Public Finance

“College Grads: It’s a Different Economy”

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This is very good:

There are opportunities, but they require a deep understanding of risk and security. A livelihood with day-to-day low-level insecurity and volatility is actually far more stable and secure than the cartel-state one that claims to be guaranteed.
 
The burdens of Fed manipulation and the cartel-state rentier arrangements will come home to roost between 2015-2017. Those who are willing to seek livelihoods in the non-cartel economy will likely have more security and satisfaction than those who believed that joining a rentier arrangement was a secure career.
 
There is a price to joining a parasitic rentier arrangement, a loss of integrity, agency and independence. Complicity in an unsustainable neofeudal society has a cost.

Read the whole thing.

(Via Lex and ZeroHedge.)

“Often, the insights of behavioral economics are used or misused to support this thesis.”

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Riffing on David Foster.

It’s like how Keynes’s theory about liquidity traps is used to rationalize all kinds of govt spending programs, perhaps far beyond what Keynes himself would have advocated.

1 Great man has a theory about a, b and c.

2 Great man’s acolytes turn the theory into a dogma, religion and, eventually, industry.

3 Politically savvy third parties with agendas use the theory to justify x, y and z.

The Lost Boys

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UPDATE: Here is one solution.

This week Europe blew up. The media haven’t caught up yet, because they are what they are. But the markets are catching up fast.

This is a huge event for the United States, because our political elite is bound and determined to turn us into Europe. Hasn’t the EU found the answer to war and peace and prosperity forever?

Our Democrats believe it. Europe is their model. Every batty new idea they have is copied from the glorious European Union. Twenty years ago they still celebrated the Soviet Union, until that house of cards crumbled. Now they have shifted their fantasy paradise to Europe.

Over there, fifty years of increasingly centralized control have made it impossible for voters to be heard. The political parties are stuck in GroupThink. Only the fascist “protest” parties agitate for reform. The ruling class doesn’t listen. They don’t have to — they don’t have to run for election.

So European voters fled to the fascists to express their rage and despair. Imagine one out of four US voters going for Lincoln Rockwell, and you get the idea.

Read the rest, as they say.

Belmont Club has an unusually good post for yesterday. I could say that more than once a week, if truth be known. This one is quite to the point on Sequester Day.

The NHS, which its creators boasted would be the ‘envy of the world’, has been found to have been responsible for up to 40,000 preventable deaths under the helm of Sir David Nicholson, a former member of the Communist Party of Britain. “He was no ordinary revolutionary. He was on the hardline, so-called ‘Tankie’ wing of the party which backed the Kremlin using military action to crush dissident uprisings” — before he acquired a taste for young wives, first class travel and honors.

The NHS is dealing with the shortage of funds by pruning its tree of life, so to speak. He also does not tolerate anyone telling the truth about it.

it emerged he spent 15 million pounds in taxpayer money to gag and prosecute whistleblowers — often doctors and administrators who could not stomach his policies.

The public money spent on stopping NHS staff from speaking out is almost equivalent to the salaries of around 750 nurses.

It has recently been noted that NHS staff no longer recommend their own hospital for family members. Also one quarter report being harassed or bullied at work.

The other half of the equation involves the youth.

The European Youth will remain outside the Death Pathways for some time yet. But they will spend the time waiting for their turn at affordable, caring and passionate medicine in poverty and hopelessness. With the exception of Germany youth unemployment in Europe is over 20%. “A full 62% of young Greeks are out of work, 55% of young Spaniards don’t have jobs, and 38.7% of young Italians aren’t employed.”

Unemployment exceeds even our own Obama economy for failure.

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What lies ahead, I fear.

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UPDATE: An an article at Belmont Club describes interest in alternative money creation as a way of anticipating inflation. It also goes further into a discussion of general competence.

The idea that Virginia should consider issuing its own money was dismissed as just another quixotic quest by one of the most conservative members of the state legislature when Marshall introduced it three years ago. But it has since gained traction not only in Virginia, but also in states across the country as Americans have grown increasingly suspicious of the institutions entrusted with safeguarding the economy.

What has changed is faith in the federal government, not just in Virginia but in a growing number of places. The lack of faith in the competence of government — and the soundness of the dollar — has been growing leading some states to create contingency plans in case the currency goes bust.

Once again, I apologize for my pessimism but this is what I see. First, there is this article, which quotes a well known financier.

There may be a natural evolution to our fractionally reserved credit system that characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets. If so, then the legitimate response of creditors, debtors and investors inextricably intertwined within it, should logically be to ask about the economic and investment implications of its ongoing transition.

Certainly “growth” seems to be fundamental to our economic health. That, of course, presumes a growing population but it also would be affected by a stagnant population with a growing age disparity. The obvious example of the latter is Japan.

The creation of credit in our modern day fractional reserve banking system began with a deposit and the profitable expansion of that deposit via leverage. Banks and other lenders don’t always keep 100% of their deposits in the “vault” at any one time in fact they keep very little thus the term “fractional reserves.” That first deposit then, and the explosion outward of 10x and more of levered lending, is modern day finance’s equivalent of the big bang. When it began is actually harder to determine than the birth of the physical universe but it certainly accelerated with the invention of central banking the U.S. in 1913 and with it the increased confidence that these newly licensed lenders of last resort would provide support to financial and real economies. Banking and central banks were and remain essential elements of a productive global economy.

The effect of asset bubbles on such a system is worrisome as the history of Japan and the recent history of the US have shown. The Panic of 1907 was largely responsible for the creation of the Federal Reserve. That financial crisis is thought, by the authors of a recent book, to have been a consequence of the 1906 earthquake in San Francisco, which destroyed a large amount of real assets and the insurance costs that were associated. The immediate cause was financial speculation but the real losses had added to the fragility of the system.

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Happy New Year

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I wish I were more enthusiastic but I still wish everyone a good year. The “fiscal cliff” talks have ended about as I expected. The Republicans have pretty much rolled over. The House has yet to vote and I wonder how that will go. If they all grew a spine (or some other anatomical parts) they would vote “present” and let the Democrats pass the bill by themselves. Drudge has a link to the Breitbart story.

According to the Congressional Budget Office, the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.

When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts—cuts that never ultimately came—they did so at ratios of 1:3 and 1:2.

“In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes,” Americans for Tax Reform says of those two incidents. “The tax hikes went through, but the spending cuts did not materialize. President Reagan later said that signing onto this deal was the biggest mistake of his presidency.

“In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes. The tax hikes went through, and we are still paying them today. Not a single penny of the promised spending cuts actually happened.”

This will be another such fake compromise. However, The Gods of the Copybook Headings are coming.

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four —
And the Gods of the Copybook Headings limped up to explain it once more.

It’s too long to post all of it and, for those who are unsure of the source of the title, copybooks were supplied for all school children in England, when it was still England. The copy books had traditional aphorisms on each page that children were expected to learn.

Another expression that relates to the books was someone “blotted his copybook.” This meant making an error that was difficult to correct.

The “copybook headings” to which the title refers were proverbs or maxims, extolling virtues such as honesty or fair dealing that were printed at the top of the pages of 19th-century British students’ special notebook pages, called copybooks. The school-children had to write them by hand repeatedly down the page.

The work has been described as “beautifully captur[ing] the thinking of Schumpeter and Keynes.”[2] David Gilmour says that while topics of the work are the “usual subjects”, the commentary “sound better in verse”[3] while Alice Ramos says that they are “far removed from Horace’s elegant succinctness” but do “make the same point with some force.”[4]

I don’t think I would agree that Keynes is an example of the copybook headings’ wisdom although his recommendations have been wildly distorted by politicians.

We are coming to a period when math will be far more determinant than wishful thinking in terms of our lives.

As it will be in the future, it was at the birth of Man —
There are only four things certain since Social Progress began —
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire —
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins
As surely as Water will wet us, as surely as Fire will burn
The Gods of the Copybook Headings with terror and slaughter return!

Hopefully, not this year. Happy New Year.