Monday, 10 October 2011

The battle of the coaches [updated]

After a great weekend of rugby action, what has emerged as the remaining four contenders for World Cup glory are four teams, three of which are coached by New Zealanders.

Henry v Deans v Gatland.

May the best coach win?

UPDATE: I hereby and most humbly apologise for making an idle Stephen Donald reference last week.

I should have touched wood.

Friday, 7 October 2011

FRIDAY MORNING RAMBLE: The ‘Winning & Losing’ Edition

It was a week that started with the Geelong Cats winning their Premiership and ended with news of Steve Jobs losing his battle for his health.  And it’s not finished yet: here’s still some other important things happening in the next two days at the Cake Tin and at Eden Park—and off Tauranga.
Since I’ve been a little busy this week (for which, I hope, my clients will thank me, if not my readers) there’s not much of a Ramble to offer you. Nonetheless, since some of you have been asking for it, here’s your chance for a wee ramble round some of the things that caught my eye online this week:


To quote Hayek v Keynes Rap II: ‘The economy's
not a car. There's no engine to stall. No
expert can fix it. There's no ‘it’ at all.’"
- Russ Roberts & John Papola

  • “Keith Ng rightly won an award for this one.”
    CPI visualizerO F F S E T T I N G    B E H A V I O U R
  • “Paul Callaghan cites 20 top technology companies, not one of which is remotely a Clean Tech company, except in as much as they are all environmentally benign. ‘That latter, in my view, is all that matters, that and being the best in the world at what they do and hence viable and profitable. The evidence suggests what we are actually good at is not at all what the Green Party would like us to be good at. What we are good at is a result of brilliant entrepreneurship and business expertise. Such genius does not follow politicians’ prescriptions.’”
    Genius does not follow politicians’ prescriptions -   H O M E  P A D D O C K
  • image“Like most Keynesians, in the end, Paul Krugman is a one-trick pony who always recommends inflation as the answer to economic problems… So, I see that Krugman now is giving the "Vietnam Strategy" to the Europeans: in order to "save" the euro, you must destroy it -- via inflation.”
    Krugman: "Save" the euro by inflating it to death
    – K R U G M A N   I N   W O N D E R L A N D
  • Don’t think it’s just the addle-pated Keynesians either. The followers of Milton Friedman are equally eager to pour inflationary fuel on their fire.
     Inflationists in Wolves' Clothing 
    - Robert Murphy,  M I S E S   E C O N O M I C S    B L O G
  • “One reason that some government agencies may be failing is that their attention is directed to the wrong things. High on that list is policing against high prices during emergencies. Basic economic analysis finds that price gouging laws end up wasting state government resources and wasting consumers’ time during emergencies.”
    ‘Price Gouging’ Law: Why Waste State and Consumer Resources during Emergencies?
    - M A S T E R     R E S O U R C E
  • “It was recently pointed out to me that certain free market orientated friends dislike policies that fail to restore immediate growth: Basic economic theory posits that as households and businesses...”
    Do nothing: a positive proposal for recovery – C O B D E N C E N T R E

“If there's a way to solve this environmental disaster
[off Tauranga] by giving away public money to
private companies, Steven Joyce will find it.”
- Tweet from Dim Post

  • “We hold these truths to be self-evident, that all men, women, and transgendered—and any other human who is able to elude the tyranny of work for a couple of weeks—are created equal…”
    Occupy Wall Street: A Manifesto – R E A S O N
  • “Until recently, I haven’t been paying much mind to the Occupy Wall Street protests. They’re a lot like Tea Party protesters. They’re upset with the status quo, and are being quite vocal about it. ...”
    Occupy Wall Street Protesters Make Demands – O P E N  M A R K E T . O R G
  • “Quantitative Easing just forcibly redistributes wealth from the poorest in society to the richest. It's immoral….
    Inequality will widen until banking is reformed – Oliver Cooper,
    C O N S E R V A T I V E H O M E B L O G S ( U K )
  • “Governor Rick Perry likes to say Texas is experiencing an economic miracle because of small government and low taxes. Another take: [S]mall government still doesn't mean scant government in Texas. It means lots and lots of small government and accompanying taxes...”
    Texas is another word for 'taxes' – M A D D O W   B L O G
  • Milestone alert: just one month left to see the Julian and Josie Robertson Promised Gift at the Auckland Art Gallery before it jets back to the US:
    Julian and Josie Robertson Promised Gift – A U C K L A N D   A R T    G A L L E R Y

Image: Paul Cézanne, La route (Le mur d'enceinte) The Road (The Old Wall), 1875-1876,
From the Julian and Josie Robertson Promised Gift

  • In my mind, I can play the ukelele too…

  • This is pretty much the highlight of Placido Domingo’s performance you missed in Christchurch last night, filmed in Tokyo on the same tour: the thrilling E Lucevan le Stelle from Tosca, sung beautifully, even at seventy years of age.

  • Compare with the same piece sung in his prime and filmed on location in Rome: a young man about to have his life ended by firing squad knowing that at this moment he has never loved life so much!

  • And one of my other favourites from last night (filmed, as before, in Tokyo), from Frank Lehar’s operetta ‘Land of Smiles’

  • Have a great weekend.
    And let’s hope Colin Slade does too.

    C.E.R.A = red tape


    I spent a day in Christchurch yesterday that was both marvellous (thank you to friends and Maestro Domingo for making it so) and depressing.

    The former commercial heart of New Zealand’s second-largest city still lies in ruins.  The place where business used to be done. And instead of allowing business to do what business does—i.e., to get on with reshaping and improving everyone’s situation one trade, one improvement, one productive innovation at a time—the government’s “solution” has been to bar businessmen from doing business while pretending to do themselves what businesses were set up to do.

    The result: More than a year after the first earthquake, the government still has wire fences and soldiers surrounding the city to keep out business owners, while their sites inside are now slowly, very slowly, being turned into tarmac.  The recovery plan in summary appears to be to ban business activity while hoping that the rescue fairy will somehow or other arrive on her own.

    No wonder there is anger. Very justified and, as yet, very ill-directed anger.

    These are just a few of the examples of “street art” decorating the barricades.




    And while it’s nothing to do with the anger directed towards the government and its creature C.E.R.A. (Cancel All Recovery Anyway), I thought this addition to the police’s “street art” was rather good:


    Thursday, 6 October 2011

    Steve Jobs, 1955-2011

    Steve Jobs has died.

    In his honour, I've reposted what I said about him just a few weeks ago.

    SORKIN-tmagSFGenius has often been described as the ability to enter an existing field and, by your contribution alone, change it utterly.

    Louis Armstrong did that for jazz. Newton and Einstein did it for physics. And Steve Jobs of Apple? Virtually single-handedly he revolutionised telecommunications, personal computing, the music business, publishing and Hollywood. Not to mention what he did to the computer itself.

    Most geniuses only revolutionise one field. Jobs has revolutionised at least three.

    But it’s not enough for some folk that his genius has improved the lives of millions. That he’s a genius who’s earned his money. He’ll only get respect at places like the New York Times if he gives it all away.

    Never mind that the focus of his wealth and productive genius on production does more for every single person on the planet than if he spent his time and energy giving his money away. He understands this:

    Mr. Jobs [told friends] he could do more good focusing his energy on continuing to expand Apple than on philanthropy, especially since his illness. “He has been focused on two things — building the team at Apple and his family,” another friend said. “That’s his legacy. Everything else is a distraction.”

    In an interview with the Wall Street Journal in 1993 , Jobs said, “Going  to bed at night saying we’ve done something wonderful … that’s what matters to me.”

    Good for him.

    Power to pillage, but not to surveil

    For all the kerfuffle about the changing of the laws recently controlling over the police's powers of surveillance (about which I've commented here) a front page story in the Herald this morning reveals something both surprising, and disgusting.

    A High Court decision has confirmed that while the powers of the police are (quite properly) circumscribed by law and legal precedent, those of the IRD to do over honest New Zealanders is not.

    "While the Inland Revenue's right to search is not new, Deloitte partner Greg Haddon said the decision showed the tax commissioner's search and seizure powers are likely to be broader than any other branch of the Crown.

    "[The ruling] identified a number of situations where perhaps in a criminal case, the search and seizure right wouldn't have existed but under a tax case it does," Haddon said.

    "The rules around what that warrant looks like is a lot looser [in a tax case] than what would be required under a criminal case. Under a criminal case the warrant's required to be specific about who is entitled to [enter a premise] plus what things they're allowed to look at," he said.

    The IRD does not need a warrant to search a business and copy documents found there and only requires one when it wants to search a private dwelling or take documents away, he said. Any information deemed necessary or relevant to a tax investigation can be copied or seized."

    Contemplate that fact for a moment. It means, to repeat, that the government continues to give complete and unlimited power to IRD to do over productive businessmen, while retaining the restraint of law only on those investigating criminals and alleged terrorists.

    And with all his much boasted tinkering with the (In)Justice system, this is one thing Simon Power-Lust has elected to leave resolutely untouched. Of course.

    Tuesday, 4 October 2011

    What if the All Blacks played by teachers' rules? [updated]

    Fran Tarkenton (Former NY Giants and Minnesota Vikings quaRterback) makes an observation in today's Wall Street Journal that I’ve translated into New Zealandese for you:

    carterImagine NZ Rugby in an alternate reality. Each player's salary is based on how long he's been playing in the Super 15 or the All Blacks. It's about tenure, not talent. The same scale is used for every player, no matter whether he's a three-time winner of the IRB’s Rugby Player of the Year or the man who regularly never makes it off the bench until the seventieth minute. But for every year a player's been in the Super 15 or ABs, he gets a bump in pay. The only difference between Dan Carter and Stephen Donald is a few years of step increases. And if a player makes it through his third season, he can never be cut from the roster until he chooses to retire, except in the most extreme cases of misconduct.

    Because if Dan Carter were injured, you’d always be able to select his equivalent off the bench, wouldn’t you. And you’d always want Stephen Donald around to fall back on.

    Let's face the truth about this alternate reality: The on-field product would steadily decline. Why bother playing harder or better and risk getting hurt?
        No matter how much money was poured into the NPC, the Super 15 or the All Blacks, it wouldn't get better. In fact, in many ways the disincentive to play harder or to try to stand out would be even stronger with more money.
        Of course, a few wild-eyed reformers might suggest the whole system was broken and needed revamping to reward better results, but the players union would refuse to budge and then demonize the reform advocates: "They hate rugby. They hate the players. They hate the fans." The only thing that might get done would be building bigger, more expensive stadiums and installing more state-of-the-art technology. But that just wouldn't help.
        If you haven't figured it out yet, NZ Rugby in this alternate reality is the real-life public education system. Teachers' salaries have no relation to whether teachers are actually good at their job—excellence isn't rewarded, and neither is extra effort. Pay is almost solely determined by how many years they've been teaching. That's it. After a teacher earns tenure, which is often essentially automatic, firing him or her becomes almost impossible, no matter how bad the performance might be. And if you criticize the system, you're demonized for hating teachers and not believing in our nation's children.

    As Tarkenton says, “Our rigid, top-down, union-dictated system isn't working. If results are the objective, then we need to loosen the reins, giving teachers the ability to fulfill their responsibilities to students to the best of their abilities” rather than the dictates of the Ministry and of central government.

    Robert Wenzel observes that the blame is not all with the teacher unions; “the problem is really government involvement in the education system.”

    The answer is to get government out of the education business so it can grow and thrive,  just like the All Blacks …

    UPDATE:  Legendary quarterback Fran Tarkenton was interviewed on Fox News on this issue:

    Should NFL Rules Apply to Teachers?.

    [Thanks to commenter “School Principal” for the link.]

    Think the European government debt crisis is over because of the latest fancy “rescue plan”? Think again. [updated]

    Think the European government debt crisis is over because of the latest fancy “rescue plan”? Think again.

    The Eurozone is already in depression, the PIIGS’ governments continue not to pay their way, banks who’ve already lent to the PIIGS’ governments continue drowning, and the solution is not for governments to stop their overspending (despite its so-called “austerity measures,” the Greek govt for example  will continue spending billions more than it has, ditto the Poms and all the fiscally malfeasant Eurozone), nor to take the pressure off the banks whose over-lending made the over-spending possible. Instead, it’s to demand that over-lent banks already overloaded with bad Greek paper get more of it, in a plan so indecipherably complex that the “plan” really amounts to a hope that no-one could possibly understand either the plan the full extent of what this makes inevitable.

    This is intended to be the model for every country facing its own Greek moment. 

    It takes faking reality to a new extreme: it demands not just that progenitors of the plan keep their blinkers on, but that the bankers themselves put their heads in the noose while pretending they’re simply being fitted out with new clothes.

    Or in the words, of the Financial Times’ Wolfgang Münchau, it’s not just like kicking the can down the road, it’s “the equivalent of putting explosives into a can, before kicking it down the road.”

    [Hat tip Economic Policy Journal]

    UPDATED: Links added; commentary sharpened.

    Monday, 3 October 2011

    ECONOMICS FOR REAL PEOPLE: Property rights and more! [updated]

    Here’s the update on tomorrow’s session with the UoA Economics Group:
    Good evening all,
    Ask yourself:
    • Why do people in shanty towns build their furniture before their roofs?
    • Why did the Industrial Revolution happen first in England?
    • Why do some places produce factories and enormous wealth, while in others all they have are pushcarts and penury?
    • How did problems with goats and chickens seven-hundred years ago lead to an enormous humanitarian advance we still enjoy?
    • And why might your neighbour want to invoice you for his new flower bed?
    Join us tomorrow night to discuss the answers to these questions and much more--and find out what they all have to do with our subject: property rights.
            Time: 6:00pm
            Date: Tuesday, 4 October    
            Location: Case Room 1, Level 0, University of Auckland Business School
    See you there!

    Sunday, 2 October 2011

    Quote of the Day: AFL edition

    "[With] yesterday's stunning victory by Geelong over
    Collingwood ... the club's ninth premiership and
    its third in five years ... [the Geelong Cats] can now
    rightfully claim to be the greatest of the modern era."
              - Caroline Wilson, writing in 'TheAge'

    Saturday, 1 October 2011

    Best of the week, and for the weekend

    If you missed them this week, these are the posts that got folk excited:

    1. Three Logicians Walk Into a Bar
      The humour of logic.  And beer.
    2. Don, John and the right to take a toke
      Even if the country’s clueless, calcified commentariat is unable to see the connection between the right to pursue your own happiness and the right to defend your own life—two rights which are linked as one in freedom—if ACT ever had a reason to exist then it was to promote the policies of freedom and individual rights while all around them parties were peddling the opposite. That they’ve rarely if ever done so has led them to the place they are now. Which is to be unelectably shambolic.
    3. Don’t like drugs? Then legalise cannabis.
      The more you actively prohibit drugs, then it is the more virulent drugs you actively encourage. The more you outlaw drugs, the more you empower outlaws.
      If you want police cracking down on real criminals instead of spending time frisking people harming only themselves, then end the War on Drugs now. Because if you can’t even keep drugs out of prisons, then you sure as hell can’t keep them off the streets.
    4. “Nobody got rich on their own, so there!”
      Some folk are saying this tirade against wealth creators  by Obama adviser and now Harvard academic Elizabeth Frigging Warren is “the best thing ever!” Like hell.
    5. "This economic crisis is like a cancer…”
      The situation in Europe has now officially become a farce. Plan? What plan. The only plan on offer is to continue driving off the cliff.
    6. DOWN TO THE DOCTOR'S: The FrACTured Party
      Don Brash dips his toe into the water and before you know it, toys are being ejected from cots by the president of ACT and the two Johnny Bs.
    7. Doug Casey: How to Prepare For When Money Dies
      An eye-opening interview with renowned speculator Doug Casey:  why fiat currencies around the world are destined for collapse, whether the US dollar or Euro might lead it … and what investors can, and should, do to protect themselves.
    8. 100,000 green jobs from $2.5 billion of green pork? Who are they kidding.
      New green jobs “created,” if they are at all, by taking away existing jobs.

    So that’s the best of the week. Now for the best of the weekend!


    227368_186235261426891_186235124760238_514391_8279974_nJust in case you didn’t know, and despite all the other games on this weekend, the game of the year for me is this afternoon: Geelong Cats (Go the Cats!) vs Collingwood Magpies (Cold Pies) in the AFL Grand Final!

    Ninety-odd thousand screaming fans strapped into their seats at the MCG to watch this year’s two dominating teams battle it out for either Collingwood’s second Flag in two years, or Geelong’s third in the last five. (Check out some of the highlights of their thrilling 2009 victory.)

    Geelong are the Counties of Australian Football—at least, Counties when it was in its prime. Hard playing, skilful, astute, possessing all the virtues of the sport. They’ve been the pace-setters of the game over the last half-dozen years.

    And Collingwood? These jokes might give you the flavour of the Collingwood supporter, and explain why for most Australians the two teams they support are their own and ABC – Anyone But Collingwood.

    Geelong-markQ: What has four-hundred legs and three teeth?
    A: The Collingwood Cheer Squad.

    Did you hear that the Post Office has had to recall their latest stamps? They had pictures of Collingwood players on them. People couldn't figure out which side to spit on.

    Q. If you see a Collingwood fan on a bicycle, why should you never swerve to hit him? A. It could be your  bicycle.

    Did you hear about the politician who was found dead wearing a Collingwood jumper? They had to dress him in women’s underwear to save his family from embarrassment.gamenight

    Q: What is the difference between a Collingwood supporter and a park bench?
    A: The park bench can support a family.

    Q: How do you make a Collingwood supporter run?
    A: Build a job centre.

    Long live the Colliwobbles!
    And just so you know,  the last time the two teams met the Cats thumped the Pies by 96 points. And Cats Eat Birds.

    Oh, and Clare Curran is a Collingwood fan.

    So go the Cats!




    Geelong2008Logo1 (1)

    Friday, 30 September 2011

    “Bail me out again, Sam.”

    “Most sovereign states are bust and so are the banks, which are
    today a protectorate of the state and have repaid the generosity
    of their protectors by lending excessively to them.”

            - Detlev Schlicter, “Faster Pussycat! Print, Print!

    German politicians have just voted to have German taxpayers wallets held guarantor for the bad debts of every  irresponsible European government. Which is to say, all of them.

    You didn’t think German politicians were that stupid? Turns out they are.  You didn’t think they’d vote to have the whole continent keep spending money they haven’t got? Turns out they have.

    If you’re wondering why the continents’ “best” economic minds think it’s a good idea to set up a “super bailout fund” to continue bailing out governments with holes all the way down their waterlines—and why German politicians would agree to have their taxpayers should fund it--then you need to think “printing presses,” and you need to read this piece by Detlev Schlicter.

    If you want to know the way the “establishment” economists think, and why they think rewarding fiscal  irresponsibility will achieve anything but more of it, then this is your place to start. Especially if you want some idea of what happens when it all fails.

    The #OccupyWallSt movement, and their single grain of truth [updated]

    Phoebe Fletcher, Tumeke’s little-seen token feminist, Martin Bradbury, the grown-up child known to other children as “Bomber”, is upset that too few are too disinterested in “the #OccupyWallSt movement... The protests have had little coverage in their initial days by mainstream media,” she whines, “and are only know beginning to be discussed.”

    Well, let’s then.  I doubt the overgrown children protesting outside Wall Street even know why they’re so angry at the bankers and financiers.  They’re angry that the bankers are getting rich while all around them are growing poor? Well, isn’t it their own big-government heroes who’ve been shovelling out the money in the bankers’ direction? They’re angry that bankers have been shovelled trillions while all around them there are people struggling to make ends meet. Well, isn’t it their own economic theories (if so they can be called) that call for those trillions to be shovelled that way?

    Don’t you think they might pause to contemplate that for a moment?

    But if they only knew it, or were prepared to sit still for a minute to learn something [something the grown-up children are congenitally unable to do, for which I for one blame their (mis)education] there is a very good reason to be very angry indeed at the bankers. It comes down to the way money is created in our fiat money fractional-reserve system, and who gets to start spending it first…

    As George Reisman explains in his comprehensive book Capitalism [online here], their anger should not be directed at capitalism but instead at the system that caused the collapse, and those who benefit from it:

    Their anger should be directed only at that which makes it more and more difficult to [buy the necessaries]. What they should be angry about is not the existence of a market economy and the way the market economy works [or would work, if it had been allowed to] but at the presence in the market of a vast gang of dishonest bidders and dishonest buyers, a gang that bids and spends dollars created out of thin air in competition with their earned dollars…  The source of those dollars created out of thin air is none other than the government. And the dishonest gang consists of it and everyone else who demands and received such fiat money.
        In other words, it is [ artificial credit expansion ] and the pressure-group demands for it that the victims should denounce, not the market economy …  It is the entry of newly created money into the economy that they should seek to stop…  Instead of, in effect, calling for the closing of the market, they should simply call for an end to the government’s inflation of the money supply, and thus for an establishment of a fully free market. [pg. 205, emphasis in the original]

    That’s where their wrath should be directed. Instead, to the extent their protests were to be successful, they would succeed only in giving even more power to those who have presided over the present system.

    Such is the result of a lack of real learning.

    UPDATE:  “#OccupyWallStreet Is a Church of Dissent, Not a Protest,” says Matt Stoller at the Naked Capitalism blog. [Hat tip Vodka Pundit]

    Thursday, 29 September 2011

    “Nobody got rich on their own, so there!”

    Some folk are saying this recent tirade against wealth creators  by Obama adviser and now Harvard academic Elizabeth Frigging Warren is “the best thing ever!” 

    Like hell, says Voices For Reason’s Don Watkins, who reckons “if intellectual obscenities could be ranked,” then this rant, right here, would be right up there. You sitting down. Then here’s what she said:

    _Quote5There is nobody in this country who got rich on his own. Nobody.

    You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.
        Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

    Got that? Here’s Watkins on Elizabeth Warren’s Social Shakedown:

    _QuoteThere is a lot one could say about this quote–notice, for instance, that it totally ignores the benefits made possible by the factory–but I’ll confine myself to this: underlying Warren’s rant is a disastrous view of the proper relationship between the individual and society.

    That’s right. Turns out, if you take Warren’s rant seriously (and people do) then "It's no longer, 'It takes a village' but, 'This village xxxxin' OWNS you!'" Got that, you worm!

    Nasty, huh. Read on here for more.  And watch him here on PJTV:

    And, you know, for all its obscenity you don’t just hear Warren’s argument from the left. You hear it from the hippies of the right every time they talk about inventions and patents…

    PS: Oh, here’s Peter Schiff:

    A word on drug legalisation from Milton Friedman et al

    A word on drug legalisation from ACT hero Milton Friedman …

    and Thomas Sowell…

    and John Stossel …

    … and some former policemen and correction officers…

    Good people all, and not a dreadlock between them—although there’s a lot of experience, at least one Nobel Prize, and a great deal of good, hard common sense.

    Oh, but you think the War on Drugs is “all about the kids”?  Really? Well, here’s another former policeman with five ways the Drug War hurts the kids.

    So why not take some time to consider what they have to say?

    Doug Casey: How to Prepare For When Money Dies

    Guest post this morning courtesy of Casey Research: an eye-opening interview with renowned speculator Doug Casey, conducted by Karen Roche and JT Long of The Gold Report. Doug explains why fiat currencies around the world are destined for collapse, whether the US dollar or Euro might lead it … and what investors can, and should, do to protect themselves.  

    Doug Casey

    The Gold Report: You've been talking about two ticking time bombs. One is the trillions of dollars owned outside the U.S. that investors could dump if they lose confidence. And the other is the trillions of dollars within the U.S. that were created to paper over the crisis that started in 2007. Are these really explosive circumstances that will bring catastrophic results? Or will it just result in a huge, but manageable, hangover?
    Doug Casey: Both, but in sequence. One thing that's for sure is that although the epicenter of this crisis will be the U.S., it's going to have truly worldwide effects. The U.S. dollar is the de jure national currency of at least three other countries, and the de facto national currency of about 50 others. The main U.S. export for many years has been paper dollars; in exchange, the nice foreigners send us Mercedes cars, Sony electronics, cocaine, coffee—and about everything you see on Walmart shelves. It has been a one-way street for several decades, a free ride—but the party's over.
        Nobody knows the numbers for sure, but foreign central banks, and individuals outside the U.S., own U.S. dollars to the tune of something like $6 or $7 trillion. Especially during the recent crisis, the Fed created trillions more dollars to bail out the big financial institutions. At some point, foreign dollar holders will start dumping them; they are starting to realize this is like a game of Old Maid, with the dollar being the Old Maid card. I don't know what will set it off, but the markets are already very nervous about it. This nervousness is demonstrated in gold having hit $1,900 an ounce, copper at all-time highs, oil at $100 a barrel—the boom in commodity prices.
        Some countries are already trying to get out of dollars, but it could become a panic if the selling goes from a trickle to a flood. So, yes, it's a time bomb waiting to go off, or maybe a landmine waiting to be stepped on. If a theatre catches fire and one person runs out, soon everybody rushes toward the door and they all get trampled. It's a very serious situation.

    TGR: If panic erupts on the U.S. dollar, would products manufactured in the U.S. become super-cheap or super-expensive?
    DC: They would become super-cheap. Everybody says that devaluing the dollar will stimulate U.S. industry because the products will become cheaper and foreigners will buy them. This is a huge canard everybody repeats and nobody thinks about. Yes, it is true for a while, but if devaluation were the key to prosperity, Zimbabwe should be the most prosperous country in the world as it has already collapsed its currency.
        A strong currency is essential for a strong economy. Sure, a strong currency can hurt exporters for a while. But, a strong currency encourages manufacturers to invest in technology, and become more efficient. It rewards savings and results in the growth of capital that's critical for prosperity. A strong currency allows businessmen to buy foreign companies and technologies at bargain prices. It results in a high standard of living for the country, and yields social stability as a bonus. The idea that decreasing the value of currency to stimulate exports is a short-lived, stupid and counterproductive solution to the problem. People seem to forget that while the German currency was rising about sixfold from its level of 1971, and the Japanese yen about fourfold, those countries became the world's greatest export economies. It didn't happen despite a strong currency, but in large measure because of it.

    TGR: Given that the U.S. is the world's biggest consuming nation, wouldn't fleeing the dollar create a big consumer vacuum in the international community? Doesn't the rest of the world want to keep up the high level of exports to these U.S. consumers?
    DC: That's exactly why the U.S. is in such trouble; it's idiotically focused on consumption, while only production can create prosperity. The world doesn't need to stimulate consumption. This is another canard, because everybody has an infinite desire for goods and services. I know for myself, I'd like not just a car, but 10 Ferraris, a couple of Gulfstreams and 10 houses around the world. So, by myself, I have an infinite desire for goods and services. Multiply that by 7 billion other people. The only way to gratify those desires is by producing enough to trade with other people to give you what you want. When so-called "economists" think the problem is that we don't have enough consumption, that shows that the profession itself is bankrupt. It's actually quite embarrassing.

    TGR: But other countries currently produce enough of what the U.S. wants. With U.S. dollars, that trade won't look good on their side eventually.
    DC: The problem is the U.S. doesn't produce enough in return. The U.S. has been lucky to have a currency that has, so far, been accepted by everybody. But when everybody realizes that the dollar is an "IOU nothing" on the part of a bankrupt government and a society that doesn't really produce anything anymore, it's going to create a worldwide catastrophe. Those $7 trillion held by foreigners are going to become instant hot potatoes.

    TGR: Considering what you said a moment ago, that the world doesn't need to stimulate consumption, you must find some irony in the Obama administration's plan to stimulate consumption again in the U.S. as a way to spur some economic growth.
    DC: I'm afraid that after being counseled by the fools that surround him, Obama talking about economics is like the blind leading the doubly dismembered. They want to spend $450 billion trying to create new jobs—but these are government jobs, where you have people digging holes during the day and filling them up at night to create the appearance of employment. No government has any idea what the market really wants and needs. There should be zero government involvement in this. The government cannot and should not even try to create jobs. If Obama wants to stimulate the economy, he can decrease the size of the government. I would say a 90% reduction would be a good starting figure.

    TGR: But that will create even more unemployment. That's one of the big concerns. States laying off employees could increase unemployment even more.
    DC: It is wonderful that states are starting to lay off employees. Once they lose their state jobs, which suck wealth from taxpayers, maybe those people can find real, productive jobs providing goods and services that people actually want and will pay for voluntarily. So I'd argue that getting rid of state employees is essential to a sound recovery plan.

    TGR: You warned early on in the 2008–2009 economic crisis that it would really be more of a hurricane. In the last year or so, we've been in the eye of the hurricane and there's more turmoil to come. Will the other side of the storm be worse than the first? And given the recent economic news, do you think we have moved out of that eye?
    DC: Yes, I think we are moving out of the eye and going into the other side of the storm. This storm will be much more severe because we haven't solved any of the problems that caused the hurricane in the first place. The fact that governments all over the world have created trillions of currency units has only aggravated those problems. Now, I expect exploding prices to compound the problems that we saw back in 2007, 2008 and 2009. That will devastate the prudent people in society who saved money. They saved it in the form of currency, and wiping out their savings will be catastrophic.

    TGR: Will this affect only North America and Europe?
    DC: Mostly North America and Europe, but it's going to be very serious in Japan, too. It could be even more disastrous in China. The Chinese real estate market bubble is very inflated, driven by the lending of Chinese banks that won't be able to recover their loans. They will all go bankrupt, taking out the Chinese populace's savings with them. At the same time, those who own real estate will find it worth vastly less than what they paid for it. Those problems will create social disruptions in China, leading to riots, perhaps even revolution, and who-knows-what. The fallout is going to be terrible.

    TGR: Many pundits and economists still project growth in China, albeit at a lower rate, and anticipate further expansion of the middle class.
    DC: The 21st century will be the Chinese century, but the distortions and misallocations of capital that have occurred over the last 30 years—notwithstanding the truly phenomenal progress the country has made—are serious and have to be washed out. I am a huge bull on China for lots of reasons, but I am bullish for the long run. I think it is going to go through the meat grinder over the next 10 years. I don't know how it will come out; maybe China will break up into five or six different countries. Actually, that would be a good thing. Most of the world's nation-states are artificially constructed and too big to be manageable as political entities.

    TGR: Your outlook on China fits right in with something you've been saying for years—about this being the "Greater Depression," which is also the topic of your upcoming presentation at the sold-out Casey Research/Sprott Inc. "When Money Dies" summit next month in Phoenix. Your opening general session talk is entitled, "The Greater Depression Is Now." We are now four years into it, based on your 2007 start date.
    DC: Actually, depending on how long a historical scale you look at, you could say that, for the working class in the U.S. anyway, the depression started in the early 1970s. After inflation, after taxes, their take-home pay hasn't risen in real terms for 40 years. But the definition of a depression that I use is "a period of time during which most people's standard of living drops significantly."
        Net savings shows that you're living within your means and putting aside capital for the future. In the U.S., people have been living above their means for many years—that is what debt is all about. Debt means that you are borrowing against future production, which is exactly what the U.S. has been doing.

    TGR: So, how long will this Greater Depression last?
    DC: It doesn't have to last long at all. It could be quite brief if the U.S. government, which is basically the root cause, retrenches vastly in size and defaults on the national debt, which is essentially an enormous mortgage, an albatross around the neck of the next several generations of Americans. The debt will be defaulted on one way or another, almost certainly through inflation. I simply advocate an honest, overt default; that would serve to punish those who, by lending to the government, have financed its depredations. Distortions and misallocations of capital that have been cranked into the economy for many years need to be liquidated. It could be unpleasant but brief. The government is likely to do just the opposite, however. It will try to prop it up further and make it worse—compounding the problem by expanding the wars. So, it could last a very long time. In that sense, I'm not optimistic at all. I think there is little cause for optimism.
        On the other hand, I'm generally optimistic for the future. There are only two causes for optimism. First, smart individuals all over the world continue, as individuals, to produce more than they consume and try to save the difference. That will build capital, which is of critical importance. They should just save by holding paper currency. Second, expanding and compounding technology will increase the standard of living. Remember that there are more scientists and engineers alive today than have lived in all previous history combined. Those two factors countervail the government stupidity around us. Whether they will be overwhelmed and washed away by a tsunami of statism and collectivism, I don't know.

    TGR: You say that the U.S. government is the root cause of this problem. Isn't that putting too much blame for a worldwide problem on one nation?
    DC: The institution of government itself is the problem, and the problem is metastasizing like a cancer all over the world. But, sad to say, the U.S. is the most serious offender because it is currently both the most powerful and the most aggressive nation-state. It has been greatly abetted by the fact that the U.S. currency has been accepted globally. The U.S. dollar is, in effect, the reserve that backs all the other currencies in the world. That is why the U.S. government has been the most destructive from an economic point of view. Furthermore, military spending—which in the U.S. equals that of all the other militaries in the world combined—is purely destructive. It serves no useful economic purpose at all. The military is no longer "defending" anything—least of all liberty. It's actively creating enemies and provoking conflict. So, yes, I think the U.S. government is actually the most dangerous force roaming the world today.

    TGR: Do you see that changing after the next election?
    DC: No. I think the chances of Obama being reelected are high, simply because more than half of Americans are big net recipients of state largesse. The U.S. has turned into a larger version of Argentina politically, where the electorate is effectively bribed to vote for the biggest thief. It is likely to turn out much worse than Argentina, however. Unlike the Argentines, the U.S. government is fairly efficient. And, unlike Argentina, the U.S. is rapidly turning into a police state.
        Electing a Republican might be even worse, though. With the exception of Ron Paul and Gary Johnson, the potential Republican candidates absolutely make my skin crawl. So, no, there is no help on the horizon. The U.S. government is spending about $1.5 trillion more this year than it takes in, and it is not going to cut that. In fact, foolish spending to bail things out will increase. And, worse than that, the Fed has artificially suppressed interest rates for three years. Interest accounts for roughly 2% of $15 trillion official national debt, or $300 billion per year. As interest rates inevitably rise, that interest amount will grow. At 12%—and I'm afraid they'll have to go even higher than that—it would add another $1.5 trillion just in interest payments.
        I absolutely see no way out without a collapse of the U.S. currency and a total reordering of the U.S. economy.

    TGR: When Money Dies, the title of your summit, implies some return to a gold standard. How do you see that playing out?
    DC: Nothing is certain, but when the dollar disappears—and it's going to reach its intrinsic value soon—what are people going to use as money? Will we gin up another fiat currency like the euro? The euro is likely to fail before the dollar. My suspicion is that people will want to go back to gold. It's not because gold is anything magical, but simply the one of the 92 naturally occurring elements that—for the same reasons that make aluminum good for planes and iron good for steel girders—is most useful as money. In fact, the reason that gold has risen as high as it has is that the central banks of third-world countries—places that don't have large gold reserves, such as China, India, Korea, Russia, even Mexico—have been buying the stuff in size.

    TGR: The concept of going to a gold standard seems impossible in the sense that there is only so much gold above ground—6 billion ounces? Maybe $11 trillion worth? But it's only a fraction of the U.S. GDP. Even with gold at $2,000 an ounce, that leaves an immense gap. In that scenario, how do you convert to a gold standard?
    DC: In terms of today's dollars, gold should probably be a lot higher than it is. I don't know what the number will be, because a lot of those dollars will disappear in bankruptcies; they will dry up and blow away. It's like a real estate development that was worth $1 billion on somebody's books; when it fails, that's $1 billion destroyed. It's a question of the battle of inflation (with the government creating dollars to prop things up) against deflation (where businesses fail and wipe out dollars). But put it this way: the U.S. Government reports it owns about 265 million ounces. Its liabilities to foreigners alone are at least $6 trillion. If they were to be redeemed for a fixed amount, that would require roughly $22,000/oz. gold. And that doesn't count dollars in the U.S. itself.
        I'm a bargain hunter and a bottom fisher, and bought most of my gold at vastly lower prices. But I think gold is going much higher because most people still barely even know that the stuff exists. As inflation picks up, they are going to want to get rid of these dollars—but what other monetary commodity can they turn to? So, gold is going higher. I'm still accumulating gold.

    TGR: You said that the storm as we emerge from the eye of the hurricane will be worse than it was on the other side. If they don't own gold, how do investors protect themselves?
    DC: It's very hard to be an investor in today's world because an investor is someone who allocates capital in a way to create new wealth. That is not easy in today's highly taxed and regulated economy. It's late in the day, but not too late, to buy gold, silver and other commodities. Productive assets are good to own. Of course, the easiest way to buy most productive assets is through the shares of publicly traded companies, but the stock market is quite overvalued in my opinion, so that's not the best option right now.
        In addition to trying to build personal holdings of gold and, to a lesser degree, silver, I think people should learn to be speculators. This is not to be confused with gamblers, who rely on random chances. Speculators position themselves to take advantage of politically caused distortions in the marketplace. In a true free market society, you would see very few speculators because there would be few such distortions. But regulations, taxes and currency inflations are likely to keep markets very volatile. Good speculators will position themselves to take advantage of bubbles, and identify bubbles that have been blown to their maximum and are about to deflate.
    Government actions are going to force people to become speculators, whether they like it or not. Most won't like it, and very few will be good at it.

    TGR: What bubbles might speculators look to exploit?
    DC: I'd say the world's biggest bubble is real estate in China, but real estate bubbles are just starting to deflate elsewhere, too—in Australia and Canada, for example. It's relatively hard to short real estate, of course. Shorting bank stocks is an indirect way to play it. I'd say bonds are the short sale of the century. They're going to be destroyed. Bonds pose a triple threat to capital because:

    1. Interest rates are artificially low, and as interest rates rise—which they must—bonds will fall.
    2. Bonds are denominated in currencies, and most currencies, let's say dollars, are going to lose a lot of value.
    3. The credit risk of most bonds, certainly those issued by governments, is high.

    On the long side, mining stocks are very cheap relative to the price of gold right now. I'd say there's an excellent chance of a bubble being ignited in gold mining stocks, especially the small ones; in fact, I'd put my finger on that as likely being the easiest way to make a killing.

    TGR: Technology was one of the two areas of optimism you mentioned earlier. Do you see a bubble forming there?
    DC: You have a point, but I'm not sure you can talk about technology stocks as a whole; technology is too variegated, too vast a field. Although, I've long been a huge believer in nanotech, which is likely to change the world as we know it. With gold stocks, however, you can jump into a discrete universe, that's likely to become a mania.

    TGR: Thank you for the tips, Doug, and as always, for your thoughtful insights.

    Doug Casey is an American-born free market economist, best-selling financial author, and international investor and entrepreneur. He is the founder and chairman of Casey Research, a provider of subscription financial analysis about specific market verticals that he has focused his investing career around, including natural resources/metals/mining, energy, commodities, and technology. Since 1979, he has written, and later co-written, the monthly metals and mining focused investment newsletter, The International Speculator. He also contributes to other newsletters, including The Casey Report.
        Casey graduated from Georgetown in 1968 where he was a classmate of Bill Clinton.
        His 1979 book
    Crisis Investing became the largest selling financial book in history, listing at #1 on the
    New York Times Best Seller list for a total of 12 non-consecutive weeks.

    Wednesday, 28 September 2011

    Brash gets support from The Bush

    Don Brash may not have found anyone in his own party willing to back his call for hard sense on cannabis without the moral panic—and instead of backing the call the hipsters from Grey Lynn who should have supported it have instead lambasted him—but there is one political party leader at least prepared to do the right thing, and that’s Libertarianz leader and Wairarapa candidate Dr Richard McGrath. He told the Wairarapa Times-Age “it’s a freedom thing.”

    _Quote4_McGrath001"There is no longer a place for the enforcement of puritanical laws that make people's bodies the property of the state," he said.
        Mr McGrath said he has worked as a doctor in the field of alcohol and drug dependence and believed that "drug use is a health issue, not a legal one."
        Legalisation of drug possession in Portugal over the last 10 years had resulted in less drug use overall, including in the under 18 age group, lower rates of HIV infection, and more people coming forward for assistance with problems associated with drug use, he said.
    There was no reason to be frightened of giving people back sovereignty over their bodies, he said.
    "Fundamentally, the issue of drug use is a moral one, with the fundamental question being: Who owns your body - you, or the politicians?"

    Ref fakes injury better

    You think rugby referees are bad? You should see some of the soccer busybodies: they do even better Hollywoods than the players!

    [Hat tip Twenty Two Words]

    “Cocaine-Related Deaths in New York Plummet; Bad Economy to Thank”

    In Portugal they decriminalised personal possession of all drugs in 2001. It now has the lowest adult rate of lifetime marijuana use in the European Union, and more people seeking help for problems related to substance use and abuse.

    In New York, however, they’re trying a different method to wean people off drugs:

    Cocaine-Related Deaths in New York Plummet; Bad Economy to Thank

    You didn’t know Ben Bernanke was also fighting the War on Drugs, did you?

    "This economic crisis is like a cancer…” [update 3]

    The cures for the economic crisis are being proffered by the folks that delivered it, using the theories that caused it. Does anyone truly buy any of the solutions? Not this trader, Alessio Rastani, speaking “in an interview on BBC News [yesterday] that left the hosts gob-smacked”:

    [Hat tip Michael D.]

    UPDATE 1:  “Apparently, many people thought Alessio Rastani was a fake that somehow managed to get on television. Forbes rang him up for an interview, and asked him a series of questions to test his authenticity. The results are here. Let’s just say that he seems to pass just fine.” – Jeffrey Tucker, Mises Economics Blog

    UPDATE 2:  “BBC Releases Official Statement On Alessio "The Trader" Rastani: He Is Perfectly Legit And The Interview Was Not A Hoax

    UPDATE 3

    • “The situation in Europe has now officially become a farce. While the Equity markets rocketed up between 4-5% last night because of a rumour that Greece, and therefore Europe, would be saved by a new plan to leverage up the EFSF, a large number of people who would actually have to approve the deal were denying such a deal even existed…” 
      – “Deal, What Deal,” Macrobusiness Superblog
    • But maybe there is a “plan”? “Europe plans to raise as much as 50 billion Euros annually with a financial transaction tax. If they are looking to increase volatility, remove liquidity, and increase the odds of a crash, then such a tax may ‘help’.” 
      – “Europe Plans to Tax Stock and Bond Transactions; Expect More Crashes Should it Pass,” Mish’s Economic Trend Analysis
    • “Today feels just like it did in 2008. We had almost as many manic up days back then as crazy down days. Remember how we were saved when Fannie and Freddie got put into conservatorship? Remember how all was good when AIG was taken over by the government? Then we sold off the day that TARP failed, but rallied when it passed? Though by the time it was signed into law, the market was already selling off again? Or that weekend when the TARP infusions were made? That suddenly TARP was available to shore up the capital of banks? And the FDIC put in the Temporary Loan Guaranty Program so that banks could issue bonds guaranteed by the FDIC and that the depositor insurance amount was increased? And reflecting on today's price action in Europe, maybe credit just started to realize that the backdoor tricks to increase the size of EFSF are unlikely to work, and that the guy with the credit card (Germany) seems reluctant to let everyone use it. Maybe they actually like being AAA!” 
      – “Won't Get Fooled Again...,” Zero Hedge
    • Meanwhile … “Wondering what just caused the market to slump? Take a wild guess. That's right - Greece. Minutes after Greece passed a vote in which it promised to promise to promise to consider collecting 1998-1999 taxes (even as all of its tax collectors are about to go on permanent strike), the FT was breaking news that while the Troika was "bailing out" Greece in the past years, the country was spending itself into an  even greater oblivion.” 
      –“FT Report That Greek Bailout Package On The Verge Of Collapse After Surge In Greek Funding Needs Sends Stocks, Euro Plunging From Highs,” Zero Hedge
    • And … “While the financial world becomes euphoric based on an unsubstantiated rumor of yet another European bailout package cited from an unnamed source and reported by one of the least insightful financial commentators on the planet, the reality is that Europe is imploding.”
      -- “If Europe is Saved Why Are Corporations Storing Cash With the ECB?,” Phoenix Capital Research
    • So … “Are we headed for recess/depress-ion? The answer in 9 simple charts.”