11/10/2011

Selected Posts

A big part of the reason for Occupy malaise is that the social model no longer works.
The machine by which universities train young people to become minor regulators and then delivers them into white-collar positions on the basis of credentials in history, political science, literature, ethnic and women’s studies – with or without the benefit of law school – has broken down. The supply is uninterrupted, but the demand has dried up.
It’s not the greedy Wall Street bankers who destroyed these people’s hopes. It’s the virtueocracy itself. It’s the people who constructed a benefit-heavy entitlement system whose costs can no longer be sustained. It’s the politicians and union leaders who made reckless pension promises that are now bankrupting cities and states. It’s the socially progressive policy-makers in the U.S. who declared that everyone, even those with no visible means of support, should be able to own a home with no money down, courtesy of their government.
The fact of the matter remains - the Occupiers are blaming the wrong people.

Job Growth
The anemic job growth numbers should be a warning to members of Congress who are flirting with higher tax rates as part of the supercommittee deficit deliberations.
There's loose talk about raising the top Bush tax rates and adding to that a surcharge on millionaire tax rates. That would be a big negative for future growth. Moving the top rate for investors, small-business owners and other successful earners, who create the jobs, from 35 percent to 50 percent in the name of deficit reduction would be a devastating blow to growth.
By the way, it would not even remotely solve our deficit problems, which are the result of overspending across the board. Once again, we do not have a "revenue" problem.
We have a SPENDING problem.

Hey, It's Green, So It Must Be Good, Right?
Is there something about the word ‘green’ that makes people go bonkers?
Rivaled only by the "get tough on Netanyahu" fiasco and the Gunwalker scandal, the "Green Jobs" meltdown is the most comprehensive and conspicuous policy failure of the Obama administration to date.
The political push to quickly create jobs and spur economic development didn’t match up with economic realities. 45 percent of stimulus dollars distributed by Energy still hadn’t been spent by state and local government as of Oct. 22. The department failed to properly document and couldn’t always demonstrate how it resolved or mitigated risks prior to granting loan guarantees.
A lot of taxpayer money was spent; few jobs were created and the failure damages the Obama brand in three ways. First, poor jobs growth is the root of all the administration’s other woes. Second, the story undercuts the idea that the stimulus was a good idea and supports the narrative that special interests hijacked it for a porkfest. Third, the story reinforces the belief that government planning and industrial policy don’t work.
Government really needs to get out of the way.

Eurozone
This week, the French bank BNP Paribas announced that it had slashed its holdings of euro-zone government bonds, including €2.62 billion worth of Greek debt.
It wasn't just bonds from Athens that the bank dumped. BNP Paribas also indicated that it had drastically reduced its holdings of Italian debt. In the three months prior to the end of October, the bank sold off €8.3 billion worth of bonds issued by Rome, reducing its exposure by 40 percent.
Italian borrowing costs soared earlier this week, with interest rates on sovereign bonds rising to 6.4 percent, perilously close to the mark which triggered emergency Italian bond purchases by the European Central Bank in August. Analysts consider a rate of 7 percent to be the level at which investors stop buying sovereign bonds.
What does all this spell out? Disaster. Black Hole. Titanic. Meanwhile, European dignitaries are busy rearranging the deck chairs.

China Got It Too
China committed to Keynesian stimulus on a much bigger scale than even the Obama administration. According to one estimate, the Chinese stimulus launched in 2008 to counteract the effect of the global recession was $586 billion in spending by the central government, plus as much as $2.7 trillion in new loans by state-controlled banks. In absolute terms, this is comparable in size to our combined fiscal and monetary stimulus, except that the Chinese actually managed to increase lending, whereas the dollars pumped into our system by the Fed never actually made it into new loans. But China's economy is about one third the size of ours, so in relative terms, this implies about three times the stimulus, as if President Obama had passed a $2 trillion stimulus bill and the Fed has pumped $8 trillion into the economy.
This was precisely the kind of massive Keynesian stimulus that pundits like Paul Krugman were pining for. So it is interesting to look at what it actually accomplished.
It's now pretty clear that a huge amount of that money went into a real-estate bubble and into big, empty vanity projects, including gleaming new government complexes in some of China's most impoverished areas. These big "stimulus" projects were eagerly promoted partly because local officials got a cut from corrupt deals with politically connected developers. China's ministers have built entire real cities that no one lives in, just to produce statistics that would impress the emperor back in Beijing.
China's central government is now trying to clamp down on credit to keep inflation under control and to prevent the real estate bubble from getting even bigger.
Keynesianism is a bubble machine Lawrence Welk would have been proud of. It now looks like this is about to be demonstrated on a truly epic scale in China.

Difference Between Civil Disobedience and Breaking the Law
When asked to do something by an officer of the law, the instinct of most people is to comply, especially if they are violating a rule. The instinct of many of the Occupy protesters is to resist, then inflate their arrests or clashes with the police into some sort of monumental struggle with the forces of oppression. "The whole world is watching", they'll say.
There is an honorable tradition of civil disobedience in America. If an injustice is so grave and the system is so rigged that it can’t be changed through normal democratic means, breaking the law may be a recourse. The civil-rights protesters did it peacefully and with dignity. The difference between them and the Occupy protesters challenging the cops is the difference between self-sacrificial heroes and ideologically drunk punks and whiners.
They shut down the fifth-busiest container port in America. Why would anyone acting in the name of people harmed by the Great Recession interrupt the flow of commerce, especially at a hub employing dockworkers and truckers? It was, by definition, a radical act.
Mere protests probably won’t satisfy this movement. It is a self-styled "occupation", which inherently involves taking what is not yours. It’s already ugly and will probably get more so. And yes, the whole world is indeed watching.