Tuesday, April 22, 2014

The Latest From Charles Hugh Smith

The Political Poison of Vested Interests:

Once vested interests take control, the only possible "solution" left is collapse.
I have long identified diminishing returns as a key dynamic in the current unraveling of the Status Quo. Why is this so? We can summarize diminishing returns as dumping more money, capital, energy and effort into a system just to keep the output from falling to zero.
But as the costs of keeping the system from imploding rise, they soon consume all the oxygen in the system, and the system implodes anyway.
Sickcare, higher education and insanely expensive weapons systems are all examples of this dynamic. The higher education cartel has raised gargantuan sums to fund its poor quality product by turning students into debt-serfs via student loans.

We must add a second definitive dynamic: protecting vested interests. There are many ways of describing powerful constituencies with an enormous stake in maintaining the Status Quo--vested or entrenched interests, for example--but the key characteristic is the enormous political pain that these groups can inflict on self-serving politicos.
Once confronted with an aroused vested interest--public union, cartel, corporatocracy, Power Elite, etc.--politicos cave in and do what is politically expedient: avoid any real reform and simply shovel more money into the gaping maw of diminishing returns.
A good example is soaring higher education costs and the decline of actual learning and the real-world value of a college diploma. The long-term study Academically Adrift: Limited Learning on College Campuses concluded that "American higher education is characterized by limited or no learning for a large proportion of students."
But rather than enable (or even insist) on real reforms that dramatically lowered costs and improved results, the political Status Quo responds to the higher education cartel's screams for more money by extending more student credit and taxpayer-paid aid to the cartel.
Once politicos respond to the cries for more money and protection from diminishing returns from vested interests, the real problem festers, unsolved and addressed, while the politically expedient "solution" drains resources away from real reform and exacerbates the underlying problem.
You see the end-game this cycle of vested interests and political expedience creates: as the real problems go unaddressed, they further diminish returns, which triggers even more frantic calls by vested interests for more funding and more protection from the creative destruction of diminishing returns.
Meanwhile, the opportunity cost of supporting diminishing-return vested interests continually increases as scarce resources are squandered on supporting entrenched interests.
Eventually the parasitic entrenched interests have consumed all the oxygen in the system and the system collapses under its own weight.
In a political system where money buys concentrated political power, decisions that affect 100% of the populace are made to benefit the 5% most powerful entrenched interests. How can wise decisions be made when all decision-making centers around placating politically dominant interests? Answer: they can't. Decisions made to protect and favor the few at the expense of the many are intrinsically unwise, as they are blind to the consequences heaped on the voiceless 95%.
Vested interests span the entire political spectrum. The "progressive" favorites, banking, higher education, public unions and sickcare, are all able to veto any reforms that threaten their share of the swag or that demand higher returns on the ever-rising sums poured into these systems.
The "conservative" favorites, banking (every politico is beholden to financial Elites), weaponry, energy, and corporate welfare, are equally able to squelch reform that threatens their share of the swag.
Combine diminishing returns with the political dominance of vested interests and you get a system incapable of reforming itself and incapable of stopping the slide off the cliff. Vested interests have no concern for the unintended consequences of their self-aggrandizement; the entire political structure is based on the faith that there is always more money to feed the insatiable hunger of entrenched interests for more funding, more protection and more power.
That there might be limits that cannot be surpassed without imploding the entire rickety, corrupt system is a danger that cannot be recognized, much less discussed in the halls of power, lest the faith that unwise decisions and spending can pile up year after year and decade after decade forever be questioned.
And so the only possible "solution" left is collapse. This is the lesson of the book The Upside of Down: Catastrophe, Creativity, and the Renewal of Civilization, which illustrates that the solution has always been collapse when corrupted, self-serving vested interests gain control of the political system and the economy.

The Ultimate Campaign Finance Reform: Smaller Government

So true: The ultimate campaign finance reform is smaller government:

The US Supreme Court’s new campaign-finance ruling has prompted a collective pearl clutch  by progressive punditistan. Short version: the 0.01 oligarchs have won, or quite nearly. And now their diabolical push for unrestrained, predatory capitalism will go unopposed — except for, as law professor David Bernstein points out, “the legacy mainstream media, Hollywood, academia, publishing, the legal profession, the mainline churches, and the arts … Limit campaign spending, and left-leaning opinion-makers utterly dominate American political discourse.”
If you are genuinely worried about the influence of Big Money on Big Government, the free-enterprise solution is to shrink the influence of Big Government. A government able to pick winners and losers through regulation, spending, or the tax code is a government worth influencing, whether through campaign donations or lobbying activities. Numerous studies and analyses have calculated a massive “return on investment” from lobbying. For instance: a 2013 Boston Globe series found that by forking over a mere $2 million over two years to Washington lobbyists, Whirlpool secured the renewal of an energy tax credit worth a combined $120 million over two years.
What’s more, the reason for lobbying may be changing. Companies used to try to, as Ronald Reagan once put it, get government off their backs. But now, according to economist Luigi Zingales, lobbying has shifted from reactive to proactive, and toward getting government in their pockets to obtain unique privileges.”
Getting back to campaign finance, Bradley Smith sums up:
The practical results of this decision will be to make fundraising easier for party committees and candidates. That is almost certainly a good thing and should help ease concerns that “super PACS” are too influential with parties. Don’t expect a landslide in new giving, however, as the old aggregates did not affect most donors, who contribute to only a few candidates.
Ultimately, this decision is a significant victory for the First Amendment. Perhaps more important than the immediate result is the insistence that the government must have an actual, rather than conjectural, theory of corruption to be prevented. The “monsters under the bed” theory of constitutional jurisprudence seems headed for the dustbin.
As Justice Roberts wrote, “If the First Amendment protects flag burning, funeral protests, and Nazi parades — despite the profound offense such spectacles cause — it surely protects political campaign speech despite popular opposition.”

"The search engine that doesn't track you"

I recommend the use of a VPN and "the search engine that doesn't track you", so read all about DuckDuckGo: the plucky upstart taking on Google with secure searches.

Damn! There Goes My Trip to Saudi Arabia

So True ...

Progressives are wrong about the essence of the Constitution from George Will: [emphasis is mine]

In a 2006 interviewSupreme Court Justice Stephen Breyer said the Constitution is “basically about” one word — “democracy” — that appears in neither that document nor theDeclaration of Independence. Democracy is America’s way of allocating political power. The Constitution, however, was adopted to confine that power in order to “secure the blessings of” that which simultaneously justifies and limits democratic government — natural liberty.
The fundamental division in U.S. politics is between those who take their bearings from the individual’s right to a capacious, indeed indefinite, realm of freedom, and those whose fundamental value is the right of the majority to have its way in making rules about which specified liberties shall be respected.
Now the nation no longer lacks what it has long needed, a slender book that lucidly explains the intensity of conservatism’s disagreements with progressivism. For the many Americans who are puzzled and dismayed by the heatedness of political argument today, the message of Timothy Sandefur’s “The Conscience of the Constitution: The Declaration of Independence and the Right to Liberty” is this: The temperature of today’s politics is commensurate to the stakes of today’s argument.
The argument is between conservatives who say U.S. politics is basically about a condition, liberty, and progressives who say it is about a process, democracy. Progressives, who consider democracy the source of liberty, reverse the Founders’ premise, which was: Liberty preexists governments, which, the Declaration says, are legitimate when “instituted” to “secure” natural rights.
Progressives consider, for example, the rights to property and free speech as, in Sandefur’s formulation, “spaces of privacy” that government chooses “to carve out and protect” to the extent that these rights serve democracy. Conservatives believe that liberty, understood as a general absence of interference, and individual rights, which cannot be exhaustively listed, are natural and that governmental restrictions on them must be as few as possible and rigorously justified. Merely invoking the right of a majority to have its way is an insufficient justification.
With the Declaration, Americans ceased claiming the rights of aggrieved Englishmen and began asserting rights that are universal because they are natural, meaning necessary for the flourishing of human nature. “In Europe,” wrote James Madison, “charters of liberty have been granted by power,” but America has “charters of power granted by liberty.”
Sandefur, principal attorney at the Pacific Legal Foundation, notes that since the 1864 admission of Nevada to statehood, every state’s admission has been conditioned on adoption of a constitution consistent with the U.S. Constitution and the Declaration . The Constitution is the nation’s fundamental law but is not the first law. The Declaration is, appearing on Page 1 of Volume 1 of the U.S. Statutes at Large, and the Congress has placed it at the head of the United States Code, under the caption, “The Organic Laws of the United States of America.” Hence the Declaration “sets the framework” for reading the Constitution not as “basically about” democratic government — majorities — granting rights but about natural rights defining the limits of even democratic government.
The perennial conflict in American politics, Sandefur says, concerns “which takes precedence: the individual’s right to freedom, or the power of the majority to govern.” The purpose of the post-Civil War’s 14th Amendment protection of Americans’ “privileges or immunities” — protections vitiated by an absurdly narrow Supreme Court reading of that clause in 1873 — was to assert, on behalf of emancipated blacks, national rights of citizens. National citizenship grounded on natural rights would thwart Southern states then asserting their power to acknowledge only such rights as they chose to dispense.
Government, the framers said, is instituted to improve upon the state of nature, in which the individual is at the mercy of the strong. But when democracy, meaning the process of majority rule, is the supreme value — when it is elevated to the status of what the Constitution is “basically about” — the individual is again at the mercy of the strong, the strength of mere numbers.
Sandefur says progressivism “inverts America’s constitutional foundations” by holding that the Constitution is “about” democracy, which rejects the framers’ premise that majority rule is legitimate “only within the boundaries” of the individual’s natural rights. These include — indeed, are mostly — unenumerated rights whose existence and importance are affirmed by the Ninth Amendment.
Many conservatives should be discomfited by Sandefur’s analysis, which entails this conclusion: Their indiscriminate denunciations of “judicial activism” inadvertently serve progressivism. The protection of rights, those constitutionally enumerated and others, requires a judiciary actively engaged in enforcing what the Constitution is “basically about,” which is making majority power respect individuals’ rights.

The Insane Dream

Paul Rosenberg's The Insane Dream:

Insanity is doing the same thing over and over again and expecting different results.
– Albert Einstein (attributed)
The insane dream has streamed endlessly through my lifetime. I saw it as a boy, and I see it still. It has never really produced any results, and it certainly shows no promise of doing so in the near future.
In fact, by all historical accounts, the dream is nearly 100% false – the results are opposite to the hopes and prayers of the dream.
And yet, nearly the whole world believes in the dream to one extent or another.
What can be said about such a thing? It never works, but everyone keeps believing in it all the same. And when I say “it never works,” I mean that its failure is clearly demonstrable – in visible, concrete, measurable terms.

What Is It?

Okay, I’m about to tell you what this dream is, but please be aware: Your defenses are about to jump up against it. Slogans are likely to fly into your mind unbidden. You can expect emotional reactions.
Here we go:
The insane dream is hoping and praying for politicians to bring us peace.
Understand this clearly: It doesn’t happen. It has never really happened. Politicians do not prevent wars; they start them.
Sure, politicians sign cease-fire agreements from time to time, but they’re also the same guys who started those wars! And they’ll happily jump into new wars a few years later!
Please understand, I am not attacking or defending any political party, nor am I promoting any particular cure for war. I am saying one thing only, which is this:
Politicians – rulers of any type – have never really created peace, and they never will.
I say this for a very simple reason: In all of human history, they never have. That goes for all parties, all systems of rulership, and all periods of time.
We’ve just come out of the bloodiest century in human history, and yet we still have a dozen wars going at any point in time. Politicians have started all of these wars. And yet, by some peculiar insanity, most people still expect politicians to save them from more wars.
Are you seeing my point? This makes no logical sense at all.
People all around us are hoping, praying, and begging for politicians to preserve us from war. They may as well pray for purple unicorns to direct traffic in New York City.
I ran across a study on war back in the 1980s. It found that since 3600 BC, there have been more than 14,000 wars. That’s 14,000 wars over 5,600 years. And ALL of this took place in systems that were controlled by rulers of some type: politicians, princes, and so on.
We have 5,600 years of evidence, and yet people are doing the same thing that failed in every one of the previous 5,600+ years. Can you see why I opened with the Einstein quote?
Political systems have shown themselves utterly unable to create peace. They’ve failed every year for nearly six thousand years running. We’re certifiably nuts if we think that next year (or the years after) will be any different.

But Why Not?

This is the next question that people bring up, but I’m not going to explain it today. There are good answers as to why politicians can never really stop war, but I don’t want to derail my main point.
Today, I want to be very clear on one point only, and to let it stick:
Hoping for politicians to give us peace is crazy – fully crazy.
If we have any pretense of thinking rationally, we have to let it go.
I will, however, devote a few lines to internal issues.

The True Opiate of the Masses

Hoping is an act of imagination, divorced from reality and reason. You can hope for anything, and it produces… nothing!
Hope is the true opiate of the masses. Once you make people imagine how great they’ll feel when the impossible blips into reality, they may as well be on drugs… strong ones.
Opium makes people feel good for a while. So does hope.
Opium is addictive. So is hope.
Opium wastes you. So does hope.

Two Choices

Like I say, I want to keep this simple. On the question of politicians creating peace, you have two choices:
  • On one hand, you have approximately six thousand years of clear, unambiguous evidence.
  • On the other, you have an addictive opiate and emotions divorced from reason.
You might think about going with the evidence.

Thomas Sowell Tells Us About The High Cost of Liberals

Nutrition 101

Great starting point for a new repository on nutrition.  Let's start off by debunking the myths that are killing us.  All new updates will be in RED BOLD going forward:

4 Foods That Have Surprising Medicinal Benefits

Study Shows That Coconut Oil Can Help Reduce Belly Fat

10 Shocking Facts About Processed Food

Four Great Fat Rich Foods To Start Adding To Your Diet

High-Carb Diet May Increase Your Risk of Dementia

The Health Benefits of Coconut Flour • A Gluten-Free Flour Substitute

John Yudkin: The Man Who Tried to Warn us About Sugar  [1.5hr video in the article is worth the time.  Sugar is a killer, plain and simple; followed by wheat]

5 Lies About Healthy Food That Are Making You Fat  [your body needs fat; plenty of it! Same with cholesterol.  Please, read the following books: Wheat Belly; Grain Brain]

7 Foods For Teeth That Your Dentist Wants You To Eat More Often  [not so sure about #6, as any sweetener will trip insulin production to some degree. I'm still researching this!]

10 Surprising Benefits of Walnuts You May Not Know About

11 Charts That Show Everything Wrong with Our Modern Diet

18 food replacement hacks worth giving a shot

7 Unexpected Ingredients You Might Eating For Lunch Today

15 Best Anti-Aging Foods You Need To Start Eating Now [Note: I'd say '14' ... be careful about #3: stay away from wheat! And, I'm not on board with the 'anti-aging' - they're just good foods]

All Salt is Not Equal

10 Amazing Benefits of Oolong Tea You Didn’t Know

Supplement Alert: Antioxidants May Protect Cancer Cells Instead Of Protecting Us From Them  [note: key word here is "may" ... more studies need to be conducted, and, the raw data and methodology for THIS study needs to be peer reviewed as well]

The Benefits of Coconut Oil

6 Things You Need To Know About Protein

How To Win An Argument With A Nutritionist

The Top Foods That Lead To Inflammation–Avoid These At All Costs

7 Super Foods That Will Make You Live Longer

8 Foods that Speed Up Ageing While Promoting Sickness:
4. Artificial sweeteners are worse than sucrose. Ignore the aspartame and diet soda trap, too. You should actually avoid all sodas, including diet soda. Aspartame is a neuron excitoxin that can excite brain cells to death, putting you in the fast lane to dementia or even brain cancer.

Walter E. Williams on Wage Discrimination

Wage Discrimination:

"President Obama Vows Zero Tolerance on Gender Wage Gap," read one headline. Another read, "Women Still Earned 77 Cents On Men's Dollar In 2012." It's presumed that big, greedy corporations are responsible for what is seen as wage injustice. Before discussing the "unjust" wage differences between men and women, let's acknowledge an even greater injustice — which no one seems to care about — age injustice.

According to the Bureau of Labor Statistics, workers ages 16 to 24 earn only 54 cents on every dollar earned by workers 25 or older. This wage gap is 43 percent greater than the male/female gap. Our president, progressives, do-gooders, academics and union leaders show little interest in big, greedy corporations ripping off the nation's youth. You might say, "Whoa, Williams! There's a reason younger people earn less than older people. They don't have the skills or experience." My response would be — if I shared the vision of the president, media elite and do-gooders: Just as there can be no justification for big, greedy corporations paying women less than they pay men, there's no justification for them to exploit the nation's youth.

The 77 percent median income statistic, used in discussions about male/female differences in earnings, tells us nothing about differences that might explain the differences in income, and it leads to stupid discussions. Let's use some common sense and look at some differences between men and women that may have a bearing on earnings.

Kay S. Hymowitz's article "Why the Gender Gap Won't Go Away. Ever," in City Journal (summer 2011), shows that female doctors earn only 64 percent of what male doctors earn. But it turns out that only 16 percent of surgeons are women, whereas 50 percent of pediatricians are women. Even though surgeons have put in many more years of education and training than pediatricians and earn higher pay, should Obama and Congress equalize their salaries? Alternatively, they might force female pediatricians to become surgeons.

There are inequalities everywhere.

According to the Bureau of Labor Statistics, Asian men and women have median earnings higher than white men and women. Female cafeteria attendants earn more than their male counterparts. Females who are younger than 30 and have never been married earn salaries 8 percent higher than males of the same description. Among women who graduated from college during 1992-93, by 2003 more than one-fifth were no longer in the workforce, and another 17 percent were working part time. That's to be compared with only 2 percent of men in either category. Hymowitz cites several studies showing significant career choice and lifestyle differences between men and women that result in differences in income.

According to 2010 BLS data, the following jobs contain 1 percent or less female workers: boilermakers, brick masonry, stonemasonry, septic tank servicing, sewer pipe cleaners and trash collectors. By contrast, women are 97 percent of preschool and kindergarten teachers, 80 percent of social workers, 82 percent of librarians and 92 percent of dietitians and nutritionists and registered nurses.

For people having limited thinking skills, differences in earnings cannot be explained away. For them, Congress has permitted — and even fostered — a misallocation of people by race, sex and ethnicity. They'll argue that courts have consistently concluded that "gross" disparities are probative of a pattern and practice of discrimination. So what to do? Maybe President Obama and Congress should require women, who are overrepresented in preschool and kindergarten teaching, to become boilermakers, garbage collectors and brick masons and mandate that male boilermakers, trash collectors and brick masons become preschool and kindergarten teachers until both of their percentages are equal to their percentages in the population. You say, "Williams, to do that would be totalitarianism!" I say that if Americans accept that Congress can force us to buy health insurance, how much more totalitarian would it be for Congress to force people to take jobs they don't want?

Tuesday, April 15, 2014

Recent Posts from Charles Hugh Smith

What, You're Surprised? ...

My Favorite Economic Indicator: The Baltic Dry Index

Good .... They Deserve It (and so do we for letting it happen)

The education bubble is bursting ... finally ... a racket, which I too bought into and worst of all, I KNEW it was bad, but did it anyway!  Well, at least my son isn't saddled with non-dischargeable debt ...

"Death Spiral" - Harvard Professor Predicts Up To Half Of US Universities May Fail In 15 Years

Here's a bit more: The Ongoing Inflation Of The Higher Education Bubble

No They Don't, But Politicians (aka "our leaders and representatives") Think So

Higher Taxes Don’t Make Capitalism “Work Better” by James E. Miller:

“Would Capitalism Work Better With Higher Taxes?”
That’s the title of a new Globe and Mail editorialwritten by Doug Saunders. The question is innocent enough. The article treads lightly on the topic without ideological moralizing. The dilemma of how to make capitalism “work better” is a common trope in mainstream rags. Saunders wants to come off as a moderate thinker who’s just trying to do what’s best for everyone. I suspect there’s something more sinister behind his motives.=
Anyone who understands the basics of capitalism knows taxation acts as a hindrance. There is no question about this. Capitalism is the free trading of goods and services; taxation is the violent extortion of the gains of voluntary trade. Anything that gets in the way of the capitalist process necessarily hinders it.
In no possible way will higher taxes make capitalism “work better.” Those who claim otherwise are either one of two things: ignorant of what capitalism is, or insidiously plotting its demise. I suspect Mr. Saunders knows what he is doing. In his piece, he gives slight deference to the orthodox view that higher taxes create a disincentive to produce. He even cites the fact that the James Bond flick Moonraker was shot all over the globe, except for the place where the Ian Fleming story takes place: England. The producers did everything they could to avoid paying Britain’s top income-tax rate of 83%. Hardly anyone could blame them for taking such measures. Even the Beatles and the Rolling Stones departedtheir home country for places with a softer tax burden.
Saunders understands this but it affects him not. He is convinced data disproves the idea that people want to keep more of their own income. Like any good news columnist, he has an academic to back him up. Thomas Piketty, a French economist, has focused much of his latest work on diving into the historic trends of income inequality. He discovered that wide income inequality acts as a large deterrent to raising living standards. Saunders, being the susceptible stooge waiting for an excuse to flex his statism, now has a scholar to throw in everyone’s face. Of Piketty’s theory, he writes,
“normal market economies, if left to themselves, will always enter a dangerous spiral in which previously existing wealth will grow in value much faster than either wages or sales.”
For Piketty, in unfettered markets, the rate of return on capital putatively outraces worker income. This is bad because it necessarily puts the rich capital owners in a privileged position when compared to the lower classes. The buildup of “dead wealth” is acting as an anchor on economic growth since too much capital remains underutilized. Therefore, Piketty proposes a number of methods to jolt life back into the capitalist class by forcing them to put their assets to work. Saunders is all for this approach and says it’s “bound to become mainstream policy sooner or later.” The only problem is, this approach to economic micromanagement has been in use since the days of Keynes. There’s nothing novel about using government authority to rid the rich of their wealth.
The underlying basis for the Piketty view is the positively Keynesian idea that idle resources are somehow bad; that if machinery, factories, plant equipment, and other forms of capital are going unused, then people are losing the opportunity to work. Economist William H. Hutt destroyed this entire notion in his The Theory of Idle Resources, where he pointed out that unused capital is never really worthless. There is always the possibility for future use. As he wrote,
“[R]esources may, however, be held up for some more wanted employment in such a way that they are not actually idle. The process of investment in them, or of continuous receipt of ‘availability’ services is still present.”
The idea that sitting capital is somehow a benefit to the wealthy is asinine. Sitting, functionless capital doesn’t get a return. It must be put to work. If it appears to be out of use, there is a good reason for it. Either the owner sees no profit opportunities presently or has bigger plans waiting to be implemented.
Economic central planners tend to think they know how to best use other people’s property. Their goal is accounted for in aggregate terms rather than individual preference. They see resources as things that exist to employ others. The very concept of personal ownership screws up their plans; so they attack it in the name of curing unemployment.
In Piketty’s work, he does his best to come off as friendly towards markets and claims to be apprehensive about increasing the size of government. But even so, his worry over capital’s dominance is tainted with Marxist thinking. His solution to the wealthy becoming too powerful is, according to Saunders, “targeting inheritance and extremely high salaries with deterrent taxes.” He even claims that inheritance – that is passing down the fruits of your labor to your children – actually “contradicts the basic principles of capitalism.”
If handing down your own property to your loved ones contradicts capitalism, then so does profit-making in general. People don’t invest, produce, work, and risk their wealth to make sure the trains run on time for everyone. They do so for their own benefit. The same goes for inheritance; which by its nature is a long-view approach to accumulating wealth.
Holding capital does not exact significant harm on the lower rungs of society. On the contrary, it provides the very basis of elongated production methods that produce intricate goods. Without the capitalist, there are no funds to pay workers. The capitalist, as economist Richard Ebeling writes, “saves, forgoing consumption or other uses of his wealth, and those savings are the source of the workers’ wages during the production process.” Punishing someone who saves capital for a later date is a good way to guarantee the stagnation of rising living standards. It’s hard enough for producers and investors to foresee consumer wants; academics and pundits are necessarily in a worst position to decide.
So do higher taxes make capitalism better? The answer is unequivocally “no.” But that won’t stop statist apparatchiks like Doug Saunders from cherry-picking data and sources to make the case for higher taxes. There can be a number of reasons for low economic growth. Low taxation and capital-hoarding businessmen are never one of them.

Truly Scary Sh*t

US Households To Withdraw $430 Billion From Stocks In 2014 - Most Since Last Bubble:

When it comes to the conventional wisdom of who owns the bulk of corporate stock in the US equity market, the consensus is simple: at 36% of total, the answer is the US household. This is shown in the chart below.
As an aside we disagree from this simplistic analysis because as is well known, the "Household" category, which is pulled from the Fed's quarterly Flow of Funds report, is merely a placeholder plug, designed to balance out all the other member categories. What is less known is that entities such as hedge funds use extensive "off the books" leverage (just ask Citadel and its nearly 9x regulatory leverage) to hold far more equities than their capital allows them. Which means that in reality the US household owns far less stock than is believed.
But even if one takes the Fed's data at face value, what becomes clear is that having owned virtually the entire stock market in 1945, households are now down to nearly their lowest fractional ownership in history, with the rest allotted to mutual, pension and retirement funds.
And it is only going to get worse.
According to a recent analysis by Goldman, in 2014 the US household is on track to withdraw a whopping $430 billion from US corporate stocks. i.e., sell. This will be the biggest net outflow by the Household group, which has constantly withdrawn cash from equities over the past decade, since the last market peak.
It is understandable why: with baby boomers retiring in droves, and with interest income non-existent, investors are forced to liquidate positions in order to generate, well, liquidity.
Perhaps a more disturbing question is why is the household outflow not bigger? After all it surpassed $1 trillion during the last market peak. Could it be because households just don't have all that much equity left in a market which is now dominated by a mere tiny fraction of the entire US population?
But the biggest question is with household pulling cash out, who will provide the offsetting inflow into stocks? The answer: corporations of course - the same entity that injected a record $500 billion in stocks in the form of buybacks is set for another bumper year of net inflows, and according to Goldman companies are on par to match their 2013 buyback activity by buying back some $450 billion of their own stock in the coming year.
This also explains why for one more year, there will be no capex rise - quite simply in order to maintain the illusion of the stock market ponzi, corporations have to keep buying back ever greater amounts of their own stock in order to keep reducing the denominator in the EPS fraction and perpetuate the myth that Net Income is growing when in reality only the number of outstanding shares is declining. So for all those hoping for that so long overdue CapEx bounce, may we interest you in some 1000+ forward PE multiple stocks.
After all in a ponzi which has already likely passed its Minsky moment, the only "trade" that works is to bet on the greatest fool of all, the Fed.

Three From The Sage, Thomas Sowell

Always an education ....

A classic quotes from A Halo for Selfishness:
Those unfamiliar with political rhetoric may not know that "special interests" mean people who support your opponents. One's own organized supporters -- such as labor unions supporting President Obama -- are never called "special interests.
and this one:
If truth-in-packaging laws applied to Congress, a campaign finance law would have to be labeled an "Incumbents Protection Act."

In Chuck Stone (1924-2014), Sowell writes about a man whose columns I remember reading in the Philadelphia Daily News back in the late '70s early '80s.  I learned  much about the man I did not know in this short column, namely that he was a navigator with the famous WWII Tuskegee Airmen squadron.

Lastly, here's Statistical Frauds with Sowell's views on the "war on women" and other such nonsensical bullshit that passes for intelligence in various political circles.

Walter E. Williams: Equality in Discipline

Equality in Discipline:

George Leef, director of research for the North Carolina-based John William Pope Center for Higher Education Policy, authored a Forbes op-ed article titled "Obama Administration Takes Groupthink To Absurd Lengths." The subtitle is "School Discipline Rates Must Be 'Proportionate.'"  Let's examine some of the absurdity of the Obama administration's take on student discipline.
Last January, the departments of Justice and Education published a "guidance" letter describing how schools can meet their obligations under federal law to administer student discipline without discriminating on the basis of race, color or national origin. Its underlying threat is that if federal bureaucrats learn of racial disproportionality in the punishments meted out for misbehavior, they will descend upon a school's administrators. If schools cannot justify differentials in rates of punishment by race or ethnic group, they will face the loss of federal funds and be forced to undertake costly diversity training.
The nation's educators can avoid sanctions by adopting a racial quota system for student discipline. So as Roger Clegg, president and general counsel of the Center for Equal Opportunity, predicts, "school officials will either start disciplining students who shouldn't be, or, more likely, will not discipline some students who ought to be." I can imagine school administrators reasoning this way: "Blacks are 20 percent of our student body, and 20 percent of suspensions this year have been of black students. In order to discipline another black student while maintaining our suspension quota, we will have to suspend some white students, whether they're guilty or not." Some administrators might see some injustice in that approach and simply ignore the misbehavior of black students.
Leef cites Manhattan Institute's Heather Mac Donald, who wrote in City Journal that "the Departments of Education and Justice have launched a campaign against disproportionate minority discipline rates, which show up in virtually every school district with significant numbers of black and Hispanic students.
The possibility that students' behavior, not educators' racism, drives those rates lies outside the Obama administration's conceptual universe." She quoted Aaron Benner, a black teacher in a St. Paul, Minn., school who abhors the idea that school officials should go easy on black students who act up because (as a "facilitator" said) that's what black culture is. "They're trying to pull one over on us. Black folks are drinking the Kool-Aid; this 'let-them-clown' philosophy could have been devised by the KKK." Benner is right. I can't think of a more racist argument than one that holds that disruptive, rude behavior and foul language are a part of black culture.
If Barack Obama's Department of Justice thinks that disproportionality in school punishments is probative of racial discrimination, what about our criminal justice system, in which a disproportionate number of blacks are imprisoned, on parole or probation, and executed? According to the NAACP's criminal justice fact sheet, blacks now constitute nearly 1 million of the total 2.3 million people who are incarcerated. Blacks are incarcerated at nearly six times the rate of whites. The NAACP goes on to report that if blacks and Hispanics were incarcerated at the same rate as whites, today's prison and jail populations would decline by approximately 50 percent.
So what to do? For example, blacks are 13 percent of the population but over 50 percent of homicide victims and about 46 percent of convicted murderers. Seeing as the Obama administration is concerned about punishment disproportionality, should black convicts be released so that only 13 percent of incarcerated murderers are black? Or should the Department of Justice order the conviction of whites, whether they're guilty or not, so that the number of people convicted of murder by race is equal to their number in the general population? You say, "Williams, that not only is a stupid suggestion but violates all concepts of justice!" You're absolutely right, but isn't it just as stupid and unjust for the Obama administration to seek punishment equality in schools?

The Latest From Walter E. Williams: How To Assist Evil

How to Assist Evil: [emphasis mine]

"Engineering Evil" is a documentary recently shown on the Military History channel. It's a story of Nazi Germany's murder campaign before and during World War II. According to some estimates, 16 million Jews and other people died at the hands of Nazis.
Though the Holocaust ranks high among the great human tragedies, most people never consider the most important question: How did Adolf Hitler and the Nazis gain the power that they needed to commit such horror? Focusing solely on the evil of the Holocaust won't get us very far toward the goal of the Jewish slogan "Never Again."
When Hitler came to power, he inherited decades of political consolidation by Otto von Bismarck and later the Weimar Republic that had weakened the political power of local jurisdictions. Through the Enabling Act (1933), whose formal name was "A Law to Remedy the Distress of People and Reich," Hitler gained the power to enact laws with neither the involvement nor the approval of the Reichstag, Germany's parliament. The Enabling Act destroyed any remaining local autonomy. The bottom line is that it was decent Germans who made Hitler's terror possible — Germans who would have never supported his territorial designs and atrocities.
The 20th century turned out to be mankind's most barbaric. Roughly 50 million to 60 million people died in international and civil wars. As tragic as that number is, it pales in comparison with the number of people who were killed at the hands of their own government. Recently deceased Rudolph J. Rummel, professor of political science at the University of Hawaii and author of "Death by Government," estimated that since the beginning of the 20th century, governments have killed 170 million of their own citizens. Top government killers were the Soviet Union, which, between 1917 and 1987, killed 62 million of its own citizens, and the People's Republic of China, which, between 1949 and 1987, was responsible for the deaths of 35 million to 40 million of its citizens.
In a distant third place were the Nazis, who murdered about 16 million Jews, Slavs, Serbs, Czechs, Poles, Ukrainians and others deemed misfits, such as homosexuals and the mentally ill.
We might ask why the 20th century was so barbaric. Surely, there were barbarians during earlier ages. Part of the answer is that during earlier times, there wasn't the kind of concentration of power that emerged during the 20th century. Had Josef Stalin, Mao Zedong and Hitler been around in earlier times, they could not have engineered the slaughter of tens of millions of people. They wouldn't have had the authority. There was considerable dispersion of jealously guarded political power in the forms of heads of provincial governments and principalities and nobility and church leaders whose political power within their spheres was often just as strong as the monarch's.
Professor Rummel explained in the very first sentence of "Death by Government" that "Power kills; absolute Power kills absolutely. ... The more power a government has, the more it can act arbitrarily according to the whims and desires of the elite, and the more it will make war on others and murder its foreign and domestic subjects." That's the long, tragic, ugly story of government: the elite's use of government to dupe and forcibly impose its will on the masses. The masses are always duped by well-intentioned phrases. After all, what German could have been against "A Law to Remedy the Distress of People and Reich"? It's not just Germans who have fallen prey to well-intentioned phrases. After all, who can be against the "Patient Protection and Affordable Care Act"?
We Americans ought to keep the fact in mind that Hitler, Stalin and Mao would have had more success in their reign of terror if they had the kind of control and information about their citizens that agencies such as the NSA, the IRS and the ATF have about us. You might ask, "What are you saying, Williams?" Just put it this way: No German who died before 1930 would have believed the Holocaust possible.

Friday, April 4, 2014


What A Loan Officer Would Say To The US Government: Denied! by Michael Lombardi:

For a moment, consider yourself a loan officer at a major bank. Would you approve a loan for a customer who says they earn $1,000 a month and spend $1,300 a month? They also tell you they have unpaid debts of $17,000.
I don’t think anyone would authorize that kind of loan because the chances of getting the money back are next to zero. The individual spending more than he earns is a prime example of a financial disaster waiting to happen. It is unsustainable living; when someone does this, they break the most basic principles of Personal Finance 101.
So why does the U.S. government get away with it?
The United States Department of the Treasury, Bureau of the Fiscal Service reported the budget deficit for the month of February was $194 billion. The U.S. government received $144 billion in revenues and spent $338 billion; the government spent 134% more than what it earned. (Source: Bureau of the Fiscal Service, March 14, 2014.)
So far for fiscal year 2014 (which began in October of 2013), the U.S. government has incurred a budget deficit of $380 billion on revenues of $1.10 trillion and expenses of $1.48 trillion. Since the beginning of its current fiscal year, the government has been spending 34% more than what it takes in.
The U.S. national debt, which has now surpassed $17.0 trillion, has skyrocketed since the Credit Crisis of 2008.
There are two important facts about our rising national debt that don’t get a lot of mainstream attention (and I certainly don’t hear the politicians talking about them):
Point #1: With higher national debt come higher interest payments.
Point #2: Interest rates are rising.
So far this fiscal year, the U.S. government has paid $166 billion in interest payments alone on its national debt. For the entire year, it expects to pay about $420 billion in interest. The more debt we pile on as the years go by, the more interest we will be paying on that debt.
As for interest rates themselves, they have been rising. Since mid-2012, the yield on the 10-year U.S. Treasury has gone up from 1.4% to 2.7% today, a whopping increase of 92%.
When a family is in trouble, it tries to make at least the minimum payments on its debt. Right now, the U.S. government isn’t even making a minimum payment. It is covering its interest payments on its debt by borrowing more; something the individual in our example above cannot do.
In fiscal 2013, the U.S. government registered a budget deficit of $680 billion. The politicians were very quick to say, “Look, it’s not the $1.0-trillion budget deficit we’ve been running for each of the past five years…we’ve come in lower!” They pat themselves on the back. But they don’t talk about the massive national debt we have created, how we are borrowing more money simply to pay our interest costs on our debt, how rising interest rates in 2015 and 2016 will just propel the national debt higher.
Maybe the amount of national debt no longer matters because we’ve all concluded it simply can’t be paid back. Or maybe it doesn’t matter because Japan’s national debt is equal to 205% of its gross domestic product (GDP), and Japan’s not broke yet. (Our national debt-to-GDP stands at 105%.) I guess that, according to the Japanese example, the size of a country’s national debt, or its relationship to GDP, really doesn’t matter anymore.
I am skeptical. What happens when one day the Japanese and China, which have already cut back on buying U.S. Treasuries, say “We want our money back”? Oh, that’s right. That won’t be a big deal because the Federal Reserve will just get the printing presses going again and buy all the new U.S. bonds coming on the market with newly printed money. Yeah, that will work. By Michael Lombardi, Profit Confidential.