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Sunday, 9 June 2013

Let us count the scandals: The politically massaged Benghazi talking points, the IRS harassment of conservative organizations, the EPA's leak of 80,000 farmers' private information to environmental organizations, the administration's fining or prosecuting of oil companies for killing protected eagles while letting wind energy firms off the hook for the same crime, the use of secret email accounts by top administration officials, the HHS secretary's solicitation of funds from companies she regulates, and now the revelation that the administration runs massive data mining operations of the sort Obama previously claimed to oppose.

Posted by walterda at 9:43 AM EDT
Wednesday, 29 May 2013


Cheney Whitney Thad 

The government chose to ignore our border and immigration laws. Historic and potentially incurable damage has been done as a result.
The government chose to accumulate incomprehensible debt. We will live with the threat of bankruptcy for at least a generation as a result.
The government has prevented the development of domestic energy resources, from coal to nuclear to gas to oil. That has enriched our enemies, enfeebled our economy, endangered our security and encumbered our prosperity.
The government has weakened our population with massive socialist programs, raiding the family budgets of those who pay for them and destroying the family responsibility of those who receive them.
The government has strangled our farm production, with the intoxication of subsidy and the lunacy of food-based fuel. This will, in the first instance, make people go broke. It will, in the second instance, make people go hungry.
The government has destroyed the benefit of education, hobbling what were once the world's best schools in favor of creating an activist- and union-driven industry of indoctrination. Students learn neither their culture nor their livelihood and are taught nothing of citizenship except resentment, rebellion and arrogant entitlement.
The government has transformed free trade into a rape of our economy, subsidizing massive trade deficits and the consequent collapse of our currency. The result is a destruction of our industry – essential to both prosperity and security – and a situation in which foreigners with solid currencies are gobbling up American businesses and American land, making us sharecroppers and tenants in our own country.
The government has conducted two wars in such a fashion as to cripple our armies, empty our treasury, destroy our reputation and bleed a generation. Our demonstrated weakness has bolstered rivals and invited insolence.
The government has given us Medicare and Medicaid and predatory liability laws and free medical care for illegal aliens and the horrible butchery they have together forced on our medical system. In less than a generation we have gutterized what many remember as the best medical system in the world.
The government is kneeling before the altar of man-made global warming, forcing this cult of de-industrialization upon our lifestyles and our family budgets.

By contrast, $26 billion taken from taxpayers and given to wind, solar and biofuel energy projects via Department of Energy subsidies and loan guarantees since 2009 created only 2,298 permanent jobs, at a cost of $11.45 million per job, the Institute for Energy Research calculates, using DOE data.

Christian activity that can be abused

Giving /receiving forgiveness

Righteous anger

Compartmentalization divide

Praying at an alter

Sid With a Y Arthur
Jesse malin

Patriarchal paternal maternal matriarchal 

The Idled Young Americans
May 4, 2013, 11:49:29 AM CDT · 14 of 14
steve86 to RegulatorCountry
Depends upon which fast food establishment you visit.
That's true. Here we have a mix of Hispanics, a few asians, and white people of all ages working in the Quick Service food stores. I really haven't had trouble with any of them over the years (eastern Washington State).

Have to tell you though, the Hispanic women and girls at one Burger King have taken a liking to me and give me extra portions and the best service all the time. Don't know how I happened into that situation but I have no complaints. Usually I am an anonymous person no one pays any attention to.

Obama transparency -- where he's invisible

This trend has been reversed to the point that the winner of the $338 million lottery winner in http://usnews.nbcnews.com/_news/2013/03/26/17470154-i-felt-pure-joy-new-jersey-powerball-winner-confirmed?lite         New Jersey, who immigrated to this country 26 years ago, needed a translator at his press conference to express his joy.

Osada Vida believe arena

 “L’etat, c’est moi” I am the state

Love seat for us instead of the throne of God. 

Jumpers 9/11 and bomb victims at Boston -- the press only encourages emotionalism when it favors them 

James 1:2 wisdom 1:13 half truth 1:22 mirror 1:26 widows 2:8 stumbles 2:12 forgiving vs mercy 4:4 enemies of God. pt2 :2
V 20 entanglements dual loyalties 

John 1:6 darkness v3 admonition a v grace and mercy

Brothers in need 1john 

Rogers mom Boston bill Davidson money 
Hopefully, whatever the circumstance, exaggeration won't be part of the mix. 


As Winston Churchill said, "The inherent vice of capitalism is the unequal sharing of blessings; the inherent virtue of socialism is the equal sharing of miseries."

Crony capitalism business cozy

From Dean the left or liberals are a culture of death in assassinations instead of torturing somebody which they think is immoral they would prefer to kill them in the case of abortion it's better that the child be killed them to have to live a tough life in medicine it's better to be dead than to be bankrupt. Death is a part of life. Elijah Cummings. We wouldn't want the people at Benghazi to suffer. 

Administrative law judges produce lack of independent courts because they are an arm of the departments that work for the executive branch ie EPA. Lack of independent judiciary are antithetical to a free government and free people. 

It doesn't hurt the guy as much as the little that has $10 billion that's what they say. Where does it say we should hurt the guy? Neurosurgeon ben Carson National prayer breakfast. 

Infidel Muslim non believer
every man in Hillary Clinton's life requires her to lie for him

Quinine Zyrtec Benadryl zinc tums

Chris  miles Boucher

The deadliest massacre of children in the United States was NOT by guns.
The deadliest school children massacre in U.S. history is the Bath School Disaster. This horrifying incident happened in the town of Bath, Michigan. The bombing occurred on 18 May 1927 and 38 elementary school children and 6 adults were killed with 58 injured. The children ages ranged from 7 to 14 and all were attending the Bath Consolidated School. The perpetrator was Andrew P. Kehoe who used dynamite. His motive: Foreclosure on his farm due to unpaid taxes for the school 

Clarence Thomas illustrates that you don't have to go through the normal hoops  and  affirmative-action that the left creates for success and therefore it is a threat to them. Rush

If some among you fear taking a stand because you are afraid of reprisals from customers, clients, or even government, recognize that you are just feeding the crocodile hoping he’ll eat you last.

Experimenting with iPhone. Sorry about that. Should be an invite to 
  Bible distribution - thunderbird motel liberal. 

Dean Walter 
Hi-Plains Pest Control LLC 
Liberal, KS 

On Dec 1, 2012, at 10:26 AM, "Rick Hanson" <rlhanson@wbsnet.org> wrote:

What is the new event?  It looks like there may be a file attached, but I can't open it.

-----Original Message----- From: Dean Walter
Sent: Saturday, December 01, 2012 10:05 AM
To: Cindy Ipad Walter ; cindy walter ; Rick Hanson Email ; Cindy Walter ; Dorothy McClure
Subject: New Event

Juggernaut gauntlet bosom boobs

Enthusiastic in theos God in us

The lord is my shepherd that's all I want

Before Christ we choose death. After we choose Christ we choose life. The unsaved still choose good just not as often. The elect still choose evil just not as often. 

Ambivalence vs antipathy

And that is a step too far for the Hobbesian progressives, who view politics as a constant contest between the State and the State of Nature, as though the entire world were on a sliding scale between Sweden and Somalia. Homeschoolers may have many different and incompatible political beliefs, but they all implicitly share an opinion about the bureaucrats: They don't need them – not always, not as much as the bureaucrats think. That's what makes them radical and, to those with a certain view of the world, terrifying.
To Progressive educators everywhere, let me say in confidence: Be afraid. Be very afraid.

When you have bet the political farm on a system that cannot get good students in the doors free of charge, and which has lost the power of compulsion to get them in the doors, your movement is comparable to the Congregational Establishment in (say) 1800. MENE, MENE, TEKEL, URPHARSIN. You have been weighed in the balance and found wanting. Your days are numbered.

Gary North [send him mail ] is the author of Mises on Money . Visit http://www.garynorth.com . He is also the author of a free 20-volume series, An Economic Commentary on the Bible .

In other words, the beneficiaries of newly created money spend that money and bid up the price of goods with their higher demand. Those who suffer are those who have to pay newly higher prices but did not benefit from the newly created money. 

Things that exist outside materialism. Laws, ideas.    The bible exists outside of the physical realm. It is not bound by material things. Is that true of the Koran? If they believe in heaven why do they lust after the material?

It stands against the only American institution that can legitimately claim for itself this unique position: it is the only established church in the nation. It has a self-accredited, self-screened priesthood, as every church must. It has a theology. Its theology is messianic: salvation through knowledge. But this knowledge must be screened and shaped in order to bring forth its socially healing power.
Gary north

Gm brands

Obama invested TAXPAYER money in:
Solyndra – BANKRUPT
Enter 1 - BANKRUPT
Beacon Power - BANKRUPT
Abound Solar - BANKRUPT
Amonix Solar - BANKRUPT
Spectra Watt - BANKRUPT
Eastern Energy - BANKRUPT
General Motors - FAILING

But here are the facts, according to the Interior Department’s Bureau of Land management.

In 2008 under President Bush, there were a total of 55,085 oil and gas leases in effect on federal land.
In 2011 under Obama, there were just 49,174, a decrease of 11 percent.
In 2008 under Bush, there were 47.2 million acres of federal land under lease. 
In 2011 under Obama, there were just 38.5 million, a decrease of 19 percent.
In 2008 under Bush, the federal government approved 6,617 oil and gas permits.
In 2011 under Obama, the federal government approved just 4,244 permits, a decrease of 36 percent.

The decrease in oil and gas leases, acres, and permits under Obama has led to a decrease in oil and gas production on federal land. 
According to the Energy Information Administration 
In 2010, 726 million barrels of oil were produced on federal land.
In 2011, just 626 billion barrels were produced, a decrease of 14 percent. 
In 2010, 5,166 billion cubic feet of natural gas were produced on federal land.
In 2011, just 4,609 billion cubic feet were produced, a decrease of 11 percent.

One claim of the declining band of Ayn Rand promoters is that European philosophies are not market friendly and need to be scrapped. Germany's Kantianism, even Nietzsche's Positivism and especially the Nihilism of France's Sartre must be replaced by simple greed, called RE or "rational egoism". Whether Germany needs any advice from the US on how to manage its economy is a moot point for some, and a waste of time for almost all Germans but at least in the US, Ayn Rand's RE has media and political support as a potential new invisible export item or product, for whoever wins the coming presidential elections.

Regulation product liability taxes unions

Got life ramp Evernote

Ambivilate  Vs antipathy

Regulation, taxes, unions, 

Reasons ChristianitjJudeo ideas are superior in science is because 1) we are outside of what web study and 2)we can experiment on it

Soft bigotry of low expectations Robinson baptist theological seminary

Or as Thomas Paine put it, "Society in every state is a blessing, but Government, even in its best state, is but a necessary evil."

e high risk products, and I mean high risk investments, in my opinion depositors are at greater risk of loss than direct equity investments in large cap consistent paying dividend stocks.

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According to President Obama, Entrepreneurs Don’t Build Businesses
Principles & Policy ^ 
Posted on July 15, 2012 1:15:14 PM CDT by Sark

Last night, President Barack Obama delivered some telling remarks to a fire station full of people in Roanoke, Virgina. I’ll save you the trouble of reading the (long and uninspired) speech and provide you with the most interesting part:

“If you’ve got a business — you didn’t build that. Somebody else made that happen.” – President Barack Obama, July 13th, 2012.

The miser, even though he is driven only by the desire to accumulate money, is a productive citizen in a free-market economy. He becomes a servant to customers, and customers find that they have a better lifestyle because of the commitment of the miser to accumulate ever greater wealth. The miser is obsessed with the accumulation of wealth, but in order to assuage his obsession, he must become obsessed with serving the demands of customers.

Think of what he has to do. He has to estimate what customers will be willing to pay for in the future. He must estimate competition from other sellers who will be actively seeking the money possessed by future customers. He must estimate the effects of government legislation on the markets in general, and his market in particular.

He must bear the uncertainty of all kinds of events that can take place between now and then. Somebody has to deal with these uncertainties, at least if future customers are going to be able to buy the goods and services they want at prices they are willing to pay. These problems do not take care of themselves.

So, what we are told about the miser is flawed. It may be correct with respect to the dangers associated with the obsession to accumulate wealth. There may be psychological disorders involved here that are a threat to the long-term mental stability of misers. But, with respect to the social function of misers, they can be highly productive people, and they are rewarded for their productivity by customers.

The Great Depression lasted from 1929 until 1940. The GDP of the country actually grew by 80% between 1933 and 1940. The stock market soared by 100% from the 1932 low to its 1933 high. It then soared another 100% from 1934 through 1937. Despite these fabulous economic statistics and investment riches scooped up by the 2.5% of the population that owned stocks, they still call this time period the Great Depression. With unemployment ranging from 15% to 25% during this entire time frame, the common man suffered greatly. There was no recovery for the 99%.  

Jn 15:1-5 we are productive in Christ



Pro bono

Inderal cures racism Mark Steyn

Free markets  is the economic system of freedom 

socialism is the economic system of tyranny

Adam Smith nations have wealth not governments

Hobbs our work is what we put into the wealth of the nation our spending it is what we take out

The consumer who is future-oriented chooses to consume less than he produces. This is the key to economic growth. People defer consumption for the sake of future consumption.

But some people save in order to produce. They live to produce. Their self-esteem is based on their production. They want to leave a legacy. They do not work mainly to eat. They eat mainly to work.

Pelosie is wrong; it’s not speculators who are driving up the cost of oil, it’s evil spirits or gremlins. I know this is so because my cat told me so.

Leftist generally and Bill O’Reilly in particular lack the brains to understand the vital role played by speculators in all realms of a working economy. They are the mechanism by which demand and supply can anticipate and inform each other

There are no absolutes in dialectical argument

Only points to negotiate a solution to

Debate is the study of absolutes in an argument

There are no absolutes in dialectical argument

Only points to negotiate a solution to

Debate is the study of absolutes in an argument

Doesn't everyone borrow money from their neighbor to give to their cousin? The money we've borrowed from the Chinese and others has been used so wisely to prop up these pitiful hell-hole countries because it made somebody, somewhere in our Gov't. feel better about "helping" our fellow man.

Karzai means well. That's all that matters in DC. Results don't matter. It's all in the optics at the beginning of the endeavor, no matter how it actually ends up. Everything that flows out of the swamp in DC is always well intentioned. In DC, the adage of "the devil you know is better than the one you don't know" does not apply.

The attitude that permeates our society with the advent of participation trophies, no grades in school, and the various self-esteem drivel bandied about, is no different than what our political elite feed us. They mean well, and results don't matter.

The pattern is no secret to historians. Machiavelli noted in his Florentine Histories (1532): "It may be observed that provinces, among the vicissitudes to which they are accustomed, pass from order to confusion, and afterwards pass again into a state of order. The way of the world doesn't allow things to continue on an even course; as soon as they arrive at their greatest perfection, they again start to decline. Likewise, having sunk to their utmost state of depression, unable to descend lower, they necessarily reascend. And so from good, they naturally decline to evil. Valor produces peace, and peace repose; repose, disorder; disorder, ruin. From ruin order again springs, and from order virtue, and from this glory, and good fortune."

Posted by walterda at 10:45 PM EDT
Sunday, 26 May 2013

Zero Interest Rates is Not Economic Stimulus, Rather a Death Knell
Interest-Rates / Credit Crisis 2013
Apr 04, 2013 - 07:34 PM GMT
By: Jim_Willie_CB
Zombie banks 
The propaganda has been thick over the last few years, especially since the US banking system suffered a fatal heart attack in September 2008. It has not recovered since, still insolvent, still wrecked, having returned a zombie center with a USTBond carry trade core and continued money laundering basement lifeline. The Jackass is tired beyond words, beyond description, of hearing that the Zero Percent Interest Policy is being kept as a stimulus measure to encourage continued economic recovery. It is neither a stimulant, nor is the USEconomy in recovery mode. The official 0% rate signals a death knell to the national financial foundation and economic vibrancy, the climax event slow in its pathogenesis following the departure from the Gold Standard in 1971. The official 0% FedFunds rate (call it 25 basis points, no matter) is a direct signal of terminal illness for the entire capitalist structures within both the United States and its Western partners who stupidly or helplessly follow its lead. They followed the US lead in the housing & mortgage bubble disaster with complete wreckage, yet they continue to follow the US monetary lead. They claim to have no choice. They do indeed have a choice, to discard the USDollar and to sell out of the USTreasury Bond, to impose a Gold Standard.


The Gold Trade Standard is coming into view. The East is no longer following the US lead, as a rebellion against the USDollar and its toxic USTreasury Bond is well along. The Eastern giants Russia and China are forging a new path, to install a new Gold Trade Standard that thumbs its nose at the Western banking system and the FOREX currency market. Its marketplace will be the Eurasian Trade Zone, and its gold central bank will be the BRICS Development Fund (clever name to disguise its eventual function). Last holiday weekend, a public article was penned by the Jackass, but due to the limited opportunity for the Easter and Passover times, the article entitled "USDollar: Ring-Fenced & Checkmate" was posted only on the Gold Seek website (CLICK HERE) as a personal favor.


It deserves extreme emphasis that the United States has put a zero price on money, and therefore two extremely important consequences are immediate. The first is that all capital is falsely priced, which causes a cancer to flow and filter throughout the entire business sector where capital is at work. Secondly, all financial assets are improperly priced, from stocks to bonds to property that ranges from commercial buildings to farmland to port facilities. The USEconomy suffers from capital mortality and capital wreckage. The US Federal Reserve by keeping the official rate near zero for four years, has in effect subjected the USEconomy to a death sentence. Evidence is seen in the Money Velocity. The USFed told the nation in early 2009 that the 0% was temporary. It was not, and the Jackass called them liars then, correctly so. They oversee ZIRP forever and QE to Infinity.

Notice the severe decline in money velocity. Even the incompetent economists recognize the importance of money flowing through the economic arteries. The banks are debilitated by a sclerosis which has spread to the body economic. The finger of blame goes initially to Sir Alan Greenspasm, who was the architect of monetary inflation management. The Mr Magoo lookalike urged the nation to tap into home equity for sustained consumption. He personally urged the renewed housing bubble, which enabled him to leave office an apparent winner. He never advocated a new business cycle, only a new speculative cycle. Greenspasm defended to the hilt the sophistication of the risk offload vehicles in derivatives, those toxic unregulated bank chits sold in the underground market where rats prevail. Beware that nothing has been solved, nothing has been attempted in solution, and the money velocity bears out the gradual death process of money itself. Money is tired, soon to be retired. It has no value in interest yield. It has no value indirectly, due to its free creation and distribution by the chief capital moron bottle washer (liquidity room) in charge of the USFed. He boasted of the electronic printing press with zero cost. Its heavy usage has rendered capital within the USEconomy to have zero value. It is in a grand retirement trend, in response to rising costs and shrinking profitability. Capital gradually in the US is dying.

An historical event look shows the decline in the effectiveness of money has a much longer established pattern. The trend down in money velocity has been in progress since the 1980 decade. My firm belief as an analyst and statistician is that the forfeiture and abandonment of industry from the USEconomy had a devastating effect over the decades. The legitimate income from tangible work was removed. The nation grew devoted and dependent upon asset bubbles for wealth and disposable funds for consumption, not actual work. The United States has pushed itself into a corner with a monetary straitjacket, a criminal banker elite class in charge, and a systemic failure that approaches rapidly. The harsh police state will be the outcome from refusal to liquidate the big US banks.


Capital destruction is not perceived by the harlot economist coven. They are paid to regard the 0% banner and QE operation as wildly stimulative. It is not. It is rather a grand wet blanket that smothers the capital at work, or drowns it from a rising tide of costs. The income side is slowed since legions of savers are denied a proper reward for putting their savings capital into the system, put to work. The pension funds are found wanting on income yield, as they take extra risks to find the required yield. The USFed has in essence forced the nation to adopt the moral hazard, to face the risks from the likes of mortgage bonds, and to suffer grand losses. Those folders full of bank CDs (certificates of deposit) earn a piddling 1% to 2% in interest, far less than the running rate of price inflation most evident in food and gasoline. The ZIRP policy pushes the grand distortions and imbalances within the USEconomy and its obscene forces. Few realize that the income from savings and bonds is equally prominent as consumer borrowing. The savings interest paid slows the USEconomy down in a powerful manner. However, consumer interest rates have not reduced much really, since borrowers are considered greater risks, the banks not so willing to lend. The entire wet blanket causes an attack on capital and its smother from rising costs. The wet blanket on the USEconomy is the grand robe of the banker royalty, purple in color from the de-oxygenated blood condition.


By promising QE until job growth and economic recovery, Bernanke has assured systemic failure. The USFed monetary policy is rendering harm to the USEconomy in a pervasive powerful systematic process, a death process, an irreversible pathogenesis. The widespread hedge practices against monetary inflation go toward commodities, lifting cost of everything. They hedge to protect their wealth from the official debasement process conducted in desperation by the USFed as central bank. The hedging is done globally. The entire sickening unfolding of events and powerful effects make for a tremendous blind spot to economists, since QE is a huge suppressant to USEconomy. The distortion to the entire pricing of assets is crippling, since cost of money is at the center.



Warning: the USGovt budget deficit will spiral out of control. No recovery is occurring. Both the ObamaCare tax and the Social Security tax hike are inflicting damage on the USEconomy. The constant competition from Asia with its lower wages, lower fringe benefits, lower regulatory burden, and lower taxes, together imposes a tremendous obstacle for the USEconomy. Thus no expansion. The recovery is a marketing myth and propaganda platform toward which the old fascist kingpins in the 1930 decade would offer praise. The sequestered federal spending cuts will reduce economic activity, not restore fiscal health. The USGovt deficits will grow much larger, toward $1.5 trillion again in the next year or two. The morons at the helm and in the dead economic brain trust will put to work their vacant wisdom with austerity and thus introduce the poison pills. The United States faces a perfect storm.

The USFed monetary policy suppresses economic activity by raising the cost structure at a time when almost no businesses are expanding. The untold fact is that the hyper monetary inflation policy firmly in place, pledged to remain in place for another three years, will assure an attack on capital, an attack on business, with a certain rise in business segment shutdowns, with the corresponding job cuts. The nation has turned hopelessly stupid on all matters economic and financial, having totally lost its way. America has no concept or comprehension of capitalism or capital formation. The wretched report card will come in the form of a quickly rising USGovt deficit, which will be covered by the USFed central bank printing press that bears a Weimar nameplate. As the USDollar becomes isolated, so will the USFed in its no so hidden inflation operation to buy USGovt debt that nobody wants. Its bond principal value is zero, yet it sports a lofty high value in the marketplace of horrors. It is Third World toxic paper.

The USFed will become the near total buyer of the toxic USTreasury Bonds issued. Foreigners will not simply avoid the purchase of USTBonds. They will continue to react to the staggering deadly debasement to the USDollar, which undercuts the value of their savings stored in FOREX reserves. They will actively abandon the USTBonds, to find a dumping ground for them, like the vast new BRICS Development Fund, which will morph into a Gold Trade Central Bank. Nations of the world are forming the USDollar alternative on the trade side, not the banking and currency side. Once again like a breath of fresh air, banking will follow trade, a concept that not 2% of American economists understand, or wish to understand. The US Economists are equally culpable for the systemic failure, working side by side with the US bankers.


The Jackass will go so far as to urge the stripping of the PhD in Economics by one Benjamin Shalom Bernanke. In the last four years, he has proved vividly how his doctoral dissertation is incorrect. A flood of liquidity does not in any way remedy insolvency, as his thesis claimed. He is the principal architect of revisionist history concerning the Great Depression, used as qualification for succeeding Greenpasm. Without the Gold Standard in place, the United States would never have climbed out of the powerful depression 80 years ago. In the present day, since no Gold Standard is in place, the United States will face systemic failure, USGovt debt restructure (default), and severe ignominy. By the way, in all my years, only one time was seen a stripped doctoral degree. A college professor had his Statistics PhD removed, when a solid young mathematical statistician proved his thesis as false. Poor Archie! Bernanke provides the discredited proof by himself, with the principal victim being the US banking system. It is sclerotic, zombie, and hollowed out. The USEconomy's industry has been hollowed out since the 1980 decade, starting with Intel relocating to Japan and the Pacific Rim. The crowning blow was the dispatch of US industry to China, replete with Wall Street betrayals that followed their ransacking of Fort Knox. It is utterly amazing that 95% of American citizens do not care about the empty vaults in Fort Knox. Actually they are not empty, since they contain nerve gas in a great repository. Note the irony!


The USFed stated publicly in early 2009 their desire to pursue an Exit Strategy. The Jackass on repeated occasions over three years ago refuted and contradicted their claimed path on monetary policy restoration to normalcy. My belief, borne out as the case, was that the USFed had painted itself into a corner, could not raise interest rates, and would be forced instead to monetize the USGovt debt, with no path offered toward normalcy. That is precisely what happened. Pardon my lack of deep formal training in Economics, since my wish was not to be encumbered by the limitations of economics credentials. The economist corps is little more than a gaggle of Wall Street harlots and USGovt apologists that operate the propaganda to produce constantly deceptive messages. There is an Exit Strategy, but it is evident in the East. The Eastern nations are assembling a Eurasian Trade Zone and a BRICS central bank (aka Development Fund) with which they will exit the USDollar global reserve standard. In doing so, they will not require to fill their banking systems any longer with toxic USTBonds. The end of the USDollar as global reserve is near, visible in tangible form.

The propaganda has never run so thick, whether on the sluggish economic recovery, the benefits of new national health care, the housing market rebound, or the threat of terrorism. The majority of Amerkans gobble the Goebbels garbled spew from the bank nazis. One is left to wonder if the US systemic breakdown and failure will be blamed on Iran or North Korea. Maybe blame will befall the Arabs, who are close to abandoning the Petro-Dollar defacto standard. When they accept Euros, Pounds, Yen, and Francs for crude oil, the game is over the lights turned off on the USDollar reign of terror. Some climax events are very near, warned by Cyprus, set up by legislation, created by a gradual methodical isolation of the USDollar for its rejection as global reserve currency. Most Americans regard the USDollar as their currency, with zero knowledge or awareness of its function as a global reserve, the staple item within myriad banking systems across the world. For their error, they will face catastrophic losses to their life savings, unless they have invested in Gold & Silver bars and coins.


Some important messages should be heard. At the macro level, the entire financial system has become hopelessly sclerotic. The chronic Western financial crisis is more like a monetary war for elites to retain control of the production of money, the setting of rules, the process of confiscation, while they desperately attempt to preserve the fiat currency system with the USDollar as its flagship. That ship should fly the Skull & Crossbones as its flag. The refusal to liquidate the big insolvent banks stands as the quintessential message of corruption and control to execute the Fascist Business Model, which will result in systemic failure. With MF-Global and Robo Foreclosure Fraud and Cyprus Bank Taxes, layered atop the QE to Infinity, the fascist bankers are finally unmasked. They were never defeated in the 1940 decade. They migrated to the banks in Switzerland, London, and New York. The big banks no longer serve as capital formation engines. They no longer serve as business investment partners. They are pure predators. At a micro level, they are giant hollow reeds ripe with bond fraud, phony accounting, insider trading, replete with financial market parasite functions. They are not credit engines for commerce, but rather carry trade platforms and money laundering centers.

If the big US banks are not liquidated, absolutely no solution will come, and systemic failure will eventually occur. They are not too big to fail institutions. They are not systemically important financial institutions. They are the criminal syndicate foundation headquarters. If they are liquidated, the nation will enter a USGovt debt default. It is that simple. Our compromised leadership crew will impose fascist police state rather than liquidate the big banks where power center lies. Tainted money and bribery with threats has changed the nation at the top, the Congress a den of thieves and panderers. As the Italian Mafia prefers to say, the fish rots from the head down. Thus the need for removing guns, as the great USDollar devaluation comes and price shock will arrive on the household doorsteps in the form of much higher food prices (bread, milk, eggs) and much higher energy prices (gasoline, electricity).

Since the big US banks will never be liquidated, instead the nation will be liquidated. Its wealth will be subjected to a vanishing act. The nation's households suffered the loss of home equity, under exploit by the banking sector. Their bond fraud and contract fraud and a plethora of other criminal activity have been converted into mere business costs, under the tarp of the Fascist Business Model. The nation's pensioners have suffered the loss of income, no longer given a justified yield on their life savings. The futures contract players have been given fair warning by the MF-Global private account thefts, with an echo from the Peregrine Financial Group matching private account thefts. The recent bankruptcy law revision and financial regulatory bill revision have given clear warning in their many insidious provisions. Next comes the vanishing of private bank accounts, private pension accounts, private stock accounts, private mutual fund accounts, and private bank safety deposit boxes. The loss will not be total in most cases. The sleepy dopey bombarded nation is about to receive a wake-up call, since all past calls have resulted in the doze button hit, a drowsy pause for a few more months (years) of sleep.


A sinister vile malicious motive is coming into view, hidden for years within legislation, pushed to the fore by newer regulatory legislation. What is coming is a magnificent vanishing act of wealth itself, since the Western economic system has suffered diverse Ponzi symptoms for 20 to 30 years. Its financial foundation has been built on money fashioned from debt. A major debt downgrade on private savings, brokerage accounts, pension funds, and more is scheduled, since money is disguised debt. Worse, a pernicious attack is set to be waged on private wealth. The first volley was to strip citizens of their home equity, that prized homestead nest egg of wealth. The second volley has been more hidden, the removal of wealth held in the stock market. It is held up in value by hyper monetary inflation. Its purchase power in value diminishes by the month during the currency debasement process.

The unmasked evil motive has been to buy time. The real purpose of the Zero Percent Interest Policy, complete with its monetary straitjacket in Global QE to Infinity, is to bail out the elite bankers and to delay the systemic breakdown. The only dominant buyer in USTreasury Bonds is the US Federal Reserve, the army of foreign creditors having departed the room long ago when QE2 was launched. The ZIRP & QE morgue toe tags are designed a) to provide a high volume buyer of toxic mortgage bond and related fraud-ridden instruments, b) to keep USGovt borrowing costs down, thus preventing an enormous rise in budget deficits, c) to enable Wall Street speculation in financial markets, with zero cost money, d) to create the USTBond carry trade arena for the big banks, investing in long-term USTBonds, and e) to finance the wars of aggression that attempt to secure supply, while enabling contract fraud. But the ugliest attack on private wealth is left for last, which will shock the nation and introduce the unmistakable police state. It will herald entry to the de-Industrialized Third World.


The law has come front and center into view. Its features, reinforced by the Financial Regulatory Bill (aka Dodd-Frank Law) have never been more important than now. The individual side to the reformed bankruptcy provisions received the most attention, including for the Jackass. It removed the Chapter 7 wipeout of debts in offset by assets, done formerly in sweeping step. Once done, the deck cleared, fresh air abounded, the path made new. However, it made standard Chapter 13, in restructure of debt with respect to income, establishing a lifetime of tax obligations. But the corporate side is far more pernicious, learned only two years ago by the Jackass. It subordinated all bank assets under the derivatives owned by financial firms. The subordinated structure still exists, like senior & junior bond holders, savings accounts, certificates of deposit, mutual funds under management, money market funds, but these all lie subordinated UNDER the vast derivatives, the unregulated contracts. The updates to these laws are clear as a cloudless day in bright sunshine. The United States and United Kingdom, even Canada, have enacted laws that serve as guidelines in the preservation of the largest banks, by forcing the vanishing of private accounts. Better described, the laws offer guidelines on the death of the big banks, since they will be washed clean of assets, including those of private citizens. The insidious Bail-In Laws will catch attention. Their invocation in Cyprus was the alarm sounded. Not many Americans heard it clearly, still distracted, still dopey, still gullible, still incredulous. It could never happen here?!?!


Protected are the Systemically Important Financial Institutions (SIMI), the pillars of corruption, the control towers for the fascist state. The USGovt will protect the SIMI institutions, as they interpret, not as the people interpret. The unmistakable conclusion is that a debt slave state is being created, where the people are to be stripped of wealth. Maybe it was never real anyway, since the money is debt in disguise, not bonafide money. The private individual assets are to be lost to dark room assets with no regulatory oversight, in a grand titration process of derivative acid (H+) acting against private wealth alkali (OH-) to produce fresh water held for the elite to drink. Here is where the vicious side is blatant and in your face. The declared losses to private assets will be at the full discretion of the syndicate bosses. The size of derivative exposure is 1000 times greater than private assets. Therefore, the law appears to be a device to impose national poverty via eradicated wealth, since the private wealth in no remote manner is of sufficient magnitude to restore the banks to health. Thus the interpreted debt slave state within the fascist police state.


The FDIC has been transformed, not to insure depositor wealth, but to remove it, to confiscate it, to tax it, and to make it vanish. Protection comes from removal of personal assets from the financial and banking system altogether. It would be best to use the banking system in a utility function, for cash flow purposes, maintenance of bill payment, the account balances kept to a minimum in case of confiscation suddenly during unscheduled bank holiday. Ideal to invest in Gold & Silver bars & coins, kept outside banks, preferably outside USA. A powerful wave of devastation comes.


The Jackass forecast of 2009 and 2010 and 2011 and 2012 is coming to pass. The divergence between the paper Gold price dominated by futures contracts, and the physical Gold price dominated by purchase and delivery of the metal bars, has grown wide and will grow wider. While many are heard in the hue & cry of the declined supposed Gold price, it is not the Gold price. It is the corrupted paper Gold price that the deceived masses focus too much on. The professionals in the Gold market who actually act on contracts for large volume deliveries are noticing the strains on supply, which is fast disappearing. The true Gold price is much higher than advertised by the corrupted networks devoted to the financial syndicate in charge. The drainage of the COMEX and LBMA is hastened, made quick by the discount offered. The Boyz are draining their own blood on stage in full view, but the majority within the gold community are lamenting the falling corrupted price. What irony! The Boyz in New York and London are committing bank suicide on the global stage, yet the investor crowd cannot see. When the big US and London bank vaults are empty of gold bullion, the game will suddenly change. The power will shift to the East. The USDollar will be devalued, buried, replaced. The Gold Standard will rise in the East like the sun in a new dawn, but a standard based in trade settlement that will turn the West upside down.

The Shanghai Metals Exchange sports a significant useful practical Gold price spread, higher than the posted London and New York price. It has opened the door for arbitrage for the last two months or more. My firm suspicion is that the BRICS Development Fund will convert USTreasury Bonds by means of the Shanghai window, thus draining the London centers of their gold bullion. As of 8am today in London, the Shanghai Gold price had a 1591 handle, compared to a 1555 handle in London. That constitutes a $36/oz spread, very feasible for arb trades and the associated drainage of London metal. The professionals are having a field day, exploiting the artificially offered Gold price achieved from yet more naked gold futures contract shorting. The depletion of the SPDR Gold Trust (GLD shares) continues at a frenetic pace. The big US banks are shorting the GLD shares, removing its gold bar inventory overnight, and selling into the market. Or else they are covering their similar sales obligations in like manner. The key to the divergence is that as the phony paper Gold price declines more and more, it signals the demise of the COMEX itself, a shutdown. The event cannot happen without the price divergence, the fast falling paper Gold price versus the stable rising physical Gold price. When the COMEX goes dark, from depleted inventory, from vacated client players, the Gold price will actually not be known for some time. Then later, it will be on display from various key centers across the globe, including Shanghai where naked futures contract activity is not sponsored by the state.

The Jackass rejoices at the utter desperation in pushing down the paper Gold price. It signals a fierce unspeakable urgency to fight the inevitable collapse underway. The rumors are thick of a grand systemic event that arrives soon, very soon. One will recognize it by the multitude of citizens with mouths hung open in disbelief. The bank nazis will not see their massive pillars, their syndicate hives be ruined without stripping the US nation of its private wealth. The US is due for a Cyprus-like event soon, very soon. The remaining freedom afforded can be exercised in purchasing Gold & Silver bars and coins, after removing funds from the financial system governed and controlled and denominated by the USDollar. Time is running out. Signals are deafening as in screeching loud shrill.


From subscribers and readers:

At least 30 recently on correct forecasts regarding the bailout parade, numerous nationalization deals such as for Fannie Mae and the grand Mortgage Rescue.

"I have been a Hat Trick subscriber since 2005. I consider your publication beyond excellent. It is indispensable to understanding the mega-trends of the past such as the housing bust, bank insolvency, monstrous US Government $trillion debt, the Fed's QE to infinity with no feasible exit strategy, and more. Essentially, your analysis exposes and documents the massive corruption ruining the future of young and old alike in America. A simple thank you is really not sufficient to express my deep appreciation of the time and effort you put into the Hat Trick Letters."

Posted by walterda at 3:58 PM EDT

Jessica Linda Tuttle Gary Betty

Mode of Action: Arylheterocycles block the passage of chlorine through cells in the insect's nervous system and this results in paralysis.

All teens need to be taught by their parents, teachers, pastors and mentors that their sexual desires are not their identity, nor do they need to be controlled by them. Who we are is so much greater than our appetites, sexual or otherwise. And all of us can learn, by God’s grace, to master and subdue our desires.


So, the Boy Scouts of America have decided to welcome openly homosexual scouts, something the Girl Scouts have done for years. What’s the big deal? Why would we want scouting to discriminate against teenage boys based on their sexual orientation? This is no different than accepting racial minorities or physically challenged children, right? At least, that’s the politically correct line we’re all supposed to repeat.

The problem is that reality is not quite so politically correct.

I’m now going to risk being labeled a hateful bigot because I cannot help but think about the practical realities of the new world the gay rights movement has given us. I want to make a disclaimer first: No one should hate anyone ever. No one should call other people names, bully them, ridicule them, intimidate them, etc. That is wrong. Period. Christians who bully and intimidate others- whether they are homosexuals or Muslims, atheists or Wiccans- are dishonoring Christ and disobeying Scripture, which commands us to love our neighbors as ourselves.

But let’s think about reality: Boy Scout troops now have to welcome openly homosexual scouts as members. This means that openly homosexual scouts will be going on camping trips with other boys, sleeping in the same tents, showering together, etc. How is this fundamentally different from allowing a boy to go on a Girl Scout camping trip?

I can already hear people screaming at me: “You’re being absurd! That’s so narrow-minded! Homosexuals are not perverts!” Here’s what I know from years of experience: Teenagers with hormones are teenagers with hormones, homosexual or heterosexual.

Imagine the uproar if an overnight high school field trip allowed boys and girls to sleep together in the same hotel room. Imagine the uproar if high schools started allowing the boys and girls basketball teams to share the same locker room and shower and dress together. Heads would roll and rightly so. It would be insane.

Now someone might object and say, “Just because the homosexual scout may be sexually attracted to some of the other males in the troop doesn’t mean they’re going to be attracted to him. So it is different.” Maybe, as long as the scout troop has only one homosexual member, but what about when it has two or three or four? Would they be allowed to share the same tent? Again, I’m not accusing them of being any more sexually promiscuous than any other teen, but if we wouldn’t think of allowing a heterosexual male and female scout to share a tent on a camping trip, then why would we allow two homosexual males to share a tent?

I was a Boy Scout. I played team sports in high school. I was a high school teacher. I have been and am going to soon be again a school administrator. I have been a church youth group leader on retreats. From my personal experience, these issues are real and practical questions, not made-up straw-men hypotheticals.

Then, another question: What about all of the evangelical churches that host Boy Scout troops? Several years ago, when the Boy Scouts stood by their decision to ban homosexual scout leaders, many churches opened their doors to scout troops who were dislodged from public spaces. Now what are those churches to do? Can they continue, in good conscience, to sponsor Boy Scout troops, sending off openly homosexual scouts on overnight camping trips together?

Again, I am not trying to be hateful, but I am trying to think through practical realities. This new world of openly homosexual teens is complicated and the problems are real.

What would my solution be? I’m not sure we have any good options open to us, given the realities of our society. We cannot tell homosexual teens that they are ineligible for team sports or gym class. If they insist on being “open” about their sexuality, it creates problems for everyone, including them.

Personally, I think all teens should be sexually abstinent and should be encouraged to discuss their sexual desires and struggles privately with their parents, pastor and perhaps a counselor. As teens struggle with desires they do not understand and cannot control (all teens do, not just homosexual-oriented teens), they should be encouraged to keep these struggles private, between them and those they can trust. I’m not saying they should keep everything bottled up inside and tell no one. Parents have a responsibility to so love their children and provide them with security that their children will feel comfortable opening up about their struggles and desires. But these do not need to be broadcast to the world.

I also think that all teens need to be taught by their parents, teachers, pastors and mentors that their sexual desires are not their identity, nor do they need to be controlled by them. Who we are is so much greater than our appetites, sexual or otherwise. And all of us can learn, by God’s grace, to master and subdue our desires.

I know those are radical thoughts in our time, so “backward” and “hateful.” I suppose I should be ashamed of myself for wanting teens to rise above their sexual desires and see themselves not as fundamentally homosexual or heterosexual but as created in God’s image and made for a life of loving fellowship with Him. Still, my heart breaks for the teens who have been sold a lie – that if they feel same-gender attraction, then these feelings define who they are and must be allowed to control their lives. God wants so much more for all of us.

Jason A. Van Bemmel is a Teaching Elder in the Presbyterian Church in America and is Pastor of Faith PCA in Cheraw, S.C. This article appeared on his blog Ponderings of a Pilgrim Pastor and is used with permission.

Posted by walterda at 3:03 PM EDT

ucsb edu ^ | orig 1999 | UCSB office of public affairs 
Posted on August 23, 2012 8:27:54 PM CDT by doug from upland



November 18, 1999

(Santa Barbara, Calif.) Next time you step on a glob of tar on a beach in Santa Barbara County, you can thank the oil companies that it isn't a bigger glob.

The same is true around the world, on other beaches where off-shore oil drilling occurs, say scientists, although Santa Barbara's oil seeps are thought to be among the leakiest.

Natural seepage of hydrocarbons from the ocean floor in the northern Santa Barbara Channel has been significantly reduced by oil production, according to two recently published peer-reviewed articles, one in November's Geology Magazine, the other in the Journal of Geophysical Research - Oceans.

The Santa Barbara Channel provides an excellent natural laboratory, as it is among the areas with the highest levels of seepage in the world, said co-author Bruce P. Luyendyk, professor and chair of the Department of Geological Sciences at the University of California, Santa Barbara.

The studies were not funded by oil companies, but rather by the University of California Energy Institute and the U.S. Minerals Management Service, states Luyendyk, responding to the fact that the results favor off-shore oil production and are opposed by some environmentalists.

"We've done a good piece of science," said Luyendyk. "We've developed a good understanding of a natural process. It's all public data; it's all straightforward. If I thought the study was compromised I wouldn't be involved in it."

Most of the seepage is methane, a potent greenhouse gas which escapes into the atmosphere, said Luyendyk. About 10 percent of the seepage is composed of "higher hydrocarbons," or reactive organic gases which interact with tailpipe emissions and sunlight, creating air pollution.

The researchers state that the production rate of these naturally-occurring reactive organic gases is equal to twice the emission rate from all the on-road vehicle traffic in Santa Barbara County in 1990.

According to the articles, studies of the area around Platform Holly showed a 50 percent decrease in natural seepage over 22 years. The researchers show that as the oil was pumped out the reservoir, pressure that drives the seepage dropped.

"If the decrease in natural seepage found near Platform Holly is representative of the effect of oil production on seepage worldwide, then this has the potential to significantly alter global oil and gas seepage in the future," state the researchers in the article "The World's Most Spectacular Marine Hydrocarbon Seeps: Quantification of Emissions " in the Sept. 14 issue of the Journal of Geological Research - Oceans.

They continue, "For example if the 50 percent reduction in natural seepage rate that occurred around Platform Holly also occurred due to future oil production from the oil field beneath the La Goleta seep, this would result in a reduction in nonmethane hydrocarbon emission rates equivalent to removing half of the on-road vehicle traffic from Santa Barbara County. In addition, a 50 percent reduction in seepage from the La Goleta seep would remove about 25 barrels of oil per day from the sea surface, which in turn would result in a 15 percent reduction in the amount of tar found on Santa Barbara beaches."

They conclude by saying that the rate of increase of global methane atmospheric concentrations has been declining for the past 20 years, and that a "worldwide decrease in natural hydrocarbon seepage related to onshore and offshore oil production may be causing a global reduction in natural methane emission rates."

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I arrived on campus in 1966. As I sat on the beach studying for a psych exam, I noticed a great deal of tar on the beach. The drilling rigs off the coast did not bother the view. They were far enough away to look like small ships. Tom McClintock has discussed this in making his arguments to be able to drill and get our energy. That is the environmentally sound position.
As a side note, some thought I was a little nuts to put a big sign in my window on the 7th floor of San Miguel Hall == "BOMB PEKING". I guess I was ahead of my time. 

1 posted on August 23, 2012 8:28:02 PM CDT by doug from upland
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To: doug from upland
I had read another study, a few years ago, that had estimated the west coast seepage at about 8-88 Exxon Valdez’s per year.

Yes, drill.

Posted by walterda at 11:00 AM EDT

Cutting Government Spending Is So Hard to Do
Economics / Government Spending
Aug 09, 2010 - 10:06 AM

Grant M. Nülle writes: In recent months, fiscal austerity among governments on all levels has come to the political fore, albeit for different reasons.

In some cases, such as Greece, belt-tightening measures were essential to avert a sovereign-debt crisis. The Greek government enacted significant deficit-reduction solutions in order to receive monetary aid from the International Monetary Fund and European Union. In so doing, it continued the de facto monetization of Greek debt by the European Central Bank.


Other governments are finding fiscal consolidation necessary to bridge the gap between paltry tax takes and ballooning expenditures — like those of G8 nations Britain, Japan, and Germany, and most US states, which (unlike the federal government) must at least nominally "balance" their budgets on an annual basis.[1]

In Washington, the backlash against further deficit spending is ephemeral; it has only become fashionable, conveniently, just prior to a midterm election. Members of Congress recently balked at the price of a "Tax Extenders" bill that would continue certain tax-and-spend provisions from the 2009 stimulus legislation, as though doing so would exonerate them from their damning $1.4 trillion deficit.

Ongoing deficit-reduction solutions inherently entail two policy options: (1) permanent spending reductions or (2) permanent increases in taxes. The former reduces the state's claim on the material results of private economic activity — the wellspring of production, consumption, and an increasing standard of living. The latter confiscates private property for forced consumption spending, distorts economic decisions, and retards capital accumulation. Consequently, the former method of deficit reduction is by far economically preferable to the latter.

Nevertheless, cutting government spending is a daunting undertaking. Public reaction to proposed spending reductions is typically negative, emotional, and severe. One can expect a backlash that at a minimum includes media commentary and reports bemoaning the supposed dire economic consequences and job losses arising from reductions in government spending.[2] It might also include attempts by special-interest groups (SIGs) imperiled by potential cuts to sway public opinion in their favor. The backlash could even include protests on the streets and at the capitol. In some cases protests turn violent, prompting the destruction of private property or the tragic loss of life, as was the case of the three bank employees killed in Athens.

The purpose of this article is to identify the principal factors that make it so difficult to effectuate reductions in the state's seizure and consumption of the fruits of private enterprise. Combining the perceptive writings and analytical tools of the Austrian School and my experience as a fiscal- and economic-policy staffer on the legislative level, I have arrived at several conclusions. While the conclusions are by no means exhaustive, they are as applicable on the local level as they are on the federal level — the only difference is in the scope of each government or policymaker's reach.

Voting and Special Interests
Every dime of government spending pleases some in-built constituency. Once legislators give money away (that is, spend tax monies), it is much harder subsequently to take the spending back.

Whether it is public employees, government agencies, trade unions (teachers, fire, police, etc.), pensioners, or particular businesses and industries benefitting from government largesse, each constituency or special interest has its sacred cows of government spending. In times of plenty — such as cheap-money-induced economic booms — when the government's tax take is bountiful, each constituency fights for additional appropriations to be directed to their favored cause, whether it is new spending programs, special tax credits for social-welfare causes, or pseudo-economic purposes. In times of dire fiscal conditions, each constituency fights vehemently to oppose a loss of their share of seized private property.

This difficulty of reducing government spending is aggravated by the boom-and-bust cycle itself. In times of plenty, it is easy for politicians (who are spending someone else's money anyway) to budget new, ongoing spending programs lauded by the special interests — on top of what are clearly extraordinary and one-time boosts in tax take.[3] When the bust occurs and taxes dry up, not only do legislators have to bring ongoing spending into alignment with ongoing tax revenue, but they must also undo the extraordinary additions to spending that were approved during the boom — with the attendant fiscal pain and inevitable public backlash.

The inherent significance of in-built constituencies is the creation of what economists call a "collective action problem."[4] On the one hand are constituencies that are small relative to the overall population but disproportionately impacted by increases or reductions to government spending. On the other hand is the general public, which is large, disparate, and individually loses or gains relatively little when government spending is provided for or taken away from those constituencies.[5] Consequently, recipients of government spending will organize and fight vigorously to protect their special interests, while it makes little difference to any individual member of the general public to oppose government spending (e.g., writing to his or her representative to complain) because the individual cost is little relative to that which is accrued by the in-built constituencies.

Constituencies that stand to gain and lose acutely from increases and reductions in government spending mobilize politically to wield significant influence over the political process.

Again, whether they are government employees, unions, subsidized industries, or government contractors, the in-built constituencies establish political organizations and associations to influence the appropriations process. These special-interest groups typically perform or fund some or all of the following functions: direct government lobbying, politically motivated policy research, media-and-public-relations activities, and campaign financing of like-minded candidates to protect their special interests.

"Constituencies that stand to gain and lose acutely from increases and reductions in government spending mobilize politically to wield significant influence over the political process."
SIGs diligently work to identify, vet, financially support, help elect, and ultimately work with and lobby like-minded politicians once they are in office. Prior to elections, SIGs often distribute comprehensive questionnaires, conduct lengthy interviews, and perform intense evaluations of both aspiring office holders and incumbents to find politicians willing to support their preferred policy positions.

Candidates meeting SIG "purity tests" enjoy political endorsements and accompanying campaign monies.[6] Throughout the legislative cycle, SIGs monitor office-holders' voting records, public comments, and policy stances to determine whether reelection support is merited or not.

Once elected, politicians find they have a number of differing "constituencies." They are accountable to their party, the legislative district they represent, their base voters who actually supported them at the polls, and the SIGs that endorsed and funded their campaigns. Now in office, the candidates are dealing with the competing priorities of all of those constituencies; however, the constituents they will be dealing with most on a day-to-day basis are those very SIGs that helped get them to office.

SIGs in turn ask elected officials to sponsor or support special interest legislation developed and drafted by the SIGs and oppose legislation threatening SIG-supported appropriations and public policies.

The legislative system is inherently a labyrinth of trade-offs, compromises, and deals, resulting in opaque and contradictory outcomes in public policy.

In a bicameral legislative system, the passage of bills requires majority support in both legislative bodies and an executive signature. For example, in a bicameral body consisting of 60 representatives, 30 senators, and one executive, the passage of a bill requires a sponsoring legislator to collect 31, 16, and one vote, respectively. Unless the bill is as innocuous as a resolution recognizing January as the first month of the calendar year, legislators face a labyrinth of challenges to get their proposals through the entire process.

Generally in the United States both legislative houses are divided between two principal parties separated in numbers by slim majorities. Politicians hailing from a wide variety of backgrounds, who possess diverse personalities and interests, establish, adopt, amend, and repeal laws in policy areas as distinctive and complex as education, health, environment, taxation, appropriations, economic development, industry regulation, and public safety. When one takes into account the difficulty of securing majority votes, heavy SIG involvement, bills spanning several different spheres of public policy, it is easy to see how the system engenders an environment rife for trade-offs, compromises, and oftentimes curious outcomes from a policy perspective.

Any bill — for example, one that originates in the House of Representatives — must make it through assigned committees, house-floor debates and votes, go to the senate for the same vetting, and ultimately be considered by the executive. Each step in the process entails public scrutiny, serious opposition, negotiations, and trade-offs, as there will be winning and losing constituencies with any piece of legislation.

Constituencies (particularly the SIGs), legislators, and the executive will actively work to try to kill bills, freeze them at a certain stage of the legislative process, or muster the votes necessary to amend bills beyond recognition. At each stage of the process, constituencies and legislators will demand compensation from one another — for example, votes on each other's favorite bills, or an agreement to kill someone else's bill — a phenomenon commonly known as "log rolling." Taking bills hostage — that is, holding bills in committee, or keeping them off the calendar for a floor vote, a privilege of legislative leadership and committee chairmanships — is common to extract concessions elsewhere.

Thus, it is little wonder there are earmarks and log rolling in the political process. No legislator is going to get something for nothing. SIGs will call in political favors, make trouble for legislators and the executive in the media, or find other leverage points (like campaign donations) to influence the fate of certain bills. What one gets in the legislative system is accomplished through negotiations, trade-offs, and backroom deals, resulting in a bevy of legislation that is often contradictory, convoluted, or illogical.[7]

Budget votes endure this entire process. Legislators buy votes, hold each other's bills hostage, and trade off policies to get a budget passed. Budget cuts can only elevate the difficulty and attendant rancor. Likening legislative politics to making sausage does not do the process justice and no mainstream textbook or politically sanitized public school classroom adequately describes this process.

Voters are generally overburdened, under- or misinformed (by political spin and the media), and apathetic.

As Thomas Di Lorenzo points out,

Modern government is much too large for any citizen to possess knowledge about anything other than a miniscule percentage of its activities. The average citizen is "rationally ignorant": he has little incentive to become informed about the activities of government, for he spends most of his time earning a living, educating himself, raising his family, etc. To make matters worse, the state, its media lapdogs, and its court intellectuals comprise a vast propaganda apparatus designed to confuse the voters about what the state is really up to.

This problem is compounded by the fact that government has grown so large that it is involved in every aspect of life. It is sometimes unfathomable to realize modern governments possess a claim on one's wages (Social Security, Medicare, and payroll and withholding taxes, income (progressive income taxes), property (property taxes), spending (sales taxes and VATs) — and this is not to mention the destruction of savings and distortion of prices through inflation. With no prospect of relieving any of these profound burdens, it is little wonder the average citizen is largely apathetic and alienated by modern government.

Taking the notion of "rational ignorance" and the "collective action problem" described earlier in this article further, one understands why elections (democracy's supposed proof that government outcomes are the will of the people) typically have low levels of participation, particularly in local and nonpresidential-year elections. It is the base of voters with the greatest amount of time, interest, or direct personal and financial stake (unions, pensioners, government employees, government contractors) who wield the greatest amount of voting clout in the political system.

"With no prospect of relieving any of these profound tax burdens, it is little wonder the average citizen is largely apathetic and alienated by modern government."
In general, citizens, particularly those voters who tend to actively participate in the political process, want government spending directed toward their favorite programs, but are reluctant to pay for it. Typically they conveniently advocate policies to force someone else — be it "greedy corporations," small businesses, the wealthy, or future generations — to pay for what they want. Accordingly, every voter has his or her own opinions on what spending constitutes the highest priority, as well as how and by whom it should be paid for.

The bottom line is that people like to get goods and services but hate to pay for them.

Cuts and Calculation
The economic value of government services cannot be calculated on a profit-and-loss basis. Government-spending cuts, like the spending itself, are arbitrary and irrational. This uniquely Austrian insight is the most critical facet of understanding why it is so difficult to reduce government spending. Government cannot calculate: it does not operate on the same basis as private enterprise.[8]

Businesses exist to serve customers. By bidding for factors of production (labor, land, and capital) entrepreneurs incur costs in making a final product for sale to customers, with the expectation of earning a surplus of yield over cost: profit.

In the free-enterprise system, customers are sovereign. Their ever-shifting tastes and demands determine what goods and services should be produced, in what quality, and whether each and every business earns or does not earn a profit. Consumers are integral in constantly shaping the quality, quantity, and types of goods and services produced in the market economy and the attendant utilization and remuneration of the various factors of production.

At the heart of the capitalist system is the reality that all business planning and decision making must be based on market prices. Prices are used to determine whether various configurations of the factors of production are available at prices low enough to yield a profit based on the expected prices customers are willing and able to pay for businesses' products.

It follows then that valuation of business performance can be made through the method of accounting. By accounting for the market prices paid for the business inputs (factors of production employed) and the market prices received for business outputs (products sold to customers), business managers may ascertain whether a profit or loss is being made. In particular, business managers can use this accounting information to identify which aspects of the business are yielding profits and which ones are not.

"At the heart of the capitalist system is the reality that all business planning and decision making must be based on market prices."
In some cases cuts in certain parts of the business may be justified; in other cases a redeployment of factors of production from one line of the business to another may be necessary to improve profitability. Calibrating business operations to minimize costs and maximize profit is the task of business managers and entrepreneurs.[9] The accounting ledger displaying profits and losses, based on market prices, allows business managers to make rational decisions about whether to cut spending, redeploy resources, or invest more capital in certain lines of production altogether.

Conversely, government does not operate by the rules of the marketplace. As the only organization in society — save criminal gangs — that parasitically thrives on plundering the fruits of others, its existence, purpose, and method of evaluation are distinctly different from business.

Government agencies do not operate on the basis of profit and loss; this method of calculation is inapplicable because government does not incur costs and receive revenues the same way a business does. Government operations are not funded through the sale of goods and services to customers; rather, monies are acquired through coercion — principally taxation — and then allocated to each agency through the Byzantine legislative process described earlier.

Regarding costs, government agencies' operations are confined to the lump-sum and dedicated line-item appropriations, regulations, and statutes meted out by legislators. The costs incurred to operate are based what is available on the market — e.g., the price of concrete for road construction — as well as approximations or imitations of market prices for inputs, such as wage rates for bureaucrats.[10]

Because there is no link between the "revenue" acquired by government agencies and the costs these entities incur to perform public functions, there is no way of utilizing the yardstick of profitability to evaluate whether agencies are performing a useful function.

As Ludwig von Mises succinctly puts it, "bureaucratic management is management of affairs which cannot be checked by economic calculation."[11]

Unlike the business manager of a private enterprise, bureaucrats and elected representatives have no means of rationally evaluating the value of any public service. This means that any cuts to that spending are intrinsically irrational — one simply lacks a reliable means of making a decision. Given this vacuum of objective assessment criteria, legislators, voters, SIGs — and really, anyone — may manufacture their own methods of justifying an increase or decrease to any dime of government spending, whether through persuasion, political pressure, or any other means available. Constituencies necessarily drive the appropriations process.

Economic calculation does not apply to government services; that is fundamentally why cutting spending is so hard to do.

What Does It All Mean?
Taken together, each of the factors above do much to explain why it is so difficult to reduce the scope of government through budget cuts. They also demonstrate the impossibility of calculating whether some government functions add economic value to the public, given government's inherent inability to operate according to profits and losses.

From the constituencies created by every dime of spending to the voters who tend to like government spending but hate to pay for it themselves, cutting budgets is extremely difficult, frustrating, and incremental. Given this reality, what do these impediments to fiscal austerity say about legislative politics and democracy itself?

"Because there is no link between the 'revenue' acquired by government agencies and the costs they incur, there is no way of utilizing the yardstick of profitability to evaluate whether agencies are performing a useful function."
As Hans Hermann-Hoppe adeptly describes in Democracy: The God That Failed, the democratic state is inherently a "public" monopoly. Unlike privately owned monopolies — for example, monarchies where the sovereign generally has an incentive to moderate expropriations of property to preserve the realm's present value for heirs — state officials in a democracy are mere caretakers who cannot privately enrich themselves from ownership or sale of government property.

Rather, a moral hazard and tragedy of the commons ensues as bureaucrats, politicians, and special interests may merely exercise use of government property while being a member of the government apparatus, precipitating a strong inducement to maximize current use of government property, irrespective of whether such activities entail dire consequences for taxpayers and the economy at large.

As concerns government finance, officials conduct the borrowing, spending, and taxation, and enjoy the resultant political plaudits from the constituencies that benefit from state largesse, while other private citizens defray the expenditures and debts through taxation or government-stoked money creation.

Hoppe also points out that democracy abolishes the distinction between rulers and ruled. And it assumes that any member of the political system may ascend to the upper echelons of governance. Given the state's indispensable need to steal for its subsistence and the nearly unfettered entry into the ranks of the ruling class, democracy renders it that much easier for politicians and their connected special interests to accelerate exactions from the public, as the gates remain open for any individual or faction to gain access to governmental powers and impose the same taxes, regulations, and direct spending themselves. As democracy has taken root in the United States and elsewhere, jostling between rival political factions has not been about how flaccid or robust the state should be, but rather about what direction the state should take as its scope expands.

The ability of elected politicians and entrenched bureaucrats to institutionalize and enforce systematic predation and redistribution of private property is an outcome of the democratic ethos itself. Indeed, the grand bargain of democracy is this: every individual within the system — voluntarily or not — cedes the inviolable title to his or her property for the ability to elect, participate in, or marshal a political movement that competes for the privilege of seizing and spending everyone else's money. It follows that individual responsibility and private property ownership are seriously impaired and denigrated. Furthermore, the government-instituted "law of the jungle" fosters base, innate human characteristics such as envy, self-preservation, and keenness for gratification.

As Frédéric Bastiat explains in The Law, self-preservation and self-development are universal instincts among men, as is the preference to do so with the minimum amount of pain and the maximum level of ease. Plunder then is favored over production, so long as the risks and inputs of confiscation are not as agonizing or as indomitable as the painstaking act of production and exchange. When given an opportunity to seize private property or stipulate regulations on an owner's use thereof, as democratic rule is wont to do, participants in the political system vie for the chance to apply the state's coercive arm in service of their supporters' ends.

Bastiat argues that the onset of universal plunder undermines the purpose of law, which in his view is the collective organization of the individual right to defend life, liberty, and property. The moment law is perverted to engineer ends contrary to individual liberty — e.g., enshrining the notion that individuals are entitled to a portion of each other's property absent voluntary agreement — morality is pitted against the adulterated law. Thus, moral chaos is the outcome of democratization, as one must either relinquish respect for the law or compromise moral sense.

It's little wonder that cutting government spending is hard to do.

[1] "Balanced" budgets are evaluated on a cash basis. Inflows of monies, whatever their source (e.g., borrowing, deferring payments to the next fiscal year, or one-time windfalls) must equal outflows. A more honest standard would be a structurally balanced budget requirement, which would mean ongoing inflows (taxes) equal ongoing expenditures.

[2] Such contentions assume that government spending and jobs are not merely derived from diversion of the private sector resources.

[3] Capital gains taxes and corporate income taxes are among the most sensitive to the economic cycle, producing extraordinary tax receipts during the boom and disappear during the bust as mal-investments financed by cheap credit are liquidated.

[4] See Mancur Olson, Jr., The Logic of Collective Action: Public Goods and the Theory of Groups (Harvard University Press, 1971).

[5] The costs of any particular spending program or special tax credit can be spread across the entire populace, conveniently diluting its direct financial impact on citizens.

[6] This observation does not imply that officeholders do not leverage their positions to extract campaign donations from SIGs, too. Specters like "tax reform" often are convenient mechanisms for politicians and their political parties to keep campaign coffers full. It is best to think of politicians, political parties, and the SIGs as symbiotic entities — or other, more-appropriately incestuous partners in legalized plunder.

[7] For example, although all taxes are objectionable, there is very little reason why a sales tax is applied to auto parts, but not the labor performed on the car at an auto repair shop. In most states, there are hundreds of exemptions of goods and services from sales taxes, as well as individual and corporate income tax credits. A few of these may have legitimate economic or public policy rationales, but most have scant public benefit or purpose, and were instead the creature of some political trade-off to satiate particular SIGs, legislators, or executives at some point in time.

[8] Although there are several superb Austrian writings on this subject, this article liberally utilizes Mises's treatment of this issue in Ludwig von Mises, Bureaucracy (New Haven: Yale University Press, 1946).

[9] This delicate balancing act to achieve profits gives rise to the business schools, MBA and other business education programs, and the innumerable business periodicals and self-help books published annually.

[10] The wage rates for bureaucrats are not based on the marginal productivity of wage-earners, as they are in the private sector. As there is no way of calculating the value of the service provided by government agencies, it follows that there is no way of determining the marginal productivity of each bureaucrat within the agencies.

[11] Ludwig von Mises, Bureaucracy.
Grant Nülle, MBA, is a former legislative staffer, finance director, and budget analyst with extensive experience in fiscal and economic policy. He is currently working on a PhD in mineral and energy economics in Colorado. Send him mail. See Grant M. Nülle's article archives. 

Posted by walterda at 3:43 AM EDT
Saturday, 25 May 2013

Ubiquity, Complexity Theory, and Sandpiles, How Change Happens
Stock-Markets / Financial Markets 2012
Aug 19, 2012 - 08:43 AM
By: John_Mauldin

"To trace something unknown back to something known is alleviating, soothing, gratifying and gives moreover a feeling of power. Danger, disquiet, anxiety attend the unknown – the first instinct is to eliminate these distressing states. First principle: any explanation is better than none… The cause-creating drive is thus conditioned and excited by the feeling of fear …"– Friedrich Nietzsche


"Any explanation is better than none." And the simpler, it seems, in the investment game, the better. "The markets went up because oil went down," we are told. Then the next day the opposite relationship occurs, and there is another reason for the movement of the markets. But we all intuitively know that things are far more complicated than that. As Nietzsche noted, dealing with the unknown can be disturbing, so we look for the simple explanation.

"Ah," we tell ourselves, "I know why that happened." With an explanation firmly in mind, we now feel we know something. And the behavioral psychologists note that this state actually releases chemicals in our brain that make us feel good. We literally become addicted to the simple explanation. The fact that what we "know" (the explanation for the unknowable) is irrelevant or even wrong is not important for the chemical release. And thus we look eagerly for reasons.

And that is also why some people get so angry when you challenge their beliefs. You are literally taking away the source of their good feeling, like drugs from a junkie or a boyfriend from a teenage girl.

Thus we reason that the NASDAQ bubble happened because of Greenspan. Or that it was a collective mania. Or any number of things. Just as the proverbial butterfly flapping its wings in the Amazon triggers a storm in Europe, we may conclude that a borrower in Las Vegas triggered the subprime crash.

Crazy? Maybe not. Today we will look at what complexity theory tells us about the reasons for phenomena as apparently diverse as earthquakes and the movement of markets. Then we’ll look at how New Zealand, Fed policy, gold, oil, and that lone investor in St. Louis are all tied together in a critical state. Of course, how critical and which state are the issues.

This is an encore appearance of the letter that is clearly the most popular one I have ever written, updated with a few thoughts from recent times (it was also part of a chapter in Endgame). Numerous reviewers have stated that this one letter should be read every year. As you read, or reread, I’ll be enjoying a week off. I have gone off to a secret location to relax and get away, all by my lonesome, which is something I have really not done for years. It will be interesting to see if I can adjust to all the peace and quiet, but so far I am coping quite well. And now, let’s think about ubiquity.

Ubiquity, Complexity Theory, and Sandpiles
We are going to start our explorations with excerpts from a very important book by Mark Buchanan, called Ubiquity: Why Catastrophes Happen. I HIGHLY recommend it to those of you who, like me, are trying to understand the complexity of the markets. Not directly about investing, although he touches on it, it is about chaos theory, complexity theory and critical states. It is written in a manner any layman can understand. There are no equations, just easy to grasp, well-written stories and analogies. www.amazom.com/ubiquity.

As kids, we all had the fun of going to the beach and playing in the sand. Remember taking your plastic buckets and making sand piles? Slowly pouring the sand into an ever bigger pile, until one side of the pile started an avalanche?

Imagine, Buchanan says, dropping one grain of sand after another onto a table. A pile soon develops. Eventually, just one grain starts an avalanche. Most of the time it is a small one, but sometimes it builds on itself and it seems like one whole side of the pile slides down to the bottom.

Well, in 1987 three physicists, named Per Bak, Chao Tang, and Kurt Weisenfeld began to play the sandpile game in their lab at Brookhaven National Laboratory in New York. Now, actually piling up one grain of sand at a time is a slow process, so they wrote a computer program to do it. Not as much fun, but a whole lot faster. Not that they really cared about sandpiles. They were more interested in what are called nonequilibrium systems.

They learned some interesting things. What is the typical size of an avalanche? After a huge number of tests with millions of grains of sand, they found that there is no typical number. "Some involved a single grain; others, ten, a hundred or a thousand. Still others were pile-wide cataclysms involving millions that brought nearly the whole mountain down. At any time, literally anything, it seemed, might be just about to occur."

The piles were indeed completely chaotic in their unpredictability. Now, let’s read this next paragraph from Buchanan slowly. It is important, as it creates a mental image that may help us understand the organization of the financial markets and the world economy. (emphasis mine)

"To find out why [such unpredictability] should show up in their sandpile game, Bak and colleagues next played a trick with their computer. Imagine peering down on the pile from above, and coloring it in according to its steepness. Where it is relatively flat and stable, color it green; where steep and, in avalanche terms, ‘ready to go,’ color it red. What do you see? They found that at the outset the pile looked mostly green, but that, as the pile grew, the green became infiltrated with ever more red. With more grains, the scattering of red danger spots grew until a dense skeleton of instability ran through the pile. Here then was a clue to its peculiar behavior: a grain falling on a red spot can, by domino-like action, cause sliding at other nearby red spots. If the red network was sparse, and all trouble spots were well isolated one from the other, then a single grain could have only limited repercussions. But when the red spots come to riddle the pile, the consequences of the next grain become fiendishly unpredictable. It might trigger only a few tumblings, or it might instead set off a cataclysmic chain reaction involving millions. The sandpile seemed to have configured itself into a hypersensitive and peculiarly unstable condition in which the next falling grain could trigger a response of any size whatsoever."

The Critical State
Something only a math nerd could love? Scientists refer to this as a critical state. The term critical state can mean the point at which water would go to ice or steam, or the moment that critical mass induces a nuclear reaction, etc. It is the point at which something triggers a change in the basic nature or character of the object or group. Thus, (and very casually for all you physicists) we refer to something being in a critical state (or use the term critical mass) when there is the opportunity for significant change.

"But to physicists, [the critical state] has always been seen as a kind of theoretical freak and sideshow, a devilishly unstable and unusual condition that arises only under the most exceptional circumstances [in highly controlled experiments]… In the sandpile game, however, a critical state seemed to arise naturally through the mindless sprinkling of grains."

Thus, they asked themselves, could this phenomenon show up elsewhere? In the earth’s crust triggering earthquakes, or as wholesale changes in an ecosystem – or as a stock market crash? "Could the special organization of the critical state explain why the world at large seems so susceptible to unpredictable upheavals?" Could it help us understand not just earthquakes, but why cartoons in a third rate paper in Denmark could cause world-wide riots?

Buchanan concludes in his opening chapter: "There are many subtleties and twists in the story … but the basic message, roughly speaking, is simple: The peculiar and exceptionally unstable organization of the critical state does indeed seem to be ubiquitous in our world. Researchers in the past few years have found its mathematical fingerprints in the workings of all the upheavals I’ve mentioned so far [earthquakes, eco-disasters, market crashes], as well as in the spreading of epidemics, the flaring of traffic jams, the patterns by which instructions trickle down from managers to workers in the office, and in many other things. At the heart of our story, then, lies the discovery that networks of things of all kinds – atoms, molecules, species, people, and even ideas – have a marked tendency to organize themselves along similar lines. On the basis of this insight, scientists are finally beginning to fathom what lies behind tumultuous events of all sorts, and to see patterns at work where they have never seen them before."

Now, let’s think about this for a moment. Going back to the sandpile game, you find that as you double the number of grains of sand involved in an avalanche, the probability of an avalanche becomes 2.14 times more likely. We find something similar in earthquakes. In terms of energy, the data indicate that earthquakes become four times less likely each time you double the energy they release. Mathematicians refer to this as a "power law," a special mathematical pattern that stands out in contrast to the overall complexity of the earthquake process.

Fingers of Instability
So what happens in our game? "…after the pile evolves into a critical state, many grains rest just on the verge of tumbling, and these grains link up into ‘fingers of instability’ of all possible lengths. While many are short, others slice through the pile from one end to the other. So the chain reaction triggered by a single grain might lead to an avalanche of any size whatsoever, depending on whether that grain fell on a short, intermediate or long finger of instability."

Now, we come to a critical point in our discussion of the critical state. Again, read this with the markets in mind (again, emphasis mine):

"In this simplified setting of the sandpile, the power law also points to something else: the surprising conclusion that even the greatest of events have no special or exceptional causes. After all, every avalanche large or small starts out the same way, when a single grain falls and makes the pile just slightly too steep at one point. What makes one avalanche much larger than another has nothing to do with its original cause, and nothing to do with some special situation in the pile just before it starts. Rather, it has to do with the perpetually unstable organization of the critical state, which makes it always possible for the next grain to trigger an avalanche of any size."

Now, let’s couple this idea with a few other concepts. First, Hyman Minsky (who should have been a Nobel laureate) points out that stability leads to instability. The more comfortable we get with a given condition or trend, the longer it will persist and then when the trend fails, the more dramatic the correction. The problem with long term macroeconomic stability is that it tends to produce unstable financial arrangements. If we believe that tomorrow and next year will be the same as last week and last year, we are more willing to add debt or postpone savings in favor of current consumption. Thus, says Minsky, the longer the period of stability, the higher the potential risk for even greater instability when market participants must change their behavior.

Relating this to our sandpile, the longer that a critical state builds up in an economy, or in other words, the more "fingers of instability" that are allowed to develop a connection to other fingers of instability, the greater the potential for a serious "avalanche."

We Are Managing Uncertainty
Or, maybe a series of smaller shocks lessens the long reach of the fingers of instability, giving a paradoxical rise to even more apparent stability. As the late Hunt Taylor wrote:

"Let us start with what we know. First, these markets look nothing like anything I’ve ever encountered before. Their stunning complexity, the staggering number of tradable instruments and their interconnectedness, the light-speed at which information moves, the degree to which the movement of one instrument triggers nonlinear reactions along chains of related derivatives, and the requisite level of mathematics necessary to price them speak to the reality that we are now sailing in uncharted waters….

"I’ve had 30-plus years of learning experiences in markets, all of which tell me that technology and telecommunications will not do away with human greed and ignorance. I think we will drive the car faster and faster until something bad happens. And I think it will come, like a comet, from that part of the night sky where we least expect it. This is something old.

"I think shocks will come, but they will be shallower, shorter. They will be harder to predict, because we are not really managing risk anymore. We are managing uncertainty – too many new variables, plus leverage on a scale we have never encountered (something borrowed). And, when the inevitable occurs, the buying opportunities that result will be won by the technologically enabled swift."

Another way to think about it is the way Didier Sornette, a French geophysicist, has described financial crashes in his wonderful book Why Stock Markets Crash (the math, though, was far beyond me!). He wrote, "[T]he specific manner by which prices collapsed is not the most important problem: a crash occurs because the market has entered an unstable phase and any small disturbance or process may have triggered the instability. Think of a ruler held up vertically on your finger: this very unstable position will lead eventually to its collapse, as a result of a small (or an absence of adequate) motion of your hand or due to any tiny whiff of air. The collapse is fundamentally due to the unstable position; the instantaneous cause of the collapse is secondary."

When things are unstable, it isn’t the last grain of sand that causes the pile to collapse or the slight breeze that causes the ruler on your fingertip to fall. Those are the "proximate" causes. They’re the closest reasons at hand for the collapse. The real reason, though, is the "remote" cause, the farthest reason. The farthest reason is the underlying instability of the system itself.

A fundamentally unstable system is exactly what we saw in the recent credit crisis. Consumers all through the world's largest economies borrowed money for all sorts of things, because times were good. Home prices would always go up and the stock market was back to its old trick of making 15% a year. And borrowing money was relatively cheap. You could get 2% short-term loans on homes, which seemingly rose in value 15% a year, so why not buy now and sell a few years down the road?

Greed took over. Those risky loans were sold to investors by the tens and hundreds of billions of dollars, all over the world. And as with all debt sandpiles, the fault lines started to appear. Maybe it was that one loan in Las Vegas that was the critical piece of sand; we don't know, but the avalanche was triggered.

You may not remember this, but I was writing about the problems with subprime debt way back in 2005 and 2006. But as the problem actually emerged, respected people like Ben Bernanke (the chairman of the Fed) said that the problem was not all that big and that the fallout would be "contained." (I bet he wishes he could have that statement back!)

But it wasn't contained. It caused banks to realize that what they thought was AAA credit was actually a total loss. And as banks looked at what was on their books, they wondered about their fellow banks. How bad were they? Who knew? Since no one did, they stopped lending to each other. Credit simply froze. They stopped taking each other's letters of credit, and that hurt world trade. Because banks were losing money, they stopped lending to smaller businesses. Commercial paper dried up. All those "safe" off-balance-sheet funds that banks created were now folding (what my friend Paul McCulley first labeled as the Shadow Banking System). Everyone sold what they could, not what they wanted to, to cover their debts. It was a true panic. Businesses started laying off people, who in turn stopped spending as much.

As I read through this again, I think I have an insight. It is one of the reasons we get "fat tails." In theory, returns on investment should look like a smooth bell curve, with the ends tapering off into nothing. According to the theoretical distribution, events that deviate from the mean by five or more standard deviations ("5-sigma events") are extremely rare, with 10 or more sigma being practically impossible – at least in theory. However, under certain circumstances, such events are more common than expected; 15-sigma or even rarer events have happened in the world of investments. Examples of such unlikely events include Long Term Capital in the late ’90’s and any of a dozen bubbles in history. Because the real-world commonality of high-sigma events is much greater than in theory, the distribution is "fatter" at the extremes ("tails") than a truly normal one.

Thus, the build-up of critical states, those fingers of instability, is perpetuated even as, and precisely because, we hedge risks. We try to "stabilize" the risks we see, shoring them up with derivatives, emergency plans, insurance, and all manner of risk-control procedures. And by doing so, the economic system can absorb body blows that would have been severe only a few decades ago. We distribute the risks and the effects of the risk throughout the system.

Yet as we reduce the known risks, we sow the seeds for the next 10-sigma event. It is the improbable risks that we do not yet see that will create the next real crisis. It is not that the fingers of instability have been removed from the equation, it is that they are in different places and are not yet visible.

A second related concept is from game theory. The Nash equilibrium (named after John Nash, he of The Beautiful Mind) is a kind of optimal strategy for games involving two or more players, whereby the players reach an outcome to mutual advantage. If there is a set of strategies for a game with the property that no player can benefit by changing his strategy while (if) the other players keep their strategies unchanged, then that set of strategies and the corresponding payoffs constitute a Nash equilibrium.

A Stable Disequilibrium
So we end up in a critical state of what Paul McCulley calls a "stable disequilibrium." We have "players" of this game from all over the world tied inextricably together in a vast dance through investment, debt, derivatives, trade, globalization, international business and finance. Each player works hard to maximize their own personal outcome and to reduce their exposure to "fingers of instability."

But the longer we go on, asserts Minsky, the more likely and violent an "avalanche" is. The more the fingers of instability can build. The more that state of stable disequilibrium can go critical on us.

Go back to 1997. Thailand began to experience trouble. The debt explosion in Asia began to unravel. Russia was defaulting on its bonds. (Astounding. Was it less than ten years ago? Now Russian is awash in capital. Who could anticipate such a dramatic turn of events?) Things on the periphery, small fingers of instability, began to impinge on fault lines in the major world economies. Something that had not been seen before happened: the historically sound and logical relationship between 29- and 30-year bonds broke down. Then country after country suddenly and inexplicably saw that relationship in their bonds begin to correlate, an unheard-of event. A diversified pool of debt was suddenly no longer diversified.

The fingers of instability reached into Long Term Capital Management and nearly brought the financial world to its knees.

If it were not for the fact that we are coming to the closing innings of the Debt Supercycle, we would already be in a robust recovery. But we are not. And sadly, we have a long way to go with this deleveraging process. It will take years.

You can't borrow your way out of a debt crisis, whether you are a family or a nation. And, as too many families are finding out today, if you lose your job you can lose your home. People who were once very creditworthy are now filing for bankruptcy and walking away from homes. All those subprime loans going bad put huges numbers of homes back onto the market, which caused prices to fall on all homes, which caused an entire home-construction industry to collapse, which hurt all sorts of ancillary businesses, which caused more people to lose their jobs and give up their homes, and on and on. The connections in the housing part of the sandpile were long and deep.

It's all connected. We built a very unstable sand pile and it came crashing down, and now we have to dig out from the problem. And the problem was too much debt. It will take years, as banks write off home loans and commercial real estate and more, and we get down to a more reasonable level of debt as a country and as a world.

Bond markets require confidence above all else. If Greece defaults, then how far away is Spain or Japan? (We now see that Spain is not all that far!) What makes the US so different, if we do not control our debt? As Reinhart and Rogoff show, when confidence goes, the end is very near. And it always comes faster than anyone expects. Bang! there goes the sandpile.

The global financial system is all connected. Tiny Greece and now larger Spain but soon Italy and even France (!) can make a huge difference in places far removed from Europe, just as our subprime debt created a crisis all over the world. The world financial system allowed too much risk to be taken on, and then spread that risk far and wide through fancy new financial engineering and securitizations. Many investors and pension funds thought that by buying a lot of different types of securities they were diversifying their risk, when in fact the same connected risk ran through almost everything.

Investments that are normally not correlated will again show a high degree of correlation, as they did during the recent crisis, just when we need that diversification of risk to help us. There is no reason to think it will be all that much different in the next crisis period. Investing is not easy.

Getting Older and Other Happy Thoughts
We celebrated my Mother’s 95th birthday last Tuesday. 140 people showed up to a nice reception and dinner. Both my father and mother were the youngest of 11 kids, so all my uncles and aunts have gone on, and even my direct cousins who were there were in their mid-80s. I am the "young" lad at almost 63. But mother has friends from many generations (through her Sunday school class of the last 30 years), who all showed up, as well as all the grandchildren and great-grandchildren and other remaining relatives.

I saw pictures of my mom that I had never seen. She was in Germany right after the war and traveled around Europe. Evidently my brother found the hidden box. She was one of the original shutterbugs and kept huge boxes of pictures, many of which she has already put into books for us kids.

I already knew she was a major babe back then, but I had never seen her with pictures of anyone besides my Dad. I am going to have to ask her about that. Who were those young bucks? She had about 300 mostly color postcards from Europe that she had sent back home and then retrieved, documenting her travels everywhere. This was an age before Facebook, when a postcard from the road was the only way to really communicate. It made me reflect on how times change, but the drive to communicate and stay in touch stays the same.

Watching the various generations interact was interesting. Both mother and dad basically stopped moving as they got older, and that lost mobility defined their existence. While mother is mentally as sharp as ever, she is confined to a small area and a few trips here and there. She was content to sit and read and watch TV (her religious shows and the news), and we simply could not get her to exercise. Then again, her life has not been easy. Mine is a dream compared to what she lived through.

But many in the Boomer generation (that would be me) remain far more active as they age. That lifestyle, combined with advances in medicine and health care, is letting us live longer and healthier.

I quit drinking (cold turkey) almost exactly a year ago, and I must report that I feel much better, which kind of surprises me. The improvement was gradual (nothing dramatic), but as I look back there is a qualitative difference. As someone quipped, you are allotted 50,000 gallons of alcohol in one life, and I had hit my limit.

Still, the last six months have been hellacious with travel, as my schedule simply got absurd, and most of the time I was either booked with meetings or had deadlines. I must confess that my typical 3-4 times a week in the gym was the victim of that schedule. And THAT I can feel. Talk about bad choices.

My mother’s birthday party reminded me (among a lot of other things) that I cannot take my body for granted, and that I am way too stiff for a (relatively) young man. That will change. This week, I simply got on a plane to a resort with a good gym and spa and will spend five days starting a routine to get back to some semblance of whatever counts as being "in shape" at 63. This time with more stretching and lighter weights/more reps. A man has to know his limitations, and mine will get much more confining if I don’t make staying in shape a priority. And when I am on the road, gym time will get scheduled first. My health is not something I want to take for granted.

All the check-ups and blood work, vitamins, supplements and eating healthy will not help if I do not do the work to maintain my health. Getting older is much better than the alternative, but I have no desire to go gently into that good night. I hope to be writing to you in 20 years. It is just too much fun to not keep it up.

And you need to stay in shape so you can be reading me in 20 years. I need all my million best friends to stay with me! So get with the program!

And with that thought, let me hit the send button. The gym calls, and some good books (non-finance!), and a ton of little things I have put off and want to do are on tap for this weekend. I am going to live on the edge and learn to put music on my iPhone without having to ask a friend or one of my kids.

Have a great week. Brother Iron and Sister Steel are calling.

By John F. Mauldin
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Posted by walterda at 11:17 PM EDT

Surviving the Great Bust Ahead
Stock-Markets / Great Depression II
Jul 28, 2012 - 03:48 PM
By: The_Gold_Report

With a perfect storm brewing on the horizon, investors should be building their cash cache and running for cover, warns Harry Dent, author of The Great Crash Ahead. In this exclusive interview with The Gold Report, Dent explains how central bank stimulus programs are fighting a futile battle because a huge army of aging baby boomers has reached the stage in their economic lifecycles when they curb spending. How is Dent preparing for the gathering storm? Read on. . .

The Gold Report: Your considerable research over many years indicates that the size and age of its citizens drive a country's economic growth or decline. Because people have predictable consumption patterns throughout life, you can predict well in advance national economic growth or decline. How does that work?


Harry Dent: We've identified a peak spending wave indicator that correlates strongly with the stock market and the economy. It doesn't apply so much to emerging countries, where we look at urbanization rates, which greatly affect incomes, and workforce growth because emerging nations don't have a middle-class curve where typical consumers earn $60,000 a year at the peak of their careers.
In developed countries, though—countries with higher-tech infrastructures and a solid middle class—this spending wave indicator peaks at around age 46. People slow in spending way ahead of retirement, from 46 on. That is basically when the average person's kids are leaving the nest. In fact, the greatest slowing comes from age 50 on. That's the correlation, that people earn and spend more money dramatically as they approach midlife. On average, they enter the workforce at about age 20, marry at 26, have their first child when they're 28, and hit 46–50 when that child gets out of school. Then their spending drops like a rock. Part of that is because they're saving for retirement but, more importantly, they don't need bigger houses and don't drive their cars nearly as much. It's just a natural life cycle in developed countries. It's the ultimate leading indicator.
We saw the spending slowdown we're experiencing now coming 20-some years ago, when we came up with this tool. We said baby boomers' spending would peak around 2007 and slow down from 2020–2023.
TGR: Is the pattern the same across the globe, or do slowdown years differ from country to country?
HD: There's some degree of variation, but the post-World War II baby boom pretty much happened around the world. Birth rates in most developed countries peaked in the late 1950s to early 1960s, so the whole developed world is pretty much synched on this baby boom, all peaking together. Japan is the one exception, where births peaked twice, once in 1942 and again in 1949.
TGR: So you've gone back through history and now can predict that every 40 years or so a country's economy slows as waves of babies come through. Is the age-related consumption pattern the only demographic you use to evaluate what influences economies?
HD: Another cycle comes into play as well. It's an 80-year economic cycle consisting of two generational booms and busts, like the Bob Hope generation that drove the U.S. economy up from 1942–1968 and then down from 1969–1982, and then the baby boomers who drove it up again from 1983–2007 after that 46-year lag, and now down again from 2008–2023. Additionally, these boom-and-bust pairs go through a pattern we relate to the four seasons.
If you think of the consumer price index (CPI) in temperature terms, a high CPI is hot, or inflationary, and a low CPI is cold, or deflationary. A deflationary period or depression, as we're going into now, is the winter season. A spring boom follows, with a new generational spending pattern and the modest inflation that comes with it.
In the summer, with that generation entering the workforce, inflation continues to rise. We do a lot of research to demonstrate that young people are inflationary. They have more to do with inflation than any other factor, and nobody has a clue of this in economics. The last summer in the U.S. occurred when the baby boomers entered the workforce in large numbers, basically from the late 1960s through the early 1980s.
The fall boom brings bubbles and the resulting expansion of debt. Stocks, real estate and so on bubble up and when that boom ends, those bubbles burst. Winter sets in again, with restructuring and deleveraging of debt, which create deflation.
The 1970s was a difficult recession time, but it was inflationary, not deflationary, and not similar to the downturn that the Federal Reserve is trying to prevent now. The Fed is actively and constantly inflating the economy to prevent deflation to avoid a replay of the Great Depression. But it won't be able to hold it off indefinitely.
TGR: Let's talk a bit about the debt issue.
HD: In the U.S., most people focus on government debt. Under George Bush, the national debt grew from $5 trillion (T) to $10T in 2000–2008. At the same time, the banking system, financial systems and shadow banking—in the private sector—created $22T in debt. That was the greatest debt bubble in history, and it occurred in developed countries all around the world. So we have this global debt crisis and this debt has to deleverage. Everybody is in too much debt—financial institutions, consumers, businesses and governments, with central banks propping them up and bailing them out. Obviously, this can't go on forever.
If the demographics weren't working against the Fed and the other central banks, it might be different. But they're fighting a battle they can't win because the baby boomers are working against them. How do you stimulate an economy when the largest part of its workforce, the aging baby boomers, wants to save and not spend, to pay down debt?
That's the problem. The money the Fed creates gooses up the markets, but doesn't do much for the economy, and banks aren't lending. It's crystal clear in history. Every time you see a big debt bubble in a fall boom—as in the 1860s and 1870s—a depression follows. We saw this from 1873–1877 and into the early 1880s. We saw the next big bubble into the roaring 1920s, followed by the Great Depression and debt deleveraging after that. In short, debt bubbles ultimately burst and then deleverage. Deleveraging debt destroys money, so there's less money in the system and it means deflation in prices.
That's very important for investors to understand. In a deflationary crisis—whether in the 1930s or what started in 2008—everything goes down: commodities, stocks, real estate, even gold and silver in many cases. In deleveraging an asset bubble, all assets go down and there's nowhere to hide. Investors have to be in the U.S. dollar and very safe bonds and cash and wait for the crash, and then buy at the bottom. That's the trick. Cash is king—cash and cash flow.
In contrast, in an inflationary crisis such as the one we had in the 1970s, commodities, gold and silver were booming. Japan was in a positive demographic cycle. Emerging countries benefited. Real estate loves inflation. In that environment, a lot of things go up, but stocks and bonds go down. In this environment, though, there's nowhere to hide.
So people just have to get out of the way. Even with all the stimulus, the Fed has no way to restore normalcy with this debt level and this demographic downturn. The stimulus has merely created bubbles in stocks and commodities, and commodities are already going down pretty fast. We think stocks are next, so we expect another stock crash within the next few years. And the next crash will be worse than in 2008–2009 because the Fed has pumped everything up and stretched the system to the max.
This is what happens in the winter season. It's a survival-of-the-fittest struggle for businesses to see who will dominate their industries for decades to come. So it's a huge payoff for the companies that simply survive and it deleverages the whole debt and asset cycle and brings things back to affordability. So it's a difficult season, but it's necessary and actually good in the long term. Lower prices in general will increase the standard of living.
The government is trying to skip winter. It keeps heating things up, pouring the money into the economy so the banks don't deleverage debt and the banking system doesn't collapse as it did in the 1930s. The truth is, it's only keeping us in high debt and maintaining a bubble that's not sustainable. Sooner or later, this stimulus will result in a crash that takes down the economy.
The top 10% of consumers are the only ones still spending. We know from demographics that wealthier people marry and have kids a little later. Their kids go to school a little longer, so their spending peaks four to five years after the average person's. After these folks' spending peaks, which will be by the end of this year, we'll have a second demographic drag on the economy.
TGR: So we're basically just getting into this 2008–2023 winter depression. How deep will the trough go? Will it bottom at the midway point? What should consumers expect over the next 20 years?
HD: A winter season lasts from 13 to 15 years or so. The worst collapses in stock prices and real estate hit when the banking system deleverages. In the 1930s, that happened early on. In this case, the government took a lesson from the 1930s and decided to keep pouring money into the banking system to prevent its meltdown. But it can't be done. There's a limit to how much you can stimulate. It's like a drug. It takes more and more of the drug and it has less and less effect until it has almost no effect, and then the drug itself kills you.
We're seeing that in Europe already. The last round of stimulus there—Qualitative Easing (QE) 2—was massive and came well after QE2 in the U.S., but Europe's already back in trouble again and is having to implement all sorts of emergency procedures. There's no bailing out Spain. It has one of the biggest real estate bubbles in the world and a rapidly aging population. The Spanish people won't be buying housing for decades.
TGR: What do you see in terms of stocks?
HD: The worst is likely to hit in the next two years. It's a matter of when the stimulus stops working or when governments throw in the towel. At some point, for example, German citizens may just say they won't bail out another country. They've been doing it to protect exports and avoid defaults on all of the money they've loaned out already, but considering the demographics, it's a losing game.
We've studied all of the major debt bubbles and depressions in history, and this one is different because Keynesian economics, which came out of the Great Depression, wasn't adopted as economic policy until the 1970s recessions. So now, for the first time in history, central banks around the world—the European Central Bank (ECB), the U.S. Federal Reserve, the Bank of China and the Bank of Japan—are actively fighting deflation. When banks start to deleverage or when deflation starts to step in, they just push money into the system. The question is: Do they lose control?
Japan has been through all of this before, but when it came into its crisis in the 1990s, it had budget and trade surpluses. The rest of the world was experiencing the greatest boom in history, which we'd predicted. There was mild inflationary pressure and everybody thought Japan was about to take over the world when it was about to collapse. We were among the few who predicted that ahead of time in the late 1980s.
Japan continued to push money into the system and never let private debt deleverage at all in either consumer or financial sectors. Japan is still carrying very high private debt, and its government debt has risen from 60% of gross domestic product (GDP) to 230% and still climbing. So Japan didn't really go through a depression. It was more an on-and-off mild deflationary recession because the stimulus eased the pain. But now Japan's debt is much larger than before the crisis and deleveraging still looms ahead. Japan has been a lost economy for 22 years now. Real estate is down 60% and stocks are still down nearly 80%, 22 years later.
Demographics say the Japanese economy will weaken even further after 2020. The interest on its debt will go up in a spring boom with rising inflation worldwide, and it will be bankrupt immediately because its debt is so high. It's only because it's borrowing at 1% or less that it can handle its deficits now. Sooner or later, this game has to end.
TGR: So Japan's QE has raised government debt to more than 200% of GDP but only managed to postpone a depression?
HD: Yes, it kicked the can a couple of decades down the road. It's like trying to resuscitate a patient with a defibrillator. You keep hitting the chest, clear, boom. At some point, the patient dies. If the bond markets allow the U.S. to keep putting in money like Japan, we'd end up with a balance sheet on the Fed at $5–6T and up with QE of $4–5T before this is over. We've only gone about $2T so far. The Fed stimulus pushes money into the banking system, but the banks don't lend it to fuel economic growth. They cover their losses and reserves, and then turn around and reinvest the rest in government bonds and stocks. They're speculating. The money ends up in the stock markets. It's like crack in the markets, and the markets just want more crack. But the markets can't continue to go up when demographic trends are pointing down.
TGR: Your earlier mention of losing control brings to mind the people of Greece out in the streets rioting because demands for further sacrifices and more fiscal austerity have become unbearable.
HD: It is true. One of our financial advisers who was there recently reported every third store is closed or boarded up. Greece is in a depression and Spain's headed there. The ECB has already pumped $270 billion into Spain and Greece just to cover its bank runs, which may happen faster than the governments can fend them off. In the U.S., the vulnerability is much more in real estate, as in Spain. We have a backlog of close to 4 million foreclosures already in the system. At some point, the banks will realize that home prices are not coming back. That they haven't come back in Japan after 21 years gives us a hint. But if the banks start dumping these millions of foreclosures that aren't on the market, it would kill the housing market and trigger a bank crisis that the Fed couldn't stop with stimulus.
China also is vulnerable. Exports, which drive most of its economy, are declining rapidly while government spending on vacant buildings and empty cities has created a real estate bubble. If that bubble begins to seriously break down, Chinese consumers with disposable income, the top 10% of the population, own the real estate that will lose its value.
TGR: A while ago, you said businesses that manage to survive the winter would dominate their industries for decades to follow. What advice do you have for those running companies to help them come out the other side of a depression?
HD: First, those who are running a company and thinking about retirement within five years should sell their companies and retire now. Those who want to keep their companies and hand them down to the next generation or continue to grow them should hunker down, cut costs, cut overhead and put off capital expenditures. Rent your building; don't own it. Sell real estate. Sell marginal product lines. In fact, sell everything you don't need. Do everything to raise cash because, as I said before, cash and cash flow are king. Be lean and mean. Office space, real estate, factories, warehouses, anything you want to invest in your company will be a lot cheaper after deleveraging. Even if your business weakens, if your competitors weaken more rapidly, you're winning. At some point, a lot of your competition, just like a lot of banks, will fail.
We saw this phenomenon after the Great Depression. There was a big payoff for the companies that survived; they dominated their industries for decades to come. Everybody thinks the market leaders were born in the technology revolution in automobiles and electricity in the early 1900s and into the roaring '20s. Certainly, the race was on then, but the shakeout of the Great Depression decided who was left standing. General Motors survived and absolutely dominated the automobile industry from the 1930s through the 1970s. In electronics, it was General Electric.
TGR: You've also emphasized the importance of cash and cash flow for investors, advising them to either exit the equity markets or greatly reduce their exposure to stocks.
HD: Yes. Take advantage of the fact that the Fed has revived stocks and sell when the market is high. Reinvest when the prices are low. Joseph Kennedy made his fortune in the early 1930s, getting out at the top of the market when his shoeshine boy was giving him advice. When stocks were down 87%, he was buying at $0.10–0.20 on the dollar.
TGR: What are you doing personally to preserve or grow your wealth during this winter?
HD: I moved from Miami to Tampa in 2005, at the top of the real estate bubble and I've been renting, so I avoided a huge loss. Real estate in my neighborhood is down about 50%, and probably will fall another 20–30% before it's over. I'm just looking at investments to actually be short stocks. I'm looking at ProShares Ultra Short MSCI Europe (EPV), which is an exchange-traded fund (ETF) at two times short the MSCI Europe index. The ProShares UltraShort Financials ETF (SKF) is another good one, two times short financials, because the financials in Europe are tending to get hit the worst. I think there's a rising chance in Europe in the next few months of either a mini-crash, about 20% off the top, or a major crash like 2008–2009, where Europe just blows up. One way or the other, you need to either be out of stocks or you need to bet on things going down.
TGR: Any other insights?
HD: We're buying natural gas, which seems to be going up since it bottomed out at $2. We're buying agricultural commodities because that's the last thing to go down in demand, and emerging market demand is still strong. Apart from natural gas and agriculture, though, pretty much everything else we see going down.
TGR: What about gold?
HD: I think gold has another run in it. It's trending down right now, but I'd expect gold to benefit from the early stage of this crisis. If we have one more big QE coming in the U.S. and Europe—especially in Europe—gold is likely to rally. We told people to sell silver when it hit $50/ounce (oz) in April of last year. Now we're suggesting selling gold if we see a good rally, say, $2,000/oz or higher.
Ultimately, there's a natural instinct to expect gold to go up in a crisis, but if you look at 2008, gold and silver went up in anticipation of a financial crisis. But when the crisis actually hit and debt started deleveraging and money supply started contracting, which happened in the second half of 2008 and early 2009, gold went down I think 32% and silver went down 50%.
TGR: Everything went down.
HD: Exactly. That's the point. The only thing that went up was the U.S. Dollar Index and Treasury bonds. This time, I think Treasury bonds may turn around. People act as if German, U.S. bonds and United Kingdom bonds are risk free. They are not. These U.S. and UK governments are in terrible debt, and Germany is holding the bag for Europe. People are throwing money at negative yields just because they don't know where else to go. A better bet might be to go long the dollar or, even better, short the euro. That would be a good hedge.
TGR: What's the best investing advice you ever received, Harry?
HD: Basically, I think you have to think contrarian, because it's just human nature for people to pile into something, especially in these bubbles we've seen. They pile into tech stocks or real estate, thinking they can't go down, and then the bubbles burst. I learned early on to think contrary to the crowd, something like Joseph Kennedy. Right now, most investors think these markets can't go down because the Fed won't allow them to. They call it "the Bernanke Put." Well, if everybody's thinking that, I don't think that.
TGR: Whom do you view as the best investors?
HD: The classic ones are Benjamin Graham back in the good old days and Warren Buffett these days, although I think Buffett's off base now that he's become a cheerleader for the U.S. government.
TGR: You're speaking at the MoneyShow in San Francisco in late August. What major themes will you cover?
HD: Basically three things: debt, demographics and deflation. People who argue that hyperinflation is ahead are dead wrong. Japan had zero inflation for the last decade despite massively more QE than we've done relative to its economy. It would have been a deflation if it hadn't stimulated so much and the world hadn't been in an inflationary mode. Debt deleveraging leads to deflation, and aging societies are deflationary. Old people are deflationary, young people are inflationary. The inflation of the 1970s had nothing to do with monetary policy. It was the baby-boom generation partying in college, spending their parents' money. It's expensive to raise kids, who don't contribute economically until they get into the productivity curve in the workforce. At that point, productivity drives down inflation.
TGR: Do you expect the U.S. to fare better than Europe over the next two decades because of the echo boom, as the millennial generation gets into a serious spending cycle?
HD: Yes. The echo boom kicks in from about 2023 forward in the U.S. and in a lot of countries. It's nowhere near the size of the baby boom generation, but enough to create growth again. But there's no echo boom in Southern Europe or in China, where the workforce will start shrinking like Japan's after 2015. Japan's little echo boom runs out by 2020, and because Japan never deleveraged its economy, it's not even benefiting much from it.
But, yes, there should be a worldwide boom with the stronger developed countries—Northern Europe, North America and Australia—doing fairly well, though as I say, not as strong as the boom we saw in the 1980s, 1990s and early 2000s. Excluding the developed countries of East Asia—Japan, Korea, China—the emerging world will really dominate in terms of demographics and workforce growth. Investors should be looking to invest more in emerging countries because they're going to outperform. I would look first at India and Southeast Asia.
TGR: Should we be doing that now?
HD: Not yet. I'd wait until after the shakeout. China's slowdown is hurting emerging countries, which depend on exporting resources, and so are the collapsing commodity prices. By the way, the 29–30-year commodity cycle has nothing to do with the 40-year demographic cycle, but they happened to peak in the same timeframe, around 2007–2008.
TGR: Other than going to cash, what else should people be doing to prepare for the depression/deflationary period ahead?
HD: Cut expenses and high-interest debt. I wouldn't cut a mortgage if I'm paying 4–5% tax deductible on it, but get rid of credit card debt with interest at 22%. Don't make any big capital expenditures. Don't buy a house and don't let your kid buy a house. If you're more aggressive, you can bet on markets going down. For example, you actually can make money in the downturn if you short the euro, European stocks and U.S. financial stocks. But for most people, it's just better to be safe.
TGR: Easier said than done these days.
HD: Unfortunately, the government is making it very difficult. The stimulus programs are knocking down interest rates on safer, long-term bonds so people can't get yield anymore. If they go after yield, if they rush into bonds, stocks, commodities or especially dividend-paying stocks—which are the most popular thing now—they'll get creamed when the stock market crashes. The alternative is to give up the dividends and low yields. Just be safe. You'd be crazy to buy a 10-year Treasury at 1.4% yield or a 10-year bond at 1.3% yield. All the countries are going to be in trouble.
TGR: Thank you, Harry, for your time and your insights.
Harry Dent will be a keynote speaker at the upcoming MoneyShow in San Francisco on August 24–26, 2012. Click here to register free.
Harry S. Dent, Jr. is founder and CEO of the economic research and forecasting organization that bears his name and publisher of the HS Economic Forecast and the HS Dent Perspective. During the early 1980s, while a strategy consultant for Fortune 100 companies and new ventures at Bain & Co., Dent recognized the force that baby boomers exerted on the trends of the time, which led to his development of The Dent Method, a long-term forecasting technique based on the study of and changes in demographic trends and their economic impact that financial advisers and individual investors use via Dent's Monthly Economic Forecast, Economic Special Reports, Demographics School and The Financial Advisors Network. HS Dent also provides two newsletter services. Former CEO of several entrepreneurial growth companies and a new venture investor, Dent also is a sought-after speaker and best-selling author. Since 1988 he has been presenting to executives and investors around the world, appearing on Good Morning America, PBS, CNBC, CNN and FOX and featured in Barron's, Investor's Business Daily, Entrepreneur, Fortune, Success, US News and World Report, Business Week, The Wall Street Journal, American Demographics, Gentlemen's Quarterly, and Omni. Dent's books include The Great Crash Ahead (2011), The Great Depression Ahead (2009), The Next Great Bubble Boom (2006), The Roaring 2000s Investor (1999), The Roaring 2000s (1998), The Great Jobs Ahead (1995), The Great Boom Ahead (1993) and Our Power to Predict (1989). Dent received his Bachelor of Arts degree from the University of South Carolina, graduating first in his class, and his Master of Business Administration from Harvard Business School, where he was a Baker Scholar and was elected to the Century Club for leadership excellence.
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29 Jul 12, 10:48 Harry Dent's Formula for Surviving the Great Bust Ahead 
Agree with most of that, but Harry doesn't seem to understand that the collapse in gold in 2008, along with every other asset other than USDs, was due to a short term liquidity crisis in the banking system. Gold was sold because it was the only asset that could catch a bid...and because it was not a Tier 1 asset; it was worth 50% less than cash in the auditor's eyes of the banks who were teetering on the brink of collapse and needed to buttress their balance sheets. Believe me, if gold had been ranked Tier 1 along with USDs & US treasuries, then the gold would have been the last asset sold.

Harry needs to have a look at John Exter's Pyramid and he might understand than now that liquidity is not such a problem and the longer term problem of solvency is the issue, that gold will be much more tightly held.

This is a replay of the 1930's. Yes. Cash is King, until it's not...and then there is only 1 superior asset.


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Posted by walterda at 10:45 PM EDT

JULY 21, 2012 4:00 A.M.
Golden Gateway to Dependency 
Obama has put nothing but roadblocks in the path to opportunity and growth.

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On the evidence of last week’s Republican campaign events, President Obama’s instant classic — “You didn’t build that” — is to Mitt Romney what that radioactive arachnid is to Spider-Man: It got under his skin, and, in an instant, the geeky stiff was transformed into a muscular Captain Capitalism swinging through the streets and deftly squirting his webbing all over Community-Organizerman. Rattled by the reborn Romney, the Obama campaign launched an attack on Romney’s attack on Obama’s attack on American business. First they showed Romney quoting Obama: “He said, ‘If you’ve got a business, you didn’t build that. Somebody else made that happen.’” And then the Obama team moved in for the kill: “The only problem? That’s not what he said.”

Indeed. What Obama actually said was:

“If you’ve got a business, you, you didn’t build that. [Interjection by fawning supporters: “Yeeaaaaah!”] “Somebody else made that happen.”

Since the president is widely agreed to be “the smartest guy ever to become president” (Michael Beschloss, presidential historian), the problem can’t be “what he said” but that you dummies aren’t smart enough to get the point he was trying to make. According to Slate’s David Weigel, the “you didn’t build that” bit referred back to something he’d said earlier in the speech — “somebody invested in roads and bridges.” You didn’t build those, did you? Or maybe he was referring back to “this unbelievable American system we have that allowed you to thrive.” You didn’t build the system, did you? Or maybe he was referring to the teleprompter. You didn’t build that, did you? Well, unless you’re Rajiv or Suresh from the teleprompter factory in Bangalore, you didn’t. Maybe he was referring back to something he said in a totally different speech — the Berlin Wall one, perhaps. You didn’t build that, did you? Who are we to say which of these highly nuanced interpretations of the presidential text is correct?

If this is the best all the king’s horses and all the king’s men can do to put Humpty Dumpty’s silver-tongued oratory together again, they might as well cut to the chase and argue that accurately quoting President Obama is racist. The obvious interpretation sticks because it fits with the reality of the last three and a half years — that America’s chief executive is a man entirely ignorant of business who presides over an administration profoundly hostile to it.
But, just for the record, I did “invest in roads and bridges,” and so did you. In fact, every dime in those roads and bridges comes from taxpayers, because government doesn’t have any money except for what it takes from the citizenry. And the more successful you are, the more you pay for those roads and bridges.

So here’s a breaking-news alert for President Nuance: We small-government guys are in favor of roads. Hard as it may be to credit, roads predated Big Government. Which came first, the chicken crossing the road or the Egg Regulatory Agency? That’s an easy one: Halfway through the first millennium b.c., the nomadic Yuezhi of Central Asia had well-traveled trading routes for getting nephrite jade from the Tarim Basin to their customers at the Chinese court over 2,500 miles away. On the other hand, the Yuezhi did not have a federal contraceptive mandate or a Bloombergian enforcement regime for carbonated beverages at concession stands at the rest area two days out of Khotan, so that probably explains why they’re not in the G-7 today.

In Obama’s world, businessmen build nothing, whereas government are the hardest hard-hats on the planet. So, in his “you didn’t build that” speech, he invoked, yet again, the Hoover Dam and the Golden Gate Bridge. “When we invested in the Hoover Dam or the Golden Gate Bridge, or the Internet, sending a man to the moon — all those things benefited everybody. And so that’s the vision that I want to carry forward.”

He certainly carries it forward from one dam speech to another. He was doing his Hoover Dam shtick only last month, and I pointed out that there seemed to be a certain inconsistency between his enthusiasm for federal dam-building and the definitive administration pronouncement on the subject, by Deanna Archuleta, his deputy assistant secretary of the Interior, in a speech to Democrat environmentalists in Nevada:

“You will never see another federal dam.” 

Ever. So the president can carry forward his “vision,” but it apparently has no more real-world application than the visions he enjoyed as a member of his high-school “choom gang” back in Hawaii. Incidentally, I was interested to learn from David Maraniss’s enlightening new biography that, during car-chooming sessions, young Barry insisted all the windows be rolled up so that no marijuana smoke would escape. If you can seriously envision President Obama opening a 21st-century Hoover Dam, you need to lower the windows on your Chevy Volt.

The Golden Gate Bridge? As Reason’s Matt Welch pointed out, the Golden Gate cost at the time $35 million — or about $530 million today. So, for the cost of Obama’s 2009 stimulus bill alone, we could have had 1,567 Golden Gate Bridges. Where are they? Where are, say, the first dozen? If you laid 1,567 Golden Gate Bridges end to end, you’d have enough for one Golden Choom Bridge stretching from Obama’s Punahou High School in Honolulu over the Pacific all the way to his Occidental College in Los Angeles, so that his car-chooming chums can commute from one to the other without having to worry about TSA patdowns.

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Posted by walterda at 10:41 PM EDT

 statistics from a survey by the United Nations International Health Organization.
From: Rick Hanson
Sent: Monday, July 02, 2012 10:00 PM
To: Undisclosed-Recipient:;
Subject: I thought you would find this interesting to put it mildly!] ...


Wow!  I've never seen anything like this, but know it's a great way to see why things are as they are!  Read the end portion for sure.  There are actually two messages here.  The first is very interesting, but the second is absolutely astounding; and explains a lot.
A recent "Investor's Business Daily" article provided very interesting statistics from a survey by the United Nations International Health Organization.
Percentage of men and women who survived cancer five years after diagnosis:
U.S................................. 65%
England.......................... 46%
Canada........................... 42%
Percentage of patients diagnosed with diabetes who received treatment within six months:
U.S................................. 93%
England.......................... 15%
Canada........................... 43%
Percentage of seniors needing hip replacement who received it within six months:
U.S................................. 90%
England.......................... 15%
Canada........................... 43%
Percentage referred to a medical specialist who see one within one month:
U.S................................. 77%
England.......................... 40%
Canada........................... 43%
Number of MRI scanners (a prime diagnostic tool) per million people:
U.S................................. 71
England.......................... 14
Canada........................... 18
Percentage of seniors (65+), with low income, who say they are in "excellent health":
U.S................................. 12%
England.......................... 02%
Canada........................... 06%
And now for the last statistic:  National Health Insurance?
U.S................................. NO
England.......................... YES
Canada........................... YES
Check this last set of statistics:  The percentage of each past president's cabinet who had worked in the private business sector prior to their appointment to the cabinet.  (You know that the private business sector is a real-life business, not a government job.)  Here are the percentages.
T. Roosevelt.................. 38%
Taft................................ 40%
Wilson........................... 52%
Harding.......................... 49%
Coolidge........................ 48%
Hoover........................... 42%
F. Roosevelt................... 50%
Truman.......................... 50%
Eisenhower.................... 57%
Kennedy......................... 30%
Johnson.......................... 47%
Nixon............................. 53%
Ford................................ 42%
Carter............................. 32%
Reagan........................... 56%
G. H. Bush..................... 51%
Clinton........................... 39%
G. W. Bush.................... 55%
Obama........................... 08%
This helps to explain the incompetence of this administration:  only 8% of them have ever worked in private business!  That's right!  Only eight percent; the least, by far, of the last 19 presidents!  And these people are trying to tell our big corporations how to run their business?
How can the president of a major nation and society, the one with the most successful economic system in world history, stand and talk about business when he's never worked for one?  Or about jobs when he has never really had one?  And when it's the same for 92% of his senior staff and closest advisers?  They've spent most of their time in academia, government and/or non-profit jobs or as "community organizers�.  They should have been in an employment line.
Pass this on because we'll NEVER see these facts in the main stream media.



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Steve Rome
Rome Farms
1096 Road BB
Hugoton, KS 67951
office 620-544-8991
cell 620-544-9260
romesd@pld.com - home email
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Posted by walterda at 10:31 PM EDT

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