Monthly Archives: September 2014

At last someone amongst the American elites has said it

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It has been obvious from the start but until now no one who has mattered has said it. Here is the story, Tom DeLay: Obama paralyzed by Muslim sympathies. Tom Delay, please note, had been the House majority leader not all that long ago. And this is what the story says:

President Obama’s left-leaning political ideology combined with sympathies for Islam acquired from being raised by a Muslim stepfather paralyze him as he faces the threat posed by the Islamic jihadist group ISIS, former House Majority Leader Tom DeLay told WND in an interview.

“In defending America against radical Islamic terrorism, Barack Obama cannot be trusted,” DeLay said.

“Barack Obama was raised a Muslim, and he claims he is a Christian, and I can’t say for sure whether he’s a Christian or not, but he has shown over the last few years that he has great sympathies with Islam,” DeLay explained.

“You combine that with Obama’s political orientation that is far to the left,” he continued, “and you get a president who hates war, hates the military, and you have a formula for military inaction when it comes to combating radical Islamic terrorists like we are seeing in ISIS.”

DeLay’s indictment of Obama did not end there.

“You add to mix that Barack Obama is incompetent, way over his head as president, and the whole combination produces a worldview that makes Obama detached and reluctant to take the type of the military action against ISIS that would be effective,” he said

DeLay concluded Obama “does not want to face the reality of the danger and threat represented to the United States by ISIS, and he does not want to admit the connections between al-Qaida and ISIS, because he refuses to understand that we are in a war against radical Islamic terrorism.”

If Delay is right, it would be like having a Nazi sympathiser in the White House in the middle of World War II or a communist as president during the Cold War. And what is remarkable, although reported at Drudge, it’s not a big story and I haven’t seen it anywhere else. But it would make Obama’s reticence in so much of what he does perfectly clear and consistent.

Imputed rents for housing

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In a previous post I mentioned the following:

The national accounts imputes the rising value of the houses we live in as a real increase in GDP so that we home owners are contributing to GDP by simply living in the places we bought years ago whose value has now gone up.

This seemed to come as a revelation to some. But it is worth dwelling on this along with much else that is faulty about the national accounts as a measure of anything. This is from a U.S. Bureau of Economic Analysis paper, Housing Services in the National Economic Accounts:

Housing services are a component of personal consumption expenditures (PCE), and consequently part of GDP, in the national income and product accounts (NIPAs). The rental value of tenant-occupied housing and the imputed rental value of owner-occupied housing are both part of PCE housing services, reflecting the amount of money tenants spend for the service of shelter and the amount of money owner occupants would have spent had they been renting. Owner-occupied housing is included in PCE because the NIPAs treat the owner-occupant as if it were a rental business, or in other words, a landlord renting to him or herself. That is, BEA imputes a value for the services of owner-occupied housing (space rent) based on the rents charged for similar tenant-occupied housing, and this value is included in GDP as part of personal consumption expenditures. This imputation is necessary in order for GDP to be invariant when housing units shift between tenant occupancy and owner occupancy.

Everybody does it the same (here is the Australian version although I don’t think it’s as clear). How the statistician adjusts the value of the houses we live in for national accounting purposes as its real value rises I am less sure about and would have been happy for some guidance. But if the rental-equivalent value of a house rises by 20%, it does seem that merely living in the place must show an upturn in the real value of consumption irrespective of whether anything at all has changed. Or so I understand. Something to keep in mind the next time you hear that consumption expenditure has gone up.

Bringing ruin to the USA

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You do have to wonder when there is going to be reaction against Y=C+I+G amongst economists. How do they explain this?

Record 92,269,000 Not in Labor Force; Participation Rate Matches 36-Year Low

The two theories of the Obama presidency remain intact: either he is an incompetent fool, or he has deliberately set out to ruin the United States. But whichever it is, he is certainly bringing ruin through every major decision he has made.

Kate Millett’s sister discusses her sister

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From Mallory Millett who is described as a CFO for several corporation living in New York:

It was 1969. Kate invited me to join her for a gathering at the home of her friend, Lila Karp. They called the assemblage a “consciousness-raising-group,” a typical communist exercise, something practiced in Maoist China. We gathered at a large table as the chairperson opened the meeting with a back-and-forth recitation, like a Litany, a type of prayer done in Catholic Church. But now it was Marxism, the Church of the Left, mimicking religious practice:

“Why are we here today?” she asked.
“To make revolution,” they answered.
“What kind of revolution?” she replied.
“The Cultural Revolution,” they chanted.
“And how do we make Cultural Revolution?” she demanded.
“By destroying the American family!” they answered.
“How do we destroy the family?” she came back.
“By destroying the American Patriarch,” they cried exuberantly.
“And how do we destroy the American Patriarch?” she replied.
“By taking away his power!”
“How do we do that?”
“By destroying monogamy!” they shouted.
“How can we destroy monogamy?”

Their answer left me dumbstruck, breathless, disbelieving my ears. Was I on planet earth? Who were these people?

“By promoting promiscuity, eroticism, prostitution and homosexuality!” they resounded.

A very sober article, not to be missed. And as one of those who read Sexual Politics in its first edition, I all too well know just how strong a message it had for its time. Nowadays its ideas are utterly mainstream.

Value added and economic growth

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I wrote about modern economics is such junk and then went out and picked up the AFR only to find across its front page that living standards in Australia are falling. The story opens:

The national income generated by each Australian has fallen for a second straight year, the first such slump since the early 1990s recession as the economy wears a sharp pay cut from the rest of the world.

Does anyone any longer base policy on the understanding that growth only occurs if what is poduced is greater than the value of the resources that are used up? The ALP set about killing off our most value adding industry through the mining tax and promoted such imbicilities as the NBN which will always be a drain on national productivity, now and forever as far into the future as you care to look. The only thing that is strange to relate is that the national accounts are even able to pick up that living standards actually are falling given what a faulty measure GDP intrinsically is. My son is astounded, as he hunts around for a place to buy, at the difference between the ratio of house prices to income in my day compared with his. The national accounts imputes the rising value of the houses we live in as a real increase in GDP so that we home owners are contributing to GDP by simply living in the places we bought years ago whose value has now gone up. That most of us could not afford our own homes today is neither here nor there.

Yet for all of the obstacles put in the way of the government by the Senate and Labor’s legacy, we are actually making progress. That the Government has been able to reverse the increases in compulsory superannuation is all to the good. These are very difficult times, but how difficult they will be when the US Fed finally does begin to raise rates is still to be seen.

Modern economics is such junk

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I was once again reminded about the multitudinous things that are wrong with economics today by two stories this morning. The first: Fed: US consumers have decided to ‘hoard money’. And then there was this: Cramped seats and angry passengers lead to diverted flights. Let me start with the first.

“Hoarding money” amongst all of the Keynesian idiocies is the most idiotic. Q: Why are people not spending? A: Because they are hoarding money. Q: What does it mean to “hoard money”? A: People are literally hanging onto cash rather than spend. And literally means literally. It means keeping money on hand and not even putting it into a bank.

It was idiocy in the 1930s when Keynes said it even though bank failures were not uncommon in the US. It has been a stupidity ever since as a cause of anything, and so far as I know, most textbooks tend to overlook this notion because it is so stupid. But not the Federal Reserve of St Louis:

One of the great mysteries of the post-financial crisis world is why the U.S. has lacked inflation despite all the money being pumped into the economy.

The St. Louis Federal Reserve thinks it has the answer: A paper the central bank branch published this week blames the low level of money movement in large part on consumers and their “willingness to hoard money.” The paper also cites the Fed’s own policies as a reason for consumers’ unwillingness to spend. . . .

“Why did the monetary base increase not cause a proportionate increase in either the general price level or (gross domestic product)?” economist Yi Wen and associate Maria A. Arias asked in the St. Louis Fed paper. “The answer lies in the private sector’s dramatic increase in their willingness to hoard money instead of spend it. Such an unprecedented increase in money demand has slowed down the velocity of money.”

These people are clueless about what’s going on, absolutely clueless. The lack of real income is crushing the American economy as the ersatz version driven by government spending has replaced the real kinds of income that are based on value adding production.

So what’s this got to do with the cramped seating on planes? Inflation means that what a unit of currency will buy diminishes. The same things cost more money, or the same amount of money will buy you fewer things. If you think of an airplane seat as a specific amount of room on an aircraft as you go from place to place, the inflation is coming in the form of less legroom and reduced space. On a cost per inch basis, prices have rocketed, but the CPI will never pick such things up.

The other way that the suppressed inflation is affecting things is in the way out capital structure is being run down. Again invisible using the national accounts or the CPI, but if you have travelled on an airplane in the US, just to give you one example, you can see just how decrepit the stock of capital in the US is becoming. The US, along with the rest of us, are finding our living standards declining because we are drawing down rather than building up.

Economic theory is such junk! But on a brighter note, the 2nd ed of my Free Market Economics will be released at the end of the month.

Airplane etiquette

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It is now a day later, I am back in Australia and no one else has blogged since my own last post. Everyone really must be at the Mt Pelerin in Hong Kong. I was scheduled to go myself but I could not pass up this trip to France and the discussion on Say.

But let me say this about air travel which gets better and compared to the really old days is incredibly cheap. But there is this one thing. Which is why this story interests me so much:

Legroom rage: Why a gadget that stops plane seats tilting back is starting fights on airliners

My own solution was to bring a rubber hammer for the people in front and a plastic helmet to defend myself against the people in the row behind. But it is not a small matter when there is hardly any space to begin with and you have pulled your trusty PC out to do some work. So now someone has come up with a solution:

You know the moment all too well — and dread it. Just as you’re getting a modicum of comfort on a flight, the seat in front suddenly pushes back, depriving you of valuable inches of legroom.

All you can do is to glower in a silent rage at the head of the other passenger, who has decided that by reclining his seat, his comfort is more important than ours.

However, some passengers have decided to get even rather than mad, by investing £13 in a gizmo called a Knee Defender, which its manufacturer claims is as ‘devious as it is ingenious’.

On this flight, the couple in front played gin rummy until the sun went down and then we all went off to sleep with our seats pushed back. But in the day time, I can understand the fury of anyone already crammed into an economy seat having what room there is taken from them. I think of it as the same as talking on the mobile in a loud voice while sitting on the train (and soon on the plane as well).

My own rule:

No pushing seats back until after the evening meal

I understand that on airplanes people have woken early to catch the 8:00 a.m. flight, and others are connecting from flights where whatever it might say on the local clock, it is still past midnight to them. But it is more than courtesy and a kind of etiquette needs to be developed so that at least we can work out who is in the right before the fights break out.

There was a time you could smoke on airplanes as well. Let us hope for a day in the future when people remember the time when you could put your seat back in the middle of the afternoon which by then they will no longer be permitted to do.

There but for the Grace of God

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I have just reached home and happy I am to be here but I must say seldom has any trip of mine been so complete. All my interests – economic, political and historical – came together so seamlessly that I only wish life was always like this.

Economically, the meeting on J.-B. Say and the Entrepreneur was an outstanding success. This being the first such meeting, it is of major significance that there is a casting about for some kind of successor paradigm to the fault-ridden neo-classical synthesis so accurately represented by Paul Krugman and Joe Stiglitz. As just a minor point, what became evident is that economists are useless at predicting the future so have substituted GDP estimates for actually knowing anything at all about the economy. If I tell you that Australia over the past twenty years grew by 50% and China by 150%, you would not have any idea about what either was really like, the kinds of economy each is or what is actually going on. Economists have substituted statistics for actual knowledge. It is all pretty useless, but if your aim is to pull wool over people’s eyes about what is taking place, GDP is a great number since it is almost meaningless as a statement about anything of significance.

Politically, it has been amazing to be here for the transition to a more market-oriented socialist Prime Minister. Every country is a hopeless case since the freeloaders have now overrun the productive. But if you are trying to manage the place, even the most dense political leader trying to re-engineer a recovery cannot help noticing that only those who make a net contribution to output actually create more value than they use up. A tremendous amount of capital to run through in our Western economies, but we are managing to do it. Fascinating to see it all in action in a place you would not normally expect it.

Historically, there are two sides to it. In relation to why I am here, I am part of a group that is trying to save Jean-Baptiste Say’s factory in Auchy-les-Hesdins for posterity. There are not many – any – places in the world that are actually historical sites in which economic issues are at the forefront. Auchy is astonishing in that it combines an ancient cotton mill – where the waterfall that ran the mill can still be seen – with the writings of one of the greatest economists of all time. If you are in France in the north-west around Calais or Normandy, and you have any interest in these things at all, you must come visit. The website I am told is coming but you should see it for yourself. The best way to describe the positioning of Auchy is to note that it is half way between Azincourt and Crecy. See all three, but if you have an interest in economics and its history, this place will astonish you. There is nothing like it on the planet and, as with everything related to Say, is only now in the process of being rediscovered.

Lastly there has been my following the trail of historical battles, with the last few days on the WWI battle fronts. Went to Villers-Brettoneaux yesterday which is the Australian Vimy Ridge. Very moving places both of them. Two things I found particularly noteworthy. The first was the direction finder in the tower pointing out various places of significance on the Somme battle grounds. But amongst the 20 miles to this and 30 miles to that was the arrow that pointed to 14,235 miles to Canberra. It was a long way from home for those young Australians who lie buried in the fields of France.

The other was a grave to some young lad who died on this battlefield in 1918. His name was S. Keates. It was quite a strange moment. It is truly the case that there but for the grace of God go we all.

Words have consequences

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Theodore Dalrymple on an unfamiliar topic for him, how the meaning of words applies to “austerity”:

I was irritated rather by the fact that the author of the article accepted that the policy of the present British government can properly be described as one of austerity. What the alleged austerity amounts to is this: that in the current year the government will borrow only one in six of the pounds it spends instead of one in five, as it did last year. As to the reasons for this less than startling decline in its borrowing requirements, it was not because the government was spending less but because it was receiving more taxes, from the speculative housing bubble which it has done much to fuel. . . .

One would not say of a man who passed from smoking sixty cigarettes a day to fifty that he had given up smoking, or that he had exercised great self-denial. And one would not, or rather should not, say of an organization that had balanced its budget once in fifty years (the British government) that it was practicing austerity merely because it had to borrow a slightly lower percentage of what it spent than it did the year before. This is to deprive words of their meaning.

But the word “austerity” is not used by those who support balanced budgets but by its enemies. Why anyone still believes high levels of public spending can do anything but harm for the nation overall remains a mystery.