Saturday, October 30, 2010

You can tell good lies with bad definitions

The government's Bureau of Economic Analysis issued a report this week touting the improving economy with a measure of Personal Consumption Expenditures (PCE) -- up 2.6%.

That would lead one to believe that the consumer is spending again, despite high unemployment, and much uncertainty over future prospects even for those still employed.

A few little details bring the PCE into clearer focus. We are often told that consumer spending is 70% of the Gross Domestic Product. It's like a mantra. I hear it everywhere. What I did not know until yesterday is that PCE includes $2.5 trillion of health care spending, half of which is financed by government! When the government writes a check for your grandma's knee replacement, that get's counted as consumer spending in the government's GDP statistics, we are told by Bloomberg's Michael Mandel.

The kind of spending most normal people (i.e. non-economists) consider consumer spending consists of buying "stuff," not getting prescription drugs, visiting doctors, or having operations.

So how is the real economy doing? How are consumer expenditures -- by a normal definition -- holding up? "...state sales tax revenue (the only valid measure of consumer sales), is still far below 2007 levels and states are in serious trouble over it," according to Mike Shedlock (aka "Mish").

Yet by including government-funded health care and other health care spending, we see a chart for "personal expenditures" that looks like this, indicating a recovery. Click image for full size.

Wow. That looks like a major recovery to pre-recession levels. But a good percentage of it is inflation-fueled health care, some of it paid with borrowed money from the federal government.

As for the economic growth on Main Street... not so much.

Thursday, October 28, 2010

Blatant Lying: Obama Claims Financial Crisis Cost Taxpayers 1% of GDP (Less than the S&L crisis)

1% of GDP would be about 140 billion dollars. But bailing out Fannie Mae, Freddie Mac, the Federal Reserve printing 2 trillion dollars to buy up bad mortgage debt and Treasury bonds, trillions in other guarantees of support for future bankruptcies, possible support for FDIC, etc -- the total is anywhere from 4-10 trillion, depending on what eventually comes to pass, and how many guarantees need to be met. That's not even counting the $900 billion stimulus package.

Yves Smith writes: "I’m so offended by the latest Obama canard, that the financial crisis of 2007-2008 cost less than 1% of GDP, that I barely know where to begin. Not only does this Administration lie on a routine basis, it doesn’t even bother to tell credible lies. .And this one came directly from the top, not via minions. It’s not that this misrepresentation is earth-shaking, but that it epitomizes why the Obama Administration is well on its way to being an abject failure."

You can hear Obama's own words on the Jon Stewart show -- it's the third video segment on this Huffington Post page, starting after the one minute mark. And the audience is applauding. They either are so stupid they don't know he's lying by a factor of maybe 25 or 50, or they are applauding the BLATANT LIE.

I suppose nothing should shock me by now, but honestly, I'm amazed. I'm sure he knowingly does this because the lamestream media will not call him on it, and he knows it. (I see the Economist discussed this concept in January and offered that a cost of 1% of GDP "may be too optimistic." LOL. What kind of accounting are they using???)

Where do we go from here? What lie is too audacious to float next? Nothing, apparently.

Sunday, October 24, 2010

Lies, Damned Lies, and Medical Science (and Vaccines)

The Atlantic Magazine is the best monthly periodical still in publication, in my experience. I have soured on them only slightly because of the recent spate of pieces by Michael Kinsley, who has dragged down the credibility of the enterprise just a smidgen. Somehow Kinsley makes less sense today than he used to as frequent guest on Buckley's Firing Line.

I haven't read the latest Atlantic article "Lies, Damned Lies, and Medical Science," but it's on my list. The Atlantic has published so many surprisingly honest articles about health and health care, I'm sure this will be no exception.

Since this is the vaccination season, everybody should be aware of what I would term a landmark article from last year, also in the Atlantic: Does The Vaccine Matter?

Of course, the feds are insisting virtually everyone should be vaccinated. It will reduce deaths 50%, protect the old and the weak. Yada yada yada.

Do the data back it up? Curious facts that do not fit the party line:

“In 2004… vaccine production fell behind, causing a 40 percent drop in immunization rates. Yet mortality did not rise.

“…vaccine “mismatches” occurred in 1968 and 1997: in both years, the vaccine that had been produced in the summer protected against one set of viruses, but come winter, a different set was circulating. In effect, nobody was vaccinated. Yet death rates from all causes, including flu and the various illnesses it can exacerbate, did not budge.

“…In 1989, only 15 percent of people over age 65 in the U.S. and Canada were vaccinated against flu. Today, more than 65 percent are immunized. Yet death rates among the elderly during flu season have increased rather than decreased.”

The dogma that flu vaccines save lives is so entrenched that the most careful studies cannot be done to prove the point, because to deny a control group a vaccine that we "know" saves lives would be "unethical." Of course it is not unethical to vaccinate 100 million people based on institutional prejudices with no solid proof of benefit for the vast majority.

But we don’t need no steeenking facts, do we, SeƱor? Salute the Dear Leader and get your shots, everybody. Stimulate the vaccine-making industry. Think about how many jobs will be created or saved.

Sunday, October 17, 2010

Awareness awareness

More than ever I have noticed that we are being bombarded by awareness campaigns. Breast cancer awareness -- the pink ribbons and pink products. The First Lady is promoting awareness of diet and exercise for children. Excuse me. "For the cheeeldren." I saw a story on the local television news about ordinary people sleeping in cardboard boxes to raise "homeless awareness."

In other words, I've become more aware of the "awareness" phenomenon. Awareness awareness. I can't think of a ribbon that would be appropriate for this awareness to the second power.

There are still threats to our survival as a once-prosperous nation of which people are not yet sufficiently aware.

As far as I can tell, no one has officially developed awareness campaigns for the unpayable national debt, or the Federal Reserve slowly destroying our savings by manipulating interest rates and conjuring money into existence out of thin air -- literal currency inflation.

What about government waste awareness? Or awareness of the courts usurping our God-given individual rights?

Each of these deserve campaigns, with public events, corporate sponsorship, identifiable symbols or "branding" (like the pink ribbon for breast cancer awareness that is now appearing on a plethora of food and other products).

I don't have the brainpower or money or influence to make it happen. But I think in the marketplace of awareness, we need competition from libertarian and limited-government ideas and movements that are targeted for mass public education and symbols that unite people in mass numbers to agitate for the return of our freedoms, a return to sound money, limited sensible government regulation that is enforced fairly and justly in the interests of all parties (not merely for the benefit of the Ruling Class), and low taxes.

Friday, October 15, 2010

Fed: We don't quite know what the blazes we're doing...

I had to chuckle at this headline on Marketwatch, regarding Federal Reserve Chairman Ben Bernanke's statement today about more "quantitative easing" [fancy term for printing money and buying bonds or securities]:

Bernanke makes his case

The Fed chair sees the need for further easing but says caution in proceeding is warranted, given the lack of experience with the new
policy tools
. [emphasis mine]

My translation: We just got our learner's permit. We don't really know how to drive this printing press yet, without crashing the dollar and the financial system.

Our economy is in the hands of Harvard-educated fools.

Wednesday, October 13, 2010

QE2 is not a ship

The dollar has been dropping, gold has been rising, on rumors that the Federal Reserve will start another round of "quantitative easing" to pump up the economy by lowering interest rates. [They are already so low, the effect is like pushing on a string.] I don't know if Karl Denninger is precisely correct about causes and effects, but there's a good possibility. Here's what he wrote.

"The total decline in the dollar since June has been about 13%. The increases in commodity prices have been radically greater, with the exception of oil, which has roughly matched the dollar depreciation point-for-point.

"The problem with currency debasement as a means of trying to control a debt implosion (occurring as a consequence of hidden bad debts) is that it doesn't work. You can print more dollars and put them into the system but you can't control where they go. When the system is debt-saturated 'where they go' is overseas, generating a carry trade. This effectively exports what you're trying to do (generate positive inflation) overseas, and causes inflation there. It in turn, however, drives up commodity prices, which translates into input costs and ultimately compresses both operating margins and consumer balance sheets. This then produces a profit recession, which ultimately produces a 'classical' recession, and when it occurs into a debt-saturated environment you get bankruptcies by the boatload along with the sort of crash we had in 2008.

"You'd think that Bernanke would have learned from the last time - which was just a couple of years ago. You'd be wrong.


"Bernanke and the markets think 'QE2' will save us. [QE2 = the second round of quantitative easing, where the Federal Reserve prints money and uses it to buy up bonds and possibly other assets, a backdoor bailout for the banks, by the way] It will not. All it will do is produce another depression inside the one we're already having and the government is unable to add another $1.5 trillion annually in deficit spending on top of the spending it's already doing. The lower and middle classes will feel the inexorable weight of the commodity price ramp starting about now, and continuing into the holiday season and the New Year, which will do exactly what it did the last time.

"This is a proved failed policy, but there's nobody with a brain home in Congress, the White House or in The Fed who will pull their head out of their ass long enough to realize that fellating bankers will not resolve what ails us, when they're the ones who have been robbing the citizens with fraudulent schemes for the last 20 years and are now desperate to avoid the just desserts that should attach to their behavior."

Karl's entire rant is good reading.

Tuesday, October 12, 2010

The next bailout: gamblers in the derivatives market?

Washington is working overtime to find new ways to bring the populace to a seething boil. Somehow Congress is able to pass 2000-page bills that are unread before passage that still, in all their length and detail, leave crucial rules to the discretion of bureaucrats.

And so, the next bureaucratic "gift" is the potential for "backstops" (a euphemism for bailout) of derivatives clearinghouses which centralize the trading of derivatives -- bets on the prices of currencies, stocks, interest rates, commodities, bonds, and virtually anything else the wizards of Wall Street can think of betting on.

"Because most derivatives transactions are expected to go through these clearinghouses, they will be 'systemically important' under the law... [which] specifically provides that 'in unusual or exigent circumstances,' the Federal Reserve may provide such entities with a financial backstop,including borrowing privileges.

"Remember this: Financial backstop is just another term for a taxpayer bailout. And the major banks and brokerage firms are the members of the clearinghouses, so a backstop would essentially be for them.

"According to the Bank for International Settlements, the entire derivatives market had a gross credit exposure of $3.5 trillion at the end of 2009. Obviously, even a small fraction of that amount could represent a sizable call on the taxpayers if a clearinghouse hit the skids.

"So much for eradicating too-big-to-fail."

New York Times, October 2

Sunday, October 10, 2010

George Washington's Thanksgiving Proclamation, 1789

A reminder of where we have been.

I perceive that the theme of this proclamation is humility. Washington urges devotion to the service of our Creator. He also asks that the nation unite in beseeching that Creator for pardon of our iniquities. Washington acknowledges the intervention and sovereignty of that Creator in the affairs of nations.

It is doubtful that any of our nation's top leaders today could even conceive of writing such a statement, not even in an act of feigned religiosity. Such humility is beyond their conception.


[New York, 3 October 1789]

By the President of the United States of America. a Proclamation.

Whereas it is the duty of all Nations to acknowledge the providence of Almighty God, to obey his will, to be grateful for his benefits, and humbly to implore his protection and favor--and whereas both Houses of Congress have by their joint Committee requested me "to recommend to the People of the United States a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many signal favors of Almighty God especially by affording them an opportunity peaceably to establish a form of government for their safety and happiness."

Now therefore I do recommend and assign Thursday the 26th day of November next to be devoted by the People of these States to the service of that great and glorious Being, who is the beneficent Author of all the good that was, that is, or that will be--That we may then all unite in rendering unto him our sincere and humble thanks--for his kind care and protection of the People of this Country previous to their becoming a Nation--for the signal and manifold mercies, and the favorable interpositions of his Providence which we experienced in the course and conclusion of the late war--for the great degree of tranquillity, union, and plenty, which we have since enjoyed--for the peaceable and rational manner, in which we have been enabled to establish constitutions of government for our safety and happiness, and particularly the national One now lately instituted--for the civil and religious liberty with which we are blessed; and the means we have of acquiring and diffusing useful knowledge; and in general for all the great and various favors which he hath been pleased to confer upon us.

and also that we may then unite in most humbly offering our prayers and supplications to the great Lord and Ruler of Nations and beseech him to pardon our national and other transgressions--to enable us all, whether in public or private stations, to perform our several and relative duties properly and punctually--to render our national government a blessing to all the people, by constantly being a Government of wise, just, and constitutional laws, discreetly and faithfully executed and obeyed--to protect and guide all Sovereigns and Nations (especially such as have shewn kindness onto us) and to bless them with good government, peace, and concord--To promote the knowledge and practice of true religion and virtue, and the encrease of science among them and us--and generally to grant unto all Mankind such a degree of temporal prosperity as he alone knows to be best.

Given under my hand at the City of New-York the third day of October in the year of our Lord 1789.

Go: Washington

Thursday, October 7, 2010

War with Muslims has just begun...

The Times Square bomber, sentenced to life imprisonment on Oct 5, made a statement/rant before the court. Some excerpts:

"Brace yourselves, the war with Muslims has just begun. Consider me the first droplet of the flood that will follow. [Defeat of the United States] is imminent and will happen in the near future."

"...the Koran gives us the right to defend, that's all I'm doing."

"[If given 1,000 lives, I would] sacrifice them all for the sake of Allah."

"We are only Muslims trying to defend our religion, people, honor and land. But if you call us terrorists for doing that, then we are proud terrorists, and we will keep on terrorizing until you leave our land and people at peace."

'We do not accept your democracy or your freedom because we already have Sharia law and freedom."

sources: and, October 6.