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Archive for February, 2009

>The credit crisis explained

February 28, 2009 2 comments

>This is a great video on how the credit crisis came about.

It doesn’t describe the government programs that led to the crisis, just the mechanics of how things became frozen.

Barney Frank, Chris Dodd et al should watch it…

http://vimeo.com/moogaloop.swf?clip_id=3261363&server=vimeo.com&show_title=1&show_byline=1&show_portrait=0&color=&fullscreen=1
The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

(Nothing Follows)

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Categories: Economics

>Capping executive pay will cause an increase in executive pay

February 26, 2009 Leave a comment

>In halls of power all across the globe politicians are getting themselves worked up about the issue of executive salaries and payouts, especially in circumstances where companies are going backwards or need government assistance.

Enter a man quickly building a reputation as Australia’s worst ever treasurer, Wayne Swan:

EXECUTIVE salaries had reached “sickening” levels, Wayne Swan said today, as he warned the Government is considering a cap on bosses’ pay.

The Treasurer said the Government was exploring all options when it came to high salaries for executives in businesses where staff were being laid off.

“I think Australians want to see a fair system for all and I think they are rightly sickened when they see some executives walk away with large payments and many workers walk away with virtually nothing,” Mr Swan said.

He was speaking in Melbourne ahead of crisis talks over the planned sacking of 1850 workers at clothing manufacturer Pacific Brands between the company, unions and Industry Minister Kim Carr.

Parenthetically, Kim Carr is of the hard-left faction and is eerily similar to the incompetent Wesley Mouch of Atlas Shrugged. His tactic is to provide government bailouts to industries that are heavily union controlled. The Wall Street Journal pointed out a few weeks back that Atlas Shrugged had gone from fiction to fact in just 50 years. It’s a concern that most of the West’s major economies are now run by the Looters.

The opposition has weighed into the debate – pretty much on the side of the government – with Shadow Treasurer Joe Hockey describing executive salaries as ‘jarring’ to those Australians who are losing their jobs or struggling to pay mortgages.

Ignoring the fact that most of the hype is designed to deflect attention from governments’ attempts to ‘fix’ the crisis by looting the future earnings of today’s young people.

In Australia, the government is conveniently ignoring the Institute of Company Directors’ current reforms to the issue of executive pay and especially when a company is losing share price.

Leaving the aside, what will be the consequence of governments legislating a cap on executive remuneration?

The answer might be counterintuitive but it’s higher executive pay.

Increased controls on company boards led to a number of companies reversing their decision to go public and list on the stock exchange.

This situation will be exacerbated if executive pay is capped as not only will fewer companies choose to list, especially into a poor economy in which increased share price will be a tough ask, but also companies may choose to de-list.

The net result will be that executives operating in companies not subject to public scrutiny will be able to achieve increased earning over their publicly listed counterparts.

With the balance of unlisted-listed companies increasing the overall remuneration for executives can only increase.

I do not believe that any company is entitled to even one cent of public money to bail them out but if it is going to be done then there is a fair case for the government to attach conditions to the assistance, which includes capping executive pay.

What happened on Wall Street was not a failure of government oversight but the direct consequence of government policy.

When people cry that Citigroup is ‘too big to fail’, for example, I point out that you could say the same thing about the Soviet Union.

(Nothing Follows)


Categories: Economics

>Sharpton channels Muslim cartoon outrage

February 26, 2009 Leave a comment

>Has anyone else made the connection between the outrage over the Islamic cartoons by Muslims and Al Sharpton et al’s outrage over the New York Post chimp cartoon?

That’s one of the reasons I call these groups soulmates though at least Sharpton’s group has only called for people’s figurative heads and not literal ones.


From a free speech point of view there’s absolutely no difference between their reactions.

People should be protected.

Ideas should always be open to debate.


It seems to me that Al Sharpton should unclench his fist…

It’s instructive that people on the right would never have made the connection between the NYP cartoon and Obama – because we’re pretty much race blind and have been for years – while the vile race baiters on the left use it as a cudgel to promote their racist agenda.


And in the immortal words of Forrest Gump:

(Nothing Follows)

Categories: Culture

>Are people running out of patience with their politicians’ spending?

February 25, 2009 Leave a comment

>Is this the type of stuff that gets people worked up and off their bums to push back against their political masters?

The problem in the world was caused by too much spending based on easy credit due to artificially low interest rates.

Can someone name one country that is not looking to try and spend its way out of its spending-induced problem?

President Obama gave his non-State of the Union to which Peter Schiff responds:

I don’t see how things are going to get better before they get much worse.

As Schiff points out, without savings there is no ability to fund investment.

I still think we’ll see 10% unemployment and inflation in the USA and across Europe. Australia will hit 8%/8% and potentially crack double figures.

At what point are people going to get so fed up as to ‘chuck the bums out’?

(Nothing Follows)


Categories: Culture

>Mother Earth comes to mankind’s rescue

February 24, 2009 12 comments

>Oh, no!

What a disaster!

What will we do?

How will we control ourselves?

What is the meaning of our lives?

And our message?

If it’s true?

Wailed the Climate Faithful.

Apparently, Mother Earth is doing a pretty good job of protecting us from ourselves…

Africa’s tropical forests have stored huge amounts of carbon over the last four decades and become a critical sponge for greenhouse gases, according to a study published Thursday.

Long-term measurements taken across the continent’s tropical belt showed that African forests absorb as much carbon dioxide as those in the Amazon.

Tropical forests only account for seven-to-ten percent of the Earth’s land area. But they hold up to half of the carbon locked inside the planet’s terrestrial vegetation, giving them an outsized role in regulating greenhouse gases in the atmosphere.

Previous studies in South America have shown that Amazonian old-growth forests have absorbed, on average, an extra 620 kilogrammes (1,364 pounds) of carbon per hectare (2.47 acres) per year.

This adds up to some 650 billion kilos every year for the entire Amazon basin, which sits astride eight nations.

Before the new study, however, it was not known whether this trend was common to all tropical forests, or varied from one continent to another, especially in Africa.

Having this information is important to broader attempts to project changes wrought by global warming, and how quickly temperatures are likely to rise.

Two dozen international researchers led by Simon Lewis of the University of Leeds in northern England pulled together data from 79 monitoring plots scattered across 10 countries in western and central Africa.

Sifting through the data, the scientists found that the region’s rain forests had pumped progressively more carbon dioxide out of the atmosphere as trees underwent photosynthesis and grew.

The average increase was almost identical to those for Amazonia, a net plus of 630 kilos per hectare each year between 1967 and 2007, reported the study, published in the British science journal Nature.

“African tropical forests are providing important ecosystem services by storing carbon and being a carbon sink, thereby reducing the rate of increase in atmospheric CO2,” the main driver of global warming, the authors note.

At least one puzzle remains. Left alone, forests will eventually reach a point at which tree growth and death are in equilibrium, meaning they neither take in or give off extra carbon.

The question, then, is why these tropical forests are continuing to draw down ever more CO2.

“There are two possible explanations,” said Helen Muller-Landau in a commentary published in Nature.

One is that major disturbances hundreds, or thousands, of years ago — massive fires, drought, changes in land use — destroyed portions of the forest which have been growing back ever since.

The second is that climate change has knocked tropical forests in South America and Africa off balance. “Perhaps the increase in atmospheric carbon dioxide is effectively fertilizing tropical tree growth,” speculated Muller-Landau.

It is probable, she added, that both factors were at play.

Whether remaining intact forests will continue to sequester carbon is unknown, and will depend in part on how humans manage this precious resource, Lewis and colleagues conclude.

“With adequate protection, these forests are likey to remain large carbon stores in the longer term,” they wrote.

We have spent tens of billions of dollars on climate change and now they tell us that there’s some new carbon sink of hitherto unknown capacity?

These people are crazy.

(Nothing Follows)


Categories: Climate Change

>The Age of Economic Ignorance

February 22, 2009 4 comments

>Frank Shostak is a former professor of economics who is now M. F. Global’s chief economist.

In this article published at Brookesnews he outlines the danger the world faces due to the belief that printing money will somehow lift the world out of recession or even avoid what appears to be an inevitable depression.

There is now no excuse for the layperson to not have spent some time studying up on the reason for the dire economic straits that the world finds itself in.

People should by now understand that consumption does not drive the economy and that the current problem has been created by the expansion of the money supply, exacerbated by ridiculous government intervention in the markets such as the immoral Community Reinvestment Act in the United States.


What’s it going to take for people to realise the folly of their ways?

Food lines?

Civil strife?

Worse?

We live in an age of grave economic ignorance, if central-bank policy is an indication of prevailing economic theory. It is apparent that we’ve learned nothing from several millennia of monetary destruction. The persistent demonstration that capital, not paper, is the basis for prosperity has fallen on deaf ears. Daily, we face the sad spectacle of government officials, pundits, and even Nobel laureates telling us that printing money is the answer to an economic downturn. Consider that since the eruption of the financial credit crisis in the second half of 2007, all major central banks have embraced an irresponsibly loose interest-rate stance. For instance, the policy rate of the Bank of England (BOE) was lowered from 5.75 per cent in November 2007 to the current level of 1 per cent.

The sharp decline in the BOE policy interest rate is in line with policies of other central banks. The US central bank (the Fed) has lowered its policy rate (the federal-funds rate target) from 5.25 per cent in August 2007 to around zero at present. Also, the relatively “conservative” European Central Bank (ECB) has been aggressively lowering its policy interest rate. The rate was lowered from 4.25 per cent in September last year to the present target of 2 per cent. Similarly, the Bank of Japan (BOJ) has visibly eased its interest rate stance. The policy rate was reduced from 0.5 per cent in September 2008 to the current level of 0.1 per cent.

Given that, so far, already extremely low interest rates have failed to revive economic activity, central bankers are now considering another approach. Last Wednesday, February 11, the governor of the Bank of England said that the UK central bank is going to embrace a quantitative easing policy to revive the economy. The idea here is to flood the economy with money by buying government bonds. US central-bank policy makers are currently contemplating a simliar idea. We shouldn’t overlook the fact that, since embracing the aggressive lowering of rates, central banks have been aggressively pushing money into the banking system without succeeding in reviving economic activity. So why should aggressive money pumping work now?

The yearly rate of growth of the US central-bank balance sheet (money pumping) jumped from 3.9 per cent in August last year to 152.8 per cent in December 2008 before falling to 127.5 per cent in January. The yearly rate of growth of the balance sheet of the Bank of England jumped from negative 7.2 per cent in May 2007 to positive 179.4 per cent by October 2008 before easing to 157.6 per cent in November last year and 129 per cent in January.

The growth momentum of the European Central Bank balance sheet has accelerated in January. Year on year, the rate of growth jumped from 7 per cent in July 2007 to 45.5 per cent in December and to 56.5 per cent in January. Also, the yearly rate of growth of the BOJ balance sheet follows a visible uptrend. The rate of growth climbed from negative 0.8 per cent in August last year to 10.3 per cent in December before easing to 5.7 per cent in January.

What permits real economic growth is an improvement in the investment infrastructure of the production process. What makes the improvement possible is real savings. It is real savings that fund the enhancement of infrastructure through various tools and machinery, i.e., capital goods. With better tools and machinery, a better quality and a greater quantity of goods and services can be produced.

In a free, unhampered market economy the established infrastructure is in accordance with the tendency toward harmony between various activities. This means that the flow of real savings is sufficient to fund various lines of production without any disruption. On this Murray Rothbard, paraphrasing Ludwig Lachmann, wrote,

Capital is an intricate, delicate, interweaving structure of capital goods. All of the delicate strands of this structure have to fit, and fit precisely, or else malinvestment occurs. The free market is almost an automatic mechanism for such fitting; … with its price system and profit-and-loss criteria, [it] adjusts the output and variety of the different strands of production, preventing any one from getting long out of alignment. (Murray N. Rothbard, Man, Economy, and State with Power and Market, Mises Institute, 2004, p. 967).

As a result of the artificial lowering of interest rates and massive money pumping, an additional demand for various goods and services emerges. This leads to an attempt to expand the infrastructure. This attempt is bound to fail since the flow of real savings is not large enough to support the expansion of the capital structure. Consequently, the attempt to expand the infrastructure leads to the diversion of real funding from various activities that make the present flow of real savings possible. Thus, the flow of real savings comes under pressure and the rate of real economic growth follows suit.

Neither an artificial lowering of interest rates nor monetary pumping by central banks has direct input in the production of capital goods and the production of goods and services that are required to promote and maintain human life and well-being. The artificial lowering of interest rates and monetary pumping only give rise to various false activities by diverting a portion of the flow of real savings to these activities. The more false activities that emerge on the back of the artificial lowering of interest rates and monetary pumping, the less real savings will be available for wealth-generating activities.

The fact that economic conditions have continued to deteriorate despite the aggressive lowering of interest rates and massive money pumping by central banks raises the likelihood that the flow of real savings is in trouble. Note again that monetary pumping and the artificial lowering of interest rates can’t replace nonexistent real savings. Without additional real savings, it is not possible to undertake various new projects without weakening the existent structure of production.

Remember that the interest rate is just an indicator of the state of demand and supply for real savings. The falsification of this indicator cannot expand the flow of real savings. Likewise money is just a medium of exchange. Its function is to permit the exchange of the products of one specialist for the products of another specialist. More money cannot generate more real savings or real economic growth.

On the contrary, a further planned expansion in monetary pumping by central banks can only weaken the flow of real savings and undermine prospects for a sustained economic revival.

I can’t see how any – any – of the so called stimulus packages around the world can have any other effect than to make the situation worse.


(Nothing Follows)

Categories: Economics

>Sunday night rock ‘n’ roll covers

February 22, 2009 Leave a comment

>“Born to Be Wild” is a rock song written by Mars Bonfire and made famous by the Canadian rock band, Steppenwolf. It is often used in popular culture to denote a biker appearance or attitude. The song is sometimes described as the first heavy metal song ever written and is also said to have inspired the name of the emerging heavy metal genre; although these claims are disputed, the song’s second verse (which refers to “heavy metal thunder,” though it is either a reference to the weight of the motorcycle or a powerful car) contains the first recorded reference to “heavy metal” in the context of rock music.

Although initially offered to other bands – the Human Expression, for one – Born to Be Wild was first recorded in 1968 by Steppenwolf. (Under an earlier stage name, Dennis Edmonton, Mars Bonfire was previously a member of the Sparrows, the predecessor band to Steppenwolf). “Born to be Wild” was the band’s second and most successful single, reaching #2 on the Billboard Hot 100 singles charts. In 2004, Rolling Stone magazine placed “Born to be Wild” at #129 on the 500 Greatest Songs of All Time list. In 2009, it was named the 53rd best hard rock song of all time by VH1.

The song was initially released in 1968, but it was subsequently included in many compilation albums and soundtracks. The first of these was the soundtrack for the movie Easy Rider (1969). Unlike the album or single version, the song on this soundtrack is accompanied by the sounds of motorcycles as an introduction. (Another Steppenwolf song from their first album, “The Pusher” was also used in the film.) When the movie was in production, Born to Be Wild was used simply as a placeholder, since Peter Fonda had wanted Crosby, Stills and Nash to do the movie’s soundtrack. Eventually, it became clear that the song was well suited for the movie. At least in part because of its prominence in this movie, Born to Be Wild is probably the song that is most closely associated with motorcycles.

If you don’t have Slade Alive in your collection then you’re missing out on one of the great live albums, as well as their fantastic version of this song.

The Original – Steppenwolf

Thumping Cover – Slade

And a terrible cover – Kim Wilde

(Nothing Follows)

Categories: Music