A Nightmare of Red Tape
Last glimpse of a real estate practitioner drowning in CFPB red tape
(Image source unknown – The Web)
Before the bailout, General Motors was known as a giant pension plan that occasionally made cars. The real estate industry today is a government compliance business. Real estate practitioners exist for the purpose of filling out a mountain of forms and occasionally sell houses or make loans.
From my personal experience, my first real estate offer was written on a single page 8.5"x11" form (circa late 1970s). My first client's loan application, all two pages of it, was initially denied. The borrower had over 20% to pay down and was self-employed with more than sufficient income to service the loan. After a sit down meeting with the loan officer, explaining the details, the loan was approved as it should have been. There is no chance this borrower would be approved today. The escrow closing statement was one legal size page and the loan documents amounted to something like four legal size pages.
Fast forward to today, it is impossible to count the mountain of paperwork involved in a simple real estate transaction. A purchase contract, with addenda, can easily exceed 50 pages. The loan package, from the loan application to the loan documents, including all the verifications, is best measured in inches, or by weight. An entire transaction file is about the size of Tolstoy's "War and Peace".
It begs the question: is the system therefore better today than the simple version of old? The answer is a resounding NO.
A Fool All Year Round
Meet typical writer of foreign policy editorials for the WP
(Image source unknown)
Coming off successes in Iraq and Afghanistan, it makes sense that the US should send troops to Ukraine, no?
When we first read this in the Washington Post, we thought it might be a late April Fools’ Day joke. Then we discovered the writer was sincere about it; apparently, James Jeffrey is a fool all year round:
“The best way to send Putin a tough message and possibly deflect a Russian campaign against more vulnerable NATO states is to back up our commitment to the sanctity of NATO territory with ground troops, the only military deployment that can make such commitments unequivocal.”
To its credit, the administration has dispatched fighter aircraft to Poland and the Baltic states to reinforce NATO fighter patrols and exercises. But these deployments, like ships temporarily in the Black Sea, have inherent weaknesses as political signals. They cannot hold terrain – the ultimate arbiter of any military calculus – and can be easily withdrawn if trouble brews.
Troops, even limited in number, send a much more powerful message. More difficult to rapidly withdraw once deployed, they can make the point that the United States is serious about defending NATO‘s eastern borders.”
And why not? The US has a global empire, supported by an unprecedented mountain of debt. All bubbles need to find their pins. And all empires need to blow themselves up. What Jeffrey is proposing is to speed up the process with more reckless troop deployments.
How to Rile Up China
Reuters reports that Japan's government has recently decided to expand the country's military footprint for the first time in four decades. This is in keeping with the nationalistic-militaristic agenda of Shinzo Abe, whose political philosophy is informed by his grandfather Nobusuke Kishi, a wartime cabinet minister and later prime minister. Abe is member of a group in the LDP calling itself the 'true conservatives', and one of the aims of this group is the restoration of 'national greatness' via expansion of the military and altering the pacifist post WW2 constitution. In other words, these people are bad news.
“Japan began its first military expansion at the western end of its island chain in more than 40 years on Saturday, breaking ground on a radar station on a tropical island off Taiwan. The move risks angering China, locked in a dispute with Japan over nearby islands which they both claim.
Japanese Defense Minister Itsunori Onodera, who attended a ceremony on Yonaguni island to mark the start of construction, suggested the military presence could be enlarged to other islands in the seas southwest of Japan's main islands.
"This is the first deployment since the U.S. returned Okinawa (1972) and calls for us to be more on guard are growing," Onodera told reporters. "I want to build an operation able to properly defend islands that are part of Japan's territory."
The military radar station on Yonaguni, part of a longstanding plan to improve defense and surveillance, gives Japan a lookout just 150 km (93 miles) from the Japanese-held islands claimed by China.
Building the base could extend Japanese monitoring to the Chinese mainland and track Chinese ships and aircraft circling the disputed crags, called the Senkaku by Japan and the Diaoyu by China.”
The disputed islands are the very issue over which Japan and China could one day come to blows. Shinzo Abe promptly added to the tension by sending an offering to the Yasukuni shrine, where a number of 'class A' war criminals are entombed (for a backgrounder on the shrine and its history see our previous article “The Strange Shrine Obsession of Japan’s LDP Politicians”). Evidently, Abe just cannot leave the shrine alone, and this is actually quite telling. His predecessor strictly avoided visits to the shrine, which accomplish little except angering the political leaders of China and South Korea. For Abe affirming his credentials as a nationalist apparently takes precedence.
File Under 'Foreseeable'
On Friday we wrote the following regarding the Geneva agreement that was supposed to chart the way forward for the Ukraine:
“We concur with [Jason] Ditz that both sides accusing each other of reneging on the deal is something one must probably expect to happen.”
The ink on the agreement wasn't even dry when the accusations started flying already. Reuters reports:
“At least three people were killed in a gunfight in the early hours of Sunday near a Ukrainian city controlled by pro-Russian separatists, shaking an already fragile international accord that was designed to avert a wider conflict.
The incident triggered a war of words between Moscow and Ukraine's Western-backed government, with each questioning the other's compliance with the agreement, brokered last week in Geneva, to end a crisis that has made Russia's ties with the West more fraught than at any time since the Cold War.
The separatists said armed men from Ukraine's Right Sector nationalist group had attacked them. The Right Sector denied any
We also pointed out that
“[...] one must also consider that the idea that Russia's government can 'order' the separatists to surrender and hand over their weapons is likely erroneous, although it possibly has a certain degree of influence with them.”
In fact, it is highly likely that the supposed influence of Russia's government on the separatists is of the same order as the influence the government in Kiev has on the 'Right Sector' – fairly small. Both sides have their extremists, whose purposes and intentions are diametrically opposed.
“Separatists are the key players in this crisis, but it does not appear they were even invited to the table.”
He also noted that it is not even certain who, if anyone, can speak for the separatists. At least one of the more prominent leaders (Pavel Gubaryev) of the Eastern Ukrainian separatists is imprisoned in Kiev.
The Eternal War's Legacy of Destabilization
The neo-conservative clique running George W. Bush's foreign policy was all gung-ho. The WTC attack had given them the opening they had been waiting for. They were always unhappy with the elder Bush's decision to halt the attack on Iraq as soon as the military objective of getting Saddam's armies out of Kuwait was achieved. 'Containment' was not for them. 'Everyone wants to go to Baghdad, real men want to go to Teheran', one of their battle cries went. Just as long as none of their own children were involved in the fighting of course. As is usual with the men who order others into war, they themselves were no longer of fighting age. It is always young men (and these days women as well) that are sent to die for one cause or another.
So what is the legacy of the intervention? Here is a list of what happened in Iraq over the past several days:
448 people dead in politically and religiously motivated violence in just 6 days and even more wounded. And on and on it goes. A day like April 18, when just 35 people were killed counts as 'peaceful' nowadays.
The Smart and the Good
[excerpted from “The New Empire of Debt” - ed.]
“Dere’s dem dat’s smart… an’dere’s dem dat’s good,” said Uncle Remus. Many young people today can’t even identify Uncle Remus. Some of their elders might want to arrest you for quoting him in the original dialect. But the man was a genius.
When we were young, we were a lot smarter. But as the years go by, many of the things we thought were smart don’t seem so smart anymore. And now we realize that, no matter how smart we think we are, we are never quite smart enough.
We think stocks are going up; we think we can build a better world in Mesopotamia; we think we can tell the fellow down the street how to discipline his children or decorate his house. But what do we know?
It is easier to be smart than to be good; that’s why there are so many smart people, and so few good ones. Smart men get elected to high office. They run major corporations. They write editorials for the newspaper.
Pity the poor good man; he goes to parties and has nothing to say that is not mocking and cynical. Others talk about their smart deals, their smart ideas, their smart plans and successes. Women crowd around them; a smart man grows taller as he speaks. The good man shrinks.
Ukraine's Army Fails to Retake Anything in the Eastern Ukraine
The Ukrainian army's recent foray into the country's East to regain control over administrative buildings seized by separatist militants has proved spectacularly unsuccessful. In Slovyansk the operation stalled out, although there was actually a shoot-out in Slovyansk which left three people dead. Pro-Russian groups insist that these were unprovoked shots at peaceful protesters, but it is of course difficult to be sure what actually happened.
“A military operation that the Ukrainian government said would confront pro-Russian militants in the east of the country unraveled in disarray on Wednesday with the entire contingent of 21 armored vehicles that had separated into two columns surrendering or pulling back before nightfall. It was a glaring humiliation for the new government in Kiev.
Though gunshots were fired throughout the day, and continued sporadically through the evening in this town that is occupied by pro-Russian militants, it was unclear whether anybody had been wounded. One of the armored columns stopped when a crowd of men drinking beer and women yelling taunts and insults gathered on the road before them, and later in the day its commander agreed to hand over the soldiers’ assault rifles to the very separatists they were sent to fight.
Another column from the same ostensibly elite unit, the 25th Dnipropetrovsk paratrooper brigade, surrendered not only its weapons but also the tracked and armored vehicles it had arrived in, letting militants park them as trophies, under a Russian flag, in a central square here. A pro-Russian militant then climbed into the driver’s seat of one and spun the vehicle around on its tracks, screeching and roaring, to please the watching crowd.
The events of the day underscored the weakness of the new government in Kiev entering critical talks with the United States and Russia in Geneva on Thursday over Ukraine’s future. Unable to exercise authority over their own military, officials increasingly seem powerless to contain a growing rebellion by pro-Russian militants that has spread to at least nine cities in eastern Ukraine.
In a tactical error, the Ukrainian soldiers on Wednesday had no accompanying force to control the crowds that formed around their advancing units. Their task, to confront armed militants intermingled with civilians, would be extremely difficult for any conventional army, but for this group, which apparently lacked the tools and the heart to carry it out, it proved to be impossible.”
The Death of Sashko Bily
EU representatives have let the new government in Kiev know that they are deeply concerned about the armed storm troopers of 'Pravy Sektor' and other militant groups in the Ukraine. Pravy Sektor is the organization that has done more than any other of the groups involved in the Kiev protests to chase former president Yanukovich and his henchmen away – mainly because it was not shy to resort to violence.
President Turchynov has quickly promised to disarm all extremist groups. There has already been one much debated confrontation between security forces (SOKOL) and one of the leaders of 'Pravy Sektor', Alexandr Muzychko, better known as Sashko Bily. Muzychko died in a shoot-out in a cafe in Rivne in the western Ukraine. Muzychko was actually wanted for war crimes in Russia: According to IB Times, “Russian officials had issued an arrest warrant for Muzychko for alleged atrocities, including torture, against Russian troops in Chechnya during the 1990s.”
IB Times also notes that there are conflicting reports about how exactly Muzychko died, who incidentally had predicted that he would be killed shortly before it happened in a video posted on Youtube. He in turn also repeatedly threatened to kill the Ukraine's new interior minister Arsen Avakov, whom he apparently disliked. Evidently, Asakov was faster.
The BBC reports that 'Pravy Sektor' promptly declared it would avenge Sashko Bily's death:
A Generous Offer He Couldn't Refuse
The tireless advocate of European-style socialism for America, the New York Times' famous promoter of Keynesian snake-oil, Paul Krugman, has joined the 'war against inequality' by deploying himself right on the front lines.
No, he still isn't going to debate Robert Murphy on economic theory so that $100,000 can be donated to New York food banks. That would be tantamount to participating in a 'circus'. Only 'serious debates' would be of interest to the great man. $106,000 have been pledged to help poor people? Well, f*** the poor people, the great man simply has no time for Mr. Murphy's 'circus'.
So what does he have time for? After all, the poor are dear to his heart, as he never tires to stress when he reminds his followers that the market is far 'too free', and that more regimentation, higher taxes and more deficit spending and money printing are absolutely needed to save the day and help the downtrodden against the nefarious schemes of the plutocrats (this is quite ironic, because the plutocrats probably agree wholeheartedly with Krugman's proposals).
Enter the University of New York (CUNY) and its Luxembourg Income Study Center , a research arm devoted to “studying income patterns and their effect on inequality”. Via 'Gawker' we learn that the institute has hired the selfless crusader to support its work on 'income inequality studies' for the pittance of $225,000, which he will receive for an engagement lasting 9 months. Surely an onerous workload awaits the poor man at the 'Income Study Center' if he should accept.
One imagines that there should at least be some 'serious debate', or perhaps that he will even teach a course that explains to students why free markets are bad. After all, growing inequality is only to be expected if one allows capitalist exploiters to run wild, as is the case in the completely unregulated free-for-all the world is forced to endure at present.
“According to a formal offer letter obtained under New York’s Freedom of Information Law, CUNY intends to pay Krugman $225,000, or $25,000 per month (over two semesters), to “play a modest role in our public events” and “contribute to the build-up” of a new “inequality initiative.”
It is not clear, and neither CUNY nor Krugman was able to explain, what “contribute to the build-up” entails.
It’s certainly not teaching. “You will not be expected to teach or supervise students,” the letter informs Professor Krugman, who replies: “I admit that I had to read it several times to be clear … it’s remarkably generous.” (After his first year, Krugman will be required to host a single seminar.)”
It looks as though the US stock market is in the process of topping out. But if you’d bet heavily on a bear market, each time you saw one coming, you’d be broke by now. We will wait to see what happens…
Meanwhile, we are still puzzling over the miracle produced by the Fed. Uri Geller could bend spoons. The Fed bends the entire economy. Hardly a single price is unaffected. Hardly a single business plan or investment strategy goes forward without an eye on the central bank.
Jesus turned water into wine and multiplied loaves and fishes. But the Fed make the Nazarene seem like a two-bit shell game hustler. The loaves and the fishes couldn’t have had a market value of more than a few thousand shekels!
Swiss Referendum on Introducing the World's Highest Minimum Wage
Most of our readers probably know what we think of minimum wages, but let us briefly recapitulate: there is neither a sensible economic, nor a sensible ethical argument supporting the idea.
Let us look at the economic side of things first: for one thing, the law of supply and demand is not magically suspended when it comes to the price of labor. Price it too high, and not the entire supply will be taken up. Rising unemployment inevitably results.
However, there is also a different way of formulating the argument: the price of labor must not exceed what the market can bear. In order to understand what this actually means, imagine just for the sake of argument a world without money. Such a world is not realistic of course, as without money prices the modern economy could not exist. However, what we want to get at is this: workers can ultimately only be paid with what is actually produced.
As Mises has pointed out, most so-called pro-labor legislation was only introduced after enough capital per worker was invested to make the payment of higher wages possible – usually, the market had already adjusted wages accordingly.
However, unskilled labor increasingly gets priced out of the market anyway, which is where the ethical argument comes in. If a worker cannot produce more than X amount of goods or services, it is not possible to pay him X+Y for his work. Under minimum wage legislation he is condemned to remain unemployed, even if he is willing to work for less.
Copying a Bad Idea
Why is there an IMF? It seems a good question, so here is the short answer: in the post gold standard world, central bank-supported fractional reserve banking has enabled the emergence of such huge credit booms, that governments frequently get into severe trouble when a boom collapses and their countries' current account deficits are suddenly no longer funded by foreign investors. Then they feel forced to go hat in hand to the IMF.
It should be obvious that the solution to the problem is not to let a tax payer funded bureaucracy treat the symptoms, but to strike at the root by returning to a sound monetary system. The only truly sound monetary system would be a market-based one. By adopting such a system, one could do away with a great many bureaucracies and regulations in one fell swoop.
Note in this context that today's popular views on the gold standard – or rather, the views that are promoted by all those with a stake in the current system – are entirely wrong. Not one of the canards brought up against it has any merit (we're thinking of a few often used lines like 'there is not enough gold', or 'we would not have the flexibility that is needed for central banks to steer the economy' and similar nonsense).
Slip-Sliding Away …
As a little addendum to our recent ritual lambasting of Abenomics, here are the latest news on Japan's consumer confidence – the reading, mind, is from March – before the introduction of the higher sales tax:
“Japan’s consumer confidence fell in March to the lowest level since August 2011, a reading that may tumble further this month after a sales-tax increase on April 1 sapped the public’s spending power.
The reading of 37.5, down from 38.5 in February, was released by the Cabinet Office in Tokyo today. About 90 percent of respondents to the survey expect prices to rise over the next 12 months, the highest in comparable data back to 2004.
Prime Minister Shinzo Abe risks the public souring on his campaign to sustain growth in the world’s third-biggest economy as prices start to rise while wages stay stagnant. Weaker sentiment could make it harder to drive a rebound from a contraction forecast this quarter, and raise the odds that the Bank of Japan adds to its already unprecedented easing.
“Consumer sentiment has been undermined to a large extent by rising prices,” Goldman Sachs Group Inc. economists Naohiko Baba and Yuriko Tanaka wrote in an e-mailed note before the release. “We expect a major retreat in sentiment from April as the tax hike drives inflation.”
The confidence reading was 39.9 when Abe took office in December 2012, and rose to 45.7 in May last year — the highest point during his current term as prime minister. The Topix index of stocks is down more than 10 percent this year after soaring 51 percent in 2013.
Confidence dropped in all five components in the survey, with willingness to buy durable goods dropping the most, down by 2 to 30.8.”
A Thousand Clowns
Economics has been called the “dismal science.” But even that is merely fraud and flattery. Economics is dismal, but it isn’t science. At best it is merely voyeurism – peeping in people’s windows as they go about their business and trying to figure out what they are doing. At worst, it is pompous theorizing about how to get the schmucks to do better.
We doubt that you are especially interested in economics, dear reader. We know we are not. But we can’t resist a good comedy … or a good opportunity to point and giggle. We keep our eye on economists and politicians the way children watch clowns; we can’t wait to see them get whacked in the head or trip over each other.
But what is amusing is also instructive. Are clowns not people too? Are they not part of human life … human organization … and human economy? Every one of them is driven by the same motors that power everyone else. They want power … glory … money. But how do they get it? Can we not watch politicians and economists and learn something about ourselves?
Other articles that might be of interest for you:
- A Brilliant Look at US Monetary History
- Are Nation States Beginning to Splinter?
- Growing Unrest in the Eastern Ukraine
- The Germans Just Love Russia
- Insiders Become Extremely Pessimistic
- Gold and Gold Stocks – A Comment on the Correction
- Walt's Law
- How This Central Bank Bubble Ends
- Who Are We Killing? It Seems a Good Question
- Why Was China Carrying Gold?