Archive for November, 2008

>Sunday night rock ‘n’ roll

November 30, 2008 4 comments

>Creedence Clearwater Revival (often abbreviated CCR) was an American rock and roll band who gained popularity in the late 1960s and early 1970s with a string of successful songs from multiple albums released in 1968, 1969 and 1970. The group consisted of singer, lead guitarist, and primary writer John Fogerty, rhythm guitarist and brother of John, Tom Fogerty, bass player Stu Cook, and drummer Doug Clifford. Their musical style encompassed rock and roll and swamp rock genres. CCR’s music is still a staple of American and worldwide radio airplay and often figures in various media.

Looking Out My Back Door

Midnight Special

Suzie Q (John Fogerty)

(Nothing Follows)

Categories: Music

>Government intervention in markets is seldom beneficial

November 30, 2008 Leave a comment

>Government intervention has a nasty habit of not only failing to fix whatever problem needed addressing but actually exacerbate the problem by distorting the free market in favour of one side over another.

Such it has been with the US car industry. Sucking on the government teat for 30 years has allowed Ford, GM and Chrysler to become increasingly less competitive with the end result being the financial ruin that they all face.

Does anyone stop to wonder why ALL three of the US manufacturers are in trouble?

Isn’t it normal for one company to be in trouble while others prosper?

Why are those foreign manufacturers doing so well in the US car market?

Star Parker offers an explanation…

How can you not feel that emptiness in the pit of your stomach as you watch our financial markets spin downward? The broad stock market indices are down well over 40 percent since the beginning of the year. Losses are somewhere in the neighborhood of $9 trillion. The real economic realities behind these numbers are starting to show up. The only question at this point is how severe the recession we are now entering will be.

Maybe, when everyone is depressed I am supposed to write cheery things to encourage folks. But I can’t, because I care about our country and what I see is not encouraging. We just had a presidential election that in some circles produced a lot of euphoria. But I believe that at some point — I hope sooner rather than later — many Americans are going to wake up and realize that this election was not a cure for our problems but a symptom of the disease.

I think this is what our crashing financial markets are telling us.

There is a well-known quote from a less well-known philosopher — George Santayana — that those who don’t remember history will repeat it. The failure of communism and socialism is not that far behind us. Yet Americans cannot seem to recall that it happened — and why it happened. What characterizes these systems? Government control. Central planning. And Godlessness.

Let’s consider the sad and pathetic state of our American automobile companies.

As the chairmen of GM, Ford, and Chrysler sat in Washington begging for public money to survive, Honda was celebrating the opening of a new non-union plant in Greensburg, Ind., which will produce 200,000 vehicles annually. The starting hourly wage at this plant will be $18.41 per hour — about $10 less than at the American companies. There were 33,000 applicants for 900 job openings.

Americans want to work, can work, and can compete with anyone. They just need to be free to do it. In 1970, GM had 50 percent of the U.S. auto market. Today it has 20 percent. What happened? The world changed in 1973. We were hit with the oil shock. The oil producing countries’ cartel, OPEC, discovered its power, and drove up energy prices.

The power of a free country and free markets is that people, when left alone, will adjust to change and do what they need to do. In fact, that’s what happened in businesses that were left alone. Changes and adjustments were made and overall the country is about twice as energy efficient today as it was in 1970.

But in our high profile auto industry that’s not what happened. Our politicians, with cooperation from our auto industry executives, decided that the auto companies could not be left to their own resources to adjust to new realities. First, we enacted import quotas on Japanese cars. Second, we enacted fuel standards to dictate to our car companies what kind of cars to make. And, of course, third, the power of the union was left intact.

Now look where we are. We have a destroyed industry that is the product not of Americans not being able to compete, but of allowing itself to become dependent on government.

This is why our auto companies have failed. This is why communist and socialist countries have failed. A few days ago Rahm Emanuel, who Barack Obama has picked to be his chief of staff, spoke to a gathering of CEOs at a Wall Street Journal conference in Washington. He went through the agenda to expect from the Obama administration. He sounded like a commissar from the Soviet Union. Government control and planning in health care, energy, the economy, and financial markets.

Why are our financial markets so pessimistic? They are bracing. The market sees the sad news that Americans have not learned from history. And it looks like we are about to relive its hard lessons.

Government intervention in markets is not needed.

Now it’s US auto workers who will feel the brunt of that truth as the Big Three are forced into administration and a much needed restructuring of their operations.

(Nothing Follows)

Categories: Economics, Politics

>After Mumbai – Who’s next?

November 27, 2008 Leave a comment

>While the mainstream media’s and liberal arts world’s heads spin around trying to blame the latest Islamic atrocity on some policy or other of the United States in order to shift blame from their murderous soulmates to those they see as being the root cause of all of the world’s problems, those with greater wisdom are trying to work out where the next attack will take place.

For there will be another attack, make no mistake about it.

These people are in it for the long term.

New York, Washington, London, Madrid, Bali and Mumbai have all suffered from an ideology whose prime objective is the return of the Caliphate and Islamification of the world not through that most liberal of avenues, diplomacy, or through the semi-annoying, overly polite method of door knocking the world and looking to convince people to come on board in the way that the Mormons do but through violence, murder and terror.

So what next?

The world’s serious people will now be assessing what the risk is to their assets and areas of responsibility.

What odds of a copycat attack at another major hotel or shopping centre?

Surely, cities with large Muslim populations from which young, radicalised ideologues can be sourced must be sleeping more nervously tonight?

The Mumbai attack must have been planned for many months and it probably started before Barack Obama had won the Democratic Party nomination and the timing can only be seen as a shot across the new administration’s bow.

But there is an even bigger issue that needs to be addressed.

How will India respond to the attack when it is clear that it was carried out by Pakistani nationals trained by the Pakistan based terrorist group Lashkar-e-Taiba?

In searching out American, British and Jewish victims the murderers ensured that they would be seen as heroes among the anti-West, anti-Zionist Middle East, as well as ensuring that the West’s leftist apologists devote many column inches to blaming America.

By attacking inside India they also inflame tensions between India and Pakistan.

Thus, India is in the difficult position of having to be seen to avenge the deaths of so many people while at the same time avoiding open war with Pakistan.

All in all, they’re in a bit of a political pickle.

Why don’t they call on the United Nations for support?

Or have Barack Obama sit down with the terrorists and have a bit of a chat?

Actually, I think that terrorist networks around the world are in for a great, fat surprise if they attack the United States or any of its assets around the world.

Unconstrained by having the media or political elites against him, Obama’s response to an attack may be much more aggressive than expected.

(Nothing Follows)

Categories: Islam, terrorism

>Unmitigated Cowards

November 27, 2008 2 comments

>This disgusting ideology is not brave and is not morally supportable.

It is nothing but destructive and evil.

These people are nothing but…

The world mourns the loss of so many innocent lives, which is as it should be.

Here’s something to think about, though.

If it was a Hezbollah operation inside Israel the you can be sure that the mainstream media – CNN, the BBC, ABC, the New York Times, The Age, PBS, the Guardian, the LA Times and all of the leftist blogs – would be furiously defending Hezbollah and accusing Israel’s security of using ‘disproportionate’ force in its response to the attack.

Such is the inversion of values in the world they inhabit.

(Nothing Follows)
Categories: Islam, terrorism

>Who is right and who is wrong in the ongoing Climate War?

November 25, 2008 17 comments

>Imagine that a Martian arrives on earth and, being obviously uncontaminated with the details of the debate going on regarding man made global warming, is asked to adjudicate on the strength of the arguments put forward by the pro- and anti-AGW sides.

In a massive blow to interstellar relations, our Martian friend is forced to sit through Al Gore’s An Inconvenient Truth.

Initially, he is impressed. The correlation between CO2 and temperature does indeed seem to be high.

He then sits though a presentation by Bob Carter – the irrepressible Australian scientist (BTW – the term is tautologous, as all Australians are irrepressible) – and discovers that ice core analysis demonstrates conclusively that CO2 lags temperature.

Not to be outdone by such pesky details the Climate Faithful roll out the high priest of climate science himself, James Hansen. Hansen then describes how climate models work along with their predictions of serious temperature rises over the next one hundred years.

Again, our Martian friend is impressed. On Mars, people who can plot lines on bits of paper are held in high regard.

Roy Spencer then appears for the nay sayers and blows the Martian away by plotting two lines on a graph – one with the model predictions and, tellingly, one with observed temperatures.

Now our Martian friend is getting really confused. Who to believe?

Michael Mann then takes the stage and outlines the inconic Hokey Stick, showing that modern temperatures are unprecedented in the history of the world. His presentation is backed up by the head of the UN IPCC, Dr Rajendra Pachauri, who highlights the prominence of Mann’s work in IPCC publications.

Impressed by more lines, and bendy ones at that, our Martian gives weight to Mann’s presentation. He doesn’t know what a Nobel Peace Prize is but he recognises that it must be important.

Enter Steve McIntyre who proceeds to thoroughly demolish the scientific legitimacy of the Hokey Stick. McIntyre demonstrates that Mann’s algorithm can be used to produce a hockey stick by using red noise data. Supporting McIntyre is Edward Wegman, chairman of the US National Academy of Science’s committee on applied and theoretical statistics.

Now thoroughly confused, our Martian friend decides to take a break before hearing more testimony.

So which side will he choose?

Who knows?

What’s clear, though, is that the science is somewhat less than clear, is clearly not ‘settled’, a consensus does not exist and, critically, the so-called ‘deniers’ have a high degree of scientific credibility.

Over the last couple of years there has been an increasing body of scientific work demonstrating that other factors are more responsible for the change in the world’s temperature than CO2 including solar activity and the effects of the El Nino Southern Oscillation and Atlantic Multidecadal Oscillation.

Entering the argument is a piece of analysis by Bill Illis, posted at Watts Up With That, that adjusts temperatures for the ENSO and AMO. Be sure to read the whole thing. It will be intriguing to see how long it takes for the Climate Faithful to strike back at Illis’s thesis.

The result of his work is pretty interesting, as it provides a more accurate explanation of temperature variation than do climate models.

People have noted for a long time that the effect of the El Nino Southern Oscillation (ENSO) should be accounted for and adjusted for in analyzing temperature trends. The same point has been raised for the Atlantic Multidecadal Oscillation (AMO). Until now, there has not been a robust method of doing so.

This post will outline a simple least squares regression solution to adjusting monthly temperatures for the impact of the ENSO and the AMO. There is no smoothing of the data, no plugging of the data; this is a simple mathematical calculation.

Some basic points before we continue.

– The ENSO and the AMO both affect temperatures and, hence, any reconstruction needs to use both ocean temperature indices. The AMO actually provides a greater impact on temperatures than the ENSO.

– The ENSO and the AMO impact temperatures directly and continuously on a monthly basis. Any smoothing of the data or even using annual temperature data just reduces the information which can be extracted.

– The ENSO’s impact on temperatures is lagged by 3 months while the AMO seems to be more immediate. This model uses the Nino 3.4 region anomaly since it seems to be the most indicative of the underlying El Nino and La Nina trends.

– When the ENSO and the AMO impacts are adjusted for, all that is left is the global warming signal and a white noise error.

– The ENSO and the AMO are capable of explaining almost all of the natural variation in the climate.

– We can finally answer the question of how much global warming has there been to date and how much has occurred since 1979 for example. And, yes, there has been global warming but the amount is much less than global warming models predict and the effect even seems to be slowing down since 1979.

– Unfortunately, there is not currently a good forecast model for the ENSO or AMO so this method will have to focus on current and past temperatures versus providing forecasts for the future.

And now to the good part, here is what the reconstruction looks like for the Hadley Centre’s HadCRUT3 global monthly temperature series going back to 1871 – 1,652 data points.

Here are a couple of graphs that show the problem not only with climate models but also the science that they are based on (click to see a larger version).

The first shows the Hadley data in blue and Illis’s ENSO/AMO model in red.

The second shows the temperature record plotted against what global warming theory expects (green), the trend and a simple model.

It’s clear that climate science is in serious trouble.

A doubling of CO2 does not lead to a doubling in temperature, as shown below:

…and the end expanded as follows:

Observed temperatures are not in line with models’ predictions.

Not by a long shot.

Climate science is based on greenhouse gasses being a forcing agent, which is then amplified by a feedback mechanism, water vapour.

The fact that temperatures are not responding in the way that is predicted by climate science proves conclusively that even if CO2 is primarly responsible for the world’s warming then the understanding of the forcing/feedback relationship is not well understood.

Our poor old Martian certainly does have his work cut out for him deciding between the two sides.

No wonder the general public is confused.

(Nothing Follows)

Categories: Climate Change

>’Minor’ errors are major problems for climate science

November 24, 2008 6 comments

>A couple of weeks ago somewhat of a kerfuffle erupted when NASA’s Goddard Institute of Space Studies, home of Al Gore’s spiritual advisor James Hansen, released data showing that October 2008 was a record hot month in Russia.

As things transpired, NASA’s statement was one hundred percent untrue.


Because the data for October contained much data that had been carried over from September.

When there can be a 14C difference between the two months this makes a serious difference.

So what happened?

Apparently, the data that GISS had received from its supplier (GHCN) was wrong and this led to the faulty conclusion.

Gavin Schmidt, of both GISS and Realclimate, defended their data quality procedures stating that “the processing algorithm worked fine”. He then went on to say that there was not a full time person dedicated to data quality control and that “Current staffing from the GISTEMP analysis is about 0.25 FTE on an annualised basis (i’d estimate – it is not a specifically funded GISS activity).”

Having been exposed by people like Steve McIntyre – yet again – GISS corrected its error but did not provide attribution to McIntyre for highlighting the issue.

Previously, McIntyre had exposed the GISS Y2K fault that, when corrected, meant that 1998 was not the hottest year in the US temperature record, 1934 was.

Now, you might think that these two corrections are much ado about nothing. The scale of the Y2K error was not huge and, anyway, the most recent error was quickly fixed.

The Climate Faithful quickly jumped to the defence of NASA including Australian blogger Tim Lambert, a serial defender of all things AGW, who dismissed the latest problem as mountains out of molehills.

So here are some questions that are pertinent to not only the debate but also the whole issue of proper scientific practice.

If errors such as with Y2K and 10/08 were not exposed by McIntyre et al then would they ever be corrected?

If there is nobody dedicated within GISS to data quality control and huge anomalies such as have just occurred can not only slip through but be completely missed by those working with the data then what confidence do we have that a myriad of other issues do not also exist?

This is an especially pertinent question given that of the four major centres producing temperature information (GISS, HadCRUT, UAH and RSS) it’s GISS that shows the highest temperature trends and is therefore quoted most frequently in the media.

Far from being a ‘mountains and molehills’ as Lambert posits, the latest transgression by NASA indicates a much deeper, insidious problem within the climate science community – the uncritical acceptance of data that supports their position.

Which raises another question. How far are these people prepared to go in order to promote the proposition that CO2 is the reason for the earth’s warming?

The record shows that they are prepared to completely rewrite history:

In 1995, David Deming, a geoscientist at the University of Oklahoma, had written an article reconstructing 150 years of North American temperatures from borehole data. He later wrote: “With the publication of the article in Science, I gained significant credibility in the community of scientists working on climate change. They thought I was one of them, someone who would pervert science in the service of social and political causes. One of them let his guard down. A major person working in the area of climate change and global warming sent me an astonishing email that said: ‘We have to get rid of the Medieval Warm Period.'”

So they did. The UN’s second assessment report, in 1996, showed a 1,000-year graph demonstrating that temperature in the Middle Ages was warmer than today. But the 2001 report contained a new graph showing no medieval warm period. It wrongly concluded that the 20th century was the warmest for 1,000 years. The graph looked like an ice hockey-stick. The wrongly flat AD1000-AD1900 temperature line was the shaft: the uptick from 1900 to 2000 was the blade.

And thus, Mann et al’s infamous Hokey Stick came to be the iconic symbol of anthropogenic global warming.

Fortunately for the reputation of science the Hokey Stick’s legitimacy was destroyed by Steve McIntyre and Ross McKitrick.

Unfortunately for the reputation of the media few major organisations gave the story any coverage and, more recently, have actively been promoting Mann’s latest reconstruction in an attempt to defend the Hokey Stick.

Minor errors are a major problem for the climate science community because the cavalier way in which they are dismissed, and defended as immaterial, can only serve to reduce public confidence not only in the field of climate science itself but also in the wider field of science itself.

(Nothing Follows)

Categories: Climate Change

>Financial hindsight has 20/20 vision

November 23, 2008 Leave a comment

>Hindsight has 20/20 vision and now we can see who was right and who was wrong on financial matters.

When Michael Lewis looks back on the Wall Street he wrote about in his 1989 best-seller, Liar’s Poker, the street looks positively quaint. At the time, it was shocking that an investment bank CEO made $3 million a year.

His newest book, Panic: The Story of Modern Financial Insanity, is a collection of essays and articles written during the past two decades. As Lewis tells NPR’s Renee Montagne, it begins with the crash of October 1987.

“It seemed to be the first of a new breed of financial panic, and it was panic without any seeming economic consequence,” Lewis says. Since then, “the financial market seemed to be able to convulse in the most extraordinary ways without most people ever really feeling very much. And the lessons people seemed to learn … was that, well, markets do these crazy things, but in the end they don’t really matter.”

A New Kind Of Crash

The current crash is different — very different. Lewis says he didn’t appreciate its distinctions until he began doing research four or five months ago. “The size of the problem is massive,” Lewis notes. “Not only did trillions — trillions — of dollars get lent to people who won’t be able to repay them, but Wall Street at the same time created a market in side bets about whether these people would be able to repay their loans. And that market in side bets is tens of trillions of dollars.”

Where did those dollars go? Most “went to building a lot of houses that we can’t afford,” Lewis says, pointing to McMansions and other “unproductive assets.”

But substantial money also went to “people who took the other side of the bet, and a lot of those people are lying low because they’re not going to be so popular,” Lewis says. “The biggest sum of money ever made by a single person in the history of Wall Street was made last year by a hedge fund manager named John Paulson, who made almost $4 billion for himself because he took the other side of the bets. … Big money has been made, but by very few.”

The cycle of soaring profits and crashes that began in 1987 is unlikely to continue, Lewis contends.

Diminished Interest In Risk Likely

“There will still be people who will take big risks and earn big returns in the financial markets, but they won’t be working at places called banks,” Lewis says. “They may be working at hedge funds or in private equity, but that will be a much smaller operation and, in general, the appetite for risk will be dramatically reduced. I don’t think, going forward, you will see people working at a place called Goldman Sachs taking home $70 million or $80 million at the end of each year, which they have done in the past.”

Such earnings are unwarranted, Lewis says. “One of the madnesses of the last 25 years … has been the rewards we’ve bestowed on financiers,” he says. “The people who have actually been allocating the capital on Wall Street have done a rather bad job of it. … The idea that these are essentially the highest-paying corporate jobs in America, by far, seems to me insane.”

The ‘Distorting Effect’ Of High Earnings

Those rewards have had “a really distorting effect” on society, Lewis says, creating a new norm for personal financial rewards for CEOs of all stripes. “That’s going to be gone.”

Disproportionate earning has another negative effect, luring young people who could contribute to society in other ways, Lewis says. “It distracts lots of young, passionate people from doing the things they probably should be doing.”

A few months ago, Lewis visited Princeton University, his alma mater, “to find out what the kids who were going to be investment bankers were now going to do with their lives.” He says he was “so frustrated with how unimaginative young people had become in choosing their path in life that I thought that someone should establish a kind of ‘Scared Straight’ program for Ivy League students.” He’d require them to spend a week with a hedge fund manager in Greenwich, Conn., “just to see how miserable” they’d be after 20 years.

The plunging market has changed many of their plans, Lewis says. “The kids … who thought they were going to be financiers are having to rethink the premise, and that’s a very good thing.”

Mr Doom, aka Peter Schiff, is an economist from the Austrian School of economics. I have come to understand that the people who use Austrian theories to support their economic predictions have a much better track record than others and especially those who follow Keynesian policies, even in so-called ‘modernised’ form.

He is not at all confident that the next 5-10 years will be anything but slow and hard.

I think that the appointment of Tim Geithner as Treasury Secretary and Larry Summers as a chief economics advisor will lead to egregious, New Deal style attempts to stimulate the economy, which will simply kick the fix-the-underlying-structure can down the road and ensure that Schiff’s predictions come to pass.

On this point I don’t blame only Democrats.

I think that John McCain would not have appointed people who would have made different decisions.

There is still a lot of pain to go through.

(Nothing Follows)

Categories: Economics

>Sunday night rock ‘n’ roll

November 23, 2008 Leave a comment

>Edwyn Collins (born Edwyn Stephen Collins, 23 August 1959, Edinburgh) is a Scottish musician.

He formed the musical group Nu-Sonics in 1976, which became Orange Juice in 1979. Critically admired within independent rock circles, Orange Juice are perhaps best known for their #8 hit single, “Rip It Up”, their only major UK Top 40 single and biggest commercial success. In 1985, Orange Juice disbanded, and Collins has since then pursued a solo career.

Collins is best known for his 1994 single, “A Girl Like You”, which was a hit in both the UK and the U.S. and was featured in the films Empire Records and Charlie’s Angels: Full Throttle, and for “Magic Piper of Love”, a 1997 single that featured on the soundtrack of Austin Powers: International Man of Mystery.

Collins’ music is mostly electric guitar-driven pop. His songwriting and vocal delivery range from the acerbically satirical to the soulfully tender – though he is probably better known for the former.

He built his own recording studio in 1994 and produced his own third solo album, Gorgeous George. He has also worked extensively as a record producer with other artists, including The Proclaimers, A House, Robert Forster, The Cribs, and Little Barrie. In 2005 Collins produced the The New Fellas album recorded by The Cribs.

If you haven’t got the album Gorgeous George in your collection then I suggest that you do yourself the proverbial favour and get a copy. It’s good listening all the way through.

Girl Like You

You’ll Never Know

(Nothing Follows)

Categories: Music

>What do the results of the American civic knowledge test say about society?

November 22, 2008 8 comments

>It says something about the power of the United States’ impact on Western culture that an Australian blogger sitting thousands of miles away can take the Intercollegiate Studies Institute’s American civic knowledge test and score 90.9% (30/33) against the average score of 77.5%.

Things like the Scopes Trial and Roe v Wade are probably well known to everybody that has had the good fortune to avoid a modern education.

Most people would know that the president is also Commander In Chief of the United States military.

However, it seems that there is a lack of knowledge of key areas of American history among those who really should possess that knowledge to help inform their decision making.

US elected officials scored abysmally on a test measuring their civic knowledge, with an average grade of just 44 percent, the group that organized the exam said Thursday.

Ordinary citizens did not fare much better, scoring just 49 percent correct on the 33 exam questions compiled by the Intercollegiate Studies Institute (ISI).

“It is disturbing enough that the general public failed ISI’s civic literacy test, but when you consider the even more dismal scores of elected officials, you have to be concerned,” said Josiah Bunting, chairman of the National Civic Literacy Board at ISI.

“How can political leaders make informed decisions if they don’t understand the American experience?” he added.

The exam questions covered American history, the workings of the US government and economics.

Among the questions asked of some 2,500 people who were randomly selected to take the test, including “self-identified elected officials,” was one which asked respondents to “name two countries that were our enemies during World War II.”

Sixty-nine percent of respondents correctly identified Germany and Japan. Among the incorrect answers were Britain, China, Russia, Canada, Mexico and Spain.

Forty percent of respondents, meanwhile, incorrectly believed that the US president has the power to declare war, while 54 percent correctly answered that that power rests with Congress.

Asked about the electoral college, 20 percent of elected officials incorrectly said it was established to “supervise the first televised presidential debates.”

In fact, the system of choosing the US president via an indirect electoral college vote dates back some 220 years, to the US Constitution.

The question that received the fewest correct responses, just 16 percent, tested respondents’ basic understanding of economic principles, asking why “free markets typically secure more economic prosperity than government’s centralized planning?”

Activities that dull Americans’ civic knowledge include talking on the phone and watching movies or television — even news shows and documentaries, ISI said.

Meanwhile, civic knowledge is enhanced by discussing public affairs, taking part in civic activities and reading about current events and history, the group said.

One wonders what the breakdown of knowledge is by demographic.

Younger people (less than 30), it seems certain, would score poorly on this test.

Would there be a difference between Democratic and Republican voters?

I suspect there would.

Anyway, take the test for yourself and see how you go.

Oh, what three questions did I get wrong?

4-What was the main issue in the debates between Abraham Lincoln and Stephen A. Douglas in 1858?

I knew it was about slavery but picked the wrong answer.

7-What was the source of the following phrase: “Government of the people, for the people, by the people”?

How I got this one wrong is beyond me…

8-In 1935 and 1936 the Supreme Court declared that important parts of the New Deal were unconstitutional. President Roosevelt responded by threatening to:

It was quite unfortunate that Roosevelt managed to overcome the Supreme Court’s ruling, which continued America’s poor economic recovery post the depression. I picked the wrong option.

Would the same result be reflected in Australia, Canada or the United Kingdom?


There is a debate happening in Australia at present regarding the citizenship test that immigrants must pass in order to become Australians.

I’d make it as hard as this civic knowledge test, myself, but with the cultural equalitists now running the show that seems an unlikely outcome.

(Nothing Follows)

Categories: Culture, United States

>Bail outs and economic stilumus packages mask real trouble lurking at the bottom of the economic garden

November 21, 2008 2 comments

>’s Gerard Jackson certainly has a take no prisoners style in his writing on economics and politics.

He gains credibility with me because he attacks both the left and right for getting economic policies wrong.

Jackson has been warning for a long time (at least a couple of years) about the expansion of the money supply by the world’s major central banks, which could only ever lead to artificially low interest rates that in turn lead to malinvestments and inevitable bubbles.

And, as we all know, bubbles eventually burst and that’s what we’re seeing now as the world deleverages from these malinvestments.

It is quite unfortunate that the financial issue has arisen at the same time that Keynesian economists hold sway in the major economies.

The history of spending one’s way out of a recession has a zero percent success rate, as this latest effort will, as well.

How often have you heard a commentator talk about consumer demand driving the economy? Too often, is the answer.

Jackson does not see good news from the US in his column of a couple of weeks ago.

Just as I predicted, the US economy is in another recession. For this you can thank the lousy economics that is taught in universities and practised by the fed. Once again, manufacturing was the first to signal an oncoming recession. When an economy reaches the final stage of the boom productivity usually declines. The US Department of Labor reports that manufacturing productivity has fallen for the second consecutive quarter

So what is the brilliant Mr Obama and his equally brilliant fellow Democrats going to do about it? Well, if they are to be taken at their word, and I see now reason why that should not be so, then they will sink the US economy. Unfortunately, this means that those Americans who had the good sense to see through his veil of economic ignorance will also pay the price for having him as president.

Nancy Pelosi — undoubtedly one of the dumbest people to ever be elected to the Senate — is proposing a stimulus package of between $60 billion and $100 billion. There are rumours coming out of Goldman Sachs that Obama will make it $200 billion. America’s greatest economist also said that there would be a tax cut next year to help expand the economy but it would not include a cut in the capital-gains tax. Instead she wants to put the money in workers’ pockets. What she really means is that she and her fellow pickpockets intend to transfer millions of dollars from those who earned them to those who didn’t, safe in the knowledge that the grateful recipient will continue to vote for Democrats, at lease until the money well runs dry.

However, let us put cynicism aside — difficult as that is when dealing with something like Pelosi — and focus on the economics of the Dems’ tax proposals. Lurking behind these proposals is the Keynesian fallacy — it is, in fact, one of the oldest economic fallacies around — that increased consumer spending will promote economic growth. Therefore the handouts are justified on the grounds that those on lower incomes, however defined, have a very high propensity to consume (hifalutin jargon for they’ll spend all of the loot).

But this is precisely why this kind of monetary stimuli will actually aggravate the recession. This, unfortunately, is where it might get a little technical. Every economy has a production structure, including even primitive agricultural societies. The more advanced the society the more complex the production structure will be. This structure is sensitive to changes in interest rates. Therefore, when the central bank forces rates down below their market clearing levels they spark a boom.

In creating a boom the inflow of money distorts the production, throwing it out of kilter. These distortions are malinvestments that require more and more monetary injections to remain afloat. Eventually the central bank is forced to step on the monetary brakes which sends the economy into recession. (It’s a lot more complicated then this). The recession is really the adjustment process during which these malinvestments are liquidated and equilibrium is restored.

Now if the additional spending by the recipients of the Democrats’ generosity is offset by reduced spending by those who were bludgeoned into paying for it there will be absolutely no change in aggregate spending. So if there is no change in aggregate spending there can be no stimulus. Moreover, if those who are paying these phony tax breaks cease saving in order to maintain their level of consumption then there will be less investment — and it is investment that drives up real wages.

If the handouts are funded by the courtesy of an obliging fed this will add to inflation. Moreover, the additional spending on consumer goods will distort the price structure (yes, there is also a price structure) by diverting factors away from the higher stages of production to the lower stages, those stages that are close to the point of consumption, resulting in a great deal of excess capacity. This is what happened in the 1930s. (Try as I can, I still cannot think of an economic recovery that was driven entirely by the demand for consumer goods). As soon as additional monetary injections start driving up prices and the current account deficit the fed would have no alternative but to once again slap on the monetary brakes.

The only genuine stimulus is from cutting taxes on business. It ought to go without saying that if you want more of a good or service you must reduce the cost of producing it and vice versa. (But I have to constantly remind myself that we are dealing with Democrats, people for whom economic laws simply do not exist). It follows with ineluctable logic that reducing the cost doing business will lead to more business. You know the sort of thing I mean, investing and hiring people. (See The US recession and Obama’s destructive economic snake oil).

This is iron law of economics was denied by both Hoover and Roosevelt. The result was the tragic ’30s, for which brilliant economic historians like Pelosi, Reid, Byrd, etc., are still blaming Hoover. No matter how low interest rates fell business remained comatosed, which completely baffled Roosevelt and his absurdly named “brains trust”. What these great minds were unable to fathom is the simple fact that businesses are not going to invest and hire if you confiscate their profits, including regulating them away. God, before you know it Pelosi and her fellow footpads will be resurrecting Roosevelt’s dismal Public Works Administration or something like it. And that would be a sure sign of economic failure.

Rest assured that no socialist or meddling politician is ever short of ideas for running an economy. Mr Obama is no different. He and his fellow compulsive meddlers are going to splurge hundreds of billions of dollars (it doesn’t sound like much if you say it quickly) on so-called clean energy. It’s neither clean, nor cheap, nor economically responsible. This expenditure would amount to the creation of masses of malinvestments, ‘investments’ that cannot pay for themselves because they are grossly inefficient economically. If fully implemented Obama’s energy policy would lead to a hideous rise in domestic energy prices that would badly cripple the American economy. The left would finally get their hateful wish: A greatly weakened and humiliated America.

But what about Obama’s economic advisors? Well, what about them? From what I understand they are nothing but a bunch of vulgar Keynesians. Let’s take Larry Summers for example. This genius, who aspires to be Obama’s Treasury Secretary, is arguing that there needs to be more government interference in the economy. Brilliant, policies favoured by so-called economists like him cause a economy and trigger a massive financial crisis. And he has the gall to ask for more of the same. Summer’s seems to have overlooked the fact that Freddie May and Freddie Mac were brought down by political meddling, not to mention a number of kleptomaniac Democrats.

Summers actually shines against some of Obama’s other economic advisors, one of whom is Jennifer Granholm. This woman is surely remarkable. Her mismanagement helped to destroy Michigan’s economy. So what did the good citizens do? They voted for more of the same. Then there is the corrupt Elliott Spitzer. The damage he did to New York’s economy cannot be measured. This is what Obama calls change! I’m telling you, kiddies, it’s going to fun times ahead.

Before I finish, a few words about Obama’s dishonest tax proposals. When he says spread the wealth he is talking about raiding the incomes of those on $250,000 and above. (I don’t doubt for a moment that the figure will be lowered). I stress once again that he is talking about incomes. But incomes are not wealth. If he were honest he would call for a wealth tax but he won’t. This means that his billionaire friends will not be touched by his tax proposals. (See Teresa Heinz Kerry: You pay taxes, I don’t)

But those struggling to accumulate wealth will be hit and hit hard. Do you think Buffet, Soros and the rest of that oily sanctimonious crew would have poured in tens of millions of dollars into Obama’s election campaign if they thought for a moment he would raid their assets once he was elected? Of course not. These people are supporting tax increase that they don’t have to pay and won’t. They bought Obama and he had better bloody well stay bought. They are truly a despicable bunch.

The announcement that President-elect Barack Obama picked Timothy Geithner, head of the Federal Reserve Bank of New York, to be his Treasury secretary sent the stock market north as Wall Street responded positively.

Geithner is a colleague and former student of Larry Summers, an arch Keynesian, which does not bode well for the long term.

He is already on record stating that elements of the bailout should become permanent.

No wonder Wall Street rallied on news of his appointment.

(Nothing Follows)

Categories: Economics