Quotulatiousness

November 30, 2010

Ireland’s debt problem

Filed under: Economics, Europe, Humour, Italy, Politics — Tags: , , , , — Nicholas @ 07:48

James Howard Kunstler looks at Ireland’s plight:

When you’re out of the country, as I was last week, it’s good to know that the home folks are keeping up with the Kardashians and bravely venturing into the blood-splattered chambers of cable TV’s latest hit, Bridal Plasty — where candidates for marriage are transformed from Holstein cows into inflatable sex toys by magic surgical technology — not to mention all those humble guardians of freedom who kept the parking lots of WalMart safe for consumerism in the wee small hours of Black Friday. These are, after all, perilous times.

Elsewhere, Ireland and the rest of Europe wore themselves out with soul-searching all week over how to handle national bankruptcy within a currency system that bears only a schematic relation to reality. Does the bankruptee go broke all at once, or is she recruited into permanent debt slavery so that the bond-holders of various banks can keep their loved ones in marzipan and Fauchon’s wonderful marrons glacés for one more holiday season? As of Monday morning, Ireland has been commanded to, er, bend over and pick up the soap, shall we say, for about a hundred billion euros in loans that will not be paid back until a mile-high ice-sheet covers Dublin (something that might happen sooner rather than later if the climate mavens are right).

We’ll see how this bail-out goes down with the French and German voters, too, who have to pay for it, after all, especially as Portugal, Spain, and Italy line up at the cash cage for their cheques (and bars of soap). Of course, a few more basis points in the interest rate spreads could prang the whole Euro soap opera — does anybody really believe this game of kick-the-can will go on after New Years? I’m not even sure it goes on past this Friday, but I am a notoriously nervous fellow.

This is almost as good as the (temporarily discontinued) daily Financial Briefings from Monty.

H/T to Terry Kinder for the link.

November 25, 2010

QotD: “The Traitors and the Spendthrifts”

Filed under: Cancon, Politics, Quotations — Tags: , , , — Nicholas @ 14:17

The Coalition horrors warned of by the Conservatives have come to pass, at the hands of the Conservatives themselves. They have spent like drunken Trudeau-era Grits. They have compromised their principles and told a key part of their base to stuff it. They have put patronage ahead of promise in their Senate appointments. Short of holding another referendum on national unity, they are as bad as what they claim to abhor.

It should then come as no surprise that Stephen the Spendthrift is rumoured to be in bed with Giles the Traitor. The deal at hand is classic pork-barrelling: Federal subsidies for an uneconomical Quebec City NHL arena. The region is the Tories only stronghold in La Belle Province, naturally a little electoral sweetener wouldn’t go amiss. Tis’ the season to be generous, with other people’s money. The Bloc serve no function except as a pressure group for the Quebecois. Their tautological platform has only one plank: What is Good for Quebec is Good for Quebec. It’s a deal made in political heaven, or hell for those who believe that principle should play a role in politics.

The much-abused Tory base remains loyal. The question is to what? To conservative values? Unlikely. Yes, the Tories have a minority government. That does limit what they can do. Lester Pearson also had two back to back minority governments, and he introduced sweeping changes to the country, albeit most of them bad.

Is the failure of the Harper Tories one of opportunity, or courage? And should the Conservatives at long last win their majority, what mandate will they have? They have governed from the center for so long, how can they justify governing from the RIght? Won’t the rationale then become we can’t take risks because we might lose the majority? So when will the Reform come? As time passes it becomes clear that many Conservatives’ loyalty lies with Team Blue, not conservative ideas or values.

Publius, “The Traitors and the Spendthrifts”, Gods of the Copybook Headings 2010-11-25

Even China may not be able to afford their High Speed Rail network

Filed under: China, Economics, Japan, Railways, Technology — Tags: , — Nicholas @ 00:24

By way of Hit and Run, a brief note of caution about the headlong pace of construction of China’s High Speed Rail:

The Chinese Academy of Sciences (CAS) reported to the State Council recently, urging the large-scale high-speed railway construction projects in China to be re-evaluated. The CAS worries that China may not be able to afford such a large-scale construction of high-speed rail, and such a large scale high-speed rail network may not be practical.

[. . .] Under the current plan, the central government has approved to build, by 2020, 16,000 km of high speed rail providing access to about 90% of the Chinese population.

[. . .]

The report submitted by the Chinese Academy of Sciences said China’s high-speed rail construction has caused debt that has already reached unsustainable levels; particularly since the end of 2008, the government introduced a stimulus plan to fight the global economic crisis and the size of local government borrowing is already very high

As Ronald Bailey points out, China is now occupying the same position in American thoughts that Japan did thirty years ago — the economic juggernaut that is poised to crush weak and defenceless American business. The recent gushing about how wonderful China’s HSR system is and how America should build one too are really just echoes of the 1980’s lament on how Japan’s economic model worked so much better than messy US mixed-market capitalism.

Back in the 1980s, I was a producer for a national weekly PBS foreign policy show called American Interests. We ran a lot of nifty programs on various aspects of the Cold War. Another abiding obsession of the chattering classes was the coming triumph of Japan Inc. over a hapless America. We regularly broadcast shows featuring the likes of Robert Reich, Chalmers Johnson (see H&R obit from yesterday), and Clyde Prestowitz predicting that the wise bureaucrats at the helm of Japan’s Ministry of International Trade and Industry deftly deploying their industrial policy jujitsu would soon bury us Yanks. As evidence, critics of undirected American capitalism pointed out that Japan’s economy was growing at 6 to 8 percent per year. Japan was exporting its way to prosperity and the U.S. was running a huge trade deficit with the East Asian powerhouse. Japan could do no wrong and America could do no right. Then the Japanese bubble burst.

Twenty years later, the new meme of would-be industrial policy mavens is China Inc. Promoters include Thomas Friedman and Clyde Prestowitz. China is growing at a blistering pace of 10 percent per year and exporting its way to prosperity. Once again, we are told that East Asian capitalism directed from the top by wise bureaucrats is going to outcompete the United States and toss us into the dustbin of histoy.

November 23, 2010

Succinct summary of Irish situation

Filed under: Economics, Europe, Humour, Media — Tags: , , — Nicholas @ 09:08

From Andrew Bloch’s Twitpic page and brought to my attention by Damian Penny.

November 5, 2010

Monty on the social security Ponzi scheme and Ireland’s coming crisis

Filed under: Economics, Europe, Politics — Tags: , , , — Nicholas @ 12:11

The always interesting Monty reminds everyone that social security won’t be there when you most need it:

Generational warfare is all but a certainty at this point as the lie that is Social Security festers and grows unchecked. All I can say is: reality will assert itself, sooner or later. Don’t get caught short — save enough of your own money to fund your own retirement, because Uncle Sugar is going to screw you just as surely as the sunrise. Pull quote:

There will be pain. The system will gore a lot of oxen. The obvious victims will be the oldsters who have become dependent on Federal handouts. They are a powerful swing vote today, but they are in the minority. When the majority of working citizens finally perceive that it is an inescapable choice between handouts to oldsters vs. their families’ solvency, they are going to vote away the oldsters’ handouts.

Social Security only survives at the suffrance of the taxpayers who fund it. Pay particular attention to the part where it’s explained in terrifyingly clear detail that it doesn’t matter how much you paid in: you were paying a tax, not a contribution to a savings account. Uncle Sam can legally stiff you at any time.

And on the Irish financial crisis:

That Irish austerity program just went from “painful” to “Oh my God I think I just barfed up a lung”. The problem in Ireland, as in Greece, is that you somehow have to convince your own citizens to accept dire reductions in their own quality-of-life to make sure that (mostly foreign) bondholders don’t have to take a haircut. I suspect that this strategy will fail, and end in default. Which, really, is probably the best course of action for the PIIGS — get off the Euro, go back to the old national currencies, and devalue. Yes, they will be shut out of the credit markets for a while, but not for all that long in relative terms. And the alternative — extreme civil unrest — is worse.

November 3, 2010

Monty: The flushing sound you just heard is California’s future

Filed under: Economics, Politics, USA — Tags: , , , , — Nicholas @ 08:57

Monty pronounces the final doom of California:

That sound you just heard was the State of California irretrievably flushing itself down the toilet.

[. . .]

California’s most dire problems right now are related to public-employee obligations (pensions and healthcare). The power of public-employee unions in California have held the State and local governments in thrall for years, and with the election of Jerry Brown as Governor, the people of California have opted to spray kerosene on a blaze that was already threatening to overwhelm them.

[. . .]

Well, the die has been cast, California. You have placed your fate into the hands of a political party and a governmental machine that cares for nothing except what it can squeeze out of you to keep the party-train rolling. There will come a time in the not-too-distant future when you will have cause to bitterly regret what happened last night, and to wonder when the disaster truly became unavoidable. Well, now you know: it happened last night when you elected Jerry Brown as your governor. You chose to kowtow to the labor unions; you chose to believe comforting lies rather than the horrible truth.

You will reap the whirlwind.

Update: A couple of Twitter updates from Iowahawk sum things up nicely.

10:28: Boxer, Brown, no on Prop 19: congrats, California. You have officially gone Full Retard.

11:05: And as if California wasn’t already full of idiots, lunatics, and drug abusers, I’m flying there this afternoon.

October 28, 2010

A significant indicator of social decline

Filed under: Economics, Government, Politics, USA — Tags: , , , , — Nicholas @ 12:04

Monty puts his finger on the biggest social change since the 1960’s and posits the likely results:

The recipe for the decline and fall of the American republic: most people who receive government benefits will not willingly give them up, or even allow them to be reduced. They’ve been told that these benefits are a right so often by the so-called “progressives” that they’ve come to believe it, and any attempt to reduce their benefits amounts, in their eyes, to a civil-rights violation. This is what the welfare state leads to — an entire class of dependents who insist upon receiving the sweat of your brow not as charity or payment for services rendered, but as a birthright not to be denied them. Class warfare (between public-sector workers and taxpayers) and generational warfare (between the recipients of Medicare and Social Security and those who must fund it) is the only possible outcome if things do not change soon. And I don’t mean that in rhetorical or symbolic terms; I mean in actual, bloody, street-fighting terms. It’s the culture of grievance, of victimhood, of moral equivalence playing out in real time. As I wrote in an essay a while back, look at what’s happening in England and France right now. That is our future — only more violent — if we don’t change our ways.

October 25, 2010

Amity Schlaes’ (condensed) The Forgotten Man

Filed under: Books, Economics, History, Politics, USA — Tags: , , , , , — Nicholas @ 13:07

An article encapsulating some of the key points of Amity Schlaes’ The Forgotten Man in PDF form:

We all know the traditional narrative of that event: The stock market crash generated an economic Katrina. One in four was unemployed in the first few years. It resulted from a combination of monetary, banking, credit, international, and consumer confidence factors. The terrible thing about it was the duration of a high level of unemployment, which averaged in the mid teens for the entire decade.

The second thing we usually learn is that the Depression was mysterious — a problem that only experts with doctorates could solve. That is why FDR’s floating advisory group — Felix Frankfurter, Frances Perkins, George Warren, Marriner Eccles and Adolf Berle, among others — was sometimes known as a Brain Trust. The mystery had something to do with a shortage of money, we are told, and in the end, only a Brain Trust’s tinkering with the money supply saved us. The corollary to this view is that the government knows more than American business does about economics.

Another common presumption is that cleaning up Wall Street and getting rid of white-collar criminals helped the nation recover. A second is that property rights may still have mattered during the 1930s, but that they mattered less than government-created jobs, shoring up home-owners, and getting the money supply right. A third is that American democracy was threatened by the rise of a potential plutocracy, and that the Wagner Act of 1935 — which lent federal support to labor unions — was thus necessary and proper. Fourth and finally, the traditional view of the 1930s is that action by the government was good, whereas inaction would have been fatal. The economic crisis mandated any kind of action, no matter how far removed it might be from sound monetary policy. Along these lines the humorist Will Rogers wrote in 1933 that if Franklin Roosevelt had “burned down the capital, we would cheer and say, ‘Well at least we got a fire started, anyhow.’”

To put this official version of the 1930s in terms of the Monopoly board: The American economy was failing because there were too many top hats lording it about on the board, trying to establish a plutocracy, and because there was no bank to hand out money. Under FDR, the federal government became the bank and pulled America back to economic health.

When you go to research the 1930s, however, you find a different story. It is of course true that the early part of the Depression — the years upon which most economists have focused — was an economic Katrina. And a number of New
Deal measures provided lasting benefits for the economy. These include the creation of the Securities and Exchange Commission, the push for free trade led by Secretary of State Cordell Hull, and the establishment of the modern mortgage format. But the remaining evidence contradicts the official narrative. Overall, it
can be said, government prevented recovery. Herbert Hoover was too active, not too passive — as the old stereotypes suggest — while Roosevelt and his New Deal policies impeded recovery as well, especially during the latter half of the decade.

H/T to Monty for the link.

QotD: Mark Steyn on China’s coming demographic bomb

Filed under: China, Economics, Quotations, USA — Tags: , , — Nicholas @ 12:29

In 2009, the US spent about $665 billion on its military, the Chinese about $99 billion. If Beijing continues to buy American debt at the rate it has in recent times, then within a few years US interest payments on that debt will be covering the entire cost of the Chinese military. This summer, the Pentagon issued an alarming report to Congress on Beijing’s massive military build-up, including new missiles, upgraded bombers, and an aircraft-carrier R&D program intended to challenge US dominance in the Pacific. What the report didn’t mention is who’s paying for it.

Answer: Mr and Mrs America.

By 2015, the People’s Liberation Army, which is the largest employer on the planet, bigger even than the US Department of Community-Organizer Grant Applications, will be entirely funded by US taxpayers. When the Commies take Taiwan, suburban families in Connecticut and small businesses in Idaho will have paid for it.

[. . .]

Chinese state-controlled enterprises are buying up everything from copper in Canada to zinc in Australia to bauxite in Jamaica. They’re doing what the first settlers did vis a vis the Indians: They sell us trinkets in return for our resources. That said, I disagree with the conclusion of this video. The danger from China is not its strength, but its underlying weaknesses: As I wrote in America Alone, it will get old before it gets rich, and, unless it’s planning on becoming the first gay superpower since Sparta, the millions of surplus young men whom the One-Child Policy has deprived of female companionship is a recipe for profound social convulsions. That’s actually worse news than if China was cruising to global hegemony — because it means their calculations on how the Sino-American relationship evolves are even less likely to align with ours.

Mark Steyn, “Campaign Countdown”, SteynOnline, 2010-10-25

October 17, 2010

P.J. O’Rourke interview

Filed under: Economics, Liberty, Politics, USA — Tags: , , , , , — Nicholas @ 12:01

Parts 2 and 3 are at Liberty Pundits.

October 4, 2010

Reason TV’s “Fiscal House of Horrors”

Filed under: Economics, Government, Humour, Politics, USA — Tags: , — Nicholas @ 16:26

A cameo economic round-up by Monty

Filed under: Economics, USA — Tags: , , , — Nicholas @ 13:11

One of the most interesting features over at Ace of Spades HQ used to be the daily economic round-ups by Monty. Unfortunately, he had to take a breather, but we’re able to get an occasional update like this one:

[In which Monty, long away from the neighborhood, returns to save the local mom-n-pop bank from a hostile takeover through a stylish melange of breakdancing, infectious urban beats, and the rap music that all the youngsters seem to be so fond of. Thrill to the parachute pants, Jheri curls, and mirrored wraparound sunglasses! (The soundtrack, “Monty Raps! Funky Accordion and Theremin Music For These Troubled Modern Times”, now available in fine discout outlets nationwide!)]

[. . .]

I just wouldn’t be me if I didn’t point out that gold is now $1314/oz as I write this. I bought some gold five years back at about $500/oz; that’s a pretty damned good rate of return for something that’s just supposed to be an inflation hedge. The naysayers can continue mumbling that I can’t eat gold, that I will be crucified on a cross of gold, the gold is just metal and has no innate value — I will simply point to the fact that it has outperformed every other investment in my portfolio, and by quite a large margin. And as a long-term store of value, I trust it a hell of a lot more than Treasuries. (Silver has done even better in absolute terms.)

Ah, but what about those safe-haven darlings of investors, municipal bonds? The romance may be on the rocks. I’ve thought for a long time that municipal debt is the next big shoe to drop in this recession/depression/worker’s paradise that we’re living in. Harrisburg, PA made the news recently when they barely escaped having to declare bankruptcy, but Harrisburg is only one of tens or even hundreds of muncipalities in the nation in dire financial straits. There seems to be a belief that the feds will bail them out before things get too grim, but this ignores two facts: a) the appetite for another trillion-dollar bailout is at subzero levels, and b) it’s not clear that taxpayers of one state will be willing to bail out the profligate citizenry of another. Prudent residents of Lincoln, NE or Minot, ND may not wish to fund the rather more lavish lifestyles of a San Diego or Miami. However much we “feel” the federal and state debt, we’d feel a municipal crash a lot harder because it hits us right where we live (literally): trash collection, sewer, water, road repair, snow removal, all the rest. You pay more and more and get less and less from it. (Oh, and guess what the major financial burden on municipal governments is these days? If you said “public-employee pension and health benefits”, give yourself a gold star and then a smack upside the head for being an insufferable know-it-all.)

October 1, 2010

You think you’re struggling with the burden of old debts?

Filed under: Economics, Europe, Germany, History, WW1 — Tags: — Nicholas @ 09:07

Consider the case of Imperial Germany:

First World War officially ends
The First World War will officially end on Sunday, 92 years after the guns fell silent, when Germany pays off the last chunk of reparations imposed on it by the Allies.

The final payment of £59.5 million, writes off the crippling debt that was the price for one world war and laid the foundations for another.

Germany was forced to pay the reparations at the Treaty of Versailles in 1919 as compensation to the war-ravaged nations of Belgium and France and to pay the Allies some of the costs of waging what was then the bloodiest conflict in history, leaving nearly ten million soldiers dead.

H/T to Jon, my former virtual landlord, for the link.

September 12, 2010

QotD: Ireland’s post-boom cleanup

Filed under: Economics, Europe, Quotations — Tags: , , — Nicholas @ 00:30

It’s not a good sign when the government has to intervene to prevent a run on a bank that is already owned by the government, but apparently, that’s what it’s doing with Anglo-Irish bank [. . .] One guesses that [. . .] the restructuring will cost a lot, and the “asset-recovery” bank will be worth very little. The Irish economy has a lot of fundamentals going for it — educated population, good corporate tax rates, and considerably fewer regulatory barriers to doing business than you find in Italy or Greece. But as a real economic boom, driven by European integration, brought increasing incomes, the Irish went on a borrowing binge even worse than our own, and inflated their boom into a bubble. One of my favorite stories of the period concerns a friend of mine, an Irish American who was married to an Irishman living in Galway. The level of status-competition that suddenly blossomed among her relatives and in-laws led her to consider opening a boutique that would literally specialize in ugly things which cost unreasonable sums of money.

Cleaning up after that consumer frenzy is going to be long and painful. As it will be for us, though less so.

Megan McArdle, “Ireland Moves to Shore Up State-Owned Bank”, The Atlantic, 2010-09-09

September 8, 2010

Austrian economics? That’s crazy talk

Filed under: Economics, Politics, USA — Tags: , , , , — Nicholas @ 07:35

As has been observed over and over again, we’re all Keynsians now. It’s usually meant in the economic sense, but perhaps it’s a reflection of Keynes’ other famous dictum: in the long run, we’re all dead. A different school of economics deserves a longer look:

Common sense is the crux of Austrian theory economics. Austrians look at how individuals act, not how “economies” or “nations” act or behave. Ludwig von Mises, the greatest Austrian thinker, and in my opinion the greatest economist, entitled his great work, Human Action not National Action. The Austrian School was referred to by the Germans as the Psychological School because its analysis started with individual action and how those actions would either attain or fail to attain the goals sought by individuals. In other words, it involves a lot of the “common sense” that guides human behavior most of the time. It’s comforting to know there’s a philosophy of economics that conforms to what human beings actually do rather than how some economist thinks we ought to behave.

Examples of economic Newspeak flourish, especially if you listen to President Obama’s economic team. My favorite example is the present conflict between consumer spending and consumer saving. Since the crash, consumers have cut back on spending and are increasing their savings. Most economists are saying this is bad for the economy; they urge us to spend, spend, spend to save the economy.

Actually, it’s just the opposite: Saving is the road to recovery.

It seems rather obvious that during a downturn of the economy it would be natural for people to save more and spend less: They’re uncertain about their jobs; the values of their homes have plummeted (about 30% since the peak in 2006); their stocks have declined, and their debts are high. Isn’t it common sense that people are doing the rational thing by saving? This is something our parents and grandparents understood well.

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