Yearly Archives: 2016

Something else to keep you awake at night

Posted on by
Reply

From Zerohedge: The IMF Sounds An Alarm As Global Debt Hits A Record $152 Trillion Or 225% Of World GDP. First the quote and then their comment:

When the debt overhang is severe, balance sheets may also need to be cleaned up. Unfortunately, without government intervention, balance sheet repair often proceeds very slowly, because of coordination problems, market failures, and the inability of distressed banks to absorb losses (Laeven and Laryea 2009; Laryea 2010). However, leaving the debt overhang unaddressed can result in lower consumption and underinvestment (Olney 1999; Myers 1977), which, if compounded by banks’ foregoing profitable lending opportunities (Philippon and Schnabl 2013), will weaken the recovery. This is an argument for targeted fiscal intervention to speed up the resolution of the debt overhang problem. These types of interventions are usually geared toward addressing weaknesses in the banking sector and typically include recapitalization, asset purchases, and sometimes guarantees. But they can also include measures to facilitate the repair of households’ and firms’ balance sheets. A government-sponsored debt-restructuring program in the latter case often includes subsidies for creditors for lengthening maturities, guarantees, or both and direct lending to companies that are viable but unable to access financial markets, as well as the creation of asset management companies.

The bolded section is also known as “kicking the bucket” and is precisely what China has been aggressively engaged in recently, following news that a quarter of its companies can not cover the interest expense on their debt. . . .

The mere thought of China, with its 300% debt/GDP, entering a recession is enough to bring nightmares for any policy planner in the world today.

And there is nothing special about China in having misdirected its resource base into non-productive activities. The US is as bad and others must be given the aggregate statistic.

VP debate post mortem at Quadrant Online

Posted on by
Reply

I have a post at Quadrant Online dealing with yesterday’s VP debate under the fantastic heading (not mine): Razing Kaine. It was obviously Kaine’s intent to win the interruption derby which he clearly did, but not in any way that prevented Pence from stating just what he had in mind. How much it matters I do not know, but Pence came across as thoughtful and considered while Kaine was a more than usually superficial emissary from the left. My final para:

Trump-Pence might amount to more than running-mates — they might be a succession plan. I think this election remains a toss-up. But if Trump should win next month and Pence is typical of the personnel he chooses to fill the slots in his administration, there is reason to hope. Only Trump can make this at all possible. Pence provides the evidence of how it might even be done.

No doubt I am getting ahead of myself since the first obstacle is for Trump to be elected. The notion that anyone can remain uninfluenced by the continuous media storm created around Trump is a self-delusion. But if Trump has remained competitive in this environment in spite of it all, you have to know there are a lot of people in the United States who really are enraged by what is going on around them but which they have no ability to prevent.

The VP’s debate

Posted on by
Reply

The most interesting part about the Vice Presidential debate was that there was not a dime’s worth of difference between the arguments put by Mike Pence and the views of Donald Trump. The difference is entirely in presentation along with the various self-imposed constraints that Pence has learned through many years of experience. He knows how to phrase what he says and knows how to craft the arguments just so. But so far as what they amount to, they are exactly the same as Trump’s.

Kaine on the other hand was a much worse version of Hillary. She was more polished and understood her position and how to present it to the back teeth. I found Kaine irritating and shallow to a startling degree. I have always recognised that anecdote is the replacement for analysis when you are dealing with people unused to complex ideas. But if underneath anything he said there actually was a complex idea of any sort, I missed it.

Pence described how a Trump administration would deal with national defence, illegal immigration, economic revival and racial tensions. He defended removing illegals along with stop and frisk policing. What possibly surprised me most about Kaine was the extent to which he repeated Trump’s policy proposals over and again, I imagine under the assumption that just to hear what Trump wishes to do is automatically to be in opposition. That’s what comes from locking oneself in the media sounding board where no other ideas seem to come through. My suspicion, however, is that for those who like what Trump has to offer, it is exactly what he proposes that is what they like. Kaine did no more than reinforce in the minds of Trump’s supporters why they are voting as they are.

Who knows if any of the more difficult parts can be done? But there is little doubt that most Americans want a stronger military, defeat of ISIS, border security, a revival of the economy, a tax system that promotes economic growth and a more cohesive community.

And then there were the two personalities on display. Kaine had no presence or substance. Pence seemed a deeper thinker who has had his ideas forged in the fires of debate among those who disagree with many of the things he says. As a conservative, even in a party of the right, he would be a lonely presence. It was a positive pleasure to listen to him.

Trump-Pence are not just running mates, but might hopefully even be thought of as a succession plan. I think this election remains a toss up. But if Trump should manage to win in November, and Pence remains a typical example of the kinds of personnel that Trump chooses for the various slots in his administration, there is reason – perhaps only dimly – but there is reason to hope for improvement, and not just a minor relief but even long term.

Only Trump makes this at all possible. Pence, however, provides evidence how it might even be done.

Censorship in the modern world

Posted on by
Reply

A very interesting article by one of the supreme observers of the world today on From Orwell to Gladwell and Back. It is about censorship in the modern age and how we are shaped into certain beliefs unless we are vigilant and have a strong sense already about who we can trust and what is likely to be true. I am more than aware of this since it is already very apparent that things that show up on Google will disappear within days if they are not part of “the narrative”.

The narrative is the set of assumptions the press believes in, possibly without even knowing that it believes in them. It’s so powerful because it’s unconscious. It’s not like they get together every morning and decide “These are the lies we tell today.” No, that would be too crude and honest. Rather, it’s a set of casual, nonrigorous assumptions about a reality they’ve never really experienced that’s arranged in such a way as to reinforce their best and most ideal presumptions about themselves and their importance to the system and the way they have chosen to live their lives.

It is to see the world in the form of a novel where the good guys and girls are always on the right side of every issue and the bad ones are always on the wrong side. Facts are selected and shaped, other facts are ignored or suppressed, and the result is like a TV serial that is guaranteed to satisfy anyone who falls into the sway of the story in the way it is told.

There is more at the original link about how we are shaped by the information flow we are permitted to have. It amazes me all the time to listen to people who are on my side of the fence who quote the mainstream press or the left-media when they know – and they really do know this – that these organisations are lying to them. To read that only 27% of people don’t think the media is biased is different from the 95% of people who take a media story as largely true.

The Fed’s not political apparently, just incompetent

Posted on by
Reply

Defending their own, from the Financial Times in London: Trump’s mudslinging puts the Fed in danger.

That the Fed is a politicised institution — more so than most other central banks — is not a contentious observation. Compared with international counterparts, there is a high degree of declared political affiliation among Fed governors and a tendency for presidents to appoint one of their own as Fed chair. Nor is it unusual for Fed officials also to have served in the executive branch: Alan Greenspan, Fed chairman from 1987-2006, had been chairman of the White House economic advisers council in Gerald Ford’s administration. Ben Bernanke, his successor, did the same job under George W Bush.

But that does not translate into setting monetary policy in a politically partisan way.

Oh no, of course not. But since the Fed would act in exactly the same way if it were a declared agent of the Democratic Party, how are we to tell the difference? Rates should have gone up a long time ago. That they have stayed put makes anyone watching what they do very suspicious.

Weak and fragile

Posted on by
Reply

global-growth

The chart is from Bloomberg so we can presume it’s reasonably accurate. I put it up since the outcome is exactly what I had expected. What more interesting is the alarmist title of the article: “Existential Threat to World Order Confronts Elite at IMF Meeting”. They really don’t have a clue, do they? Here’s one more example that they don’t see the order of cause and effect nor their own role in it:

Fed by stagnant wages and diminishing job security, the populist uprising threatens to depress a world economy that International Monetary Fund Managing Director Christine Lagarde says is already “weak and fragile.”

If things were strong and robust, no one would be saying a thing. The populist uprising is because these people are so incompetent, and the rest of us find it nerve wracking to watch them in action. I particular liked this:

Lagarde said last week that policy makers attending the Oct. 7-9 annual meeting of the IMF and World Bank have two tasks. First, do no harm, which above all means resisting the temptation to throw up protectionist barriers to trade. And second, take action to boost lackluster global growth and make it more inclusive.

They wish to do no harm wish to but take action to boost global growth. And I like the implied definition of free trade found here:

Perhaps the biggest beneficiary of free trade over the past generation, China, still restricts access to many of its key industries, with economists worried about increasingly mercantilist policies. . . .

“The consensus in policy-making circles was that more trade meant better economic growth,” said Standard Chartered head of Greater China economic research Ding Shuang, who worked at the IMF from 1997 to 2010. “But the benefits weren’t shared equitably, so now we see a round of anti-globalization, anti-free trade.

The article didn’t say the form on which these economic leaders intend to “take action to boost lackluster global growth and make it more inclusive” but my guess is they will try the same old tired nonsense that has done so well so far, as the data above can attest.

Redemption is always possible

Posted on by
Reply

Woodstock Nation meets the Jewish New Year: Sha Na Na Tova. Great title. The final para:

“They say you can’t go back again, but we did,” Cooper said a few weeks later when I ask him about that night. “It was just a magical night.”

On the day they performed at Woodstock, I was a long-haired New Left dragoon with no idea about anything except …. You know, I had no idea about anything but wanted to find out more so that I could know something. This chap now teaches religious studies. I teach free market economics. There is hope, but not for everyone.

My mantra on this has always been that I am very sorry that this transformation of our Western society happened at all, but if it had to happen, I wanted to be part of the transition team, which I was.

Hillary’s remake of The Sting

Posted on by
Reply

Thought of this last night but someone has already been there. It is surprising that more has not been made of the possibility that Hillary was in cahoots with the moderator although I can see that this is not the time for a distraction of this kind. The lessons of the first debate have no doubt been absorbed. Remembering The Sting may require you to be of a certain age. A fantastic film if you haven’t seen it with a surprising degree of relevance in the present election.

Internet in whose hands now?

Posted on by
Reply

obama-internet

So it has come to this: US cuts cord on internet oversight.

The US government on Saturday ended its formal oversight role over the internet, handing over management of the online address system to a global non-profit entity.

The US Commerce Department announced that its contract had expired with the Internet Corporation for Assigned Names and Numbers, which manages the internet’s so-called “root zone.”

That leaves ICANN as a self-regulating organization that will be operated by the internet’s “stakeholders” — engineers, academics, businesses, non-government and government groups.

The move is part of a decades-old plan by the US to “privatize” the internet, and backers have said it would help maintain its integrity around the world.

The last bit is truly a marvel. The things that some people believe!