On Economy


Too Many Geezers

So far, we’ve proposed two reasons why the 21st century has been such a dud …

First … the developed nations are cursed with too many geezers. We have nothing against old people (especially as we hope to be one ourselves all too soon). But old people do not build a new economy; young people do. And today, there are not enough young people to power the kind of economic growth we’ve gotten used to.

Second… rules, regulations, subsidies, laws and orders now protect established financial interests against upstart competitors. Businesses get older along with the population, as government creeps over more and more of the economy.

The feds use monopoly force to prevent competition and reward today’s voters and capital owners. The baby born in 2015 finds himself subject to debts, obligations and restrictions that were meant to benefit his grandparents. Today, we give you another reason for the flop that is the 21st century. As you will see, they are all related…


1-2014-3_FR pages_webimage2013Pages in the Federal Register. There was a brief reprieve from over-regulation in the Reagan era, but shortly thereafter the regulatory State went into action again at full blast. Capitalism is slowly but surely asphyxiated, and with it any chance to escape the debt trap is dying with it (chart source: the George Washington University regulatory studies center) – click to enlarge.


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Nothing Against the Old

We would like to preface today’s Diary with a clarification: We don’t have anything against old people. We don’t have anything against high GDP growth rates either. But the two don’t go together.

Some of this opinion comes from looking in the mirror: New products? New technology? New businesses? The older we get the less interest we have. When we learn a “new” song on the guitar, for example, it is likely to be one written half a century ago.

When we sit down to watch a movie, we’re as likely to pick out something from Leslie Nielsen’s Naked Gun series as a new Hollywood release. There are different stages in life… with different interests. One dear reader explains it:


In India there is a concept of Vrana ashram. In it, a person’s life is divided in four parts. From birth until 25, it is Brahmacharya – a person should gain knowledge by reading scriptures. From 25 to 50, it is Grihastha ashram – to live married life. From 50 to 75, it Vanaprastha – away from society in the forest seeking god. From 75 to 100, it is Sannays – complete renouncing of the world.”


We guess we are in the Vanaprastha stage. Maybe that’s what we’re really doing out on this remote ranch high in the Argentine Andes: seeking god.


Saiva_Swami_Sangam_2011Vanaprastha activities in the temple.

Photo credit: Kauai’s Hindu Monastery

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One Bad Idea After Another

Ben Bernanke is frequently in the news these days. The latest occasion concerns his opinion on the Fed’s “inflation” target, i.e., the target for the speed at which money should be debased relative to consumer goods in order to finally attain centrally planned economic nirvana.

Price inflation is currently deemed to be “too low” by our bien pensants, in spite of the fact that the broad US money supply TMS-2 has more than doubled since 2008 (as of March, it is very close to $11 trillion, up from $5.3 trn. in early 2008). If recent CPI data are to be believed (which requires a bit of a leap of faith), consumers may actually get slightly more goods and services for their money henceforth. What an unimaginable horror!


CPICPI dips ever so slightly into negative territory year-on-year – the nightmare of central planners around the world – click to enlarge.


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Ben “I Didn’t See It Coming” Bernanke Hired by Big Hedge Fund

Ben Bernanke is not only blogging now and thereby making an unwelcome contribution to lowering the citizenry’s aggregate economic intelligence, he has also decided to once again follow in the footsteps of his predecessor, “Maestro” Alan Greenspan, by joining a hedge fund. Bernanke is calling in some markers and is about to cash in by becoming an advisor to the Citadel Group, the world’s most highly leveraged large hedge fund and HFT shop.






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Industrious Hands

In politics and economics, most people believe what isn’t true: that the common folk select their leaders … and that these leaders are wiser than God.

We recall an early experiment. The pilgrims washed up in the wrong place … and then proceeded to almost exterminate themselves with clumsy central planning.

Their system discouraged work and encouraged zombies. Wrote Plymouth County governor William Bradford:


[The system of] taking away of property and bringing [it] into a commonwealth [caused] confusion and discontent [and] retarded much employment that would have been to benefit and comfort [of the settlers].


Some went to work for the Indians, cutting wood and fetching water in exchange for a “capful of corn.” Others starved.

Finally, the colonists abandoned central financial planning and collective production. Families were given individual plots of land, which they were able to cultivate for themselves. The colony was saved.

“This had very good success,” Bradford wrote, “for it made all hands very industrious.”


BradfordCity fathers hewn in stone, sternly gaze across the lawn …William Bradford, governor of Plymout County, 1590-1657

Photo credit: cataloft  / flickr


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Citigroup’s Chief Economist Joins the Cash Ban Bandwagon

We have discussed the views of Citigroup’s chief economist Willem Buiter previously in these pages (see “A Dose of Buiternomics” for details), on occasion of his coming out as a supporter of assorted monetary cranks, such as Silvio Gesell, to name one. Not to put too fine a point to it, Buiter is a monetary crank too.

Buiter is always shilling for more central bank intervention, and it seems no plan can ever be too silly or too extreme for him. In fact, he seems to have made the propagation of utterly crazy ideas his trademark.

Buiter has now joined one of his famous colleagues, Kenneth Rogoff, another intellectual enamored with central planning, in clamoring for a cash ban (for our discussion of Rogoff, see “Meet Kenneth Rogoff, Unreconstructed Statist”). Both Buiter and Rogoff want to make it impossible for citizens to escape the latest depredations of central bankers, such as the imposition of negative interest rates. This is to be done by forcing them to keep their money in accounts at fractionally reserved banks.


web1_WSOP-FINAL-TABLE_111114DB_020_6If Buiter gets his way, there won’t be a WSOP final table with piles of cash anymore.

Photo credit: David Becker / Las Vegas Review-Journal


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Headfirst into the Sublime

Today, we plunge into the sublime. That’s right: We are leaving the ridiculous behind. Instead, it’s headfirst into the dark pool of things we will never understand and probably never should try.

First, we pause to take note of the latest debt binge. Reports Bloomberg:


“Just when debt-addicted American companies were starting to worry that Federal Reserve Chair Janet Yellen was going to take their proverbial punch bowl away, along came Mario Draghi.

The European Central Bank president has made borrowing so cheap in the region that foreign corporations are selling record amounts of debt. Forget the deeper, bigger US corporate-bond market. Borrowing in euro is all the rage these days because it’s about 2 percentage points less expensive to do so.

About 65% of the record 60 billion euro of investment-grade bonds sold in March came from overseas companies, according to a March 27 Bank of America report. And a lot of those sellers are based in the US. […]

The trend comes down to basic math. Yields on investment-grade bonds in Europe have fallen to 0.99%, compared with 2.9% on those in the US, according to Bank of America Merrill Lynch index data.”


Like all borrowing binges, this one is likely to end badly …


Euro high yield indexBofA/Merrill Lynch euro “high yield” index. The new era of return-free risk created by the allegedly well-meaning bureaucrats manning central banks, via St Louis Federal Reserve Research – click to enlarge.


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Fantastic Progress

We ended last week wondering what had gone wrong: How come the 21st century has turned out to be such a dud?

Where are the jaw-dropping new inventions? Where are the rising incomes? Where is the dynamic, sizzling economy we expected?

Back in about 1963, we recall trying to picture ourselves in the 21st century. The rate of progress then was so fantastic we had to stretch to imagine it.

Every year, Chevrolet, Ford and Chrysler put out a new and better automobile. In 50 more years, surely cars would be regularly flying through the air!

In 1969, Neil Armstrong walked on the moon. It was just a matter of time before we had a colony there… from which we could explore the solar system.

Then in 1970, the pocket electronic calculator appeared. Half a century later, imagine the condensed knowledge and computing power we would be able to carry around.


jetsonsThe question should not be whether the government should or shouldn’t build and administer roads – the question should be: “Where the hell are our flying cars?”

Cartoon : Hanna / Barbera


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Dudes, Where’s My Money?

Over the weekend, conservative German newspaper FAZ (Frankfurter Allgemeine Zeitung) reported that euro-group negotiators were allegedly “shocked” by the lack of viable reform plans offered by Greece and the general attitude of the Greek delegate. As Reuters reports:


“Euro zone officials were shocked at Greece’s failure to outline plans for structural reforms at last week’s talks in Brussels, a German newspaper on Saturday cited participants as saying, adding the Greek representative behaved like a “taxi driver”. A meeting of deputy finance ministers on Thursday gave Athens a six working day deadline to present revised economic reform plans before euro zone finance ministers meet on April 24 to consider unlocking emergency funding to keep Greece afloat.

Euro zone sources told the Frankfurter Allgemeine Sonntagszeitung that they were disappointed and shocked at Athens’ lack of movement in its plans, and in particular its reluctance to talk about cutting civil servants’ pensions.

The mood between Greece’s leftist government and its euro zone partners, especially Germany, has deteriorated in the last few weeks, with personal recriminations flying between ministers and calls from Athens for Berlin to pay war reparations.

The paper said at last week’s meeting the Greek representative just asked where the money was “like a taxi driver”, according to sources, and insisted his country would soon be bankrupt.

The euro zone sources told the paper that Greece’s creditors do not believe this is the case and that it would be a domestic political issue if Athens is unable to fully pay salaries and pensions.

The paper also said that German Finance Minister Wolfgang Schaeuble, who has taken a tough line toward Greece in bailout talks, would have to get the Bundestag lower house of parliament to vote on any fundamental changes to the reform program.


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Less rich, Less Free, Less Safe and Less Smart

Yesterday, we spent the day riding up to Tacana. So few people have been there, we thought it might be a ranch myth. More about that soon …

The last Diary recounted what a flop the 21st century has turned out to be so far. We focused on the economy. We might just as well have looked at education, health care, human liberty, safety, politics or war.

Almost everywhere you look things appear to be degrading. We are less rich, less free, less safe and probably less smart than we were 15 years ago.



Cartoon by Gary Varvel


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Is Inequality a Bad Thing?

We couldn’t believe what we were seeing when coming across the following headline at Reuters recently:Fed’s Yellen says research needed to understand inequality issue”. Seriously? Maybe we can help the good chairwoman out a bit. First of all, human beings are already born unequal. With that we not only mean that they are born in different social strata, but that they are usually born with unequal talents, brains, physique, and so forth.


Janet YellenFed chair Janet Yellen – she doesn’t look concerned here, but of course we don’t want her to constantly wear a frown. Anyway, inequality is on her mind she says.

Photo credit: AP


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A Great Time to be Alive

What a great time to be alive!

Mankind stood on the foothills of Olympus ready to join the assembly of gods – rollicking, frolicking and generally misbehaving without regret.

The World Wide Web was gaining velocity. It was widely believed that breakthroughs in communications had “removed the speed limits” to economic growth. Information was now readily and easily available to everyone.

Any dope in Peoria could go on the Web and find out how to manufacture a bomb in his basement or make a cherry pie in his kitchen.

And the genius in Kuala Lumpur or Kabul was now liberated from the lowbred, backward and benighted people around him; he could see what fun it would be to have a Beverly Hills ZIP code.

And he could reach across the World Wide Web and get a chisel and a steel file to create a killer website … and free himself from his miserable circumstances.


Mount Olympus – where the ancient Greeks suspected the gods to reside, with Zeus as chairman of the Pantheon. The top of the mountain often disappears in the clouds, so it was a good spot to place the gods in. Latter-day mountaineers spoiled the fun by reporting they couldn’t find anything up there.

Photo via toutiao.com / Author unknown


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Government-Subsidized Alternative Energy Madness

It is our contention that without government subsidies, most of the so-called “alternative energy” industry would not exist. In fact, as you will see in the addendum further below, it barely manages to hang on with subsidies. This follows quite simply from the fact that anything that can be done profitably and is economically viable doesn’t need government subsidies in the first place – it will simply be done voluntarily by the private sector.



President Obama announces his latest green energy boondoggle

Photo credit: AP


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Japan’s Ministry of Defense Not Letting its Guard Down

Back in 2007, Japanese politicians were beginning to ponder how to defend the country against invading green men from neighboring star systems within the framework of the country’s pacifist constitution. Apparently a thorny issue, but at least the ministry of defense was on the case.



Hi there! (artist impression of a space alien from the Rigel II system)


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Catching Themes

China Merchants has a knack for catching themes. China Merchants Holdings has been a decently managed company in the China context, holding decent port assets. But investors, mainland and foreign, always seem to get taken away by some idea of golden returns. In the late ‘00s there was all this fanfare about its Vietnam investment with billions of HK$ market cap added pretty much on the back of the concept.

Having Shanghai Port Group shares take off in the late ‘00s also helped propel the shares into the stratosphere for awhile, as owning a stake in a Shanghai listed company offered investors participation in China rallies.


silkie 235

No, I’m not part of a mop …

Photo via tinngan.vn


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