Sunday, June 28, 2009
Irwin Stelzer (“No more consensus: this time there is a choice”) holds up Ronald Reagan as a model of a Conservative working for the ordinary voter. He could hardly have chosen a worse exemplar.
From 1947 to 1981 (the year in which Jimmy Carter left, and the Great Communicator took office), US public debt outstanding had fluctuated between $2 – 2.5 trillion (inflation-adjusted to 2009 dollars). Carter ended his Presidency with the debt no worse than it had been when he began. Under Reagan, the debt doubled in real terms (average 9.7% p.a. increase). Bush senior continued this trend (7.3% p.a.); the next two terms under Clinton showed a significant slowing (1.8% p.a.); but Bush junior picked up the pace again (6.3% p.a.) America now has $11.4 trillion public debt around its neck, approximately 5 times the equivalent in 1980, when Reagan asked voters, “Are you better off than you were four years ago?”
Well, how much better-off is Joe Average now? In the latest issue of Harvard Business Review, Gary Pisano and Willy Shih conclude that “average real weekly wages have essentially remained flat since 1980.” Instead, the “trickle-down effect” has turned out to be a torrent for the upper stratum only: in a 2006 speech reviewing hourly wage rate increases from 1973 – 2005, the economist Janet Yellen, of the Federal Reserve Bank of San Francisco, said “... the growth was heavily concentrated at the very tip of the top, that is, the top 1 percent”. The rest played catch-up by taking on extra personal debt: an investment analyst quoted in The Economist (22 January 2009) says “... the share of household and consumer debt alone went up from 100% of GDP in 1980 to 173% today, equivalent to around $6 trillion of extra borrowing.” Naturally, this process was much to the advantage of bankers, brokers and others in the top 1%.
In short, America has been pretty nearly busted by and for its elite. So much for the party of smaller government; so much for supporting the core Conservative, hard-working average wage-earner; not so much clear blue water, as a tide of red ink. One can only hope that the next British Conservative government, if there is one, will seek not to emulate Reagan and the Bushes.
Saturday, June 27, 2009
Thursday, June 25, 2009
The folly of buy-and-hold may also apply to houses.
"Holding stocks, you have to hold your breath, as the smell may be fatal" - wepollock (htp: Jesse)
Tuesday, June 23, 2009
Our own view is that a serious stagflation with further devaluation of the US dollar as it is replaced as the world's reserve currency is very likely, after a period of slackening demand and high unemployment. A military conflict is also a probable outcome as countries often go to war when they fail at peace.
From my own readings in this area, the people who tended to survive the Weimar stagflation the best were those who:
1. Owned independent supplies of essentials including food and shelter and were reasonably self-sufficient.
2. Had savings in foreign currencies that were backed by gold such as the US dollar and the Swiss Franc
3. Possessed precious metals
4. Belonged to a trade union and/or had essential skills or government position which guaranteed a wage
5. Were invested in foreign equity markets, and even in the domestic German stock market for a time
Sunday, June 21, 2009
Why can we not design and post up a form - a petitition for a referendum, for printing-off and taking round for signing by work colleagues, friends and neighbours? With a request that everyone follows suit - downloads, prints, distributes and posts into a central address?
Or even an unofficial, but fairly-worded referendum itself?
Or are we indeed "entering a post-democratic age?"
Saturday, June 20, 2009
For the first 70 years, the gold-priced public debt was always less than twice its 1791 level, and often below the starting point.
Now to see the progress of the public debt since 1860:
... and second, since 1945:
These pictures seem to indicate the influence of:
(a) two world wars
(b) the closure of the "gold window" in 1971
(c) monetary expansion since the 1980s
(d) the Grand Bust of 2000, NOT 2007, and the consequent flight to commodities
- and on this way of measuring the catastrophe, we're 50% worse off than at the end of WWII - plus we're not rebuilding the economy, we're doing the reverse.
Here's the overall view from 1791 onwards:
Next, from 1945 to now:
Do you believe that there is a right time for the truth to be revealed?
Can you give examples of any truths that should be revealed, or myths dispelled, now?
Friday, June 19, 2009
Gold bugs say that the price of gold and other commodities has been held down by parties interested in maintaining the credibility of the US dollar. Willie thinks that the entry of a large Chinese sovereign wealth fund may foil such market manipulation in future, especially since the Chinese can back their hedge fund loans with their US Treasury holdings. An attempt to break a Chinese-held commodity position, if successful, could lead to a selloff of Treasuries and so crater the bond market, leading to raised interest rates and/or a drop on the dollar.
Between a rock and a hard place. This is what it is to be a debtor.
There's various ways you could interpret this - e.g. it could be a way to deflect criticism of Tesco's powerful position in the retail commercial property market, which some say has been used to prevent competitors setting up near their own outlets. But there are cheaper ways to deal with critics.
I think this billion-pound bet may be a straw in the wind - or perhaps an uprooted tree in the mighty gale - portending a significant fall in commercial property values.
Are there some people who just get away with it, for ever?
Tuesday, June 16, 2009
Big changes are on the way. Jesse reports on how the world is weaning itself off the dollar; the Contrarian Investor notes how China is cornering the market in rare minerals vital to modern technology.
There is a power struggle - a host of power struggles - going on. The good news is that life goes on, too. The bad news is that not everybody makes it.
Don't be the doughboy this time.
Sunday, June 14, 2009
We do the same. We complain of encroachments on our liberty, the debauching of our currency and national wealth, the weakening of the bonds that tie society together, and so on. And we do it many times, passing judgment with our "wise saws and modern instances", like Shakespeare's magistrate.
We're not alone. In a well-worth-reading article today, former Tory minister Neil Hamilton tells it like it is now with our rulers: democracy is dead (not that it was ever much alive). It's especially disturbing that senior politicians will say this now, not just the cranks among the public.
But why are we singing? Simone de Beauvoir said, "Every good book is a cry for help"; who do we hope will make speed to save us? And why does he have a sword and sceptre in his hands? Because to ask for help is to surrender power.
So let us combine against the oppressor. But who will lead us? And how will they mutate as they convert our assent into fresh authority? Is a libertarian party ultimately doomed by its oxymoronic essence?
George Orwell said, 'All historical changes finally boil down to the replacement of one ruling class by another. All talk about democracy, liberty, equality, fraternity, all revolutionary movements, all visions of Utopia, or "the classless society", or "the Kingdom of Heaven on earth", are humbug (not necessarily conscious humbug) covering the ambitions of some new class which is elbowing its way to power ...'
Like charity, liberty, wealth and happiness begin at home. Let us waste no more of our dreaming time on the puppets that wish to master us; in a Berkleian way, they are created and maintained only by our perception. Neither vote nor revolt; ignore. Trying to change society is like sending flowers to a soap opera wedding.
The revolution is personal. How much of your time and money could you save, reorganise, invest to make you and yours happier? "Il faut cultiver notre jardin."
And in our garden, the birds will sing.
This is not quite as ludicrously James Bond-ish as it seems. Bear in mind that some time ago, Brad Setser studied Treasury bond purchases by China and the UK and concluded that the latter country was acting as an additional conduit for the former's loans.
Good news for the Italians - their law says they'll take 40% of the contraband.
Saturday, June 13, 2009
The London-based retiree looking for a bungalow in the South or South-West; the cereal packet family-of-four headed by a breadwinner; the pair of teachers deciding whether one can afford to go part-time; the buy-to-renter who sold out in time; the one who didn't; the rich guy dashing off a cheque for a Park Lane house to add to his international collection; the divorcee who bought out her ex-husband's share of the family home because she just can't let go; the car worker who's just lost his job; the Last Of England emigrant; the oldie looking for a sheltered housing apartment.
Houses sold by estate agent, by private treaty, by auction; houses sold, repossessed, swapped, abandoned, divided, combined, left as legacies, sold for care costs, seized by the law, occupied by squatters; flats, terraced houses, semis, detached dwellings. Brick and mortar, cruck, stone, straw bale, genuine and mock Tudor, eco.
Houses in central London, the London boroughs, the Home Counties, the provinces, Wales, Scotland and South-West; houses in thriving, decaying and recovering cities; in towns, villages, hamlets, lonely moors, islands; even a house on a pair of rocks on Newquay's beach.
How can one generalise meaningfully?
- Interest rates go up, to make it worthwhile for lenders to continue financing us. This will cut into take-home pay and make it more difficult to service large mortgages. House prices will drop, and so, eventually, will rents.
- The government will continue pumping cash into the system, one way or another. Our currency will depreciate further. Imports will become more expensive - and we import essentials like food and fuel. Since we have let our industries wither, we cannot quickly turn to providing for our own needs. So prices will soar and remain high for a long time. This will cut into take-home pay and make it more difficult to service large mortgages. House prices will drop, and so, eventually, will rents.
"Eventually" is happening now, as it happens. We were looking for a place to rent, found one on the Internet at £595/month, looked round it last week and the agent handed us a details sheet with the asking rent: £450.
Friday, June 12, 2009
Or if you regard murder and suicide rates as indicators of general unhappiness, note the countries with low rates. (Also note how statistics is plagued with problems of accurate information, though.)
Thursday, June 11, 2009
Beg to differ on one point:
If the Brown government fails, Britain will be left rudderless in the midst of the worst fiscal storm in decades. In a worst-case scenario where bad events lead to worse decisions, opines Stephens, the domino chain could even lead to a British exit from the EU.
"Worst-case"? Au contraire, the sooner the better, and for the reasons he has given in his exploration of Europe's problems.
Seems like a metaphor to me. The winner certainly didn't paddle any harder or smarter than the others. How much of a part does luck play in our lives?
Wednesday, June 10, 2009
Historically, the p/e ratio of the S&P 500 has averaged less than 20 - whether you measure from 1881, 1900, 1945 or 1970.
If the earnings don't improve dramatically and soon, the implication is a super-crash. But even if earnings triple from last week's level, that would merely put us back to where we were in December 1999, when the S&P's p/e ratio stood at its highest-ever (up to then) level: 44.2. And as you know, the market went on to halve in value by 2003.
So the S&P earnings have to become three times better than they are now, just to match the pre-Millennium crash conditions.
The dominant feeling I have now is a diffuse sense of denial.
Tuesday, June 09, 2009
I suggest you read this op-ed piece in the NYT (htp: Jesse). Revolution is in the air - here, too. That's why we need radical reform, instead.
China is requiring new PCs to come with factory-installed Internet filters (don't tell our government)...
... and may be buying American military secrets from the US Government (I believe I suggested this as a possible development quite some time ago, but I'm still looking for the reference.)
So anyone who has real money wants out: "The Chinese, Saudis and others with actual money that we are attempting to borrow to kick that can once again have figured out our scam and they are headed for the exits."
Coming soon: austerity, a devalued currency and high interest rates. And in the UK, it'll be worse.
A good time to save money, while you're still able to; and to bet against the crippled Anglo-American horses. No point piling up savings in our rotten fiat cash.
The Mogambo Guru continues to chirrup his commodities song.
Monday, June 08, 2009
I've often suspected that those who employ the ad hominem strategy do so because they are on dodgy ground. I'm not a fan of logical proof by abuse, but it has its adherents.
Nevertheless, surely handsome, trendy Cox has heard of the possibility of a "Vacuum metastability event", explained thusly in Wikipedia:
"If our universe is in a very long-lived false vacuum, it is possible that the universe will tunnel into a lower energy state. If this happens, all structures will be destroyed instantaneously, without any forewarning."
How could this happen? A further link in the infallible Wiki universe considers the possibility of cosmic annihilation by particle accelerator:
One scenario is that, rather than quantum tunnelling, a particle accelerator, which produces very high energies in a very small area, could create sufficiently high energy density as to penetrate the barrier and stimulate the decay of the false vacuum to the lower energy vacuum. Hut and Rees, however, have determined that because we have observed cosmic ray collisions at much higher energies than those produced in terrestrial particle accelerators, that these experiments will not, at least for the foreseeable future, pose a threat to our vacuum.
"...at least for the foreseeable future": a phrase to treasure, when set beside the earlier phrase, "...without any forewarning."
Not that I'd mind. After all, we'd know nothing about it. And it'd end the debate about global cooling / global warming / climate change - no guilt, either. And it'd make the Bible a nice bookend for both ends of the history of the universe, starting with "Let there be light" and ending "the day of the Lord will come as a thief in the night."
Throw that switch, Twatfinder General.
Sunday, June 07, 2009
...the proximate cause was a vast income disparity which placed much of the prosperous era's profits in the hands of a small wealthy class, who then mal-invested the profits...
- in the "non-real" economy:
The financial Plutocracy, observing that actually producing goods is not very profitable unless you can fix prices [...] sinks its capital into the FIRE economy (finance, insurance and real estate), eschewing real-world investments as comparatively unprofitable.
Though rarely noted, this is a longstanding trait of capitalism stretching back to 1400-era Venice. When trade became less profitable than mainland farmimg, the Venetian Elite stopped funding trading and bought farms on the mainland. As a side effect, Venice ceased to be a military and trading power. But the Elite remained immensely wealthy.
Watch that Gini coefficient rise.
Friday, June 05, 2009
So I thought I'd revisit the notion of corporal punishment, too. Here in the UK, we had a tiny but influential pressure group called STOPP (Society of Teachers Opposed to Physical Punishment). Its spokesman was a Tom Scott*, who used to teach in London. What do I find in the Guardian online?:
One of the leading figures in the campaign to abolish corporal punishment was Tom Scott, then a teacher in Tower Hamlets, east London, who helped set up Stopp, the Society of Teachers Opposed to Physical Punishment. Scott is believed to have quit teaching since, and retrained as a theatre director.
I've watched it all happen. The replacement of CSEs and O levels by GCSEs; the move towards, then away from continuous assessment; phonics as obligatory, then phonics as career suicide, then phonics as essential again; book-burning by heads of English in secondary schools (literally) to ensure that coursebooks could never again be used, followed by the fay ce que voudras English curriculum; then the "we'll sort the teachers out" National Curriculum; then the exploitation of the need for new textbooks by commercial publishers; then the teaching of sciences coalescing into a general science, the withering of maths, combined with introduction of PC characters in the SATS assessments to mix-in multicultural social issues...
*I don't know whether he's the same Tom Scott who ran the Eye Theatre and/or later joined the BBC's whizzy digital department...
Tuesday, June 02, 2009
Would it even be possible to hold the American revolution today? The Boston Tea Party? Imagine if George III had been able to sit in his palace across the ocean, look at the security-camera footage, press a button, and freeze the bank accounts of everyone there. Oh, well, we won’t be needing another revolt, will we? But the consequence of funding the metastasization of government through the confiscation of the fruits of the citizen’s labor is the remorseless shriveling of liberty.
Read more from the excellent and usually sharply funny Mark Steyn.