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Friday, July 30, 2010

The Growth of Fairy Tales and Hokum over the Growth Imperative: The NYT Wanders About in the Cognitive Swamps again

The Growth of Fairy Tales and Hokum over the Growth Imperative: The NYT Wanders About in the Cognitive Swamps again.

Abstract: David Brooks of the New York Times surveys the needs and mechanisms to advance our economy from the radical liberal view while tossing a few tidbits to the hated capitalists. They need money from this group to succeed. Brooks discusses the “psychological war between business and the Obama administration” and the fact that “business types think the administration is stuffed with clueless professors.” That assessment leaves out some lesser attributes concerning marijuana addiction, Marxism and worse thing. Brooks pushes infrastructure building again as if this were some new flavor of fat-free gelato to taste. Brooks attempts to muddle the facts by advising us that the American entrepreneurism [Exceptionalism!] is gone and we need to be more mundane. He offers a simultaneous pathway for both command economies and the concomitant spending buy seems to abandon the business class at the last moment. David Brooks fails in his attempts to show us that a dominant command-style government of the USSR dustbin grade can solve our problems if we just believe in the potential glory. This is a farce. Entrepreneurs must stay on the sidelines with their risk capital until Obama fades away.

Politics is the art of persuasion but the most desired outcomes are burdened by the intrinsic decision making processes in groups. Some in the group just refuse to accept the decisions. Thus, we enter a pit of noisy cajolery and soap box whooping when appealing to the masses for support for some political scheme. To make an effective and convincing argument, the facts are frequently skewed and some Master of Mystagoguery is habitually summoned from the high mountain to settle the quarrelling. The Master needs willing acolytes to assist in his mystical dance so the near-bankrupt New York Times—aka the Walter Duranty Papers provides a platform and crude stage for a public display of the Wisdom that resides there. Brooks echoes the ramblings of Paul Krugman here. Here, the dilettante reader who cannot cope with the business world will find hope if not the truth. Today, we can enjoy an op-ed that provides echo chambers and other sonic devices to amplify and hacknefy the old, stale leftist radical clarion call for more money to spend in the economy. They cannot raise taxes yet, cannot spend enough so they need suckers to chuck their wealth into the rot pot so they can waste that too.

Hearing his Master’s voice and responding to the call, we are now exposed to a fine piece of tony propaganda from David Brooks.

“We could be in for a long, slow decade. There’s a confluence of forces that are probably going to retard economic vitality.” -- The Growth Imperative By Op-Ed Columnist David Brooks Published: July 29, 2010 [Emphasis is mine in all quotes.]

Now, we can set up a list and tabulate how many of these forces can be attributed to the Obama administration and how many barbs are tossed at Americans of the standard tradition.

First the facts:

“Consumers are still over indebted, and it will take years of curtailed spending before households are back on a sustainable path. Federal and state governments also will have to pull back. Labor markets were ill before the recession and are worse now.

Our trading partners in Europe and Japan are stagnant or in peril. Banks in this country are not lending to small businesses and banks elsewhere have huge write-downs to endure. The psychological war between business and the Obama administration also is taking a toll. Business types think the administration is stuffed with clueless professors. Some administration officials think corporate honchos are free-market hypocrites prowling for corporate welfare.” -- The Growth Imperative By David Brooks

This essay covers more political and economic territory than is customary for this mechanical tome architect. Such a large list implies that some response to most is in order. We already know that there is massive debt , the economy is collapsing , taxes need to be cut , banks are failing , inflation looms , spending is too high and the debt will crush any recovery. These factors are all known but not wholly accepted by the left.

Revisionism:

“In my previous column, I tried to imagine what a moderate Democratic growth agenda would look like. You could call it the Moon Shot Approach. In this approach, government tries to spur economic development first by creating the context for growth with a big infrastructure program and then by focusing subsidies and tax credits on key sectors, like energy research.” -- The Growth Imperative By David Brooks

Thus the approach that guarantees that business will not accept this rubbish is offered for a restroke and fresh gilding. This is a command economy dictum whereby government decides what, where, when and why widgets are to be made and also only by union labor. This is a recycled vision of the first Obama stimulus that failed. The GDP sinks to 2.4% we learned today even in spite of wonderful spending and predictions to the contrary. Such a paltry growth rate argues against the ability to handle large deficits and massive debt in the long term. Canada is paying 3.5% on short term bonds so why park your money here?

Now, a straw target is superimposed upon the economic vision that our hero belittles and can be used as an example [in reverse] of how not to advance into socialism.

“Brooks (no relation) argues that Americans are a uniquely entrepreneurial people. A nation of immigrants, “America’s vast success might be explained in part by our genetic predisposition to embrace risks with potentially explosive rewards.”
Citing an array of polling data, Brooks argues that 70 percent of Americans embraces this free-market and entrepreneurial vision of their country. But 30 percent prefers a more government-centric, European-style vision. The battle, Brooks concludes, is between the 70 percent, trying to reclaim the country, and the 30 percent, which is now expanding the federal role on an array of fronts.” -- The Growth Imperative By David Brooks
And we suffer further:

“Both the Democratic and Republican approaches have problems. The Moon Shot Approach relies on omniscient experts to pick out the engines of future growth and on public-spirited legislators to pass bills that maximize productivity instead of special-interest favors. The weakness of the Brooks and Ryan approach is that their sociology is off a bit. America is not a nation of risk — embracing pioneers. It is a nation of heroic bourgeois families who want to thrive within a secure social order. The economic debate is not as Manichaean as the culture war since most people are split down the middle and because it’s easier to compromise on money than on life.” -- The Growth Imperative By David Brooks

There is much truth and wisdom in this comment. Brooks admits that Shooting the Moon requires pointing the missiles in the correct direction and that it takes a team of bureaucrats to wind up all the springs in concert for the launch and trajectory for success. The Marxists made this process a howling success. But, here an ideological gloss in inserted as casual fact and that is that: America is not a nation of risk—embracing pioneers. This erroneous comment portends to mask the elementary fact that we have million of entrepreneurs working these levers as we speak and that we have had them on the spot for some 300 years now. What they need is risk capital, lower taxes and the Moonies off their backs.

Brooks devises the implausible number of 30% of the population that longs for something like European socialism. He probably gets that number from illegal aliens, felons, some wandering Canadians and city dwellers who vote several times to increase their welfare.

“The two projects are in tension, but in a sane political culture they are not mutually exclusive. It should be possible to simplify the tax code, target welfare spending and also build strong infrastructure at the same time.” --The Growth Imperative By David Brooks

This conclusion appears to accept, if not enthusiastically, the fact that the capitalism that built this place and that other spending of the socialist ideals can produce viable goods and services at the same time. His conclusion contradicts the premise surpa of two coexisting projects in that it lists only what leftist government wants to see. There are no business opportunities in this ‘strong infrastructure’ for entrepreneurs given that Obama and Moonies are standing on their backs and threatening them with more taxes and regulations. They sit on the sidelines, along with their 1.8 trillion in cash, ready to jump in when this preposterous amateur crashes in a puddle of his own radical academic brewing.

That 30% or their ilk always had a place to go such as poor houses, drug rehab facilities, cane fields in Cuba, rice paddies in Viet Nam, prison and mental institutions. They were well cared for then and now and are doing about the best they can given their negative attributes they inherited from the left.

I often wonder if David Brooks believes in what he scribbles or if he is a contract chucker for the House of Chum.

rycK [a 5th generation Californian in exile]

Comments to: ryckki@gmail.com

Wednesday, July 28, 2010

US Economics Sink into Oblivion but Mystagogues like Krugman Recite the Same Old Runes.

Abstract: Surveying the civilized world, even including places like California if we must, we note that many nations are sinking into a murky swamp of unrecoverable debt and now many nations are theoretically obliged to cut spending and take severe austerity measures to cut their deficits. They resist with all their might and are aided by soothing mystagogues[1] who rumble through their sticky stack of clich├ęs so as to author an undiminished elliptical-cross sectioned yellow stream of propaganda to help keep the massive tax revenues securely embedded in the pockets and other orifices of the civil servants. We find after reading the Telegraph that the Richmond Fed has issued troubling and negative economic date for us. Analysis of this data prompts Ambrose Evans-Pritchard of the Telegraph [London] to restate his earlier findings that we are in deflation and headed for more. Krugman, aside, stage left, offers his ‘proof’ that debt does not cause a slowdown in growth thus disgracing himself in public again.

How to best read my blogs:

[I offer extensive quotes in this blog so that the reader can view the exact language and can be confident that nothing was taken out of context or that nobody was misquoted. The easiest way to take in the salient points is to read the emphatic points in the quotes and then peruse my comments. Comments on my comments are always welcome: ryckki@gmail.com.]

The Premise: We are deflation with a very slow recovery on the horizon.

Today’s release on manufacturing activity by the Richmond Fed is pretty ghastly, as you would expect given that the effects of fiscal stimulus are now wearing off at accelerating pace – before the happy handover to the private sector is safely consummated – and given that the structural East-West imbalances that lay behind the global crisis are getting worse again.”[2]--Drip after drip of deflation data by Ambrose Evans-Pritchard[3] July 27th, 2010 [Emphasis is mine in all quotes.]

These numbers indicate a significant slowdown.

As David Rosenberg at Gluskin Sheff reminds us eloquently every week, the bond markets are telling us that we are already in a deep and intractable depression – which does not preclude Japanese-style rallies, technical recoveries, and bursts of growth, all within a Kondratieff Winter[4].”-- Drip after drip of deflation data

That means years or decades.

So watch the Chinese banking system. Watch Japanese exports. Watch OPEC as it keeps cutting output to hold up the oil price. Watch Euribor rates and the continued contraction in eurozone lending to companies. Watch French industrial output. Watch Polish sovereign debt (that’s a new one).

Watch the M3 money supply in the US as it contracts at a 10pc annualized rate. And for goodness sake watch the Fed Board.”-- Drip after drip of deflation data

Krugman repudiates [go see his amateurish graph in this link]:

“So, Japan has had high debt and low growth since the mid-90s — in other words, since the economy entered deflation.

Do you really want to argue that the debt caused the low growth, rather than the other way around? Really, really?[5]-- The Conscience of a Liberal July 28, 2010, 10:12 AM Japanese Debt And Growth

Kenneth Rogoff and Carmen Reinhart ague the opposite:

In a new paper presented Monday at the annual meeting of the American Economic Association, Carmen Reinhart of the University of Maryland and Kenneth Rogoff of Harvard study the link between different levels of debt and countries’ economic growth over the last two centuries. One finding: Countries with a gross public debt exceeding about 90% of annual economic output tended to grow a lot more slowly. For advanced countries above the 90% threshold, average annual growth was about two percentage points lower than for countries with public debt of less than 30% of GDP.”-- Reinhart and Rogoff: Higher Debt May Stunt Economic Growth January 4, 2010,

Krugman's rememdium es hinc signum in latrines.[6]

The thinking exercise:

I am thinking about this and have arrived at the transitory conclusion that we have a world-wide sector depression in progress and will for a decade or two. Our world economy is divided into various economic and financial sectors where many nations have a number of such divisions within their boundaries and also external to their boundaries as many have global businesses. Thus some sectors overlap sovereign boundaries. Some can be doing well and others not so well but the average performance of sectors by a selected nation or the average of several nations by metrics like the Baltic Dry Index [shipping, containers and all that], interest rates and export/import ratios do not produce a usable result. If you generate a random set of numbers ranging from 0-9 the average tends to be 5 although we can tolerate several 1s and 9s in this mix and the actual count of these outliers remains secluded. If an average suddenly declined we would not know if all data decreased or there was a mix of positive and negative changes in the data set. Indeed, there are numerous cases [tending toward infinity] that can be generated to show that a radical change in several or all numbers might leave the average unchanged! We need dependable averages on specifics like the S&P 500.

If one looks at the gross sales in the US and watch the top line of businesses then, on average, many are doing a fair job of sustaining their revenues using cost-cutting measures, elimination of superfluous jobs and instituting efficiency improvements in their units.

Efficiency and Productivity:

This drive to cut fat from business gives an immediate boost to revenues with static top line revenues. Longer term performance, given the salient fact that businesses, unlike governments, can react and adjust to new business climates in days or weeks if not hours, some sectors will excel and others will perform poorly. Note that middle line tax costs are ameliorated by carrying forward loses from the first two years of this depression to enhance or defend earnings. The accumulation of cash is now paramount. The banks are now hollow puppets with their gossamer strings being jingled and jangled by incompetent government bureaucrats and their howling advocacies. The banks ‘caused’ this mess so government will reign in and control the banks. This is the wrong horse with the wrong saddle in the wrong race in the wrong country and has the wrong money placed on its nose.

The efficiency game then reduces to an analysis of two cohorts: those who can cope with costs and taxes and changing business conditions and those who cannot. Part of besting the efficiency game is avoiding government interference and socialism by moving out of hostile business environments [California, New York, parts of the EU[7]] and spreading out certain business departments across the world thus avoiding certain punitive taxes and enjoying lower wage costs. The average of the performance of the two cohorts is what we see reported by our governments that issue unusable and questionable metrics for their economies. The phony ‘stress tests’ in the US and EU attest to this theme as assets in banks are not marked to market thus their value is unknown and arbitrarily fixed to show that these zombies are apparently alive. We are still not sure how much money the Fed printed in Sep 2008 [7.79 trillion dollars] and where it went.[8] Thus, when new housing starts seem to rise, and they are of course real, the counterbalancing abandonment of existing housing is not subtracted from this number. In such cases, we do not know what the house count really is nor do we know how many people live in the same house. The census tends to be a decade late.

The stock markets are also averages so when the S&P 500 runs up this is the arithmetic result of balancing winners and losers. Note that the S&P 500 is an index weighted for size and earnings thus showing us the most important information possible. We can sort out winners from this index and from those stocks that make new highs. There must be some reason why stocks do well and price appreciation is the key. Short sell those who continually make new lows. If I could short our government based on its performance I would seek a leverage of 100:1 and become rich.

All this leads to unsynchronized sector recoveries and the concomitant sector recessions from a complex mix. In the years 1929 to 1938 many businesses flourished and 75% of the citizens were gainfully employed.

Business already knows how to navigate these treacherous waters and can adapt to most changing conditions. If they fail, they will be chopped up, the parts reassembled and new attempts to be successful will be ongoing. Governments, to the contrary, employ spending based on debt to ‘solve’ economic problems. Governments are slow and stale and tend to accumulate the worst possible economic planners in their bloated ranks or rely on phony economists to tell them what they want to hear.[9][10][11][12] The game then becomes a process where incompetent governments [US and UK and most of EU] put up nonstop barriers to progress and businesses react to those barriers. As a crutch, those governments tend to solicit and adorn slick stooges and Sooth Sayers like Keynes[13] or Paul Krugman[14][15][16][17][18][19] to give credence and some license to their wild spending and taxation. The New York Times—aka the Walter Duranty Papers[20][21]--a turn-of-the-crank Marxian puppet stage—is where intermezzos and grand opera songs are tooted and is a springboard to launch this flotsam. The goal here is to always to identify some potential Pulitzer Prize winner like Walter Duranty.[22] He was the patron saint of literary sleaze. A creation of a similar person would be a boon to the NYT.

Thus, although many economies are crashing in this world some businesses will find ways to make money in the worst of times and prosper and we need only identify them and invest accordingly. Asia and gold look good to me. It is too bad we cannot sell short on governments as that would provide enormous profits. Ignoring the advice and counsel of phonies like Krugman is a good starting point in modern business for avoiding monumental taxes. Frequently the advice proffered by the leftist media may be compared to the gibberish translated from a rabid bat that just survived a crash into some wino and was entangled in his truss in some alleyway for a brief time. That kind of noise is frequently toxic and meaningless.

When things get bad enough the unthinking slugs that voted for this radical Afro-Leninist[23]Communist Obama will vote the other way. We need to find more ways to short sell our phony government or governments being run into the economic latrines like the U.K. or Italy.

rycK [a 5th generation Californian in exile]

Comments to: ryckki@gmail.com

 


[1] A mystagogue is a person who initiates others into mystic beliefs, an educator or person who has knowledge of the Sacred Mysteries

[2] Drip after drip of deflation data by Ambrose Evans-Pritchard July 27th, 2010 http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100007034/drip-after-drip-of-deflation-data/#dsq-content [Emphasis is mine in all quotes.]

[3] Ambrose Evans-Pritchard has covered world politics and economics for 25 years, based in Europe, the US, and Latin America. He joined the Telegraph in 1991, serving as Washington correspondent and later Europe correspondent in Brussels. He is now International Business Editor in London.

[4] Kondratiev waves (also called Supercycles, surges, long waves or K-waves) are described as regular, sinusoidal-like cycles in the modern capitalist world economy. Averaging fifty and ranging from approximately forty to sixty years in length, the cycles consist of alternating periods between high sectoral growth and periods of relatively slow growth. Unlike the short-term business cycle which in various forms has been familiar since the nineteenth century, the long wave of this theory does not belong within current orthodox economics and is sometimes categorized as part of heterodox economics (a catch-all term for alternative ideas to economic ideologies in force). http://en.wikipedia.org/wiki/Kondratiev_wave

[5] The Conscience of a Liberal July 28, 2010, 10:12 AM Japanese Debt And Growth http://krugman.blogs.nytimes.com/

[6] “Krugman's nostrums are hence sealed in the latrines” http://www.stars21.com/translator/english_to_latin.html

[7] Inefficiency in California, Greece and Other Places and the Socialist Disease of Parasitism: They will NOT stop spending and WILL default.

http://rycksrationalizations.blogtownhall.com/2010/03/05/inefficiency_in_california,_greece_and_other_places_and_the_socialist_disease_of_parasitism_they_will_not_stop_spending_and_will_default.thtml

[9] Krugman Applies Protosimian Logic to Health Care. Big Government and Higher Taxes! Of Course!

http://rycksrationalizations.blogtownhall.com/2009/07/31/krugman_applies_protosimian_logic_to_health_care_big_government_and_higher_taxes!_of_course!.thtml

http://tinyurl.com/28yd3l2

[13]Keynes himself placed equal emphasis on redistributive taxation and a monetary policy of ‘cheap money’ as well as fiscal policy, and he did not believe governments should run deficits for current consumption, as opposed to public investment. He was by no means a socialist in the usual sense and did not advocate big government for its own sake.”[13]Wikipedia on the Keynes book: The General Theory of Employment, Interest, and Money 1936 [3-

4 years after the low point of the depression.]

[16] Krugman Confuses Bacchus, Baucus and Baloney with the Threshold for Healthcare. Not Enough Big Government in the Latest Episode

http://rycksrationalizations.blogtownhall.com/2009/09/18/krugman_confuses_bacchus,_baucus_and_baloney_with_the_threshold_for_healthcare__not_enough_big_government_in_the_latest_episode.thtml

[21] In honor of that celebrated Communist stooge and liar and winner of the Pulitzer Prize for the NYT. The color RED is used in my essays in honor of Walter Duranty, a saint, if there could be one, in the Marxist Archives of Honor.

He said that these people had to be "liquidated or melted in the hot fire of exile and labor into the proletarian mass". Duranty claimed that the Siberian labor camps were a means of giving individuals a chance to rejoin Soviet society but also said that for those who could not accept the system, "the final fate of such enemies is death." Duranty, though describing the system as cruel, says he has "no brief for or against it, nor any purpose save to try to tell the truth". He ends the article with the claim that the brutal collectivization campaign which led to the famine was motivated by the "hope or promise of a subsequent raising up" of Asian-minded masses in the Soviet Union which only history could judge.” http://en.wikipedia.org/wiki/Walter_Duranty

[22] In honor of that celebrated Communist stooge and liar and winner of the Pulitzer Prize for the NYT. The color RED is used in my essays in honor of Walter Duranty, a saint, if there could be one, in the Marxist Archives of Honor.

He said that these people had to be "liquidated or melted in the hot fire of exile and labor into the proletarian mass". Duranty claimed that the Siberian labor camps were a means of giving individuals a chance to rejoin Soviet society but also said that for those who could not accept the system, "the final fate of such enemies is death." Duranty, though describing the system as cruel, says he has "no brief for or against it, nor any purpose save to try to tell the truth". He ends the article with the claim that the brutal collectivization campaign which led to the famine was motivated by the "hope or promise of a subsequent raising up" of Asian-minded masses in the Soviet Union which only history could judge.” http://en.wikipedia.org/wiki/Walter_Duranty

[23] The Rape of the Your Wealth: Obama and his Illegal Aliens are set to Regulate and Redistribute All that you have.

http://rycksrationalizations.blogtownhall.com/2008/10/20/the_rape_of__your_wealth_obama_and_his_illegal_aliens_are_set_to_regulate_and_redistribute_all_that_you_have.thtml