Uncertainty

With far too much of the world gripped in a panic induced by a pandemic, I've been contemplating how poorly the vast majority of humans deal with uncertainty in life. The following ramble came out of that exercise.

Fear of the unknown has been considered the most potent of fears experienced by humans. A microscopic virus cannot be seen by the unaided eye with only its casualties left behind to be witnessed as evidence of its passage -- unless you work in a lab analyzing test samples. For all intents and purposes it is almost supernatural to the lay person, resulting in an intense primordial fear being felt by more than a few and far too many.

The most dangerous problem with intense fear is that it is intrinsically irrational and furthermore generates deeply irrational reactions that really can't be called thoughts. Feeding into that is another fear that is common and lurks below the surface in a constant fashion: uncertainty. Often manifesting as anxiety over change, it can be debilitating all by itself.

Now add the normal fear of death and you have a cocktail of genuine madness that is capable of being spread more quickly than any virus. If that wasn't enough, the continued political actions based on Rahm Emmanuel's famous line, "You never let a serious crisis go to waste," has generated genuine fear of government infringement of civil rights here in the United States. Since the upper middle class to wealthy so far aren't affected by job loss the way middle and lower class voters have been, a huge disparity in economic impact is exacerbating the situation.

There is a terrible social and economic disconnect between the highly educated classes and everyone else being fully revealed by this. Not only is there no empathy, there is zero sympathy exhibited toward the struggles of the poorer as they suffer economic devastation. Instead, vilification is the order of the day as the lock down turns into an open class struggle.

When people are oscillating from fear of death to fear of losing their homes to fear of having their rights taken away to fear of anyone disagreeing with them, you have truly reached uncertain times. The uncertainty is inescapable, not even through binge streaming television as has become the big thing to do -- with so many trapped at home now.

It's driving people crazy and making them meaner.

Time of EVE Kickstarter Makes Stretch Goal

Having already recommended the anime Time of EVE and how it blew through its initial $18,000 Kickstarter goal in less than 24 hours, I am pleased to report that it has exceeded $126,000 by a good amount. This shows there is a model for import/export that may be emerging even as the world economy is in decline. Transitional time bring opportunity and I've decided to put my money where my mouth is by upping my backing to the $80 tier.

Yes the book is nice goody to have, but my intention has less to do with greed than with wanting to see this economic model flourish. For niche industries such as anime this could encourage more independent projects such has happened with video games. Crowd sourcing is also an interesting way to weed out ideas since demand has to occur up front rather than just being speculated on.

It might be that Time of EVE is an exception and this model won't work for other animes. After all, it is a brilliant work that is not your average animated fair of any kind. Time will tell, but at least this gem succeeded beyond anyone's wildest expectations.

Germany Removing Gold From the Fed

German courts want an auditing all its gold holdings and has begun moving 50 tons a year from the Fed to Germany. This is very interesting because it indicates a lack of trust in the security of the banks. It also shows the German government does not trust the current economic conditions to get better – or stay the same. Fascinating times.

Global Tensions Rising: China and Japan

Things seem to be escalating quickly over a group of islands, with one Chinese general telling his troops to prepare for war with Japan. This looks awfully calculated given the other aggressive actions in the region, but there is a component to it that is not traditional posturing. Instead it is an aspect of asymmetrical warfare being given a test run with Japan as a proxy for the United States.  Asymmetrical warfare involves using methods other than overt military force to bring down a foe perceived as more powerful. Propaganda, cyber warfare, and attacks on financial infrastructure are all key parts of this approach.

The latest tiff has led to threats of using Chinese ownership of Japanese government debt to bring them to their knees. Do not think this is disconnected from the U.S.A., for yesterday’s demonstrations briefly attacked the Ambassador to China’s car. The demonstrators knew what they were doing and chanted anti-American slogans during the incident.

With the two largest American bond holders in an intense war of words that could go hot to some degree (how hot? Ask the Chinese.), this is not something that should be ignored right now. The threats being made to undermine Japan’s economy can be made against us.

It should be noted that such a threat only works if a war does not actually follow. In war time, all debts to an enemy are declared void. Quite a tricky balancing act for China’s rulers, eh?

Runaway Inflation Is Now Unavoidable

Bernanke has chosen to do the worst thing possible and that is an open ended qualitative easing. If you have savings or an IRA, expect to lose your shirt since interest will be held low and hyper inflation will lower the value of every penny you have. I suggest looking up the Weimar Republic in German history to get an idea of what is going to happen now.

Stock up on foods and goods while you can, your purchasing power is going to decrease very quickly now. Buying ammo would also be prudent since it will be going sky high after this news is absorbed.

Incompetent and suicidal are the only words I can find to describe this development. It looks like a desperate bid to influence the election.

Insert Title Here

Pick a title, any title, my creativity is not flowing today. While I have more energy than I did over the weekend, yesterday was a busier than usual Monday and so today is already dragging and it is not even 10:00 am yet.

One thing worked on yesterday was revamping and partially rewriting an old movie review. While I have done this to a minor degree before, this is a much more comprehensive overhaul which makes it a learning experience. Today it should get finished and it is about time I figured out how to bump a post to the front page. If I remember to, that is.

It is spring, so thoughts of maybe following baseball have emerged again. I find it ridiculous that streaming MLBTV online costs $20.00 a month. How sports fans can continue to fork out insane sums of money for PPV, tickets, and merchandise is beyond me. All I can surmise is that it is the latest form of idolatry to afflict the masses and there isn’t even a dollop of spiritual rewards promised.

I am not pleased with the Supreme Court ruling on strip searches. While it is a sad testament to the decay of society that such searches are often needed, the ability to force them on a person if they are arrested for anything is way over the line. The argument that ruling against them would have a “chilling effect” on law enforcement is somewhat legitimate, but when are we going to stop ceding all our civil liberties to the government?

Meanwhile, President Obama took another step toward tinpot dictatorship by threatening the Supreme Court over Obamacare. Why he thinks this will work when even Franklin Delano Roosevelt could not pull it off? FDR was far more popular and had much broader support, but the public completely rejected his attempts to bully and replace that branch of government. Rallying the base is one thing, but when it alienates everyone else it is not even a zero sum gain. It is a loss.

That is a lesson that seems to have been forgotten by a lot of politicians across the spectrum of late.

The wrong hood was ordered for the car and a new one has been placed. Hopefully a sunny day will arrive soon (forecast says tomorrow) to continue work on straightening metal. There is still a radiator attachment made of plastic that I have not figured out how to repair. Since the only other option is replacing the entire radiator, it has to be solved. Normally, a pin could be inserted into a drilled out hole, but I am afraid of leaks from the area if I do drill. Sigh. I probably could seal it well enough if that happens.

I am puzzled how people think that increased manufacturing with decreased demand is a positive sign, even in the short term. All it means is inventory will increase, which is not a good thing in a “just in time” economy. But if there is one thing I have learned about economic experts and investors is that anything can be tortured into becoming good news when desperate.

My growing suspicion is that the US stock markets will become the last haven for money for the wealthy before that wealth is permanently destroyed. Metals and real estate are the best places to sink money into, because the value of both will never reach zero. You will not be able to avoid losing money so it is all about having something rather than nothing in the end.

On that subject, the single most awesome thing I have seen on the Web so far this year. See, the Canadians are good for something!

China Going Backwards

It has been fashionable in multiple circles to believe that China will take over the title of most powerful nation during this century. Much has been made of their economic growth and of their acquiring companies, land, and ports in other countries. This has presented an impression of an unstoppable juggernaut backed by the reality that they have become the main manufacturer of goods in the world. But does this mean China is ready or able to take over the lead?

I do not think so. Despite their growing military aggression in Asia, there are cracks appearing. With protests sporadically appearing in different regions, the specter of civil unrest has cast a long shadow across the very large country. In December, the village of Wukan rose up against land seizures and managed to make international news. That inspired another uprising in the nearby city of Haimen despite knowing they would be beaten by police.

It is no wonder that the authorities are spooked  for they have witnessed successful uprisings in Arab countries this past year. They too sit on a powder keg of poor and oppressed citizens. But what is interesting to me is that the latest uprisings are in in southern China, which is supposed to be the wealthy part of the nation.

Another intriguing tidbit of information is that the wealthy are looking to escape the country in the future. From other things I have read, there is a sense of fear that another peasant rebellion could happen. So we have the wealthy prepared to pull the handle on their personal ejection seats at the first sign of serious unrest.

So when President Hu wrote a piece saying that China is under cultural attack from the West and then the government restricts television broadcasts in order to present a more pure socialist message it made my antenna go up. This strikes me as being both a reaction to domestic control problems and preparations for conflict. The latter could be internal or external, with the latter being of particular concern to me.

It is not unknown for nations to attack others to bleed off internal pressures that have become too difficult to regulate. However, this may not be the conventional bombing or invading of another country kind of attack. The communists running China have been orchestrating cyber attacks on other countries for years. Asymmetric warfare is at the heart of Chinese military planning, being a theory of fighting a foe who is more powerful by using unconventional means. Right now, that means using cyber warfare against America.

Frankly, I do not think that will do a thing to vent social pressures at home. So the odds of an open confrontation with the United States to whip up patriotic fervor are increasing. While the OWS idiots focused on the spurious one percent here, the income disparities in China make us look well balanced by comparison.

With a housing bubble bigger than the one that popped here and a massive population that are truly dirt poor, China has problems too big to easily fix no matter how much state control is imposed. Actually, state control rarely fixes problems and just breeds more from what I have seen. Aggravating this is how they are driving out Western companies and nationalizing companies again. Wealth and power are being consolidated in the hands of an elite few, as is typical with socialist systems. It is sadly reminiscent of Orwell’s Animal Farm.

With Europe and the United States poised for even worse financial problems in 2012, China will become even more unstable as the buyers for their manufactured goods dry up. November and December saw drops in manufacturing there, so those ballyhooing increased manufacturing in the States should take a reality check, stat. Demand is still not coming back. The fact that Hu and company think that the US is deliberately taking economic hits to undermine them financially does not help things either.

An unstable China will be prone to doing things that would be out of character for them in recent decades. People in the West have forgotten the China that invaded their neighbors Vietnam and India. Suffice it to say, nobody in the region has though. There is quite a military build up going on throughout Asia right now due to Chinese naval aggression at sea.

I would like to be a fly on the wall in some of the intelligence briefings in the region. Even the cash strapped Philippines government is looking to get F-16 fighter jets because of what has been going on.

It is going to be an interesting year.

Productive Pain

Living with chronic pain is not pleasant, no matter how you look at it. But there is pain and then there is pain from actually doing things. The last two days I’ve hurt quite a bit because I’ve been doing some physical activity to make up for lost time.

It is all yard related, except for taking down my filthy blinds and deciding replacing them was easier than cleaning them. We bought some Colorado Blue Spruce and Black Hills Spruce pine trees to plant as a mini windbreak. Three of them went in the ground yesterday just in time for frost last night. The fourth and last one is indoors for the moment and awaits the removal of a diseased Asian Elm tree – if we can get a neighbor with a chainsaw to help out.

Speaking of sawing, a replacement pole saw and lopper finally was purchased a couple of months ago. Tuesday was my first chance to use it and I discovered to my dismay that my recent slide in health is worse than I realized. It was torture using it and one oak tree branch will take multiple days to get through.

No, it is not very thick being six inches in diameter or so. I am just that weak now. Oy.

Back to the frost. Last night set records for lows in some places around the area. We could use some global warming right about now. Pity it is junk science since humanity always prospers in warm periods.

Prosperity would be nice, but the coming storm is nearly upon us. China is going to be liquidating their U.S. treasury bond holdings. This shows that borrowing to increase our national debt is not going to work anymore. But that is not stopping the Fed from assisting in bailing out European banks. The insanity continues until everything falls down, I suppose.

At least the view from my window is nice with the blinds removed. It is amazing how plastic attracts dust that never lets go. I made the mistake of trying to dust them with a Webster extendable duster yesterday. The clouds of dust that arose could have felled a horse and drove me from the room.

I had purchased them close to twenty years ago to be able to vary sunlight since my eyes are very sensitive to light. But years of working on pain tolerance has helped a bit with that so I am ready to evict the things in favor of Asian blinds. Temporary plastic fake reed blinds (left overs from upgrading the dining room twelve years ago) will go up while I budget to get the real thing.

I’m thinking of painted bamboo ones but need to check my finances first.

Egad, the windows are dirty. Something will have to be done about that. Also have tomatoes to can today. So despite all the pain, at least it has been a productive week. That is something I have not been able to write down in some time.

That is worth the pain.

Things Fall Apart

One inescapable reality is that all things break down at some point. Some can be repaired, some can be replaced, some are lost forever, but this is what happens in life.

Yesterday our internet access went down and so did one phone line as we discovered this morning. Good thing we called in since it turned out to be a cabinet problem that affected others too. But repairs took awhile and service wasn’t restored until after 2PM. For which I’m grateful.

Timing wasn’t great since I had been hoping to see how world stock markets reacted to Friday’s downgrade of the U.S.A. by Standard & Poors. Not surprisingly, they didn’t take it well and the Dow Jones was down by over 500 at one point. As I type, a minor rally failed at it is down 500 again which is a loss of 4.4%. Nasdaq and the S&P 500 are being hit harder, both down more than 5%.

People can point politically motivated fingers all they want, but this is debt driven and can’t be fixed. An ineffectual, incompetent, and detached president doesn’t help, but this is the result of decades of financial folly. It can’t be easily fixed. Most likely it can’t be fixed and we’ll have to take our lumps

Such is life and the current generations have had it easy to this point. Many of our ancestors would shake their heads at our mistakes, but most of all at how spoiled we are. Time to pull ourselves up by our bootstraps and stop looking to others to solve our problems.

Sad thing is we no longer have true leaders to get us out of this mess.

Updated

Mere moments after posting this, the Dow dived to a 632 point loss or 5.53% down.

Updated Again

London is burning. “Youths” are doing their best to destroy everything they can and beat as many people they can lay hands on. The citizens are defenseless against this and I can’t think of a better argument in favor of the 2nd Amendment.

It isn’t just finances that are falling apart in the world. Order is beginning to as well.

Dueling Banjos

Sometimes it seems like politics is all about who shouts the loudest, but the reality is that the winner is often the one allowed to shout the longest. There is a limit to how effective such tactics can be and woe be onto the ones who try to base strategy on it. Here in Minnesota, Governor Dayton found out that lesson the hard way with a state shutdown calculated to catapult the DFL into retaking the state houses in 2012.

Instead of getting widespread support from the public, he got an earful from the proles in a tour the last week. It is no surprise even union members wanted a deal done and the budget passed now. Why?  Most union members are public employees these days, that’s why. They were the ones suffering the most. While a cutoff of beer to Minnesota may have been a factor, this is what most likely caused Dayton to blink.

Now there will be a passing of the last negotiated budget, which is still the largest increase in state history. A victory, but how much of one?

Meanwhile, President Obama continues to demagogue the debt ceiling and threaten the disabled, seniors, and military veterans with cutting off their August checks. Will he blink or is he bluffing? If he isn’t bluffing, the country will begin tearing apart very quickly. Take advantage of every crisis is the motto of this administration, but there is that pesky 2012 presidential election coming up. So who knows what will happen?

But I’d like somebody to ask the President if he’ll keep paying federal employees while he’s starving the elderly and disabled. Not very likely to be asked, is it?

I don’t think the disconnect between the ruling political class and the masses has ever been bigger. With the political class isolated from the day to day reality that the average citizen experience, they have no way of understanding what is at stake. A complicit and equally distant media aren’t helping when they should be bridging the gap. That’s a disaster.

Then there are Europe’s economic analysts, mad at the GOP because they want the debt limit raised in order for countries to buy more U.S. debt. They insist the issue of default be kicked down the road while acknowledging it is a problem. Why is that so important to them?  They want a safe haven for money to move to and apparently have no real faith in the European Union despite what they say publicly. In other words, the political class there wants someplace to stash money before the Euro collapses. Talk about a twisted mess!

It is little wonder that the people are losing faith in government and trust no one. That’s the biggest danger to maintaining order there is. The political class appears to be oblivious to this, especially on the Left. People compare Obama to Carter or Hoover, but perhaps we should be thinking about Nero.

Bad Moon Rising

There are those who actually believe we emerged out of the recession and are worried we are going into another. Well, we aren’t. We never got out of the first one and it isn’t a recession, but the early stages of another Great Depression. While we have more social safety nets in place, they aren’t going to last very long at this rate.

One myth on the Left is that Social Security is a “lockbox” and all the funds are safe there to pay it out. If that were true, how could President Obama threaten to not send checks out next month? Note that this is a threat in political speak and his verbal tones suggest he was eager to issue it.  While it is a despicable thing to do, it does unmask the fallacy of the lockbox.  Another Democrat President ended that isolation of Social Security funds from the general fund back in the 1960’s – Lyndon Baines Johnson. They are now controlled at the whim of our government and are not guaranteed.

But the most interesting thing about this is that there will be money to spend on Social Security and other needed things even if we can’t borrow money. It means drastic cuts elsewhere, but that is at the discretion of the Treasury. Which means it is at the discretion of the President. In other words, Obama is threatening to cut off benefits for political gain in the 2012 elections. Some servant of the people he is.

Being on Social Security Disability, this hits me directly. Loss of Social Security means no food, no shelter, no Internet, and the loss of everything I have.  I can’t say I’m surprised how cavalier the President is about the people who will be affected as he is part of the Chicago Machine which is all about thuggery. The willingness to hurt the elderly and disabled just to damage the Republicans shows the quality of Obama’s character.

Sadly, that is only the beginning of our problems. The debt ceiling will mean nothing in the near future because an economic catastrophe has already begun across the globe. Large things tend to be slow moving and people don’t notice the changes until they hit critical mass. And much like an avalanche, they can’t be avoided.

The jobs report for June in the United States is an unmitigated disaster. 18,000 jobs were purportedly created when we need 150,000 new jobs created each month just to match population growth. Notice I used the word “purportedly.” At The NY Post it is revealed that 131,000 jobs were estimated out of thin air to pad the number upwards. In the United Kingdom, their latest report on employment isn’t quite as grim, but it isn’t good.

Meanwhile, the PIIGS crisis in the European Union continues unabated. Ireland just got relegated to junk bond status and Greece continues to be a bottomless sink hole despite hundreds of billions of Euros dumped into it. I don’t even want to discuss the problems China is having with inflation and bad loans. Two ballyhooed stimulus packages have failed to do anything positive at all and now they are talking about another one, QE3. Throwing money that doesn’t exist at something caused by spending money that doesn’t exist is not a sign of intelligent or even sapient behavior.

What will the second Great Depression look like? That’s hard to tell, since there has been so much wealth generated worldwide since the end of World War II. As mentioned before, there are safety nets in place that weren’t previously in developed countries. But there has never been so much debt in place as we have today. It will hit slower than in the 1920’s and 30’s and it has already begun.

We have much more to lose, so the possibility of it being more dramatic and catastrophic increases due to the simple fact the masses aren’t acquainted with real hardship anymore. What happens when food supplies become permanently disrupted? What happens when fuel is too expensive to allow easy migration to better places? What happens when electricity becomes unreliable with rolling blackouts the norm? What happens when groups begin hoarding resources? Those are all questions the world is going to have to face very soon.

Here in the U.S., we have a cultural divide that is now unbridgeable. The Left have gone so far away from common ground with the middle and right that the political frictions we see now are going to look quaint by comparison when the real crisis hits fully.  Though the truth is the middle will do whatever the group in charge tells them to do, so really they don’t matter. It is a sad thing, but the result of apathy/fence sitting is the loss of any real say in things.

My prediction is greater division and rising violence, both of which have already begun. Frustrations will continue to grow and the political class will continue to play games as long as they are comfortable. By the time anything will be attempted seriously, it will be too late.

So where does that leave the little guy? Up a creek without a paddle in most cases.

All we can do is prepare ourselves for the worst outcome and pray for the best. Storing food for more than threes days of supplies is a beginning. Having the ability to protect yourself wherever you are means exercising your 2nd Amendment rights here in the States, no matter how you feel about firearms. Most of all, you need to be spiritually prepared.

In God you can trust, but not man. I wish people would remember that whenever the latest demagogue of any political persuasion shows up.

The Shutdown

The big news in Minnesota is the state government shutdown due to an inability to get a budget passed. As I expected, the media is backing Governor Dayton and one of the main line of attacks is hammering on incessantly about the closure of state parks during the popular camping season of the 4th of July weekend. All very predictable and probably very effective in swaying public sentiment. Portraying the Republicans as only cutting spending when they actually presented an increase in spending is all part of the dishonest game.

I have to give credit to the state Republican leadership who didn’t cave in despite knowing this was exactly what Dayton wanted, contrary to his protestations to reporters. The surprising thing is how many Republicans I know who didn’t think the shutdown would happen. When a reversed version of this happened while Pawlenty was in office in 2005, the Democrats used it to great advantage to vilify the Republican party and it was believed it contributed to the rout of the GOP in 2006. Of course Dayton was going to return to that playbook!

In the end, there is a high probability that doing the right thing on holding back spending will damage Republican chances statewide in 2012. The power of the media is still great and that can’t be ignored. For all the talk of how the new methods of communication like Twitter and Facebook have changed things, the old partisan media is still where most people get their information. However, there is a lot going on nationally that will effect the local races, especially the economy. That keeps things unpredictable for the moment.

Frankly, I don’t think the public has the intestinal fortitude to deal with the extensive cuts that are really required and we will see Minnesota and the nation collapse into economic ruins. Cynical pandering and class warfare are already being used to buttress the Left’s insane devotion to Keynesian economics. Spending when you have no savings will never get a person, a state, or a nation out of debt. So all of that stimulus into the economy just made things worse and yes, both political parties are to blame for it. You would have thought the lessons of the 1970’s would have been remembered.

Dark times are ahead, far darker than most expect because it is a systemic problem with how our government “works.” People look to the demonstrations and riots in Europe while wondering if it can happen here. It can and could get much worse with the Left’s history of violence.

I would like to be wrong about this.

Comic Books and Economic Realities

Back in high school, I was a serious collector of comic books. Financial problems for the family compelled me to sell off my collection for a pittance in 1987 and that always haunted me.  But after reading this article at The Weekly Standard, I don’t feel so bad now.

It is a very good article on the perils of speculation and what happens when the bubble bursts. The lessons of it apply to many types of industries and even government programs.  Loose credit is a dangerous thing when it artificially boosts business with nothing concrete to back it up. 

The money quote of the article:

As painful as it was for some of us, the comic-book bubble teaches two important lessons. First, bubble-mania is not always the fault of buyers and sellers. Sometimes it’s caused by intermediaries. Second, sometimes markets don’t “come back.” People who owned blue-chip comics took a hit in 1993. People who owned modern-era comics were wiped out, the value of their collections never to return.

That’s something to keep in mind. The same thing happened to baseball card collectors around the same time period. As mentioned, housing may see the same results and that will take a lot of banks down – not to mention people’s futures. Go read the whole article.

Oh and I had that #1 issue of The New Teen Titans too.

Ceding Sovereignty

AKA Joining the EU or the Greek Regret

For some time I’ve been collecting links to articles for a large post on the American economy.  Sadly, there are simply too many pieces of bad news to write a reasonably sized post. Still don’t know what to do with all those links, but in the meantime a financial crisis in Europe may be an indicator of what will happen to the USA.

Greece’s deficit percentage of their GDP has ballooned to unmanageable proportions and it has caused the money markets to be shaky.  For awhile, it looked like Germany would bail them out since that is what people in Europe expect.  That is looking highly unlikely and the economically better off EU nations have little sympathy for the Greeks despite the threat insolvency would have on the Euro.

The Greek government shows no signs of taking any real measures to deal with their debt and the Greek people have threatened strikes and riots over austerity plans.  Total paralysis of the always unstable government is where they are at. With reform opposed by people on the dole, nothing can be done. This is the sad place turning a nation into a welfare state will take you.

Thing is, they joined the European Union. That means they ceded sovereignty under certain economic conditions according to the Lisbon Treaty. So now the Greeks have been informed that they have to take drastic measures or the EU will do it for them. While I have my doubts about the ability to force the Greeks to comply; it has to be noted that there has been talk of throwing them out of the EU.

I’ll be blunt.  I have no sympathy for the Greeks as they are a socialist state that can’t keep a coherent government in place for any extended amount of time. They also foolishly voted away their ability to be an independent nation out of greed, with visions of wealth rolling in from the union.

But this crisis bears watching for it may be a predictor of what will happen in the near future for the United States.  We are currently running an insane deficit in a moronic attempt to spend ourselves out of debt. While we aren’t part of an economic union that can step in to take over our finances, we have a problem in how much of our securities are held by China, our number one creditor.

Oh wait, they sold off a huge amount of our bonds in December and Japan is now #1.   China is showing signs of getting out of our bonds. But hey, we can find plenty of buyers because of how safe our bonds are, right? Ummmmm….

Yeah, we are in trouble.  Just three years out from when the Democrats took over Congress and we are considered riskier than Kazakhstan.  At some point the debts are going to be called due, especially if economic woes get worse in China and Asia. Our creditors will be in a place to dictate to us.

Our founding fathers looked to ancient Greece and Rome for inspiration in setting up our government.  I posted earlier about Victor Davis Hanson’s argument that we have made the same economic mistakes as the Romans.  Now I have to wonder if we are also following the path of the modern Greeks. 

 

 

del.icio.us Tags: Greece,financial crisis,economy,debt,EU,China,US bonds

The Fall of Roman America

Is America repeating Western history? Victor Davis Hanson has an interesting piece up comparing the Roman Empire to the United States.

It isn’t uncommon to hear people talk about how America is going the same way Rome did.  I’ve muttered about ‘bread and circuses” and have heard others make similar statements. Obviously, it is easy to make comparisons based on military, economic, and political parallels with the phrase “pax Americana” having been bandied about in the past. Rome was a republic, had the best military of its time, and were an economic powerhouse; all things that the United States was in the 20th Century.

It is the latter comparison that is the crux of Hanson’s article.  After giving an overview of how Rome succeeded economically and then was emulated by conquered provinces and neighbors who eventually outstripped them, he points out how rising countries such as China and India are doing the same to us.  Romans became rich and sedate by farming out the work to the outer provinces; losing their innovation and fire in the process.

Quote of the piece:

But as in the case of Rome, there is a price for all these sudden riches. Just as the Iberians, and Libyans, and Thracians were hungrier and more enterprising than Italians back in the bay of Naples, so too we, the beneficiaries of this wealth, lost the values that were at its heart, in a way that the Indians, Chinese, and others have not — yet.

Of late, I’ve had that horrible feeling of living history from within a failing culture.  Always wondered what it would be like to witness such a thing firsthand and I’m not too pleased at realizing I’m living it now. Like VDH, I think it is caused by psychological decisions and was preventable – maybe even reversible if we just had the will to take action.  But he puts it better than I can:

We could do this all right — but too many feel such medicine is worse than the malady, and so we probably won’t and can’t. An enjoyable slow decline is apparently  preferable to a short, but painful rethinking and rebirth.

That stubborn refusal to bite the bullet and do what is uncomfortable is normal for humans.  In our spoiled and entitled culture there is no desire to make personal sacrifices. Oh, we are good at making other people make sacrifices; usually through expanding government. Alas, being unselfish is a lost virtue.

Read the whole thing.

 

 

del.icio.us Tags: Rome,fall,America,Victor Davis Hanson,history repeats

State of Disunion Speech

Well, that was a dismal performance last night.  Watching the talking heads on PBS try to spin the State of the Union speech being a great performance was to view an exercise in futility, as even Mark Shields admitted the speech wasn’t one that would be remembered in history.  I didn’t catch the entire thing but what I saw was a vintage Obama campaign speech.  That means it was devoid of substance, filled with lies, and highly partisan.

The AP put out a fact check that took the President to task on multiple statements and promises he made during the speech last night.  All are valid points and I’d like to add the one that managed to really anger me:  the claim to have supported the protesters in Iran.  Those of us who have followed the protests there have been frustrated with Obama’s refusal to support them and weak criticisms of the ruling dictatorship he wants to negotiate with so badly.

Despite the voters in Massachusetts rejecting Obamacare in shocking fashion earlier this month, the President showed himself to be no Bill Clinton.  There was no attempt to triangulate, or at least no intelligent one, by moving away from health care “reform.” Instead, Obama showed himself to be utterly committed to passing that corrupt bill no matter the cost.  Nobody is buying that it will lower costs, Champ.

Of course, he whined constantly about inheriting all the problems and this shows the Democrats inability to do anything other than “blame Bush.” That isn’t going to work anymore and will be completely without effect by the elections in November.

Another thing jumped out at me was when he announced the spending freeze and that it wouldn’t hurt people today because it would be implemented next year when the economy was better.  No applause when he made his typical “stop for the adulation pause” and scattered laughter followed.  Mr. Cool lost his cool and glared at Congress and ended up evoking more laughter.

Empty promises are the medium politician work with, but this one was such a whopper that even a chamber full of pols couldn’t believe it.  Obama believes everyone is so stupid that they’ll buy into the ridiculous concept of making an emergency cut in funding after it is no longer needed!  That way it won’t hurt!

Oh, please.

More people are waking up to the fact that President Obama is a con man who doesn’t really care about the people of this country.  If he keeps throwing out farcical pronouncements like the spending freeze, his only supporters will be the diehards in the Democratic Party.  It is already getting dangerously close to that as recent special elections have shown. By the time November rolls around, the Democrats in Congress will be in dire shape.

But we are stuck with this fraud in the White House for another three years and he will do a great deal of damage through the bureaucracy.  Barack Obama is simply the wrong man at the worst possible time to helm America.

 

ADDENDUM

I forgot to mention the direct attack on the Supreme Court that was made to their faces.  That was not a Presidential action and showed just what a demagogue Obama really is. Trying to cajole Congress into writing what would be another unconstitutional law to override the SCOTUS decision freedom of speech shows what disdain the so-called Constitutional scholar has for the Bill of Rights.  It also made clear how little value he has for the separation of powers across the three branches of government.

Barack is not a class act.

Mayo Clinic Testing Dumping Medicare

The world famous Mayo Clinic is piloting a program of refusing Medicare patients at their Scottsdale, Arizona clinic.  While technically not rejecting the patients, there are few on Medicare who can afford to pay their own way.  In other words, if you have Medicare as your only means of health insurance you are screwed.

This is something that has been coming for some time.  In a desperate effort to contain spiraling expenditures on an already overstressed social programs, the government has been underpaying fees and services.  Medicare, like Social Security, is in very bad financial shape and rationing is starting to happen.

The quote of the article for me is this:

Mayo’s move to drop Medicare patients may be copied by family doctors, some of whom have stopped accepting new patients from the program, said Lori Heim, president of the American Academy of Family Physicians, in a telephone interview yesterday.

“Many physicians have said, ‘I simply cannot afford to keep taking care of Medicare patients,’” said Heim, a family doctor who practices in Laurinburg, North Carolina. “If you truly know your business costs and you are losing money, it doesn’t make sense to do more of it.”

Basic economics, that.

Medicare is for the elderly and disabled. It is already getting difficult to find doctors that accept it in some areas and that is going to get worse if the above quote is any indication.

Funny how every federally run welfare program is mismanaged.  Knowing that, what sense is there in either expanding Medicare or adding yet another program as Obamacare? 

Being on both Social Security Disability and Medicare, I’ve been sensitive to the growing problems with both.  In fact, I’m planning for the day when I can’t get medical care due to being on Medicare.  I can’t afford to save or go on another plan, so I’ll simply stop going to the doctor when that happens.

I won’t be the only one and things will get very dire in America as the quality of living plummets for many.  We are a graying nation and don’t have enough young people to sustain the system.

Oh yes, we are living in interesting times.

Rekindling the American Dream

A plan to get America out of the financial crisis.

I normally don’t post material written by others, but when I read this message put out by Hugh Miller I felt it should get more attention.  While I haven’t gotten permission to reprint, the fact he paid money to get into the papers in the first place makes me think he won’t mind.  If he does, I’ll take it down!

REKINDLING THE AMERICAN DREAM

by Hugh Miller, Nov. 30, 2009

Our country is in very serious financial trouble, mortal financial danger, and unless and until we turn it around, quickly,the American Dream will die. But upon reflection it’s even worse than that, for while the death of the American Dream would be tragic enough, the end of America being a safe, stable and good place to live would be cataclysmic.

It’s that serious, and as an impassioned American citizen, very worried about his country, there is an obligation to speak out, as forcefully as possible. Here’s how I see it.

The national debt we are accumulating is both debilitating and unsustainable, and by most standards we are already bankrupt. What this means, in practical terms, is shortly we will not be able to control our own destiny -- others will control it for us. It also means our children, and their children, will not have the same opportunities we had, and in fact will be lucky to find a real job. Further, it means our standard of living declines, rapidly, bringing about extreme and likely violent social unrest. Let me try and explain.

The numbers are staggering and confusing, so I’ll try and state it in terms we can better understand.

Imagine you, Mr. or Mrs. Public, have take-home pay of $27,000 per year. During the year, however, you spend $47,000, $20,000 more than you take home. How can this happen? You charge things you can’t afford and your creditors look the other way. Anyway, you now have a debt of $20,000 you’ll have to pay back over time. You have a real problem, solvable, but unless you get at it, soon, you’ll end up in serious trouble.

Now let’s imagine you suddenly realize you have a second debt of $120,000. That’s on top of the $20,000, so the total you now owe is $140,000. That’s a very big number, more than five times your take-home pay. With a really dedicated approach, and cooperative creditors, your debt is still manageable, but only with extreme discipline and understanding bankers.

Believe it or not it gets worse. Now let’s imagine you’ve just discovered you have a third debt and will owe another $480,000 in just a few years. That’s on top of the $20,000 and the $120,000 for a total of $620,000. That’s more than 22 times your take-home pay, so even if you paid all your take-home pay for 22 straight years you’d still be in debt.

You are beyond out of control; you’re a fiscal catastrophe.

Fortunately most of us don’t live this way, as we live within our means. Unfortunately, however, our favorite uncle does not. No, our Uncle Sam has spent too much in the past, is spending too much now, and will spend too much in the future.

Mr. or Mrs. Public in this example is actually the U.S. government, not with take-home pay and spending in the thousands, which we can all understand, but with take-home pay and spending in the trillions, which most of us cannot understand.

Instead of taking home $27,000, the U.S. government takes home $2.7 trillion dollars. Instead of accumulating debt of $20,000 over the next year, the U.S. government will accumulate debt of $2 trillion dollars over the same period.
Instead of having a second actual debt of $120,000, the U.S. government today has an actual debt of $12 trillion dollars. And instead of discovering you have a third debt of $480,000, the U.S. government has unfunded liabilities, due shortly, of $48 trillion dollars and growing. This would include future payments for Social Security, Medicare pensions, and other obligations.

How can any person live like Mr. or Mrs. Public? The answer is they can’t. How can any government live the same way? The answer is they can’t either. Most Mr. or Mrs. Publics know better and would never put themselves in such a terrible position. Sadly, and certainly shortsightedly, and arguably stupidly, the U.S. government has put our country, and all Americans, in extreme financial peril. Worse, they don’t seem to care.

If we are to solve our problems, we must first understand them, and so we need to step back and realize just how much we have already borrowed from our future and future generations. We are a nation of about 300 million people, and we now have a total debt and unfunded liabilities of about $62 trillion. That’s $200,000 apiece! That’s truly a startling figure, but that’s reality, and that’s the burden we’ve already placed on ourselves. Irresponsible doesn’t begin to describe this travesty.

What should we do? Here is what I would do.

1) First we must immediately come to grips with and try to comprehend the dire financial position we’re in, today. And we must explain that ugly truth to our people, also today.

2) Second, we must stop things from getting any worse. We simply must start living within our means, within our take-home pay, whether it’s $27,000 or $2.7 trillion dollars. In that regard I’d be in favor of an amendment requiring our government balance its budget, every year, except in times of a declared war. Until that happens, I’d balance the budget anyway.

3) We don’t take in too little, we spend too much -- much too much. Since 1999 to the present the U.S. government has taken in, on average, 4% more per year. Unfortunately, during that same time frame, they have spent, on average, 9.2% more each year.

Simply put we must cut spending, drastically, tough and unpopular as that may be. The alternative is worse, much worse. Taxing businesses or other job creators is not the answer and will make the deficit worse while increasing unemployment.

Sacrifice will be required by all of us, and it must be done fairly, and that’s as it should be. But whatever policies emerge must not be done at the expense of growth, for that would be counterproductive. After World War II we also had a huge debt, but strong economic growth made it much easier to handle that debt. And the reverse is true, the lower the growth the harder it is to pay back debt.

4) Any new spending programs should be shelved until we have a real plan for fiscal solvency. It’s like redecorating your living room while a fire is blazing in your basement. Put the fire out first, completely, before you even begin to think about redecorating.

Our first order of business, by far, is to put out the fire in our basement. Unless and until we fully extinguish that fire we won’t have a house to live in anyway.

5) Both the second debts, $120,000 for Mr. and Mrs. Public and $12 trillion dollars for the U.S., and the third debts, $480,000 for Mr. and Mrs. Public and $48 trillion dollars for the U.S., must be dealt with, now. Aggressive repayment and other appropriate procedures, in a bipartisan way, must be implemented immediately. We either solve these problems, together, or we die, financially at least, together. We have no choice, it must be done.

6) Lastly, but certainly not least, we must start rekindling the American spirit, which once was so great, and inspired our ancestors to come here in the first place. That same spirit turned this country into a great world power, largely by way of American manufacturing, American education, and American entrepreneurialism.

Today that would seem far less likely, as that American spirit is missing. We live in a highly competitive global society, and, sadly, America not only has a fiscal nightmare it has also lost its competitive edge in manufacturing, in K-12 education, particularly math and science, and in entrepreneurialism.

While our first order of business is digging ourselves out of our self-inflicted financial hole, simultaneously we must also start solving our manufacturing, educational, and entrepreneurial problems. By doing that we make ourselves globally competitive and give ourselves a chance to win. By not doing so we lose.

Those six things are keys to solving our problems and laying the foundation for a successful future. It will be difficult and painful, but it can be done and it must be done.

I often think of my grandfather, who like many others came here with little more than the shirt on his back. But those brave souls also brought with them a dream, a dream of making a better life for themselves in their new country, America -- the American Dream. And they did. I’ve little doubt my grandfather never heard of, let alone understood, the term entrepreneur. But nevertheless he was one, and mainly by hard work and sheer determination established a business, made life better for his family and his community, and created opportunities for others along the way. He lived the American Dream.

Would he be able to do so today? He certainly was strong and determined and his wife even more so, but I’m not so sure, in fact I doubt it -- there simply are too many roadblocks. Would he even want to come here today? I’m not so sure of that either, and that, to me at least, is really sad.

Minus that entrepreneurial spirit our economy won’t grow, jobs won’t be created, and we’ll start to experience an increasingly rapid decline in our standard of living. If we are to recover, it’s entrepreneurs who will lead that recovery. Accordingly they must be encouraged, not discouraged.

This looming catastrophe hasn’t happened overnight, but clearly it has accelerated rapidly this past year. We’ve trusted our politicians to do the right things, and clearly they’ve betrayed that trust. You might give them the benefit of the doubt by saying they don’t understand the problems, but if that’s the case they should find another line of work.

Rather than playing the blame game, however, and God knows there’s plenty of blame to spread around going back many years, let’s take the positive approach and just start solving the problems.

Quite frankly we have a mess, actually messes, almost beyond description, and they become increasingly unsolvable the longer we wait. We must start attacking them today. But it’s going to take a unified, bipartisan approach, starting right now.

From a personal perspective I would greatly prefer not to be the one highlighting these extremely unpleasant issues. However as an American citizen, very worried about his country, and very worried about the future of his children, and someday their children, and all other people’s children, there is no choice -- it must be done. There is, in fact, an obligation.

We can rekindle the American Dream, and we must, but we must get going. Our grandfathers and fathers would want it that way. Our children and grandchildren will be forever thankful.

Hugh Miller
President and CEO
RTP Company

What Recovery?

I find it fascinating how government agencies such as the Commerce Department fudges numbers for media consumption. They put out projected numbers that are usually rosy and then revise them downward after the media has forgotten about them. Somehow we’ve gone from a 3rd quarter figure of 3.5% growth to 2.8%  to 2.2% in three months!

Captain Ed has a great dissection of the announcement and explains how even the 2.2% is inflated by the Cash for Clunkers and new home owners tax credit stunts. Without those the growth was 0.7% and I have to wonder if even that happened. I don’t think things can be hidden forever when people are losing jobs and pay raises. 

Then there are the disastrous home sales figures that came out today.  A rise of 6.2% in sales was expected for November. Instead, they fell 11.3%.  I think this is the quote of the article:

November’s performance was a “hangover from the tax-credit-induced binge in the July thru October period," Peter Boockvar, market strategist at Miller Tabak, wrote in a note.

I think both ugly figures show the perils of government based stimulus efforts.  All the Feds can do is create a short term artificial bounce and that obscures the systemic problems at the core.  It looks good politically and might even get a country through a small recession, but it does nothing to solve the underlying weaknesses.  In this case, it may have done more harm by generating false expectations -- if not more credit bubbles.

Adding to the problem is the way the media portrays sales as increasing by only talking about month to month sales.  Comparing sales by year to year in the same period, things are not good.  Even the anemic 1.3% growth for November sales is from October.  This Gallup survey says holiday spending is actually down 22% from 2008, which was considered a very bad year. If the consumer is all we have to pull us out of the recession, we are in very bad trouble.

It seems we have a great many proverbial Nero’s fiddling while the American economy burns.  Bluntly, it probably already too late to do anything.  We are in for another major fall in 2010.

Another Debt Crisis or Two

Ran across a few interesting economic pieces last week, but didn’t feel well enough to write about them. Fortunately, or more accurately unfortunately, they still apply. I’ve been warning that bad commercial real estate loans would be the next shoe to drop.  We’ve seen that happen in Dubai, which I’ll write about further on.

But another debt problem is brewing and it will dwarf the real estate bubble.  That debt problem is the debt of sovereign nations, with the United States poised to be in major trouble.  Earlier in the year, the federal government had problems with some of its bond auctions not selling.  Now a new complication has entered the picture.

Ralph Benko’s op-ed at The Washington Examiner lays out the details of our debt servicing problem.  I was surprised to find out that we are only giving 1-2% interest on treasury bonds.  What country would want to buy those from us when inflation could easily turn them into losses rather than investments?  Something has got to give.

Quote of the piece:

The federal government currently pays, according the article, $202 billion a year in interest. White House estimates that interest payments will rise to $700 billion a year in 2019.

That doesn't count the projected catastrophic increases in entitlement costs in Medicare as the baby boomers retire. And you thought the American people were already shellshocked!

I don’t know, I think there is a point where the barrage of bad news ceases to register emotionally.  How low can we go is the question I ponder reading the news anymore.

Meanwhile, Greece is in a financial meltdown that is spooking investors in Europe.  Credit agencies have been making noises about what’s going on, even lowering ratings for Greece.  Quote of the article:

Analysts and credit-rating agencies are warning that countries with already high debt levels have rung up historically large deficits during the financial crisis, with tax collection plummeting even as public spending has soared.

The same principles that apply to individual debt apply to nations as well, duh!  Yet the idea of more spending by governments has taken such a firm hold on policy that increasing deficits are the norm rather than the exception.  But when it is someone else's economy they have no trouble in telling them to make cuts.

Instead, most officials in Europe are pushing the Greeks to clean up their own mess by making tough cuts.

"Considering the gravity of the situation, I am confident that the Greek government will in the near future take the courageous and necessary measures required," European Central Bank President Jean-Claude Trichet told the Belgian economic dailies L'Echo and De Tijd this week.

I can’t decide if it perverse hypocrisy or an indication the other European countries don’t have any capital they can infuse into the Greek system.

The Dubai financial crisis has been a problem that rippled out all the way to Scotland.  Now their neighbor, Abu Dhabi has come to a short term rescue to the tune of $10 billion.  It looks like a temporary solution that doesn’t address the long term defaults that may happen. After all, it a $80 billion debt that still need to be addressed. 

Buying time is a scary part of solutions offered by debt ridden governments and is becoming all too common. I think the truth is that nobody knows how to deal with what is happening world wide and domestically. 2010 is going to be interesting.