“Occupy Wall Street” and its Futility

September 29, 2011 · Posted in Government, Politics · Comment

Tags: occupy wall street, socialism

Fiat Money, Governments, Banks, and Corporations

September 29, 2011 · Posted in Monetary Economics · Comment

Tags: fiat money

Chinese Economy “Teetering On the Edge”

September 27, 2011 · Posted in Global Economics · 2 Comments

From Bloomberg, On the Move in Asia:

Some posts I wrote before on China:

Rally in Chinese Stocks – Time to Kiss it Goodbye and Cash Out:

The truth is: There is no decoupling. The Chinese economic miracle is a mirage, a very popular one to be sure. If it is China the world is banking on to lead a recovery, then the world is royally screwed.

By the way, the Shanghai Composite index has fallen from around 3000 when I wrote that post to around 2390 now, a 20+% drop.

China’s Bubble Produces Empty (!!!) City:

China’s growth is a mirage, its bubble a monstrous one, its impending crash completely inevitable.

China will not be immune to this global slowdown, in fact it may be leading it.

Update: Another important post I wrote about the macro environment in China, in particular money supply:

The Chinese money supply figure that is closest to my True Money Supply in the US is M1 as reported by the People’s Bank of China:

The money supply in China has easily tripled over the past 6 years.

And here is a comparison between the money supply growth rates in the US and China:

Money supply and credit supply have both been exploding in China, while money supply in the US has rather stagnated or at least grown a lot slower alongside contracting credit.

This is the main reason why I don’t think that the Yuan will remain strong against the US dollar for very long, and it is also why I don’t think the Chinese bubble can continue for much longer, but then … bubble often times last a lot longer than you’d expect.

The only way how the Yuan can maybe remain strong against the US$ for a sustained period of time, in my view, is if the PBC tries to cheapen the Dollar by selling reserves against Yuan, which in turn would exert an upward pressure toward exports from the US into China while having the adverse effect on Chinese exports, and thus hurt China’s politically powerful export lobby.

However, such a policy, too, would find its natural boundaries in the amount of Dollar reserves accumulated by the PBC.

Tags: china, chinese economy

Health Care & Drug Shortages in the USA

September 25, 2011 · Posted in Health · Comment

I’m seeing more and more reports about drug shortages/unavailability in the US, for example Hospital drug shortages deadly, costly (emphasis mine):

A drug for dangerously high blood pressure, normally priced at $25.90 per dose, offered to hospitals for $1,200. Fifteen deaths in 15 months blamed on shortages of life-saving medications.

A growing crisis in the availability of drugs for chemotherapy, infections and other serious ailments is endangering patients and forcing hospitals to buy from secondary suppliers at huge markups because they can’t get the medications any other way.

An Associated Press review of industry reports and interviews with nearly two dozen experts found the shortages — mainly of injected generic drugs that ordinarily are cheap — have delayed surgeries and cancer treatments, left patients in unnecessary pain and caused hospitals to give less effective treatments. That’s resulted in complications and longer hospital stays.

Just over half of the 549 U.S. hospitals responding to a survey this summer by the Institute for Safe Medication Practices, a patient safety group, said they had purchased one or more prescription drugs from so-called “gray market vendors” — companies other than their normal wholesalers.

Most also said they’ve had to do so more often of late, and 7 percent reported side effects or other problems with those drugs.

Hospital pharmacists “are really looking at this as a crisis. They are scrambling to find drugs,” said Joseph Hill of the American Society of Health-System Pharmacists.

At a hearing Friday before the health subcommittee of the House Energy and Commerce Committee, hospital officials and other experts testified that the worsening shortages are preventing them from giving many patients the best care and are driving up costs.

“Considering the nation’s budget crisis and our skyrocketing health care bill, these markups are nothing more than profiteering at the expense of patients and providers who are struggling to afford vital medicines,” said Mike Alkire, chief operating officer of Premier Healthcare Alliance, a group that helps U.S. hospitals and other health providers improve their patient care and finances.

The shortages could cost hospitals at least $415 million a year, he said, citing data from health care providers across the nation. So far, hospitals have been absorbing the extra costs, but they’ll soon have to start passing them on to insurers and patients, according to the American Hospital Association.

The scarcity of mainstay cancer drugs is not only hurting patients but is halting or disrupting clinical studies of potential new treatments, said Dr. Robert S. DiPaola, director of the Cancer Institute of New Jersey.

“The drug shortages of today can have a ripple effect on the availability of new drugs and treatment combinations tomorrow,” he told the committee.

On Monday, the Food and Drug Administration is holding a meeting with medical and consumer groups, researchers and industry representatives to discuss the shortages and strategies to fight them.

The FDA says the primary cause of the shortages is production shutdowns because of manufacturing problems, such as contamination and metal particles that get into medicine.

Other reasons include theft of prescription drugs from warehouses or during shipment, as well as the “gray market” vendors who buy scarce drugs from small regional wholesalers, pharmacies or other sources and then sell them to hospitals at many times the normal price. These sellers may not be licensed, authorized distributors.

In addition, many companies have stopped making generic injected drugs because the profit margins are slim. Producing them is far more expensive than stamping out pills, and it takes about three weeks to produce a batch. Making things worse, companies don’t have to notify customers or the FDA that they’ve stopped making a medicine. That means neither FDA nor competitors can fill the gap in time.

Only a half-dozen companies make the vast majority of injected generics. Even if other companies wanted to begin making a drug in short supply, they’re discouraged by the lengthy, expensive process of setting up new manufacturing lines and getting FDA approval.

The article goes on, but that last paragraph is really the most important point we need to wrap our brains around to understand this terrible tragedy: Drug shortages occur precisely because of the existence of the government’s meddling with the process of researching, manufacturing, selling, and purchasing drugs.

As I explained in Fixing US Health Care Once And For All – 5 Crucial Steps:

On the market, such imbalances are, under free competition, swiftly addressed via a simple process: High prices for certain consumer goods indicate a high demand and an insufficient supply. Thus profit seeking entrepreneurs have an incentive to shift from what they are currently doing to focusing on producing more of such highly demanded goods, by employing more commensurate factors of production that turn out the demanded goods. This leads to a decline in their prices, moving the market closer to equilibrium and thus restoring balance.

But when a group of people which obtains its means of operation via aggression and theft, the government, imposes decrees that prevent the voluntary market participants to perform such balancing acts, and threaten them with imprisonment and fines should they not oblige, the imbalance will persist. If that group’s actions are such as to bring about even more shortages for the demanded goods, the imbalance will grow, prices will keep rising.

Of course Obamacare has not addressed a single one of the points I put forward in that article, quite the contrary, and so it should not surprise us that this horrific and quite frankly murderous trend continues to aggravate shortages of health care products and services, continues to drive sick people into bankruptcy, and continues to kill people by the thousands, if not millions.

Tags: drug shortages, health care

Mish: Expect Continued Rally in US Dollar

September 22, 2011 · Posted in Monetary Economics · Comment

I second everything Mish says in his latest post:

Those who think the Australian dollar or the Canadian dollar are some sort of safe haven will find out otherwise.

China is in a credit bubble and when it pops it will take commodities and commodity producing currencies down with it.
Australia’s property bubble has already popped, and a commercial real estate implosion will follow with a lag, just as happened in the US. Canada will join the implosion party as well.
The Canadian and Australian central banks will respond with liquidity measures or interest rate cuts, sending the currencies lower.

There is no reason to like the Euro, the Yen, the Australian dollar, or the Canadian dollar.

For that matter there is no reason to like the US dollar except things are about to get worse than expected everywhere else. That coupled with a messy default setup in Europe and a Fed that did “less than expected” on Wednesday are sufficient reasons to expect a rising US dollar.

… along with the Dollar I think gold will continue to do well also.

Tags: dollar, dollar rally

States Are Underestimating Budget Crisis By Trillions

September 19, 2011 · Posted in Government · Comment

From the interview with Jeffrey Miron:

The problem is pension liabilities are not being accounted for in state budgets. The results: states across the country, he estimates, are underestimating their liabilities by $1-2 trillion.

See here for more that I’ve written regarding state pension plans over the past years.

Tags: public pensions, state pensions

Examining the Theory of Catastrophic & Man-Made Global Warming

September 18, 2011 · Posted in Environment · Comment

In honor of the recent Gore-fest …

Climate Skeptic is a great source for logic and evidence in the field of climate change. Kudos to Warren!

Tags: global warming

What’s Behind the West’s Involvement in Lybia?

September 18, 2011 · Posted in Foreign Policy · Comment

Some food for thought regarding Lybia (a friend forwarded several articles to me):

First off, I believe it’s quite curious that the IMF was so quick to recognize the TNC as Lybian government:

International Monetary Fund (IMF) today recognised the rebel’s National Transitional Council (NTC) as the legitimate government of Libya, assuring the war ravaged country of rapid and sustainable economic recovery.

“I am happy to report that reflecting the views of the international community, the IMF will deal with the NTC as the government of Libya,” IMF Managing Director Christine Lagarde said.

“In this context, the Fund stands ready to help the authorities through technical assistance, policy advice, and financial support if requested, as they begin to rebuild Libya’s economy,” she said.

… it certainly helps motivate “rebel” leaders to seize power when they are given the ability to request massive financial aid, pay it out to themselves and their cronies, and kindly pass the bill on to the country’s future taxpayers, in short … the IMF’s modus operandi.

In March BBC already reported:

Libya has declared gold reserves worth more than $6bn at current prices, thought to be held largely at home.

The reserves are substantial, ranking in the global top 25, according to International Monetary Fund (IMF) data.

… since then gold has risen by about 30%, so those total reserves would now be closer to $8bn, if the reports are accurate.

And Asia Times Online asks Libya all about oil, or central banking?:

(…)

I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising. This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.

(…)

Another provocative bit of data circulating on the Net is a 2007 “Democracy Now” interview of US General Wesley Clark (Ret). In it he says that about 10 days after September 11, 2001, he was told by a general that the decision had been made to go to war with Iraq. Clark was surprised and asked why. “I don’t know!” was the response. “I guess they don’t know what else to do!” Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.

What do these seven countries have in common? In the context of banking, one that sticks out is that none of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers’ central bank in Switzerland.

The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked. Kenneth Schortgen Jr, writing on Examiner.com, noted that “[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept euros instead of dollars for oil, and this became a threat to the global dominance of the dollar as the reserve currency, and its dominion as the petrodollar.”

According to a Russian article titled “Bombing of Libya – Punishment for Ghaddafi for His Attempt to Refuse US Dollar”, Gaddafi made a similarly bold move: he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Gaddafi suggested establishing a united African continent, with its 200 million people using this single currency.

During the past year, the idea was approved by many Arab countries and most African countries. The only opponents were the Republic of South Africa and the head of the League of Arab States. The initiative was viewed negatively by the USA and the European Union, with French President Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Gaddafi was not swayed and continued his push for the creation of a united Africa.

(…)

So is this new war all about oil or all about banking? Maybe both – and water as well. With energy, water, and ample credit to develop the infrastructure to access them, a nation can be free of the grip of foreign creditors. And that may be the real threat of Libya: it could show the world what is possible.

Most countries don’t have oil, but new technologies are being developed that could make non-oil-producing nations energy-independent, particularly if infrastructure costs are halved by borrowing from the nation’s own publicly owned bank. Energy independence would free governments from the web of the international bankers, and of the need to shift production from domestic to foreign markets to service the loans.

If the Gaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors, and whether education and healthcare continue to be free.

Of course health care is never free, so just ignore that nonsensical statement. The article also makes some, in my opinion, very questionable analyses about monetary policy and central banking which I am sparing you in the excerpts above. But that doesn’t mean it doesn’t provide a lot of interesting journalistic insights into what may be going on behind the scenes in this project.

As my friend who sent me these articles pointed out: Let’s see how long it’ll take until we hear stories about Lybian assets missing.

Tags: bis, central banking, gold, imf, lybia

The Inevitable Waste and Corruption of “Stimulus” Spending

September 16, 2011 · Posted in Politics · 1 Comment

A good theory has predictive power. A prediction doesn’t automatically make a theory true, but it’s a good first test in my opinion.

Quite a while ago, I made the case, based on praxeological reasoning, why bureaucracy can’t ever accomplish its stated objectives in the long run.

Based on that theory I suggested many times over that government stimulus programs will not be a panacea to economic sluggishness, quite the contrary.

In particular I wrote almost 3 years ago:

The $800 billion spending bill that is currently being discussed will not fix the US economy.
(…)
This bill was never [Obama's] bill. It was the Congressional Democrats’ bill, led by Harry Reid and Nancy Pelosi. Now Obama has made it his bill. All the scandals, wasteful projects and corruption that will be uncovered under the projects funded by it will be associated with him.
(…)
To ignore [those who oppose it] would be the biggest mistake Obama could make now.
(…)
If he continues doing it, the political retaliation will ensue sooner or later in the next Congressional elections and maybe in the next presidential elections. This is an unnecessary, harmful, and avoidable political gamble.

Here we are, almost 3 years later, with an unemployment rate higher than it was at the time (~9% now vs. ~8% then), which I would submit as one piece of evidence that the stimulus did not work. (My readers will know that there are many more, but that’s not the main point of this post!)

(And yes, I know the good old argument that “it would have been much worse, had it not been for the stimulus” etc. I would only kindly ask that anyone wanting to submit such an argument please logically refute the counter arguments that I have already laid out very clearly in The Trouble With Bureaucracy, and empirically supply specific examples that corroborate this thesis and that outweigh any evidence that may exist to the contrary.)

But in addition to that, I would say that the corruption, scandals, waste, and the ensuing political backlash that I predicted above, have only just begun to unravel: The case of Solyndra is suddenly a big thorn in the administration’s side, and it doesn’t seem to be going away any time soon:

Pressure on the Obama administration over the loan guarantee given to Solyndra ratcheted up after the discovery of e-mails from a White House official warning of possible political ramifications of the loan. As Carol Leonnig and Joe Stephens reported:

A White House official fretted privately that the Obama administration could suffer serious political damage if it gave additional taxpayer support to the beleaguered solar-panel company Solyndra, according to newly released e-mails.

(…)

Solyndra, the first renewable-energy company to receive a loan from the stimulus law creating the guarantee program, had its headquarters raided by the FBI last week. As AP reported:

The FBI raided Solyndra’s headquarters last week and interviewed company executives at their homes. A U.S. official, who spoke on condition of anonymity because the case is under seal, said the search was related to a fraud investigation into whether Solyndra filed inaccurate documents with the government.

The Silicon Valley company was the first renewable-energy company to receive a loan guarantee under the stimulus law, and the Obama administration frequently touted Solyndra as a model for its clean energy program. President Barack Obama visited the company’s headquarters last year.

Even as Obama declared that “the future is here” during a May 2010 visit to Solyndra, warning signs were being sent from within the government and from outside analysts who questioned the company’s viability.

At least three reports by federal watchdogs over the past two years warned that the Energy Department had not fully developed the controls needed to manage the multibillion-dollar loan program.

… and as was predictable, Republicans are happy to pounce:

“What did the stimulus give us last time? It gave us Solyndra,” Bachmann said to cheers at a packed Tea Party fundraiser this week in liberal Marin County. “Wasn’t that great?”

Bachmann is among the growing ranks of Republicans, including the lineup of 2012 GOP presidential candidates, who are increasingly salting their stump speeches, press releases and talking points with references to the Fremont firm that once was a poster child for the Obama administration on alternative energy jobs before it shut down last month.

The Minnesota Congresswoman and Tea Party darling delights audiences when she dryly quotes Vice President Joe Biden’s past observation that the federal government’s $528 million loan to Solyndra “was exactly what the stimulus act was all about.”

“It’s exactly true,” she said to cheers and applause from conservative activists in Marin on Thursday. “I tell you … we have so much material, it’s going to be a joy.”

Read more: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2011/09/16/MNED1L5MRI.DTL#ixzz1YAbztAT7

I would actually be shocked if this will remain the only example of blatant stimulus waste that will come back to haunt the president.

Actions have consequences; stupid decisions, whose long term impact you are unable to assess, will come back to bite you in the ass, particularly during election year. From the Republicans’ viewpoint, Obama could not have picked a better time for pushing the stimulus bill, since it usually takes at least a few years for all the filth and corruption of giant government programs to build up and trickle through the shiny, pompous, and mindless facade of politics.

But as I have come to realize about politics a while ago, the best thing to do in my opinion is to abstain from participating in these spectacles, sit back, relax, and don’t hurt your head too much about petty, boring, and small minded sociopaths who aspire to exercise power over millions of people year after year.

Tags: obama, Politics, stimulus

Comments Functionality Fixed!

September 14, 2011 · Posted in Service Announcement · Comment

I just noticed that for quite a while the comments functionality was broken, because reCaptcha seems to have changed a lot when they were moved into the Google Apps platform, and I wasn’t aware of this at all.

So I now issued a new public/private key pair and comments seem to be working again.

Sorry to all those people whose comments I have missed during that time.

It’s all up now, so … comment away! =)

Tags: wordpress comments