Sunday, August 30, 2009

The terrorist state comes closer

No2ID has put a full-page ad in The Spectator (p.47) saying that the Home Office plans to make issuing your next passport conditional on your agreeing to be on their super-database.

Wikipedia says, "All British passports are issued in the exercise of discretion by Her Majesty's Government under the Royal Prerogative. In any event, discretion must be exercised reasonably and not on a whim, and even though there is no statute governing the issue of passports, such prerogative powers are susceptible to the normal processes of judicial review (Council of Civil Service Unions v Minister for the Civil Service [1985] AC 374)."

I've read somewhere that there was a time when the British could travel abroad without a passport. And according to "Stiggy" on the No2ID message board, it's still legal to do so - I'd be interested to know if this is so, and how it could be done.

"Get out of the market" - RBS strategist

A caller to the excitable Max Keiser's show (htp: Nathan Martin) quotes from a statement by Bob Janjuah at Royal Bank of Scotland, warning clients to cash in and hunker down while the market tests "new lows". (And Jesse says "wealthy insiders are increasingly trying to liquidate investment positions to raise cash and diversify their holdings into cash and hard assets.")

Keiser got wide attention in July when he referred to Goldman Sachs as "scum" and (I think, not incorrectly) said that the practical results of some of their activities were worse than terrorist atrocities. Protests like this make no difference, except that they may relieve hearts clogged with helpless anger: what we've learned recently is that the shameless tenacity of politicians and bankers will outwear public indignation.

But society may change when everyone gives up looking to the the über-scum to help, and concentrates instead on personal benefit and survival. I think I may not even bother to vote in the next General Election.

Oh, and Nathan Martin also directs us to an article by Robert Kiyosaki, who compares the market to a dead frog galvanized by ever-higher charges of financial electricity until "Pretty soon the dead frog will be fried frog." Kiyosaki cites demographic change as a major threat in the long term.

How much does education matter?

Greg Mankiw thinks that correlating SATS scores and subsequent earned income misses the point that inherited intelligence are a factor in both. This appears to be supported by the graph in Alex Tabarrok's blog that shows "higher parental income predicts higher child income but only for biological children and not for adoptees."

David Davis points out that the £45,000 true cost of a university education is not always recouped by graduate earnings. (See also Charles Hugh Smith's piece, "Is Higher Education Worth a Lifetime of Debt?")

I have read that there is a positive correlation between shoe size and IQ. Public policy is to buy big shoes for everybody so they get smarter.

Hitchens against war

Really fascinating article by Peter Hitchens today, on what the world might have looked like if Britain had not declared war in 1939. And a wonderful three-paragraph (in the print edition) pudding of complaints about our present condition:

... if we won it, how come we look back on the Second World War from conditions we might normally associate with defeat and occupation? We are a second-rate power, rapidly slipping into third-rate status. We have a weak currency and shrunken armed forces, deployed as auxiliaries in wars that are not in our interest, and we are largely governed from abroad.

Our Parliament is a bought and paid-for puppet chamber. Our culture and customs have been debauched and our younger generations corrupted, as subject populations are, with drink, drugs and promiscuity.


We are compelled, like an occupied people, to use foreign measures to buy butter or meat, and our history is largely forgotten or deliberately distorted in the schools to suit anti-British dogma. Those schools are unable to educate most of our children up to the levels of our main rivals, so ensuring that we provide no challenge to them. Our country has been Balkanised into provinces and regions. Our language is invaded by foreign words and expressions. Our food and most of our consumer goods are imported, along with our TV programmes and films.

The remaining veterans of the supposedly glorious struggle, far from being gratefully honoured, often live in pinched poverty, scared of feral youths, or die neglected in squalid hospitals in a country many of them no longer recognise as their own.

A little over-egged, but still tremendously good.

Saturday, August 29, 2009

HSBC: Britain's safest bank

... at number 18 in the worldwide list. 4 of the top 10 are German; the safest US bank (Bank of New York Mellon Corp) is at #32.

Meanwhile, the Daily Finance is sanguine about the US banking system, reporting the view of several analysts that the total number of failures will merely be in the hundreds, as opposed to Nouriel Roubini's "much too high" 2008 prediction of 1,200.

Reborn investment banker asserts legal right to bonus

Cold turkey would kill the US debt junkie



Reading Jim from San Marcos' latest, it occurs to me that debt default looks like a seriously bad idea - cutting off your nose to spite your face doesn't come into it.

Tuesday, August 25, 2009

Debt, unemployment and escape routes

Interesting observation by Steve Keen: unemployment correlates closely with the amount that debt contributes to demand in the economy.

Let me try to reason out the consequences, however inexpertly.

So, as everyone scrambles to cut spending and get out of debt, unemployment will soar. Since there is a great deal of international trade, the hit will be felt internationally.

Then government finances will come properly unravelled, especially in countries that have generous social welfare provisions. Worldwide, sovereign states will look for anyone who has real money to lend.

This should result in higher interest rates, but that would make the cost of debt, and its sustainability, extremely difficult, both for states and for corporations (and the burden on the latter will tend to result in even more unemployment and more claimants on the government). A rise in rates would also hit holders of long-term government debt, which may be one of the reasons the Chinese have been swapping that for shorter-dated Treasuries. A collapse in bonds will affect the capital value of pensions and investments, oh dear.

Another way out is default on debt. But who will be hit by that? Not just foreigners, but our pensions and managed investment funds.

A third way, which given that we have history to learn from doesn't seem likely, is the true hyperinflation approach. Germany in 1923, Hungary, Argentina, Zimbabwe... do you really see this happening here?

Then there's the downgrading of debt, with corresponding falls in the traded value of the currency. We've seen some of that - what, 20% off the pound? - so maybe there's more to come from that direction. Except other countries may follow suit. In 1922, if you were a far-sighted German, I suppose you might have sold marks and bought dollars; what currency would you buy now?

Or there's "more of the same" again - talking up the economy and pumping in cash until you spend because you daren't leave it to rot in the savings account.

Which way will it go? Where will it all end?

Housing (and the stockmarket) bear rally

For more, see Smith's redoubtable blog.

Monday, August 24, 2009

More on Al-Megrahi

Should an innocent man stay in jail to assuage our feelings about Colonel Gaddafi? A member of the Scottish Parliament thinks not.

And the total number of visitors to Professor Robert Black's blog has leapt 50% in the last week. They also serve, who only stand and wait.

The world may not be flat, but the universe is... or maybe not


Does dark energy exist? And if it doesn't, what about dark matter? These two are supposed to constitute 96% of the universe - and we get to see the other 4%. Or is it 5%. Or maybe not.

I'm sticking to Marmite. Though even there, theological problems rage.

Credit contraction is outpacing monetary stimulus

"... the Eurozone, the UK, Japan, and essentially every county on the planet is all attempting some sort of stimulus plan or other. This is bound to cause a major distortion at some point, as no country has anything remotely close to an exit strategy for this. What kind of distortion and when cannot be certain because we are indeed in uncharted territory, worldwide."

- Mish.

The more I read around, the more uncertain I become. All I have is my instinct, that things are out of control and we're being told fairy stories to lull us.

Mish's argument is that "The credit bubble that just popped exceeded that preceding the great depression, not just in the US but worldwide. Thus, it is unrealistic to expect the deflationary bust to be anything other than the biggest bust in history. Those looking for hyperinflation or even strong inflation in light of the above, are simply looking at the wrong model." If he's right, it's cash is king, for a long time to come.

Thursday, August 20, 2009

Freedom and healthcare

I've just watched Daniel Hannan's address to Americans on the dangers of a nationalised healthcare system. I, too, want America to carry on holding up the torch of freedom and democracy that is being doused here in the UK, so that one day we'll be able to re-light ours from theirs.

But it seems to me that if you want private solutions for problems which all have (or will have), but not all can afford, then you must address the question of inequality of resources.

Peter Rogers, co-creator and producer of the Carry On film comedies, once remarked he would 'do anything for my actors except pay them.' Similarly, so much is done for us in the UK, perhaps so badly, in the way of health and education (to name but two functions), when it might work so much better if we had the money personally and could make our own decisions.

We are witnessing a concentration into ever fewer hands on both sides the Atlantic, not only of power but of economic wealth. Every dollar and pound is a vote in the daily election of goods and services. To use the terms of the French national motto, if we wish for liberty but mistrust fraternity, then perhaps we should contemplate some redistribution of wealth to restore a greater degree of equality.

For example, how about some form of credit card (funded from general taxation and directed to individual accounts) that can only be spent on defined areas of need, but the holder to determine how to use his/her budget to best effect? Something like the educational voucher idea, but radically extended?

New fiction website

I've set up a new blog for fiction with a topical twist. The first story is about the euthanasia debate. The site is called Future His Story. I hope you like it; if you do, thanks for reading it and please let others know.

Wednesday, August 19, 2009

The long crisis, and the rediscovery of the family

Calculated Risk plots the actual and projected change in demographics from 1950 to 2050, adds the observation that over-65s cost 3 times as much in medical care as their juniors, and the rest is future history.

Meanwhile, Leo Kolivakis looks at the looming meltdown in US pension schemes, mirroring what's going on now in the UK.

Long term, it looks like down with house prices (since the younger generation will have much less free income to take on debt) and (thanks to the oldies' rising income need) down with stocks.

Nurture your young.

... and the money trickles up

... Americans will thus pay for the TARP and low interest rate subsidies to their financial rulers with erosion in the purchasing power of the dollar. What we are experiencing is a massive redistribution of income from the American public to the financial sector.

- Paul Craig Roberts (htp: Jesse)

The ranks close

...the US has a finance and policy elite defined by college ties and related social connections, an elite with a strong sense that only people in their circle can really be trusted, and that their institutions must be saved at all cost at taxpayer expense if necessary.

- Robin Hanson

The energy crisis

There's much talk of looming energy problems - it's a staple of Nick Drew's blogging and even The Economist has now turned its attention to it. Today I see Brian Gongol has netted a story about battery development and how it could support the energy infrastructure.

But how much could we still do in the way of more efficient use, and non-use, of energy? According to this DTI report based on 2001 stats, the home uses 31% of the nation's energy (see Chart 1.3 on page 9). Chart 1.6 shows that in 2000, space heating accounted for 40% of all non-transport energy consumption.

More woolly pullies?

Tuesday, August 18, 2009

Law

We've been renting a house and now it's about to be sold; but the purchaser is delaying the exchange of contracts, with good reason:

The house has a fabulous view southwards, across fields and woods to the silver river and the sea beyond. This is an Area of Outstanding Natural Beauty, which is also a Site of Special Scientific Interest, so it should be highly protected. However, the field immediately in front is owned by a farmer who wants planning permission to build six houses on it. He's tried several times before, and although he's on the local council himself, he's been turned down each time, so far.

I jest to the owner of our house: "Have you tried dropping a few rare species in the field?"

"There are rare species. The Authority wrote a letter to him saying that they would be conducting a field survey. When he got the letter, he mowed the whole field - right down to the ground. Then he sprayed it all over with weedkiller."

Saturday, August 15, 2009

I see a bad moon rising

... sang Creedence Clearwater Revival. And as Panzner points out, inequality and growing poverty are factors that destabilise society.

He reproduces a graph (see below) that shows inequality is now higher than it was just before the Crash of 1929. The line also suggests that the rich do get hurt when the economy goes down - but they still do very well compared to the "ordinaries":
See where the least inequality came? Around 1980 - just when "it was decided" that lending and debt should take off and power a generation-long series of bubbles. Please see below my graph from June, which shows that political conservatives can be far from conservative when it comes to handling the nation's finances:

Friday, August 14, 2009

Market signals

At the hospital shop, a woman puts a £1.15 bottle of mineral water on the counter. The till operator says, "If you buy a Telegraph, the water's free."
"How much is the Telegraph?"
"90p."
"Okay." She rings it up. "Do you want the paper?"
"No."
She folds it and puts it to one side.

Everybody happy.

Thursday, August 13, 2009

A gross miscarriage of justice?

The proposed release, on medical and compassionate grounds, of the supposed Lockerbie bomber Abdelbaset Ali Mohmed Al-Megrahi, is controversial and currently leads the TV news agenda here.

It is well known that GP Jim Swire, who lost his daughter in the atrocity, attended the trial in the Netherlands and became convinced that Al-Megrahi was innocent of the charge laid against him.

It is also most interesting to read a blog set up two years ago by Robert Black QC FRSE, Professor Emeritus of Scots Law in the University of Edinburgh. His blog supports Swire's contention and discusses the way in which the legal case against Al-Megrahi was conducted. The very first post contains this paragraph:

It is my firm view that the crucial incriminating findings made by the judges were unwarranted by the evidence led in court and were in many cases entirely contrary to the weight of that evidence. I am convinced that no Scottish jury, following the instructions traditionally given by judges regarding the assessment of evidence and the meaning and application of the concept of reasonable doubt, would or could have convicted Megrahi. So how did it come about that the three distinguished and experienced judges who concurred in the verdict felt able to convict him?

Black summarises and comments critically on numerous points of evidence and the court's findings in relation to each. He posts again today and says:

The families of Pan Am 103, as victims, deserve justice; they deserve to know the truth. My own dark thought is that any decision made by Mr MacAskill will not really be based on compassion but on political expediency. There seems to be a desire to get Mr Megrahi out of the country and to have the appeal halted at all costs. Perhaps the Crown Office and governments fear what might be revealed as the appeal continues.

Black's blog stat counter shows that he has had only some 33,000 visits since October 2007. Perhaps, reader, you will look at what he has to say and encourage others to do so.

Tuesday, August 11, 2009

Taking a break from blogging - back soon


Liberty: a debating point

We've been arguing liberty vs addiction recently, and my own latest comment is:

Libertarian laissez-faire needs to mean more than simply standing aside and watching the rich and powerful cock it up for everyone. Paradoxically, libertarianism implies some kind of rule-setting and limitation of power.

Does that seem reasonable?

Monday, August 10, 2009

Back where we started

As concern grows for the future of the dollar, we should reinterpret stock movements to take account of currency exchange fluctuations. The above chart shows the Dow since the start of the year (red line) and adjusted for relative value of the US dollar against the Euro (green line).

If you have any suggestions as to what other currency to use instead, I'd be glad to read them. I fear that future weakening of the British pound and the US dollar may well undermine apparent future recoveries on their stock exchanges.

Sunday, August 09, 2009

Why are you doing so well, dummkopf?

The Economist has its needle so stuck in liberal economics that its leader writer almost audibly busts a gut trying to find something wrong with Germany. As far as I can see, the daft Krauts are to be roundly condemned for...

1. Basing their economy on manufacturing
2. Running a trade surplus
3. Saving money instead of spending it on more imports
4. Not paying others to provide services they can perform for themselves
5. Not lending money to encourage more new businesses to start up (despite the fact that, as I learned years ago, 80% of new enterprises fail within two years)
6. Allowing women to stay at home
7. Saving jobs in order to preserve the skill base

We should all be so stupid.

A couple of days ago, I tried reading The Guardian newspaper again, and although there were one or two peanuts to pick out of the ordure, mostly it was, as I said to my wife, "Facebook for tw*ts". The writers even include their pictures in their by-lines so you can see they're still congratulating themselves on how well they used to do in the sixth form debating society.

But I think The Economist may have beaten them by a short head this week.

Addictive behaviour is the West's major challenge

"I finally decided to give up", say some. Yet I made that decision about smoking many times, before the last time (1977) that worked. I haven't seen an account of how to make a decision that sticks. Otherwise most of us would be slim, fit etc.

Gerald Durrell, in "My Family and Other Animals", tells how as a child he let his sister take care of some orphaned baby hedgehogs while he was away. He told her to be strict with the milk, not to overfeed. When he came back, he found that she'd fed on demand and they'd all died, because they couldn't stop demanding.

We live in a society that has plentiful cheap food, readily available and aggressively marketed alcohol, easily obtainable tobacco, easily found illegal drugs (and glamourised a thousand times by the media), computer games everywhere. It's surprising that anything gets done.

Some argue for decriminalisation of "harmless" drugs like cannabis, contrasting it with the undoubted dangers of alcohol. I agree with them in a way they won't like: alcohol is far too easy to get hold of.

Libertarians overestimate the amount of control we have over our behaviour, I think. Sartre argued stubbornly against the theory of the unconscious, because it undermined his philosophy of existentialism. I incline to the Buddhist analysis, that we continually form strong attachments and only the most determined can break the chains. Few manage it on their own. Some would say only 5% per year break free of alcohol, and perhaps a far smaller percentage stay off it permanently.

In our debates on liberty, should there be some discussion about restrictions that make us more free?

Forget the teepee

Green, not hippie, is Tim Smit's view (htp: Brian Gongol)

Perhaps more practical is the Transition Towns initiative, which has already recruited Totnes and Monmouth, for example.

And an even wider perspective is offered by Charles Hugh Smith's thoughtful "Of Two Minds" blog, which is founded on the principle that individual survival is necessarily a collective issue. He believes in this so firmly that he is making his book* available for download free of charge. * "Survival+: Structuring Prosperity for Yourself and the Nation"

Social implications of advancing technology

... the economic problems of the future will not be about growth but about something more nettlesome: the ineluctable increase in the number of people with no marketable skills, and technology's role not as the antidote to social conflict, but as its instigator.

The battle will be over how to get the economy's winners to pay for an increasingly costly poor. ... In a future with higher taxes, the divide between rich and poor would be the central economic challenge.

- Economist's View

We're in for a big theoretical debate with highly practical consequences. Liberty, individualism, redistribution of wealth, where the wealth comes from in the first place, what is the Good Life... There must be somewhere between Goldman Sachs and Karl Marx. I don't like the two-party State (cosy-cosy) and I don't like bipolar philosophy.

Interpreting US LTV problems

"Almost one-third of all U.S. households have no mortgage. If you adjust for that, the 70-80 percent debt-to-equity ratio suddenly becomes a major challenge because it means that the two-thirds who do have a mortgage already face a debt-to-equity ratio in excess of 100%. Even worse, once the mean reversion has run its course, two-thirds of US households will be facing a debt-to-equity ratio of 120-125% on average. U.S. CONSUMERS ARE EFFECTIVELY BROKE."

New Deal (htp: Credit Writedowns)

Has he got this right?

And how about us in Britain? Can anyone make sense of it for me?

Saturday, August 08, 2009

Bubble 3

It's getting to the point where things go worryingly quiet. First we had a speculative and debt-fuelled stock market bubble; then ditto a housing bubble; and now that the US/UK governments have swallowed the grenades of debt instead of throwing them over the firing-step, a government finance bubble.

I started this blog two years ago, because I thought precious few people sniffed what was in the wind - though I've since discovered that there are quite a few, mostly in the US, who did. I don't know why the UK is so poor at this, unless it's to do with not being used to retaining much of our income. Or a hangover from aristo-landlord days, of pretending to be uninterested in money but always expecting it to be there when needed.

But where can I go from here? There's not much point in continuing to cry iceberg when the ship's side is ripped open. Both Karl Denninger and James Kunstler are saying today that the disaster is far from over, the difference between the two being that Denninger still believes in fixing it with due legal process and decisive action, whereas Kunstler has no such hope and almost looks forward to the final scene because it will usher in a postmodern bucolic age and restore human values. (Kunstler's latest echoes what I've said recently, about drawing some cash for just in case.)

I feel like the Chinese philosopher who dreamt he was a butterfly and when he woke, was not sure whether he wasn't a butterfly dreaming he was a Chinese philospher. The sun shines (beautifully today), I have my teaching to prepare for September, I am proceeding with my plan to revive my IFA business. And yet these projects seem insubstantial, a soapskin full of emptiness.

For now, I have to go on with the assumption that Denninger is right - that when it gets bad enough, tough action will be taken and we'll pull through. That's the horse I'm backing. For I don't believe the proto-Marxist fantasy that a better society will rise out of a collapse, especially not on an overcrowded island like the one where I live.

Off on my hols again next week; and when I get back, time to tackle real life.

Swirly Marmite

According to this and this, the "dark matter" (that nobody can observe directly) influences the distribution, spin and orientation of galaxies. As Haldane said, "The Universe is not only queerer than we suppose, but queerer than we can suppose."

Bias

Thought-provoking article in The Guardian today, about how even medical research can end up with an unreliable consensus skewed by influential reviews:

A small number of review papers funnelled large amounts of traffic through the network. These acted like a lens, collecting and focusing citations on the papers supporting the hypothesis.

Worse, science can be "spun":

One paper reported no beta amyloid in three of five patients with IBM, and its presence in only a "few fibres" in the remaining two patients; but three subsequent papers cited this data, saying that it "confirmed" the hypothesis.

This is an exaggeration at best, but the power of the social network theory approach is to show what happened next: over the following 10 years these three supportive citations were the root of 7,848 supportive citation paths, producing chains of false claim in the network, amplifying the distortion.

This leads one on to consider the implications of social network theory. I suppose it's a talent for this that helped Mao and Stalin rise, but also it may explain how people in other fields (e.g. finance and banking, the media) can be both successful and dangerously dumb. (Remember Mao's bright idea of 1958, culling sparrows because they ate crops? The resulting explosion in the crop-gobbling insect population forced him to ask Russia for thousands of birds to restock).

And have you watched the celeb version of "Who wants to be a millionaire?" and been struck by the ignorance of some of them? Yet they know enough (of what they need to know) to make a sight more than most of us. The technique seems to be, get the job first, then learn how to do it from those around you. Duffers try to learn first, then apply for the post, by which time it's gone. Look at chancer Blair as against plod-towards-it Brown. (Some say that Blair has never read a book; but then, he doesn't need to. As Disraeli said, "When I want to read a book, I write one.")

Connected to social network theory is Cass Sunstein's notion of "group polarisation", where like-minded people get together, not only reinforcing their views but making them more extreme. I suppose this has implications not just for political caucuses and media advisers, but for how we choose our newspapers.

And what blogs we read.

Happy or clever

"If you're so clever, why aren't you happy?" a friend's mother would say to him.

I'd turn that around. I think that for some, being unhappy is what stimulates the mind. That doesn't mean that I believe it's a good thing; it's just that your brain accelerates, looking for a way to survive. Having taught Looked After Children for a couple of years, I'd say that typically, although they were academic under-achievers, they were unusually sharp for their age in other ways. Maybe that's also why girls from broken homes become sexualised earlier.

But the one thing that all this cleverness doesn't address is the root of the cleverness itself. It may seem an impertinence to judge people one hasn't met - though that is the bread and butter of the modern media - but would you regard, say, Stephen Fry or Dawn French as happy, well-balanced people?

A clever person is more likely to out-argue you than to put right anything about themselves. I've read that psychoanalysts find highly intelligent patients the hardest to cure; and that successful entertainers avoid seeking a solution for their neuroses, because it might turn off the tap of their talent.

I hope for a world that is fit, not for heroes nor for geniuses, but for the dully contented.

Thursday, August 06, 2009

Our Achilles heel?

The Contrarian Investor suggests that the next market destabilizing factor is the need for minor European nations to refinance.

Nail on head

The cure will be to increase the median wage, and to stop the transfer of the national income to fewer and fewer hands. For that is how the system is set up today. It is not the result of 'free markets' but a sustained transfer of wealth through regulatory and tax policies, and a pernicious corruption of the nation most significantly starting in 1980, although a case has been made for 1913.

- Jesse

Turkeys Reunited

Goldman Sachs are on the brink of a massive new consultancy contract, it is rumoured. An unnamed source within the organisation hints that ITV may be asked to take over Lloyds Bank and Northern Rock.

"ITV's £105 million operating loss is peanuts," said the trader. "We at GS paid out £1 billion more in bonuses than we got in bailout money last year. The guys at ITV don't think big enough. If they don't wise up fast, they could be in danger of making a profit."

This alleged development lends credence to the long-standing speculation that the American and British governments are secretly planning the creation of a "Super-Turkey", merging all remaining manufacturing, banking and finance into a giant loss-making enterprise that will employ increasing numbers of the population until everybody starves.

Wednesday, August 05, 2009

The power of ignorance

If we were as ignorant of what goes in political circles, as country folk were in the Middle Ages, how could we tell which party was in power? Unless we had been pressed into military service, wouldn't we pretty much go on as usual from day to day? The papers rage about tax but most people haven't a clue how much they pay in income tax and NIC on their salary slips. Is it OK, rational, to be politically apathetic? Isn't personal action to improve one's life 100 times more important than who you vote for every 5 years?

Tuesday, August 04, 2009

1984

It hasn't happened the way Orwell said it would, they keep saying. Yet:

The Children’s Secretary set out £400million plans to put 20,000 problem families under 24-hour CCTV supervision in their own homes.

They will be monitored to ensure that children attend school, go to bed on time and eat proper meals.

(htp: Mark Steyn)

Soon, I shall wake up and discover it was all a dream.

Monday, August 03, 2009

What's happening to houses?

Mish gives us a few interesting graphs on the US housing market and asks whether it's hit bottom yet. I did leave a comment but it disappeared, so here's the gist:

It looks as if most of the air has come out of the balloon - in the US. Houses doubled in 5 years, and in some cities have now halved again.

As the tide recedes, it uncovers evidence that the market is segmented - look for example at New York compared to the others. The "best" areas are holding up better, and I'll bet the best houses within those areas ditto.

I think this segmentation will continue to be important, because of growing inequalities of wealth. This has been going on over there since 1980, but also historically (as Fischer in "The Great Wave" points out) the rich get comparatively richer in times of crisis.

I also think that the not-the-best-but-better-than-average housing sector will enjoy support for some time, because I suspect that there are not a few people downshifting from the most sought-after areas. These will be aware that they could have got more if they'd sold in 2007 (when I was mooting a caravan to my dearest), but have still done okay and so will not haggle too hard to get that nice little place in the country, especially since many sellers are hanging on stubbornly, waiting for an upturn.

Here in the UK, we have much less land available for residential development, and nothing like the oversupply of housing that exists in the US, so quite possibly our house price bottom will not be so deep. Of course, if our government hadn't encouraged the (legal and illegal) import of masses of poor people who also need a roof over their heads, the picture might have been somewhat different.

In both countries, we still face long-term economic decline; lower real wages as we continue to lose our manufacturing sector, higher energy and food prices and so on. So I expect house prices to continue their decline in real terms over the next generation.

On average, that is. I think we can take the Blair's real estate coup in Connaught Square as not untypical of what will happen in the best end of the market. Speaking of whom, I note that Tony's practising the "sneer of cold command" these days. Pitiable, really.

The dam may break after all

Jesse reports on another big bank about to go down; Karl Denninger speculates that the FDIC is colluding in the cover-up of widespread bank insolvency, so it isn't forced to step in when there's no money left in its kitty - for the only thing after that is load more of the losses onto Uncle Sam, i.e. the taxpayers and all our descendants.

If the pressure continues, maybe we'll end up doing what some have said all along needs to be done: step back and let the losers fail, to flush all the rubbish out of the system. Well, all the rubbish that Uncle Sam hasn't already been forced to eat.

More difficult for us in the UK, though, since we don't have lots of second-tier banks ready to take over the loan books. Maybe Barclays and HSBC will profit enormously? Or how about the Bank of China, now moving into the British market?

Sunday, August 02, 2009

A great mood-lifter

The penny drops

So, why Chloe Smith? Why is a 27-year-old accountant suddenly an MP?
Then it dawned on me: newsreaders. That's what they are today.
Doesn't mean they're stupid (Chloe got her first class honours) or unskilful (the swan above, the paddling feet below); but it's a different skill set, and a completely different function.
Can't remember when we were asked about this change of job description, though.

Do you want to be happier?

A British professor is urging us to join in his experiment to see how we can make ourselves more happy.

Why do I feel oddly reluctant? Do you feel the same?

An answer to that, might go a long way to explaining why we aren't as happy as we think we ought to be.

I think it's something to do with identity, and the personal past. We cling on, afraid that we'll fall endlessly if we let go; but maybe we're gripping an anchor on the sea floor, and will float towards life when we open our hands.

Saturday, August 01, 2009

Green news

Overnighting in the South Hams, we pass Dartington Primary School, which is relocating nearby to a £6 million purpose-built zero-carbon site. Interesting.

As it happens, this year's Key Stage 2 SATS English (for 11-year-olds) was about low-environmental-impact housing - the Earthship.

Should I be for or against? Is this Marie Antoinette territory - a dreamworld for the well-heeled - or is it the way forward for us all?

A simple question

All these bankers and investment houses jumping up and down on the bed until (inevitably it seems, one day) the springs break... where do they invest their own personal money? How do they hope not to share in the debacle, when it comes? Or is the strategy to become so obscenely rich that they can afford to lose 90% and still be rich?

Friday, July 24, 2009

Turning point; hiatus

Reading around in the wisdom of others, I predicted Dow 9,000 here, here and here. Now it's happened. Good for you day-traders, but a fraidy-cat like me is staying away.

Since Marc Faber and others have been saying for some considerable time that they can't see anything worth getting into, and now the dollar is getting closer to having the carpet yanked out from under its feet, and the British pound may follow suit thanks to the miserable state of the British economy, and China is busy blowing an inflationary bubble to maintain its vampire trading relationship with the West, and the gold-bugs are chirruping ever louder (though the US Government might not only seize gold as it did in 1933, but for those smarties who invest in overseas gold stores the bad news may be that Uncle Sam will also seize US citizens' title to those stores), the question is... where to hide your stash?

For the private investor, maybe part of the answer is to look at the currency market, for a country that isn't over-dependent on international trade, has enough natural resources to survive if the world system goes down, and is reasonably stable by second or third world standards. Sadly, I have even less expertise here than elsewhere, but any thoughts on e.g. the Thai baht?

HIATUS

We're going on holiday now, to a place where cellphones don't work (and it's in the UK) and our place has no broadband. Best wishes to you all, hope to be back in touch soon.

Thursday, July 23, 2009

Out of their depth

The first serious, sensible, important piece I've seen from Toby Young, and it's a corker. He reflects on the well-heeled but louche and rackety Bullingdon Club, of which David Cameron and Boris Johnson were members:

... the theatrical element of Oxford's secret clubs and societies, the fact that so much of their activity seemed designed to dazzle and mystify bemused onlookers, is precisely what makes them such ideal training grounds for British public life.

... you don't have to be to the manor born to become a member of Britain's ruling class - or even particularly clever. You don't need charisma or sexual confidence or a sense of entitlement. All you need is the wherewithal to pretend to be someone who has these qualities. Provided you can do a reasonable impression of a person with the right stuff - and provided you wear the right uniform - that's enough to propel you to the top.

... The discovery that all these young pretenders make when they take their seats at the Cabinet table, or become QCs, or pocket £100million on a complicated land deal, is that the people at the very pinnacle of British society - the people pulling the levers of power - are exactly like them.

There is no such thing as the real McCoy, just a bunch of schoolboys parading around in the contents of the dressing-up box. They don't feel like frauds, because everyone else in this elite little club is as fraudulent as they are.

And when all is well, they get away with it. But when it comes to an emergency, a crisis needing skill, grit and sacrifice?

My father served his 25 in the British Army, and my mother used to say, "Thank God for civilians," i.e. the experienced people that would come in on callup when war broke out. Doubtless it's different now, with our much reduced and far more battle-experienced Armed Services, but in my father's career he met more than a few "educated idiots." Does the current crop of politicians and bankers have what it takes, including the moral fibre, to get us out of this mess? Or when it gets too tough, will they jump, like "Lord Jim" Blair, leaving us to our fate?

We're going to find out sooner than we'd like, if Denninger is right. He's looking at new Treasury debt issuance of $235 billion in the next week alone, and is busily folding his kitchen foil into a helmet:

Folks, this is how you get detonation of a nation's monetary and political system. Timing the "event" it is not easy, but the certainty of outcome given this sort of outrageously irresponsible activity is not in doubt.
I'm increasing my stock of things that "will never go to zero" and keeping my ear to the ground. The "short the phone book but make sure you get out fast before you get trampled" moment approaches - mark my words.

Wednesday, July 22, 2009

Mutter

In support of Man In A Shed's "Silly Week" campaign, may I suggest the libertarian blogger's alternative to Twitter: Mutter.

Up to 140 characters of mutinous grumbling in the comments, please. After a time, all will collated and republished in a new "feast o' bitchin' "post.

Think of of it as a kind of haiku for the disenchanted.

Monday, July 20, 2009

Doomsday scenario

Marc Faber is now using the phrase "total collapse". A commenter on this post says he's joking, because he's smiling, but I don't think the commenter understands European schadenfreude. The Dance of Death illustration on Dr Faber's website should warn you that he is in a very long tradition that sees death and disaster as the spice of our transitory existence.

Faber lives in Chiang Mai, northern Thailand, a country whose King is a proponent of national economic self-sufficiency. It's also worth noting that Chiang Mai is a fairly short air-hop from Burma, Laos and China; and that Dr Faber collects Mao memorabilia and has business interests in Vietnam. I see him as a long-term planner who covers all possible options.

As Dr Doom notes, "...a major crisis like we had should clean the system but nothing has been cleaned," so why should all be well again? But you could choose to side with Faber's co-interviewee Giles Keating of Credit Suisse; very nice accent, nice bearing - just the sort of thing the clients like.

However, witness also Karl Denninger today, commenting on a report that US Federal Government support for the economy could reach almost $24 trillion:

A couple of market technicians have noted certain "patterns" in the market that have potential downside targets of zero. That sort of thing normally results in a loud guffaw from me - even though I'm bearish I'm not that bearish - I couldn't imagine anything short of global thermonuclear war, ala "Joshua", that could lead to such an outcome.

Well I think I just found something purely economic that could lead to that outcome, and it's right here.

Be prepared. As the Greek saying goes, "There is no borrowing a sword in time of war." I'm going to go back to doing what I started to do a few months ago: draw extra cash and stash it in a locker. And some other things (though not weapons - the tiger is the endangered species, not the rabbit).

House prices to sink further

Barry Ritholtz gives his reasons why house prices will continue to drop - 15% to the mean, probably more - say 20%? (htp: Michael Panzner)

But the market is segmented. Maybe it'd be more useful to discuss the projected impact on different regions and price brackets.

Sunday, July 19, 2009

Step by step - how the dollar is recycled via China

A propos China and monetary inflation, please see two very useful and enlightening articles by The Contrarian Investor - this explaining why the money supply is growing there, and this detailing the steps by which money from the US goes on a round trip to China and back.

North Dakota? Or New Mexico?

Interactive WSJ diachronic unemployment map here. (htp: Tim Iacono)

Lost in fantasy

Following up my Parthian shot about Waldsiedlung in the previous post, I looked up Erich Honecker and discovered that one of his slogans in the 80s was "Vorwärts immer, rückwärts nimmer" ("Always forwards, never backwards").

Perhaps you remember Tony Blair's "Forward not back" in 2005? Or his "the People's Princess" (I thought I heard his throat tightening in a desperate attempt to stop the awful phrase coming out - Diana was an Earl's daughter - but maybe it was only a stage sob). And how about "In the years to come, wherever I am, whatever I do, I'm with you", weirdly echoing Matthew 28.

A schlock PM, turning eclectic sources into a mishmosh of gibberish less meaningful than Queen's Bohemian Fantasy, for the sake of a momentary, meretricious glamour. An extension of the "Spacematic DISCO with LIGHTS!!" of his Oxford student days.
Did he ever understand what he was playing with?

Locking the doors

The dethroning of the US dollar as the international trading currency is under way. New bonds issued by the International Monetary Fund in the form of "Special Drawing Rights" are related to a basket of currencies, thus diluting the dollar element and reducing America's opportunity to cheat the world by devaluation.

The same article describes a Chinese proposal to start issuing bonds denominated in renminbi, so that if the dollar does drop against the Chinese currency, all that will happen is that the dollar cost of the capital debt will increase.

It occurs to me that such extra security for lenders may help interest rates to remain lower than they otherwise would be. So the threat to borrowers is not that interest rates will increase, but that debt outstanding will continue to feel heavy, since inflation won't lighten the burden. In fact, the burden of foreign debt could get worse, if the dollar weakens in this new foreign-currency-mortgage era.

Another factor, which may be a deliberate strategy with an eye to the above, is China's own expansion of credit. If monetary inflation goes global - including in the East - then there's less hope that Western businesses could use relative currency devaluation to increase the demand for their goods and services. Manufacturers here will still be unable to compete and debt will grow. Our creditors will own us - we'll "owe our soul to the company store".

It's time to grasp the nettle - bust the banks who got us into this, have a tremendous clearout of debt from the system, reset wages and prices at lower (more internationally competitive) levels, get the people back to work and shrink the dead weight of government and its dependants.

That, or see what's left of our wealth leak away, and then suffer all the above as well - at even lower levels of per capita assets and income.

Doubtless the politically-favoured option is the latter - "Let it all happen on someone else's watch, after we've made ourselves into the New European Aristocracy and gone to our country estates." This would be a mistake. The palace of Versailles didn't protect Louis XVI, nor Waldsiedlung the East German communist elite.

Belling the cat

Karl Denninger calls again for the fat cats to "eat their own cooking", i.e. accept responsibility for the ruinous debt that will otherwise put a brake on the American economy for a decade. Good luck with that. Now, who's going to make them do it?

This is a test, not of the economy but of democracy.

Saturday, July 18, 2009

Signs and portents

Over at Financial Sense University, Jim Willie paints a frightening picture. He claims that the US Federal Reserve has been secretly giving dollars to foreigners to buy US Treasury Certificates, so (temporarily) supporting US bonds and the dollar. Meanwhile, big banks are waiting for smaller banks to suffers losses on commercial loans, at which point they will gobble up their smaller competitors. But the big banks are insolvent, so rather than a healing juncture, it'll be a vampire puncture.

Studying the US Dollar Index, Willie uses a measure that Karl Denninger has previously cited, namely, a comparison of two trends: the 20-week moving average with the 50-week moving average. When the first crosses the second, the second will eventually follow - in this case, downwards.

In my previous post, I referred to signs and portents. This is because when big things are happening, the fog of lies thickens, so we have to look for betraying details and use our intuitions. Art is often the canary in the mine - you hear the coming conflict in the discords of Stravinsky's 1910 "the Rite of Spring". The disturbed children that I teach have recently been exploring zombies. Some also play computer games at home, that involve stabbing opponents in the eyes or genitals. One child's graffiti tag is JABZ.

Doodling, they draw pistols, rifles, knives, swords; but still read Postman Pat and Spongebob Squarepants. Gossiping, they talk of their mother's vibrator, their father's merkin, but (at age 11) don't quite understand and are looking forward to learning the facts about sex next week, which our curriculum now requires me to deliver. They come in shadow-eyed from gaming, but also from (in one case) accompanying their father late at night as he hunts down and savagely beats people who tied up and soaked with petrol an uncle suspected of stealing a motorbike. Where are the police? you may ask; the father is an ex-policeman. The Monarch's writ does not run where our underclass have to live; to have normal social inhibitions would be dangerous in such an environment.

Some may accuse me of moral panic; but I didn't grow up with the currently prevailing sense of moral ambiguity, despair and social collapse. Are we breeding a nation of future child guerrilla-band soldiers? And how tragic, how culpable, that the entertainment industry is playing its part in this; and that the Government hopes to shore up its vote by perpetuating the financial dependence of its claimants.

But it won't happen to us, will it? "Wat geht dat mik an?" as the mediaeval Germans would say: "What's it got to do with me?" Years ago, my Prussian grandmother described Der Flucht, the flight from the Red Army in 1945. They would come to a farm and be very grudgingly permitted to sleep in the haybarn; two days later, the owners would be on the road themselves.

We are in this together; but I cannot see how the present political arrangement can tackle the challenges. There are too many ways for our leadership to be distracted, to be suborned and to escape consequences personally.

Crash, cash, gold stash

Max Keiser is emphatic that there will be another huge banking crisis within the next 6 - 9 months, and says that the Chinese are "aggressively" buying gold in anticipation of a currency collapse. His talk (esp. with regards to Goldman Sachs) is intemperate, as his French co-guest diplomatically points out, but he may be correct.

I don't know how it is for you in the US, but here the jewellers have recently been fielding TV ads offering to buy your gold. What a favour they are doing for you.

PS

Barry Ritholtz shares in a strange, ecstatic group experience.

This, I suggest, is a sign. Norman Cohn's mediaeval history "The Pursuit of the Millennium" notes that at times of great societal stress, there were mass outbreaks of spontaneous frenzied dancing, singing, visions.
Unconsciously perhaps, Ritholtz connects the two, for just before he describes the happening he says, "The multitudes were slowly moving thru the mass transit walkways like cows being led to slaughter." The people are feeling the fear and reaching for joy.

Friday, July 17, 2009

Prepare

Realistically, growth was far above where it should have been for close to seven years because of the Fed induced lending boom, insane lending standards, and extreme leverage and risk taking everywhere epitomized by "liar loans" and zero-percent down housing. Now is the payback time. We should be expecting growth to be below trend for the next seven years, with a few outliers tossed in for good measure to keep everyone excessively optimistic.


1 And it came to pass at the end of two full years, that Pharaoh dreamed: and, behold, he stood by the river.

2 And, behold, there came up out of the river seven well favored kine and fatfleshed; and they fed in a meadow.

3 And, behold, seven other kine came up after them out of the river, ill favored and leanfleshed; and stood by the other kine upon the brink of the river.

4 And the ill favored and leanfleshed kine did eat up the seven well favored and fat kine. So Pharaoh awoke.

5 And he slept and dreamed the second time: and, behold, seven ears of corn came up upon one stalk, rank and good.

6 And, behold, seven thin ears and blasted with the east wind sprung up after them.

7 And the seven thin ears devoured the seven rank and full ears. And Pharaoh awoke, and, behold, it was a dream.

8 And it came to pass in the morning that his spirit was troubled; and he sent and called for all the magicians of Egypt, and all the wise men thereof: and Pharaoh told them his dream; but there was none that could interpret them unto Pharaoh.

Thursday, July 16, 2009

The East is [in the] Red

Here's an interesting one: the Contrarian Investor reckons a credit bubble could be brewing in China.

For now, a cloud no bigger than your fist on the horizon; but sometime... This is how we ourselves started, back in the 80s.

Wednesday, July 15, 2009

Masters of the Universe vs. the Lord's Elect

A bright gleam has caught the helmets of our bankers. Goldman Sachs is set to pay an average £500,000 bonus to its London traders. This modest lagniappe is the equivalent of merely 20 years' median annual remuneration for NHS nurses. It is heartening to see that amid the gloom of an economy wrecked by... well, anyway, I'm sure we all agree that they deserve it. Indeed, more; but we must hope they may reasonably expect further such emoluments in the years to come. Nothing is too good for our money-boys, or for the politicians whom they will accommodate when put out to grass.

On an unrelated note, I've suddenly recalled the episode in Evelyn Waugh's "Decline and Fall" where Paul Pennyfeather meets a madman in prison:

"Well, one day I was just sweeping out the shop before shutting up when the angel of the Lord came in. I didn't know who it was at first. "Just in time," I said. "What can I do for you?" Then I noticed that all about him there was a red flame and a circle of flame over his head, same as I've been telling you. Then he told me how the Lord had numbered His elect and the day of tribulation was at hand. "Kill and spare not," he says."

Fortunately, the nutter's victim is a Modern Churchman, not a vitally important, wealth-creating banker.

Many market "shorts" are due to expire on Friday, I understand. Perhaps the market - a free and unmanipulated market, you may be sure - will change its mood next week.

PS

The S&P 500 closed above 900 points yesterday. "Mish" has said that it could easily fall below 500 points, or stall for years. He is against "buy and hold." So who profits if the poor layman is persuaded to stay in the market?

Regardless of what strategy one uses, it is a horrible idea to hold stocks throughout recessions.

Why Is Bad Advice So Common?

Clearly, stay the course is bad advice. So why is it so common? A personal anecdote might help explain things: In January of this year, an investment advisor from Wachovia Securities called me up and stated "Mish, I am sitting on millions because I see nothing I like". I told the person I did not like much either and that Sitka Pacific was heavily in cash and or hedged. His response was "Well, I do not get paid anything if my clients are sitting in cash".

I called up a rep at Merrill Lynch and he said the same thing, that reps for Merrill Lynch do not get paid if their clients are sitting in cash.

Massive Conflict of Interest

Notice the massive conflict of interest possibilities. Reps for various broker dealers have a vested interest in keeping clients 100% invested 100% of the time, even if they know it is wrong. And so it is every recession, bad advice permeates the airwaves and internet "Stay The Course".

We own you

The Big Picture selects several articles for us on US debt.

This one points out that to balance the US budget with borrowing, new bonds must be sold totalling 3 times the amount issued last year. Bearing in mind that there's less money around, and that people are getting nervous about America's credit rating, inflation and the value of the dollar on the international market, it seems very unlikely that this new debt auction would succeed; and if it did, it would have to be on the basis of higher interest rates, to factor-in the various increased risks.

Alternatively, it's time for the repo man - with a twist. Nassim Taleb and Mark Spitznagel suggest that banks could take part of homeowners' equity in exchange for lower interest rates. But if houses continue to decline in price? I bet the banks have thought of that, so if such a scheme were introduced, they'd want a bigger share than most homeowners would be willing to give them. My guess is that when houseowners realize that the market isn't going to turn soon, there'll be more voluntary bankruptcies and doorkeys in the post. That, plus rising and lengthening unemployment could set off the domino chain.

But returning to the Sprott analysis, note that late last year, 28% of US debt was foreign-owned. Look out for some form of debt-for-equity here - if not the sale of equities, then in the form of favours and concessions. He who pays the piper calls the tune.

Sunday, July 12, 2009

It's just the way things are?

UPDATE: The Big Picture begs to differ with the no-blame angle, and names names...

I've asked several times before, whether any country could have played it differently and avoided getting involved in The Crash. Then I read this article (htp: Jesse) about ex-BIS economist William White, and near the end there's an indication that maybe it's not simply about baddies and goodies:

White is more concerned about the things he doesn't understand. New Zealand is a case in point. Interest rates were raised early in the crisis there, and yet the central bank was unable to come to grips with the credit bubble. Investors were apparently borrowing cheap money from foreign lenders.

This is the sort of thing that worries him. "That's when you have to ask yourself: Who exactly is controlling the whole thing anymore?"

Perhaps his model has a flaw in that regard. Could it be possible that central bankers today have far less influence than he assumes?

The thought causes him to wrinkle his brow for a moment. Then he smiles, says his goodbyes and quickly disappears into a Paris Metro station.

...this time it vanished quite slowly, beginning with the end of the tail, and ending with the grin, which remained some time after the rest of it had gone.

They

Lots of people now muttering darkly. But if we think we know what They are up to, and think we can't thwart Them, there should be some way to exploit the situation. For example, if They are manipulating the price of gold to keep it down for as long as possible, then surely it's a great time to buy it before They run out of possible.

Can't we do better than call vainly for somebody to restore justice to the world? Because that's the one thing that won't happen.

So, any ideas?

For example, what to do about the New World Order coinage unveiled by Medvedev the other day?

If you have a son or daughter, would you advise him/her to join GS and their ilk? Or McKinsey? Or emigrate?

Saturday, July 11, 2009

KBO

From Colwyn Bay to Kettering
They're sobbing themselves to sleep,
The shrieks and wails
In the Yorkshire dales
Have even depressed the sheep.
In rather vulgar lettering
A very disgruntled group
Have posted bills
On the Cotswold Hills
To prove that we're in the soup.
While begging Kipling's pardon
There's one thing we know for sure
If England is a garden
We ought to have more manure.
Hurray-hurray-hurray!
Suffering and dismay.

Noel Coward.

Wednesday, July 08, 2009

An astrologer writes

Russell Grant is trenchant in his criticism of feckless governments and financial advisers.

Next market peak due in... 2018 - if society's still around by then

See here. Back in November, I figured that inflation-adjusted Dow took 16 years to decline from 1966 to 1982, and my guess is that we're on a similar inflation-fuelled ride, so starting with the last peak in 2000, we might think about hitting bottom in real terms in 2016.

On the other hand, history doesn't repeat, it rhymes. In 1966 China was... a disaster area. The world economy is much more interconnected now, and the tide is Eastwards, and big business is global. The company you invest in, if US or UK-based, may still be making good profits on its overseas earnings, even if domestic workers are all on the dole.

A recovery for the investors may happen sooner, and the market bottom may not be so deep in nominal terms (currency-adjusted is something else: look at what has happened to the dollar and pound; and what may yet happen). I think there's a big disconnect between the markets and Joe Average, since the extra wealth from 1980 on has mostly accrued to the top layer of society.

The concentration of money into fewer hands means that investment issues must inevitably give way to considerations of maintaining (repairing) the social and political fabric of our democracies.

Ho, ho


Sunday, July 05, 2009

Where did the funny money go?

A few days ago, I charted American public debt in the 2oth century. I also wrote to the Spectator (they didn't publish) to point out that Ronald Reagan and the Bushes were far from conservative when it came to fiscal matters, and that this did not result in benefit to the average American.

Now I come across a graph that makes it plain:

I suppose much the same happened here in the UK. So that's why we got all those posh-cooking and property-in -Provence TV programmes. We were encouraged to dream about the top echelon, not try to join them. As Eva Peron said, "I am taking the jewels from the oligarchs for you"; but somehow we never got to wear them ourselves. Not unless we went into hock for them.

This Wiki entry on the Gini coefficient remarks "Overall, there is a clear negative correlation between Gini coefficient and GDP per capita; although the U.S.A, Hong Kong and Singapore are all rich and have high Gini coefficients." Perhaps there is going to be a reversion to the standard international model: a poorer USA with a high Gini coefficient. Or (same source) a reversion to the social stratification of 1929:

"Gini indices for the United States at various times, according to the US Census Bureau:


1929: 45.0 (estimated)
1947: 37.6 (estimated)
1967: 39.7 (first year reported)
1968: 38.6 (lowest index reported)
1970: 39.4
1980: 40.3
1990: 42.8
2000: 46.2
2007: 46.3"

This blog projects a Gini convergence between the USA and Mexico - perhaps it makes sense, on the reversion-to-mean basis:

Friday, July 03, 2009

The sun also rises


... the governance of Britain which as we have said is semi-feudal, ruled by a few corporations and the wealthy elite in partnership with essentially a one party government.This will go a long way in helping to understand the "British disease" of economic stagnation. You start by crippling the middle class through debt indebtedness to a corporate elite.

So sorry, an error in transcription: for Britain and British, I should have written Japan and Japanese. Gomen nasai. But an understandable mistake, you may think. How much difference will a regime change in the UK make? The inclusion of Ken "fags and Bilberberg" Clarke on the Opposition team seems a deadly marker to me.

Returning to our muttons... Jesse has been focusing on the Land of the Rising Sun recently. He's pointed out that an ageing demographic structure is a major brake on the economy, especially with tight controls on immigration (though we in the UK may have have drawn the wrong conclusion from this); and today he looks at how the Japanese have organised themselves to reduce energy costs and oil dependency.

Especially the car: "I have long thought of cars as vampires sucking the economic life out of every household in the US. And the risk of death and serious injury from car accidents is about half what it is in the US (although the statistics may not be directly comparable)." And considered from a coldly economic point of view, think of the enormous overall costs of those deaths; and the possibly far greater costs of medical care and other support for the vast and growing army of injured and permanently disabled.

It's well worth reading the whole letter from Jesse's friend in Japan - not just about energy, but preventive healthcare etc. They walk to McDonald's - not waddle. They're organising themselves; so can we.

Wednesday, July 01, 2009

Market support

Denninger:

... a handful of banks, most specifically Goldman Sachs, constitute the majority of NYSE trading volume... This "back and forth trade" between a handful of institutions is nothing more than the old "pump and dump" game that has been played in the OTC market forever - and almost always screws the individual investor.

This is no different than you and I selling a house back and forth between us repeatedly, each time at a higher price. We both appear to be geniuses as we're both making a "profit", right?

Well, no. One of us is destined to take a horrifying loss if we do not find a sucker to make the final transaction with.

I wondered what was keeping it all up. And sooner or later...

P.S. Rob Kirby strongly suspects that similar manipulation is going on in oil and gold - one kept up, the other down. (For an update on the latter, click on the goldcam.)