. The auction’s combined $199.5 million in revenues was also a record for Sotheby’s. During Sotheby’s Geneva fall auction season, records were also set for the prices of an orange diamond and a Rolex Daytona watch.

While the Austrian insight that super-accommodative Fed monetary policy may be causing a recurrence of asset bubbles is making headway in policy circles, it has not yet dawned on Janet Yellen. Nor is such an epiphany likely. Ms. Yellen wears the intellectual blinders of the mainstream macroeconomist which force her to focus narrowly on arbitrary and increasingly irrelevant statistical averages and aggregates like the CPI, the unemployment rate, and GDP and to ignore what is going on around her in real markets.

Paul, Ron

This was clearly revealed in remarks prepared for her confirmation hearing released yesterday. Ms. Yellen noted that the rate of increase in the CPI index was less than the Fed target of 2.00 percent and that the labour market and the economy were performing far short of their potential (based on the meaningless concept of “potential GDP”). She thus reiterated her commitment to continuing monetary accommodation and “unconventional policy tools such as asset purchases.” It is true that in her testimony before the Senate committee last Thursday she did concede that it is “important for the Fed to attempt to detect asset bubbles when they are forming.” However, she blithely dismissed concerns that recent record highs in asset markets reflected “bubble-like conditions.”

With Ms. Yellen’s confirmation highly likely, we can look forward to the Fed blindly fueling asset bubbles to a fare-thee-well. With the financial system still on shaky ground, this will lead to another financial meltdown and a U.S. government takeover of the financial system, the likes of which will make the last Wall Street bailout appear to be a minor intervention.

Photo of Joseph T.    SalernoJoseph Salerno is an Economics professor at Pace University, academic vice president at the Ludwig von Mises Institute, and editor of the “Quarterly Journal of Austrian Economics.” He is the author of the book ‘Money, Sound and Unsound,’ a sweeping and nearly comprehensive book on applied Austrian monetary theory.
This article first appeared at the Mises Daily.

Friday 22 November 2013

Friday Morning Ramble: The ‘Obamaware is Failware’ Edition

Pic by Bosch Fawstin

“’Barack Obama is a lying sack of garbage.’ That was the exact sentence that went through my head when I opened my mailbox and saw the following message from my health insurance company.”
ObamaCare Rage – Robert Tracinski, TRACINSKI LETTER

A record has been broken: “The so-called “Patient Protection and Affordable Care Act”—the showpiece of democratic welfarism in the 21st century—has made history as the largest, fastest failure in the history of State-provided welfare programs.” And that’s not an easy record to break!
 Catastrophic Plans: The largest, fastest failure in the history of welfare programs – Jeffrey Tucker, THE FREEMAN

“Obama has proved himself so inept with his "Care" law that he should resign and give the Buffoon Biden a chance to wreck the country.”
Tweets by GEORGE REISMAN

“The time is not far off when Barack Obama yearns for the days when he had a 37% approval rating.”
Obama in Free-Fall - POWER LINE

“Is there a similarity between the Court-packing scheme of President Roosevelt in the 1930s and Obamacare today? Yes there is. In both cases, we see the fatal consequences of presidential overreach.”
Presidential Overreach – BURT FOLSOM

“Here, then, is a clear example of how the Obama regime departs significantly, in its political philosophy and program, from the uniquely American framework.”
Obama’s Utilitarian Foibles – Tibor Machan, TIBOR’s SPACE

Locals are wondering whether the IRD have set up a new office in the main street of Masterton...

image

From the man’s-inhumanity-to-man file: “More than a thousand refugees have died trying to reach Christmas Island. But faced with unbearable conditions at home, they keep coming.” And Canberra sends out its navy to stop them.
The Dream Boat – NEW YORK TIMES

The collapse of communism spelled the end for hardcore Marxism, or should have. Has the collapse of 2008 done the same for capitalism? Two scholars debateThe collapse of communism spelled ‘the end of history’ and left the capitalist system of liberal democracies without apparent challenge.
The End of Capitalism? Eamonn Butler v David Pitt-Watson – SPEAKERS’ CORNER TRUST

He faced perhaps the hardest task of any American President, and accomplished the deed no other President wanted to face.
Lincoln was truly heroic –Kiwi Wit,  THOUGHTS FROM 40o SOUTH

A simple way for governments to signal they’re aware of the human rights abuses of other governments: Rename streets in front of the embassies of dictatorships after their most prominent dissidents.
Issuing a Streetwise Challenge to Dictators – Garry Kasparov & David Keyes, WALL STREET JOURNAL

"Get rid of all the green crap" David Cameron has told his aides. However …
On green issues no one talks more 'crap' than David Cameron – James Delingpole, TELEGRAPH

Not everyone benefits from Quantitative Easing. “As you can see from the graphic above, the big beneficiaries of QE since the onset of the crisis are governments.” And who pays? You do. (This, by the way, is the insidious form of redistribution called The Cantillon Effect.)
Here's the evidence that QE has harmed the economy – Jeremy Warner, TELEGRAPH

It was all such fun at university, until we realised that no business really uses game theory.
You've Got Game Theory! – FAST COMPANY

“It’s not Gold 2.0,” says Peter Schiff, “It’s TulipMania 2.0.”

Radical Capitalists v Libertarians, Round CXIII
Libertarianism vs. Radical Capitalism – Craig Biddle, OBJECTIVE STANDARD

“Is being opposed to government regulations like being opposed to laws? There is some plausibility to the argument until one considers just how different laws and government regulations really are.”
Laws Versus Regulations – Tibor Machan, SOMEWHAT REASONABLE

So apparently porn sex and real sex are different. Oh, and food!

Can I say I’m a little underwhelmed?
Look Inside Apple’s Spaceship Headquarters With 24 All-New Renderings – WIRED

Please, please, start reading Mark Hubbard’s blog, before he sues me.
Of Law Revue Girls & Thorny – Privilege & the New Puritanism; Blog Inequality; Identity Politics; Quotas – Mark Hubbard, LIFE BEHIND THE IRON DRAPE

How to muddy the waters to make yourself appear deep. And get a degree doing it.
How to speak and write postmodern – PAPER THIN HYMN

A little celebration, in advertising, of technology and humanity. Make sure you click the “Captions” button bottom right. And try not to cry.

Creative passive-aggression.
The 27 Most Passive-Aggressive Messages Ever – BUZZFEED

Time for another Ashes series. And making fun of the Poms.
Fussy cricketers, or prima-donnas? – KEEPING STOCK

And the Ockers.
Memo: Ashes Day One Pessimism Alert – FOOTY ALMANAC

At least one good reason to risk encountering MPs.
Well, Well, Well, - I Never Thought I'd See the Day #1: The Backbencher Pub – Neil Miller, MALTHOUSE BLOG

CALENDAR COLLAGE

If you’d like great art on your deck each month, then check out the Cordair Gallery’s 2014 desktop calendars.
Quent Cordair Fine Art Desk-Top Calendar – QUENT CORDAIR FINE ART

Neil Gaiman sings about the pain of being Joan of Arc.

Jesse Norman sings about the pain of love. (Wagner’s song title translates as “in the hothouse.”)

And Nick Cave and Barry Adamson sing about falling out of love .

[Hat tips Richard McGrath, Julian D., Sandrine L., Geek Press]

Thanks for your patience (as you see, I did manage to recover it), and thanks for reading.
Have a great weekend!
PC

Friday Morning No-Ramble.

Sorry folks. No Ramble today: Just as I was about to press “publish,” the computer melted down—and I’m unable to recover the post.

Maybe tomorrow…

It’s the Day John Kennedy Died

Fifty years ago today.

Here’s Lou Reed.

Thursday 21 November 2013

Wagner vs Verdi: Who was the greatest composer?

Now this is fascinating, especially if you have at least two hours to enjoy it properly. (Go on, you know you’re going to need to YouTube when it finishes.)

It’s a debate over the merits of history’s two greatest opera composers, both of whom have their 200th anniversaries celebrated this year, held in the Paul Hamlyn Hall at Covent Garden—otherwise known as “the bar,” i.e., exactly the place where all good debates should be held.

Enjoy.

[Hat tip Russell W. And I think by now you might have some notion of which one I think should be the winner…)

Quote of the Day: What the left needs most…

“The last thing the political left needs, or can even afford, are self-reliant
individuals. If such people became the norm, that would destroy not only
the agenda and the careers of those on the left, but even their flattering
image of themselves as saviours of the less fortunate.”

- Thomas Sowell, “The War Against Achievement

[Hat tip Jeff Perren]

Government Economists: About as Useful as a Fork in a Sugar Bowl

Guest post by Dan Steinhart, introducing John Mauldin

Humans tend to believe what they're told by authority figures. Even in the face of contradictory evidence.

The Milgram Experiment taught us this in 1963. Posing as scientists, researchers instructed volunteers to inflict painful electric shocks on what they thought were other innocent volunteers, as a penalty for answering questions incorrectly. The shockers couldn't see the people they were shocking, but could hear their reactions: terrible cries of pain, pounding on the wall, pleas to stop, and eventually, ominous silence.

Of course, it was all a ruse, but the shockers didn't know that. They thought they were effectively torturing the victims. Yet most shockers ignored the victims' agonized pleas to stop, opting instead to obey the "scientist's" commands to continue.

Why? Because the "scientist" was an expert. He was wearing a white lab coat, so he must know best.

Archival photo from Milgram experimentWe treat economists similarly today, deferring to their expertise in economic matters, even when common sense suggests they are wrong. Paul Krugman says an alien invasion would cure our economic ills by forcing us to spend money to defend against their attack. If a stranger on the bus said that, you might direct him to the nearest mental facility.

But Krugman? He has a framed MIT doctorate gracing his office wall, so he must know what he's talking about.

Here's a dirty little secret: Economists—particularly government and other mainstream ones—stink at their jobs. They're awful at forecasting the future. History shows that not only are economists incapable of forecasting recessions, they usually can't even recognize that we're in a recession once it's already started. If you were as bad at your job as the average economist is at his, you wouldn't have a job. Management would fire you, assuming they could do so before your horrendous decisions brought down the entire company.

With that background, I'm excited to share with you an excerpt from John Mauldin's fantastic new book, Code Red. As you might've guessed, the premise of the passage you'll read below is that mainstream economists have a horrific track record, a claim the book backs up with impressive stats. For investors, relying on mainstream economists' forecasts is a sure path to subpar returns.

But Code Red is about so much more. I plowed through it this over the weekend, and if I had to describe it in one word, it would be "satisfying." John Mauldin and his co-author Jonathan Tepper beautifully explain how seemingly unrelated pieces of the global economy fit together, how we've arrived at our near zero-interest rate world, and which countries are closest to crisis. What seems absurdly complex before reading the book becomes crystal clear afterward.

Here are a couple of the chapter titles, to give you an idea of the topics Code Red covers:

  • 20th Century Currency Wars—The Barbarous Relic and Bretton Woods
  • A World of Financial Repression
  • Easy Money Will Lead to Bubbles, and How to Profit From Them
  • How to Protect Yourself Against Inflation
  • A Look at Commodities, Gold, and Other Real Assets

With that, I'll leave you to explore the excerpt for yourself. If you like what you read, you can purchase a copy of Code Red for 28% off the regular price by clicking here.

Enjoy.
Dan Steinhart
Managing Editor of The Casey Report 


An Excerpt from Code Red:
Chapter 6 - Economists Are Clueless

By John Mauldin & Jonathan Tepper

In November of 2008, as stock markets crashed around the world, the Queen of England visited the London School of Economics to open the New Academic Building. While she was there, she listened in on academic lectures. The Queen, who studiously avoids controversy and almost never lets people know what she's thinking, finally asked a simple question about the financial crisis, "How come nobody could foresee it?" No one could answer her.

If you suspected that mainstream economists are useless at the job of seeing a crisis in advance, you would be right. Dozens of studies show that economists are completely incapable of forecasting recessions. But forget forecasting. What's worse is that they fail miserably even at understanding where the economy is today. In one of the broadest studies of whether economists could predict recessions and financial crises, Prakash Loungani of the International Monetary Fund wrote very starkly, "The record of failure to predict recessions is virtually unblemished." This was true not only for official organizations like the IMF, the World Bank, or government agencies but for private forecasters as well. They're all terrible. Loungani concluded that the "inability to predict recessions is a ubiquitous feature of growth forecasts." Most economists were not even able to recognize recessions once they had already started.

In plain English, economists don't have a clue about the future.

Queen Elizabeth II and Luis Garicano at LSEIf you think the Fed or government agencies know what is going on with the economy, you're mistaken. Government economists are about as useful as a fork in a sugar bowl. Their mistakes and failures are so spectacular you couldn't make them up if you tried. Yet now, in a Code Red world, we trust the same bankers to know where the economy is, where it is going, and how to manage monetary policy.

Central banks say that they will know when the time is right to end Code Red policies and when to shrink the bloated monetary base. But how will they know, given their record at forecasting? The Federal Reserve not only failed to predict the recessions of 1990, 2001, and 2007, it didn't even recognize them after they had already begun. Financial crises frequently happen because central banks cut interest rates too late and hike rates too soon.

Trusting central bankers now is a big bet that (1) they'll know what to do and (2) they'll know the right time to do it. Sadly, they generally don't have a clue about what is going on.

Unfortunately, the problem is not that economists are simply mediocre at what they do. The problem is that they're really, really bad. And they're so bad that their ineptitude cannot even be a matter of chance. As the statistician Nate Silver pointed out in his book The Signal and the Noise:

Indeed, economists have for a long time been much too confident in their ability to predict the direction of the economy. If economists' forecasts were as accurate as they claimed, we'd expect the actual value for GDP to fall within their prediction interval nine times out of ten, or all but about twice in eighteen years.
   
In fact, the actual value for GDP fell outside the economists' prediction interval six times in eighteen years, or fully one-third of the time. Another study, which ran these numbers back to the beginning of the Survey of Professional Forecasters in 1968, found even worse results: the actual figure for GDP fell outside the prediction interval almost half the time. There is almost no chance that economists have simply been unlucky; they fundamentally overstate the reliability of their predictions.

So it gets worse. Economists are not only generally wrong, they're extremely confident in their bad forecasts.

If economists were merely wrong at betting on horse races, their failure would be harmlessly amusing. But central bankers have the power to create money, change interest rates, and affect our lives in every way—and they don't have a clue.

Despite their cluelessness, there's no overestimating the hubris of central bankers. On 60 Minutes in December 2010, Scott Pelley interviewed Chairman Ben Bernanke and asked him whether he would be able to do the right thing at the right time. The exchange was startling:

Pelley: Can you act quickly enough to prevent inflation from getting out of control?
Bernanke: We could raise interest rates in 15 minutes if we have to. So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time. Now, that time is not now.
Pelley: You have what degree of confidence in your ability to control this?
Bernanke: One hundred percent.

There you have it. Bernanke was not 95% confident, he was not 99% confident—no, he had zero doubts about his ability to know what is going on in the economy and what to do about it. We would love to have that kind of certainty about anything in life.

We're not picking just on Bernanke; we're picking on all central bankers who think they're infallible. The Bank of England has had by far the largest QE program relative to the size of its economy (though the Bank of Japan is about to show it a thing or two). It has also had the worst forecasting track record of any bank, and the worst record on inflation. Sir Mervyn King, the head of the Bank of England, was asked if it would be difficult to withdraw QE. He very confidently replied,

_Quote_IdiotI have absolutely no doubt that when the time comes for us to reduce the size of our balance sheet that we'll find that a whole lot easier than we did when expanding it…

(Are central bankers just naturally more arrogant than regular human beings, or are they smoking some powerful stuff at their meetings?)

Let's see whether this sort of absolute certainty is at all warranted.

In his book Future Babble, Dan Gardner wrote that economists are treated with the reverence the ancient Greeks accorded the Oracle of Delphi. But unlike the vague pronouncements from Delphi, economists' predictions can be checked against the future, and as Gardner says,

Anyone who does that will quickly conclude that economists make lousy soothsayers.

(As an aside, we suspect that economists may be the modern-day functional equivalent of tribal shamans. Instead of peering at the intestines of sheep to forecast the future, we look at data through the lenses of models we create, built with all our inherent biases, and then confidently predict the future or try to guide government policy in one direction or another, generally along paths that fit the favor depending on whether we are telling our fellow tribe members and leaders and potential leaders what they want to hear. It may be that economics is more like religion and less like science than most of us want to admit.)

The nearsightedness of economists is nothing new. In 1994 Paul Ormerod wrote a book called The Death of Economics. He pointed to economists' failure to forecast the Japanese recession after their bubble burst in 1989 or to foresee the collapse of the European Exchange Rate Mechanism in 1992. Ormerod was scathing in his assessment of economists:

The ability of orthodox economics to understand the workings of the economy at the overall level is manifestly weak (some would say it was entirely non-existent).

When people think of economic forecasts, they almost always think of recessions, while economists think of forecasting growth rates or interest rates. But the average person in the street only wants to know, "Will we be in a recession soon?"—and if the economy is already in a recession, he or she wants to know, "When will it end?" The reason most working Americans care is that they know recessions mean job cuts and firings.

Figure 6.1 Recessions lead to falls in GDP and spikes in the unemployment rate
Source: Variant Perception, Bloomberg

Unfortunately, economists are of no use to the man or woman in the street. If you look at the history of the last three recessions in the United States, you will see that the inability of economists and central bankers to understand the state of the economy was so bad that you might be tempted to say they couldn't find their derrieres with both hands.

Figure 6.2 Economists have never predicted a recession correctly

Source: Societe Generale Equity Research

Let's remind ourselves what a recession is and how economists decide that one has started. A recession is a downturn in economic activity. Normally, a recession means unemployment goes up, GDP contracts, stock prices fall, and the economy weakens. The lofty body that decides when a recession has started or ended is the Business Cycle Dating Committee of the National Bureau of Economic Research. It is packed with eminent economists and other extremely smart people. Unfortunately, their pronouncements are completely unusable in real time. Their dating of recessions is authoritative and more or less accurate, but this exercise in hindsight comes together long after a recession has started or ended.

To give you an idea just how late recessions are officially called, let's look at the past three. The NBER dated the 1990-91 recession as beginning in August 1990 and ending in March 1991. It announced these facts in April 1991, by which time the recession was already over and the economy was growing again. The NBER was no faster catching up with the recession that followed the dotcom bust. It wasn't until June 2003 that the NBER pinpointed the 2001 recession—a full 28 months after the recession ended. The NBER didn't date the recession that started in December 2007 until exactly one year later. By that time, Lehman had gone bust, and the world was engulfed in the biggest financial cataclysm since the Great Depression.

The Federal Reserve and private economists also missed the onset of the last three recessions—even after they had started. Let's look quickly at each one.

Starting with the 1990-91 recession, let's see what the head of the Federal Reserve—the man who is charged with running American monetary policy—was saying at the time. That recession started in August 1990, but one month before it began Alan Greenspan said, "In the very near term there's little evidence that I can see to suggest the economy is tilting over [into recession]." The following month—the month the recession actually started—he continued on the same theme: "... those who argue that we are already in a recession I think are reasonably certain to be wrong." He was just as clueless two months later in October 1990, when he persisted, "... the economy has not yet slipped into recession." It was only near the end of the recession that Greenspan came around to accepting and acknowledging that it had begun.

The Federal Reserve did no better in the dotcom bust. Let's look at the facts. The recession started in March 2001. The tech heavy NASDAQ Index had already fallen 50% in a full-scale bust. Even so, Chairman Greenspan declared before the Economic Club of New York on May 24, 2001,

_Quote_IdiotMoreover, with all our concerns about the next several quarters, there is still, in my judgment, ample evidence that we are experiencing only a pause in the investment in a broad set of innovations that has elevated the underlying growth rate in productivity to a level significantly above that of the two decades preceding 1995.

Charles Morris, a retired banker and financial writer, looked at a decade's worth of forecasts by the geniuses at the White House's Council of Economic Advisors. In 2000, the council raised their growth estimates just in time for the dot-com bust and the recession of 2001-02. In a survey conducted in March 2001, 95% of American economists said there would not be a recession. The recession had already started that March, and the signs of contraction were evident. Industrial production had already been contracting for five months.

You would have thought that their failure to forecast two recessions in a row might have sharpened the wits of the Federal Reserve, the Council of Economic Advisers, and private economists. Maybe they would have tried to improve their methods or figured out why they had failed so miserably. You would be wrong. Because along came the Great Recession, and—once again—they completely missed the boat.

Let's look at what the Fed was doing as the world was about to go up in flames in 2008. Recently, complete minutes of the Fed's October 2007 meeting were released. Keep in mind that the recession started two months later, in December 2007. The minutes make for depressing reading. The word recession does not appear once in the entire transcript.

It gets worse. The month the recession started, the Federal Reserve was all optimistic laughter. Dr. David Stockton, the Federal Reserve chief economist, presented his view to Chairman Bernanke and the meeting of the Federal Open Market Committee on December 11, 2007.

When you read the following quote and choke on your breakfast or lunch, remember that at the time the Fed was already providing ample liquidity to the shadow banking system after dozens of subprime lenders had gone bust in the spring, the British bank Northern Rock had been nationalised and spooked the European banking system, dozens of money market funds had been shut due to toxic assets, credit spreads were widening, stock prices had started to fall, and almost all the classic signs of a recession were evident. These included an inverted yield curve, which had received the casual attention of New York Fed economists even as it screamed recession.

Read these words of the Fed's chief economist and weep. You can't make this stuff up.

_Quote5Overall, our forecast could admittedly be read as still painting a pretty benign picture: Despite all the financial turmoil, the economy avoids recession and, even with steeply higher prices for food and energy and a lower exchange value of the dollar, we achieve some modest edging-off of inflation. So I tried not to take it personally when I received a notice the other day that the Board had approved more frequent drug-testing for certain members of the senior staff, myself included. [Laughter] I can assure you, however, that the staff is not going to fall back on the increasingly popular celebrity excuse that we were under the influence of mind-altering chemicals and thus should not be held responsible for this forecast. No, we came up with this projection unimpaired and on nothing stronger than many late nights of diet Pepsi and vending-machine Twinkies.

We do not want to pick on Dr. Stockton unnecessarily, as all other government economists were equally awful. The President's Council of Economic Advisers' 2008 forecast saw positive growth for the first half of the year and foresaw a strong recovery in the second half.

Unfortunately, private-sector economists didn't do much better. With very few exceptions, they failed to foresee the financial and economic meltdown of 2008. Economists polled in the Survey of Professional Forecasters also failed to see a recession developing. They forecasted a slightly below-average rate of 2.4 percent for 2008, and they thought there was almost no chance of a recession as severe as the one that actually unfolded. In December 2007, a Businessweek survey showed that every single one of 54 economists predicted the U.S. economy would avoid a recession in 2008. The experts were unanimous that unemployment wouldn't be a problem, leading to the consensus conclusion that 2008 would be a good year.

As Nate Silver has pointed out, the worst thing about the bad predictions isn't that they were awful; it's that the economists in question were so confident in them:

This was a very bad forecast: GDP actually shrank by 3.3% once the financial crisis hit. What may be worse is that the economists were extremely confident in their bad prediction. They assigned only a 3% chance to the economy's shrinking by any margin over the whole of 2008. And they gave it only about a 1-in-500 chance of shrinking by 2 percent, as it did.

It is one thing to be wrong. It is quite another to be consistently and confidently and egregiously wrong.

As the global financial meltdown unfolded, Chairman Bernanke, too, continued to believe that the United States would avoid a recession. Mind you, the recession had started in December 2007, yet in January 2008 Bernanke told the press, "The Federal Reserve is not currently forecasting a recession." Even after banks like Bear Stearns needed to be rescued, Bernanke continued seeing rainbows and candy-coloured elves ahead for the U.S. economy. He declared on June 9, 2008, "The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so." At that stage, the economy had already been in a recession for the past six months!

Why do people listen to economists anymore? Scott Armstrong, an expert on forecasting at the Wharton School of the University of Pennsylvania, has developed a "seer-sucker" theory: "No matter how much evidence exists that seers do not exist, suckers will pay for the existence of seers." Even if experts fail repeatedly in their predictions, most people prefer to have seers, prophets, and gurus with titles after their names tell them something—anything at all—about the future.

So, we have catalogued the incredible failures of economists to predict the future or even to understand the present. Now, with their record in mind, think of the vast powers Fed economists have to print money and move interest rates. When you contemplate the consummate skill that would actually be required to manage Code Red policies, you realize they're really just flying blind. If that doesn't scare the living daylights out of you, you haven't understood this chapter so far.

imageJohn Mauldin (left) is the President of Millennium Wave Advisors; author of several books including “The Little Book of Bull's Eye Investing,” Endgame: The End of the Debt Supercycle and How It Changes Everything,” and “Code Red: How to Protect Your Savings From the Coming Crisis.” He was previously chief executive officer of the American Bureau of Economic Research.
His website is MauldinEconomics.Com.

Dan Steinhart (right) is a CPA and Big 4 accounting firm alumni, reformed Wall Street trader, and the Managing Editor of The Casey Report .

This post first appeared in the Casey Daily Dispatch.