Belly Up

The state of Illinois is flat broke. So is California. There are in fact half a dozen states close to the edge. All the states except North Dakota are bleeding red ink. It's so bad that some in Congress are writing up legislation to allow states to declare bankruptcy.

The state of Illinois owes creditors 6 billion dollars. The state comptroller in Feb 2011 is paying the bills for Aug 2010. Drivers of state vehicles are seeing their state issued credit cards being rejected when they try to fill up the gas tank. Everyone is tired of not getting paid. No one want's to do business with Illinois. The legislature in Springfield believes the solution is raising tax rates. A huge tax rate increase for individuals and businesses that recently passed has neighboring states salivating. Wisconsin is aggressively wooing businesses to hop the border and enjoy lower taxes and a shiny new business friendly climate.

California is most likely the reason DC legislatures are crafting a bill to legalize bankruptcy for states. The state is billions in debt and there's no light at the end of the tunnel. Is it somehow poetic justice that the man most responsible for the decline of the Golden State is now faced with the carnage his policies have wrought? Is Gov. Jerry Brown at least a bit humbled by what he found oh so many years later? Possibly. California's suffering in the current economy is exponentially greater than almost every other state. The housing bubble hit the state especially hard. Public services for illegal aliens are a massive drag, but it is the state pension system that is killing California. Bankruptcy would allow the state a way out of the pension nightmare.

America basically has it's own Greece in California. Except that instead of a small minor economic power California has an economy the size of Italy. If California gets a Federal bailout then watch the floodgates open wide. The Cloward/Piven Strategy to overwhelm the government with social obligations will be complete.

One has to wonder if what's happened to America was the inevitable result of blind fate or of cynical manipulation. Probably both. A true unplanned capitalist free market society is equally as impossible as a successful totalitarian communist society. American capitalists see a billion consumers in China and a billion more in the neighborhood. With visions of cheap labor and selling product dancing in their heads coupled with encouragement from the governments in DC and Beijing a massive jobs migration was inevitable. So far the reality of an enormous consumer driven middle class in China has failed to materialize. Maybe it will someday...

In the meantime American's are losing their jobs and the government is forced to borrow billions from China to pay pension and unemployment benefits. Seems crazy, but what do I know?

In a catch 22 situation we realize that a growing, robust American economy would help fill both state and federal coffers, but that's not going to happen if the jobs keep going overseas while the government squeezes the remaining producer class even harder. The current paradigm is unsustainable. How long before the whole thing goes belly up?



CW

2012 Disaster? The China Bubble

For years we have been hearing two tales about China. The obvious one that China will overtake the U.S. as the dominant economy on the planet and eventually even hold the world' s default currency. Not to mention China's expanding military and its ambitious goals to lead in space exploration among other likely conquests. Who's to stop it? The other tale is the specter of the grand daddy of all "bubbles".

If you have been listening and reading you will have seen the occasional China bubble story. While it seems impossible in the back of your mind you wonder to yourself what will it mean to me...

I've relied on one of my favorite bloggers for specific information, that would be Al Fin of http://alfin2100.blogspot.com/. While I find Al Fin extremely credible it doesn't hurt to see evidence in main stream publications. Take a minute to read this article in The Times of London called "Hedge funds bet China is a bubble close to bursting".

FTA
We think we’ve experienced credit bubbles over the past few years, but China is the biggest. And yet the global economy is looking to China as not just a crutch but a springboard out of the recession. It’s crazy.”


He is not alone. Hugh Hendry, a former star of Odey Asset Management, has launched a distressed China fund at Eclectica Asset Management.


He follows Mark Hart of Corriente Advisors, the American hedge fund manager who made millions of dollars predicting both the subprime crisis and the European sovereign debt crisis, who started a fund based on the belief that rather than being the “key engine for global growth”, China is an “enormous tail-risk”.


There have been academics and analysts who have argued about the dangers of China’s economy overheating for some time. But for many, the fact that hedge funds, particularly those with track records on previous crises, are launching specific funds is the sign that the bubble is close to bursting.


One academic said: “Economists have contrarian views all the time. But these hedge funds have their shirts on the line and do their analysis carefully. The flurry of 'distress China’ funds is a sign to sit up.”


More analysts are becoming bearish too. Last week, Lombard Street Research put out a note warning of China’s “already dangerously home-grown inflation”.


The analysts said figures showing the continuing boom in China were far from welcome: “On the contrary, Chinese policymakers have to slam on the brakes.” The financiers are warning that rather than depending on China as the prop of the recovery plan, Britain needs to be braced for another shock.
END QUOTE


The housing bubble in The U.S. and to some degree in Europe has caused a near global economic meltdown. It's hard to say what havoc the bursting of the China bubble will do. Nothing good I'm sure.

If one thinks about it the very fact that China became an economic powerhouse is intrinsically tied to the American housing bubble. Through the 80's and 90's technology, computers, the Internet and the digital device revolution helped keep the U.S. economy afloat. First it was the manufacturing of the devices and later, when the manufacturing went overseas, the servicing of the technology culminating in the Y2K economic boom. Thereafter it was the housing market and the wildly inflating real estate prices forged by bad government policy and ridiculously low interest rates that fed the economy the equity capital that would float the economy for a few more years. All the while the jobs flooded out of the U.S. and into China with the blessing of the multi-nationals as well as the Federal government. U.S. consumers flush with all that home equity money bought a lot of Chinese manufactured goods.

Let the good times roll, right?

Where does that leave us now. Well, does a sustained (official) unemployment rate of nearly 10% ring a bell? Does record bank foreclosures sound familiar? Do bankrupt state governments and multi-trillion dollar Federal deficits come to mind? Bad, yes, all bad, but thank God we have cheap Chinese imports at WalMart!!!

If the Chinese bubble bursts we could actually see shortages of some basic supplies since they are not made here anymore, but that would be the least of our worries. Many companies would be hurt and it could cascade into more job losses here, maybe even enough to send us into a deep recession or even a global depression.

No one really knows what might happen. These hedge fund managers, some of whom were ringing the warning bells about the U.S. housing bubble, will point out the canaries in the coal mine for us - we should listen this time.


CW

REVIEW: Decision Points

Decision Points is George W. Bush's memoir. In it he highlights major decisions he faced as President. It is not a chronological look at his two terms in office. His was a consequential presidency on many levels, good and bad and I suspect this format served him well as he recounted his days in the White House.

Overall I didn't find anything revelatory in the book. Most of the subjects and his positions on them were well known and were endlessly hashed out in the public discourse at the time. This to me was a little disappointing. I had hoped for more, I guess.

There's little point in recounting the "decision points" chapter and verse here since we all lived through them. What I can do is give an impression. I had supported President Bush, voted for him twice. I definitely bonded with him in the aftermath of 9/11. I was ultimately disappointed with his presidency on the whole, but I continue to like the man.

The one thing that becomes clear in Decision Points, and its no small thing, is that Bush is a very thoughtful man. He is neither the evil genius nor the blithering dunce he was alternately portrayed as in the hostile media. President Bush was acutely aware that his job was to make decisions on difficult and consequential matters. He took the job very seriously and not with some cliched shooting from the hip cowboy style.

Bush was profoundly affected by the events of 9/11 as you would imagine. Protecting the country from further attack became the central tenant of his presidency. In his every waking moment and I suspect even in his dreams he was waging a war on terrorism. Obviously this overshadowed everything else and the consequences of the actions the administration took to protect the nation cluttered everything inside the White House as well as inside the newsrooms.

The cacophony of dissent once the immediate shock of 9/11 wore off colored every single topic and poisoned the airwaves and headlines for the remainder of his term. He was determined to proceed on the course he had chosen, knowing quite well that it was going to have to be historians fifty years hence that would have final judgment on the decisions he made - including invading Iraq and taking out Saddam Hussein.

The other thing that come out in this memoir was that Bush did not hate his critics, he actually understood their vitriol. Much to the chagrin of his supporters he did not lash out at his attackers or defend himself from the scurrilous lies. This attitude I suspect was deep in his Texas heart and it was not in his nature to feel the need to defend his own honor. Did it serve him well? It's hard to say. Letting your worse critics define you without correcting the record now and then is a tough bet.

Even in his private life he continues to turn the other cheek. He is respecting a time honored tradition that former Presidents shall not criticize their successor - even as he endures his successor trashing his presidency at every turn. There is not one negative reference to President Obama or even President Clinton is this book. He makes it clear that in a 235 year old nation of hundreds of millions people that less than 50 men stood where he stood. Only a few people have ever had that unique understanding of what it took to be President of the United States. He is not about to make President Obama's job harder.

Decision Points was worth reading, but it probably won't change anyone's mind about the man or the President. I came away with the impression that Bush is an intelligent, thoughtful, honorable and yes, also a stubborn man. He made big decisions, some right, some wrong. He admits his mistakes openly and explains (rather than defends) the things he believes he got right.



CW

It's Bush's Fault

Hey, I'm just trying to be first.

Not to make light of the horrific tragedy that took place in Tuscon AZ on Saturday, but the drive-by media and their minions are already painting conservatism and conservatives as the guilty party in all of this.

Rep. Gabrielle Giffords has somehow miraculously survived a gunshot to the head. Several others were not as lucky. It is a senseless tragedy. The gunman Jared Lee Loughner is clearly deranged. The anti-gun left, so eager to pin this on Sarah Palin and conservatism, have wasted no time making such dubious links in public. It's not even known if this nut-burger has any particular political allegiances or influences.

Remember the massacre in Fort Hood, TX? Or, the murder at the Arkansas Army recruitment office that took place last year? Hard right conservatives got zero traction throwing multicultural tolerance up against the wall. These were hate crimes if you want to call them that, Muslim hatred for the American military, nonetheless few blamed liberalism or specific leftists. Why? Because it was ridiculous to do so. It's just as ridiculous to blame right-wingers and especially Sarah Palin for this. Sorry, but people can be convinced of anything if it is repeated enough. Lies and smears can be embedded far easier than they can be removed. When they find that there wasn't any connection whatsoever between Jared Loughner and any aspect of the conservative movement will that be remembered? Probably not.

God Bless Giffords and the other innocent souls, my heart breaks for them. Let's not go blaming the sky for the darkness...


CW

Political Correctness Inspected

If there is one thing we can point to as the cause of the precipitous decline of Western Civilization it is the rise to supremacy of Political Correctness. PC is so much more than just the speech police. It first hit my radar decades ago as simple speech correction by self assigned entities of virtue who would call out those who didn't tow the line. One can remember Howard Cossell crying out "look at that monkey run!" when calling a Monday Night Football game as a black, err, I mean African American, no, no, I mean black player made a mad dash to the goal line. (Ironically, as a person who loathes political correctness I just felt compelled to stop myself from using a rational and descriptive word in favor of the politically acceptable term, interesting to say the least...) Anyway, by the time this incident occurred and Howard Cossell had been publically chastised the foundation for political correctness was already firmly entrenched.

Today no one can or does deny that Political Correctness exists and that it holds tremendous power in its exercise. Yet, everyone claims to hate it. Liberals and conservatives, the young and the old, the rich and the poor all claim to hate what PCism has done to rational discourse in our society. What or who gives it such power?

PC has found it's home inside the bureaucracies of Western Civilization. Political Correctness is the natural child of communism and socialism, all seeking to downgrade the individual in favor of the collective. It shouldn't come as a surprise since communism and socialism are themselves the children of Western Civilization. In a communist utopia the the elites and the common man would be subsumed into the collective, eventually becoming indistinguishable. This we know instinctively to be impossible. It is thought that Political Correctness was conjured up as a tool of the elites to strip the masses of their individualism while maintaining their hold on the upper reaches of society. According to the scholar Bruce Charlton, PC's ultimate goal is the destruction of what it means to be human...

excerpt from:
Bruce Charlton's Miscellany "Political correctness cannot be explained by selfishness among the elite" (hat tip to Al Fin)

...the culture of atheistic, leftism - which is now PC - stripped away the basic toolkit of assumptions with which humans were born into the world. So the culture of radicalism rapidly made humans helpless in the face of reality; took pre-designed people - created for this world - and made them into (psychologically) formless blobs.

The hope behind this was that formless blobs would be amenable to re-programming - and indeed they are (many of them). But, in an unreal world, what to reprogram them with?

The formless blob humans created by PC deprogramming are being filled with the highest thing known to PC; which is impersonal abstract altruism; they are being filled with the idea that the highest goal a human can aim-at is to impose upon human behaviours an abstractly virtuous system which does not depend on individual humans, does not require moral humans, does not need human choice - human agency.

*
At a deep level, PC has become a program to destroy humanity (destroy not the physical form of humans, but destroy their agency, freedom, choice etc) - and this is not seen as a bad thing to do, since humans are intrinsically selfish animals, and therefore the highest imaginable thing in the PC world is an abstract system which shares-out 'goods' despite what humans might feel about it. Of course PC cannot justify that imposing a system of altruism is objectively a valid endeavor. Because no endeavors are valid. There is no valid positive goal for PC - it is negative and reactive against our spontaneous perception of selfishness/ injustice/ corruptibility.

PC is therefore always working-towards - and if it ever actually arrives and achieves its goal, then it will collapse from its internal contradictions. That collapse might still leave humans enslaved to abstract systems of altruism, but the humans so enslaved would no longer be politically correct.
:END excerpt

If we take Mr. Charlton's definition and break it down the true hideousness of PC comes into focus.

From Merriam-Webster.com

impersonal adj \(ˌ)im-ˈpərs-nəl, -ˈpər-sə-nəl\
2. b : not engaging the human personality or emotions c : not existing as a person : not having human qualities or characteristics

ab·stract adj \ab-ˈstrakt, ˈab-ˌ\
1. a : disassociated from any specific instance b : difficult to understand : abstruse c : insufficiently factual : formal

al·tru·ism noun \ˈal-trü-ˌi-zəm\
1 : unselfish regard for or devotion to the welfare of others 2 : behavior by an animal that is not beneficial to or may be harmful to itself but that benefits others of its species

Reading these definitions one thing is perfectly clear, there is no place for individuals, or individual freedom in the world of political correctness. Is it any wonder Political Correctness is so destructive to a nation like the United States where individual liberty is actually a right.

If Charlton is right Political Correctness will (eventually) collapse of it's own weight, but not before it takes out entire societies and civilizations. Currently many liberal causes and passions use political correctness as a bludgeon. It's used as a poison in the court of public opinion against its enemies, rendering entire rational arguments invalid by virtue of a slip of the tongue. Their day will come, hypocrisy eventually reaches critical mass and the unequal application of the "poison" on only right of center transgressors will no longer stand.

How do we fight political correctness? This is an enemy without a focal point, there is no army, no king, no central command. It exists primarily in the bureaucracies, halls of academia and the popular media all of which have the power to influence and cast aspersions. We can work outside these institutions as much as possible. We can teach our children to think for themselves. We can start to develop alternate institutions such as home schooling or the Tea Party-like movements. We can fight the media by disabusing ourselves from its perceived power. We can play the game without losing ourselves and use political correctness as a rope to hang the left every time they slip up. The time has come to fight fire with fire.




CW

Where are we going?

So where are we going?

The better question may be: are we going up or are we going down? It is in our human nature to see the sky falling, believing the world is going to hell in a hand basket. Can we even see the sky when our gaze is on each tedious step we take through the muck and mire of daily life? I'll be first to admit it's hard to be an optimist even if all the evidence that has come before predicts a better future than the past.

When the Soviet Union collapsed twenty years ago I saw a spectacular future for the world. To me the Cold War represented shackles on all of humanity. I was convinced that much of humanity's potential and Earth's treasure was wasted on waging the MADness of the U.S./Soviet conflict. Well, as it turns out there were shackles holding us back. The Cold War wasn't holding back astounding human potential, it was holding back pent up conflict in every little corner of the world. Face it, the twenty years that have passed since the end of the Cold War have been a major disappointment. How could I have been so wrong?

I am ready to admit my naivete. Yet, according to people like Matt Ridley, Thomas Sowell and Peter Dupont there is still reason to be optimistic. The good old days weren't all that good.

Still, considering the state of affairs the world finds itself in am I really the one being naive?

One of the problems with my perception is that I live in times when changes in the human condition are readily apparent. Up until about two hundred years ago the pace of change in daily life was glacial. Since then the transportation of people and goods (ideas and trade) has set the world on a breakneck pace. According to Matt Ridley's book "The Rational Optimist" (hat tip to Al Fin) trade and specialization has been responsible for the blessings of prosperity we have enjoyed since the 19th century. The way the average Westerner lives today is radically different than the way our ancestors lived in the 1770's. Our colonial fore-bearers had more in common with the humans who battled the mammoths ten thousand years ago than with us.

We tend to see everything in the here and now, failing to consider there were dark times and dire predictions many times before and yet mankind forged ahead. Things were pretty bleak in the American heartland in the 1930's. What must Europeans have thought about their future as the smoke cleared in 1945?

Looking at the state of affairs here in the United States one can easily conclude we are heading downhill and fast. Ridley acknowledges in his book that the U.S. and his homeland of Britain may be in for a rough couple of decades, but progress, innovation and specialization continues. Trade with China and India has moved capital and jobs where it is more efficient for the time being. History shows that when one power contracts financially another expands. It took significant political an economic changes in these emerging economies to ensure that progress and prosperity continue unabated. Refreshingly Ridley reinforces what most people know instinctively (whether they will admit it or not) that prosperity is a positive benefit to all of humanity and not some planet-destroying consumerist nightmare. Additionally, it is individual freedom that results in millions of transactions of personal choice and not government planning or humanitarian drivel that is the primary engine of prosperity.

To that point Thomas Sowell shows us in his book "Economic Facts and Fallacies," how the use of undefined terms and non-evidenced based assumptions are used to manipulate an uninformed public. Much of the financial, political, and psychological basis for left-wing policies are shibboleths and canards. When everything is structured in the language of social justice, racism, sexism, fairness and inequality it weakens the pillars of a prosperous society. This is what has happened to the American psyche over the past 40 years. We have talked ourselves out of our place as the economic leader of the world even while we still are. While there is always an element of truth in the doomsayers proclamations their heavy handed prescriptions applied with a brute force of the courts almost always burdens society with terrible, debilitating and unintended consequences.

And yet humanity overcomes to create even more with less.

We have seen this with our own eyes, more than once. Doomsayers predicting the collapse of economic and environmental systems are as old as the written word. Today's global warming or climate change if you will, is only the latest sky is falling narrative. The real danger here is that coordinated efforts by governments and NGO's can enact policies that will shackle rich, energy consuming societies in favor of poorer nations, when in the end the charlatans themselves will be the only real beneficiaries.

The same is true for the financial manipulators. There is a fine line between debt and disaster. A monetary and fiscal system reliant on debt can't make debt the enemy and the savior through manipulation and continue to create prosperity. It takes debt to inject new money into the system, providing the fuel for wealth creation. However, the use of massive amounts of government debt as we are seeing today can't succeed due to the inefficiencies of forced redistribution. Such government spending drains private capital through higher taxes, increased debt burden or inflation. Right now with taxes and hyper-inflation held in check the looming debt burden actually leads to deflation fears. Nothing is more dangerous to prosperity than deflation.

On one side you have the debt scare mongers and on the other the government panacea. Neither side has exclusivity on truth, but this statistic is telling: since the end of World War II, average annual Federal government spending was a relatively consistent 19% of gross domestic product, but in the last few years it has spiked up to around 24% or 25%. If you were to include state and local spending, total government spending is now probably about 50% of GDP. We have seen a proportional dip in our economic prospects as a result. With much of the government spending going toward transfer payments via social programs overall prosperity suffers the inefficiencies of government ineptness.

Is there new hope that the government beast will be tamed? I'm skeptical. The Republican track record during the Bush era was hardly different than the Democrats. It is hopeful thinking on The Wall Street Journal's Peter DuPont's part to believe that "when the Republican House comes into session there will be new rules, new procedures, and very new thinking about what the government should be doing."

DuPont does offer this The Wall Street Journal sentiment that I wholeheartedly agree with... "The single most important result of the November 2 election is the marginalization of the House Democratic left... Paul Ryan has replaced Barney Frank as the most prominent House spokesman on economics."

Amen to that!



CW

Merry Christmas

If there is ever a good time to set aside life's worries and tribulations it is Christmas Day. Visit with family and friends, eat good food and smile a lot. It is good for your soul whether you're a believer or not.

As commercialized as Christmas has become it is still a time of hope, of grace, of companionship and good will. All these things Jesus wished for us. There will be other days to contemplate repentance, forgiveness and life everlasting.

Christmas itself is not the pinnacle of the Christian tradition, but it is important. More than anything it brings friends and families together. For this one night nearly the world over hearts lighten, children smile and people of the planet Earth take a second to inhale...


CW