It was always about China,

Bob writes in a comment:

"China can slow economic growth, but not by a great deal."

In my weirder moments, I think Iraq was really about China.

Posted by bob mcmanus at October 31, 2004 01:37 PM

Iraq was about China. It's obvious. Just like Japan pre-WWII the one thing that China needs but doesn't have is oil. The only way we can keep our economic viability as a super-power under the current model is to get away with printing a lot of dollars - a reality only made possible by bringing a lot of oil on the world market. As Stirling has pointed out, nobody wanted to trust Saddam to be the delivery man.

In addition, whether or not Saddam would have cooperated by occupying Iraq we could prevent Chinese encroachment on the middle-east sphere. It's been reported and is fairly well known in circles that it was Chinese electronics and fiber-optics that Saddam was attempting to rebuild his anti-aircraft defense system with - the one we kept degrading by bombing it under Clinton.

If you look at Afghanistan you'll also see that China is involved. Afghanistan is a nice regional buffer against China and operations against Taliban and Alqueda from bases in Kazakstan or Georgia or Turkemnstein also make a geostrategic hedge against China.

Bush or rather should I say Condi and Rummy were trying to checkmate China before it ever got to super-power status by putting a strangle-hold on the one commodity that could bring it to its knees given a conflict over Taiwan or North Korea, etc. Oil.

This of course all goes without saying, sine non qua.

That's why we all, myself and others, were taking a rather considerable risk by failing to support the Iraq venture. The USA is already committed to a oil blockade against Chinese hostilities. Failure to complete the gambit will be disasterous - ten years hence when China attempts to seize Taiwan or let's North Korea off the leash.

That's why Kerry can't be allowed to just bring the troops home whatever he is promising. It would effectively guarentee the loss of South Korea and Taiwan within a decade. And then worse as China displaces the USA as preminent superpower and locks up the middle-east by allying with Russia and negotiating with Europe.

One way or another Iraq will have to be made to work ... I feel this is true even if I have to go there myself. There is no other option that doesn't cede Taiwan, South Korea, and the South China Seas oil fields to China. However first Bush and his power-base have got to be reined in one way or another.

Anyone under the illusion that the world would be safer under a "multi-polar" world hasn't been paying much attention. "Multi-polar" is a recipe for a new Warring period.

China has two choices in the medium term. It can continue expanding or it can undergo revolution. It could also reform but every sign is that they aren't becoming efficient enough fast enough (unwinding the tangled ingrained social power relationships of corruption) widely enough enough to provide sufficient social justice and stability in order to obtain popular legitimacy. Therefore they must expand or undergo revolution when the pent up pressures are feedback into the system by the limits of expansion. For expansion they need oil and cheap oil and the strategic freedom implied by a guarenteed oil supply to accomplish geostrategic advances.

The logic is inevitable.

Social Justice: Gunsmoke Tribute,

With a President who consciously invokes comparisons to the myth of the West in American culture it seems appropriate to revisit the modern incarnation of the uber-western "Gunsmoke". For those unfamiliar with American culture, Gunsmoke ran for twenty seasons on TV. Here is the TV-land summary:

Premiering on CBS in September 1955 and completing its network run September 1975, Gunsmoke is the longest running dramatic series in the history of television. Two of its stars, James Arness and Milburn Stone, remained all 20 seasons, with Amanda Blake a close second, departing after 19 years.
The series started out as a half-hour show, and expanded to an hour in its seventh season. Prior to Gunsmoke (and The Life and Legend of Wyatt Earp which premiered the same week), western shows generally focused on fantasy characters such as the Lone Ranger and Hopalong Cassidy, holdovers from movie and radio serials. Gunsmoke was one of the earliest "adult westerns," centering around the exploits of Marshal Matt Dillon (James Arness) in the frontier town of Dodge City, Kansas in 1873. His kindly companion was Doc Adams (Milburn Stone), the town physician who spent many hours chugging beers at the Long Branch Saloon, owned and operated by the shapely Kitty Russell.

Over the years there were several changes in the supporting cast, most notably the replacement of Matt's loyal deputy, Chester Goode (Dennis Weaver), with hillbilly deputy Festus Haggen (Ken Curtis).

Gunsmoke started a longtime trend for TV westerns. At one point there were 30 of them on the air at the same time. But Gunsmoke outlasted the others and at the time of its cancellation in 1975, it was the only show of its kind still on the air.

A testimony of the enduring popularity of the Gunsmoke series is that nearly thirty years after its final episode when I try to visit the official site it gives me back "bandwidth exceeded".

The Gunsmoke series isn't the only indicator of the popularity and defining nature of the Western in American culture. The most popular American author of the post-modern era has been Stephen King, and his defining franchise has been the Dark Tower series. The Dark Tower series is based upon the premise of the trans-dimensional traveler Roland, The Gunfighter, and his companions in search of the cross-temporal nexus known as the Dark Tower. Roland is by King's own admission in his newly issued preface consciously modeled after the infamous Spaghetti Westerns (They derived their name from being filmed in of all places Italy) starring Clint Eastwood (The model for Roland) and directed by Sergio Leone. These movies where in turn modeled upon the work of Akira Kurosawa a Japanese filmmaker most famous for his depictions of samurai swordsmen bringing social justice in difficult and adult situations such as The Seven Samurai (later to be Americanized into the Magnificient Seven). Eastwood would later become famous for playing many different versions of the tough guy and "sheriff" figure including the vigilannte policeman Dirty Harry.

The arisal of Kurosawa movies effectively paralleled in a different culture the same theme that became predominant in the myths of the west, the figure of the "sheriff" or altruistic strong-man. It arose for similar reasons in America as in Japan, namely that economic and political oligarchies (the West was the same age as the Trusts and Robber Barons and post-bellum Carpetbaggers) were by coopting the public trust and appealing to public prejudice essentially looting the common good and producing atrocities.

The mythic figure of the Sheriff, embodied in actual Western history by the legend of Wyatt Earp, is interesting because it reflects the fundmantel flaw in the American culture and social scene. In actuality, President GWB reflects the reality of actual law-enforcement and political leadership in the era of the West. GWB has much in common with the Presidents of that era and other more regional political or military leaders and how they became participants and colluders in exploitation and colonization of illegally seized territory driven by economic and political oligarchies. In that aspect GWB can rightfully claim the mantle of the historical sheriffs who as often as not were "in on the deal" so to speak. However the enduring power of the myth reflects that whatever the historical truth of the American culture there has been an enduring desire for the "white knight" or altruistic strong-man who will save Americans ultimately from their own worst instincts.

All of this is fundamentally interesting because it posits a problem and in artistic terms proposes a solution to the enduring flaw in the public psyche. The drama of a small western town and the various criminals and oligarchs who attempt to exploit others and how they are stopped has lessons for our modern understanding of the present socioeconomic condition.

The people of the western town are concerned with their everyday lives. In a general sense they have a sentiment of social justice that can be outraged, but in practice their prejudices, parochialism, greed, or fear can be exploited to obtain consent (coerced or otherwise) to unjust outcomes. Without a "sheriff" therefore the people of the town are easy prey to the agendas of the powerful.

As a side note, I would point out that the defining space opera of the modern film age, The Star Wars franchise, essentially plays out the same dynamic by positing altruistic figures capable of using discretionary vigillente force to bring social justice - better known as Jedis. As Eastwood himself would comment "It's not possible that The Outlaw Josey Wales could be the last Western to have been a commercial success. Anyway, aren't the Star Wars movies Westerns transposed into space?" Finally even the Star Trek movies are essentially patterned upon the same premise. A close inspection of the original series and all successful spin-offs shows a basic pattern of the ship captain as altruistic law-enforcement, usually accompanied by a side-kick doctor for socialization in the exact same mold as Gunsmoke. Kirk or Picard are just updated Matt Dillons, while Eastwood is just a more cynical version.

This isn't merely art criticism however as clearly Stirling's monographs on the present political, international, and economic situations shows that we haven't moved far from the resource exploitation and economic oligarchy issues of the late 1800's. In the later comment, we see a very interesting comment by Simon:

Has anyone seen "3 days of the Condor"? Made I think in the 1970s? At the end of the movie, Robert Redford has figured out the huge CIA plot -- it is a secret plan to INVADE THE MIDDLE EAST FOR OIL.

And now the CIA wants to kill him. However, Redford gets one last meeting with the secret CIA people, and he gets them to be like "yes, we are going to invade the middle east to get oil." And then, Redford turns and points upwards. Look, he says, IT'S THE NEW YORK TIMES BUILDING! I HAVE BEEN WEARING A WIRE! IT'S ALL ON TAPE, AND THE TIMES IS GOING TO BLOW YOUR COVER.

Well, it turns out that if you do have secret information about government conspiracies to invade the middle east under false pretences, the New York Times is not going to help you very much.

3 days of the Condor because it reveals the problem of the theme of the "sheriff" rescuing us from ourselves. The problem is that it is both necessary and impossible. We posit these fictional hero figures because we are incapable of helping ourselves.

The most interesting part of the film is the dialogue between Redford's character and the CIA spymaster who said that people just wanted stuff and didn't care where it came from so long as they go it. Unfortunately, he was correct. You see the real joke of the film, which couldn't be shown because people really don't want to think this of themselves, is that the spymaster knew that he was in front of the Times and didn't care that he was being taped.

Because as the run-up to Iraq showed, verifiable evidence that you were invading for oil wouldn't be printed by the Times in a serious way.

So if you cut off the "exposure" moment and take the spymaster's revelation of the venality of man as true then the film is absolutely correct.

Because the spymaster was right. People really will give up power to a military caste system and elite rich people who pander to their pride and identity politics in return for giving up all responsibility for making tough choices about basic resource distributions.

To be fair before the war a bare majority of Americans indicated that it probably wasn't a good idea. But then again a majority of Americans also will say that they wish the debt was paid down with any surplus.

The lesson isn't that people are bad but that they're weak. Perhaps naughty is a better word though it triviliazes the enormity of the collective irresponsibility of a 100 million persons. They know what the right thing is generally, and most will even admit it, but they would rather talk themselves out of it or ignore the right thing if it panders to their psychological weaknesses.

This is a crucial social problem and also culturally it has a fantasy solution. The fantasy solution is embodied in the Wyatt Earp and Gunsmoke myth. The reason why it is fantasy is that in historical fact Wyatt Earp had to flee local "justice" for his vigilennte action at the OK Corral. Wyatt Earp as a fugitive from justice for the chrage of murder isn't a comfortable thought for most Americans but that's the history. What it reveals is that even though people long for a "Sheriff" figure that in practice they will allow themselves to be dominated by their parochial and personal interests so that they will discourage or marginalize or attempt to destroy any figure that emerges.

Consider how the establishment effectively manipulated the public in order to reject both McCain and Dean.

But the myth underneath the microscope is Gunsmoke. In the mythical town, the sheriff Matt Dillon performs an important social function. Essentially he destroys the power-base of oligarchal exploiters or criminals. There is a lesson here that resonates with the real lesson of "3 days of the Condor".

Once you expose the bad guys then somebody has to take them down. Without an analogous Colt (God may not have made all men equal, but Colt did is the old saying) revolver and someone willing and able to use it, the bad guys just thumb their noses at you and walk away. Social opprobium has never been enough unless someone has already had their power-base destroyed. Then social opprobrium prevents them from recapitalizing themselves.

But even if they had, without a Matt Dillon'esque sheriff figure to destroy the power-base of the bad guys the good folks of the West wouldn't be able to stand up to bad guys. Public exposure is insufficient unless the power-base is already shattered because the public can always be coopted by appealing to its weaknesses and addictions. Public opprobrium is necessary to the system, because it prevents the reformation of capital for offenders. However it cannot destroy the power-base of "bad guys". The quintessential "sheriff" or "good guy" is someone who is strong enough to destroy the power base of the "bad guys" but won't acquire their capital exclusively for himself. His willingness to limit his acquisitiveness and redistribute resources is what makes him "good".

You could argue that FDR was such a "sheriff" figure. This is not to excuse the man as perfect. The liberal welfare state he built was essential in destroying the economic viability of modern America. Undoubtedly he expected that sooner or later it would have to be revised accomodate changing circumstances. The problem was that there was no political will for change.

The problem is that even after you expose the bad guys, for instance people misleading the public in order to justify a neocolonial war, if they are powerful enough and have enough supporters then nothing happens. The truth may set you free but it certainly doesn't give you justice. Without a powerful enough figure to rein in extremists and to destroy their power-base, public opprobrium simply isn't disciplined enough in order to restrain and disenfranchise powerful rogue individuals.

Napoleon cannot be stopped unless The Duke of Wellington has a showdown at Waterloo with him. Hitler couldn't be stopped except with the combined efforts of FDR, Churchill, and Stalin. Stalin himself lived to a ripe old age unchallenged in his sovereignty principally because of the deal he cut with FDR and Churchill. Without them to overthrow him, his rule was secure.

This was the logic I'm sure that led many Iraqis to endorse an American invasion. They thought they were getting the "white knight" and the "sheriff". Many Iraqis had become convinced that they would never be able to overthrow Saddam and his sons on their own. They thought they were getting Matt Dillon. Instead they got Polk, as in President Polk, him of Manifest Destiny and colonial expansion, territorial annexation, and indigenous ethnocide.

It is testimony to the enduring power of American ideals that they actually thought we would do the right thing by overthrowing Saddam, quickly restore democracy and economic health to them, and quietly leave.

Of course to describe American interests in Iraq as "looting oil" would be wrong. America has never derived its prosperity from direct control of oil receipts. It has derived its power from supporting repressive client state governments that ensure a steady market supply of oil to keep the price low in return for the lion's share of the oil receipts. However even this solution far short from ideal reality would likely have been tolerated by the Iraqis, if only we could have delivered. There is much to be said about the ability to deliver.

As the references to different cultures should have demonstrated - Japan, Iraq, Europe, etc. - the lesson of Gunsmoke isn't limited to American culture.

Ian mentioned in a comment below that he was investigating how could this have happened to America. The answer is that the same thing happened that always happened, with the caveat that this time GWB wasn't up to snuff to become either a Napoleon or Hitler or Stalin. Napoleon whatever else you want to say about him was an exemplary military man and conquered most of Europe. GWB wasn't able to conquer effectively a third world country. So we are at a very awkward point in history.

We have someone who tried to consolidate an oligarchy of social and political power. The faction attempting this came close, but they made a terrible mistake. They chose the wrong man for the job. They preferred a weak-minded figurehead that they could manipulate, rather than risking a strong man who would have become their master, but he couldn't get the job done. So now the world and America pauses.

The faction supporting GWB doesn't want to lose and they have the power to make life miserable for everyone, up to and including escalating to a civil war. However he can't get the job done right. On the other hand there is no one, and by no one I mean to include Clinton, strong enough to stand against him and play the role of the Sheriff - a role doubly dangerous because such a sheriff figure would have to not only withstand Bush but be strong enough to withstand the full force of the public turned against him.

One of the lessons of this campaign election year is to compare the flap over GWB's national guard service and the Swift Boats veteran controversy. The former happened when the media attempted to get on board an attempt to bring down Bush by exposing him. Because they were sloppy and because Bush had a power-base capable of effectively defending him, it failed. That is what happens in the real world when you tape the spymaster confessing in front of the Times. The Times doesn't print it or if it does it buries it in page A-12. This is the reason why the Times goes along with lies. It understands that it cannot destroy GWB and in not destroying him would be humbled by any attempt to do so. If we compare that to the legs that the flip-flopper and Swift Boats controversy had on Kerry, then the media was taught an effective lesson. It was taught that it could not Gore Bush, but that it could Gore Kerry.

So much for the hopes of the press bringing down the President ala Watergate. Nixon's mistake is that he hadn't consolidated his power-base and this is what allowed the press to destroy him. It was able to undermine his core support constituencies. It was only that that allowed a Republican Senator to ask "What did the President know and when did he know it?" and the Supreme Court to rule that Nixon had to turn over the tapes. If Nixon had consolidated his power-base the Post wouldn't have been able to touch him. Bush and the right wing are already beyond that point. There will be no intrepid Deep-throat capable of deep-sixing this movement. Bush started out with the Senate and the Supreme Court in his pocket. Republican Senators have already run cover for him on the 911 commission investigation and the Supreme Court started out his term by ruling 5-4 in his favor.

In the next seventy two hours Americans will choose a President. It is possible that Kerry will be elected and that he will be allowed to take power. That is the hope of many. However there is every possibility that it is not going to happen. Even if it happens the lesson that the right-wing will learn is not that they have chosen the wrong path but that they choose an insufficiently strong leader. The next time there is every possibility that extremists will nominate a Napoleon, someone strong to take it "all the way" even at the risk of them losing control of him and him taking over just the same way that Hitler turned around and put the leash on the Thule group that supported him.

I think McCain's and Christine Todd Whitman's throwing in with this effort is foolish. Understandable but foolish, since they neither believe how far this could go. In a way the best hope for stopping this movement is for Bush to be elected. Bush has proved patently incapable of carrying out successfully the agenda of the movement and his lieutenants have also proven incapable. Four more years of Bush might be utterly disasterous, but American democracy would survive because four more years of Bush would utterly discredit the movement and shatter its broad-based support.

However if he should resort to extreme measures or if he should fall but later be replaced by a more dreadful leader, it will likely take a Duke of Wellington or FDR or Lincoln or Washington, archetypal Matt Dillons, to take the movement down. Only a great man, which is not to say imperfect, could derive the breadth of support and discipline necessary to destroy the power-base from which Bush derives his power.

Every tyrant that comes to power whether Saddam or Mugabe or numerous others is but the leader of a power-base, a clique or Hunta or oligarchy of powerful social and economic establishment actors that benefit from policies that are to the detriment of the public weal and commonwealth. Strong ones like Saddam or Stalin own their power-bases. Weak leaders like GWB are captive to their power-bases.

By all accounts one to one GWB is a likeable guy and frank about his past short-comings and failures. He once described his own business ventures as "floundering" to a ghost-writer. However he is a weak leader unable to handle the burdens and agendas of the various power-brokers and barons in his own cabinet much less his power-base.

However he persists because of the lack of a true sheriff. Dean tried to be that sheriff but he forgot the collary of the sheriff. The movie most honest about this is probably "High Noon" starring Gary Cooper and Grace Kelley.

Will Kane (Gary Cooper)is the marshal of a small town on his last day in charge. He is marrying a Quaker (Grace Kelly) and is leaving office for her. But then he hears the news that Ben Miller, a murderer, has been released from jail. Three gunslingers (Sheb Wooley, Bob Wilke and Lee Van Cleef) are at the train depot, waiting for the train carrying Miller, which is due to arrive at high noon.

Kane's junior deputy, Harvey Pell (Lloyd Bridges) refuses to fight by his side because Will didn't recommend him for sheriff to the town leaders. Will seeks help from everyone, but he is turned down, over and over again. So Kane will have to confront his fears and prove his courage as he goes alone against Frank and his men.

The first test that anyone attempting to become the Sheriff must overcome is desertion by the public. Because the people want a champion to fight for them, not to fight for their champion. This is what McCain and Dean learned the hard way. It is also the reason that there is no one who can oppose GWB much less his power-base which if temporarily defeated will only come back ten times more potent later. It is the reason why in the real facts of history after the OK Corrall that Wyatt Earp had to flee from charges of murder.

The people's champion must first be the people's enemy. It is in a Neitzchean sense of the hero as a criminal that we must conceive of this phenomena. Essentially this is society's manner, however crude, of differentiating between rebels and socioopaths. A sociopath is someone who ignores social conventions in order to abuse the public trust by harming or exploiting others. If you turn on a sociopath or abandon them, they will be undone. A rebel is someone attempting to overthrow a previous social order and institute a new one. Note that this judgement isn't moral, it's simply one of coherence.

In a practical sense the townspeople will neither help Miller or Kane. It is interesting to note that there is a Gunsmoke episode that essentially deals with the same theme of the strong man being abandoned by others. In it, Matt Dillon faces not just one criminal but one coming for vengeance with a gang. He sends back his townfolk posse in order to face them alone and challenges the leader of the gang to single combat. The gang leader accepts but indicates that his lieutenant should shoot Matt Dillon if the gang leader loses.

The way the episode is resolved is the townfolk posse sneaks up and shoots the lieutenant about to kill Dillon after Dillon defeats the gang leader in single combat. This is a theme repeated in the Clint Eastwood movie called Pale Rider. "Pale Ride" features a scene where the "Preacher" - a moralistic gunfighter figure - has destroyed the hired guns and goons of the local economic oligarch and then the "ordinary guy" who he has befriended then shoots the oligarch who is about to shoot "Preacher" in the back.

The lesson here is that the limitation upon any such Sheriff figure arising is that he himself must be strong enough to survive the full force of public opprobium and desertion after he arises, and only after he has proven he can triumph without public aid will others rally to him. The public has got your "back" if you can face down the bad guys - all by yourself. The Rebel fleet will mop up the Imperial fleet if you can defeat Vader in single combat, destroy the Emperor, and blow up the Death Star. The colonies will rally to you against the Redcoats - if you can survive Valley Forge.

The surprising thing is that we actually have had a number of hero-figures step foward in both American and British history. The names have been ennumerated before, peoples' champions who stepped forward and defeated the forces of extremism and oddly enough did not for whatever reason seize tyrannical power for themselves but took a benign attitude. I am not sure where such a figure could arise from now but if we are talking about the mythological arc that society is playing out then this is the standard solution.

Hope you find this helpful with your project there Ian.

Memos from Wonderland pt 1,

I confess that of late the world has seemed to me somewhat surreal. Or rather the world has been in crystal clear sharp focus but the social world overlaying it of human perceptions and relationships has been particularly out-of-touch. It is operating under what one poster to BOP-news called "bizarro world rules".

This is world were four years after the media and conventional wisdom mantra was that "there wasn't that much difference" between the two major candidates, once again the media and conventional wisdom mantra is once again that there isn't that much difference between the two major candidates or what they will do. However on margins both sides have become obsessed about the deficiences of the other side's candidate.

So it's more like a story of the flanks against the middle.

Barry is pretty representative of such a middle.

The election of your lifetime.

That's what the vote on November 2nd vote has been called. It's probably a fair description in many, many policy areas. The two major party nominees for President differ on a host of issues, ranging from international affairs to economic strategy to tax policy. Even on basic issues of science – stem cell research (biology), global warming (chemistry), missile-defense (physics) – there are huge distinctions between the Republican and Democratic candidates.

When it comes to the capital markets, conventional wisdom assumes that the outcome of this election will matter a great deal.

I disagree.

Actually I would disagree with Barry. I think that the conventional wisdom is the opposite - that one candidate is only just more preferable than the other and that neither candidate is very preferable. At least if by conventional wisdom we mean mainstream opinion that swims in the "middle". As a moderate technocratic centrist Barry would fit in nicely with that category.

On the right wing side though, I hear a lot of Republicans justifying their vote by saying well "Kerry would be worse" or in the words of one friend "I can't let that ass-clown in,". Completely erased is the notion that their candidate might have any flaws or if there is an acknowledgement there is a rationalization that Kerry would do even wose. It's gotten so bad that Bush public outings now have ceremonial loyalty oaths. While not illegal this is unConstitutional. As put to me by someone in the military, one of the defining differences of our system of government is that there are no loyalty oaths of individuals but only to the Constitution as the framing document of our system of governance.

Just as have many before me, I too have sworn to protect and defend the Constitution of the United States of America against all enemies, foreign and domestic.

While not strictly illegal, the oaths that the Bush camp are trotting out are highly disturbing. Oaths such as these are not mere spectacle, but by ritualistically tying loyalty to Bush personally above and beyond the office of the Presidency and the system of governance which gives him legitimacy and by binding it to the emotional ties that form people's way of life Bush is essentially building his own private armies. That's a classic ploy in building a personal army - one of the first step is to get them to identify their way of life with loyalty to you and then swear an oath of allegiance to you personally.

Representative of the middle, Slate put out well a slate of endorsements for Kerry that were at best luke-warm. This is symbolic of the conventional and mainstream wisdom that either candidate will be constrained by reality. As Barry writes:

Why? There are simply far too many structural factors that will hamstring whoever assumes the Office of Presidency on January 20, 2005. The post-bubble environment has problems that will likely be cured only by the passage of time. Large budget deficits will continue, as will the ongoing weakness of the dollar. The economy is likely to grow, albeit at only a very modest pace, for the foreseeable future.

The point of view seems to be that any rational person would limit their activities given the restrictions ennumerated and others not mentioned regarding military resources. Of course the great flaw in rational individuals is that they generally fail to understand that irrational people will accept extreme penalties and setbacks in the pursuit of unrealistic ambitions. So the fact that reality constrains us is in fact no bar to the attempt to overextend to reach impossible goals by either the irrational extremism of right or left.

Of course we know that the ABB crowd has long been driven into shrill hysterics about how "Anyone But Bush". What hasn't been widely acknowledged by the center left however is the inner corruption and weakness of the Democratic party makes it a poor champion for reality. The far left in the forms of progressives and Greens have long accused Democrats of being no different from the Republicans. That isn't true as the past four years has shown, but the argument resonates that they are almost as bad.

This is acknowledged by the middle and mainstream center however and this is what makes the middle consider Kerry as evaluated by the luke-warm endorsements as preferable but only just to the guarenteed insanity of 'four more years'.

So given the whole mess, it's no wonder that I have a somewhat surreal perception of things since the world as people consider priorities important is extremely distorted as if seen through, well to be frank, a looking glass.

As for the weakness in the dollar, it isn't a "limitation" - it's part of their plan. As in the Estbalishment's plan embodied in the persons of the FOMC. As far as I can tell the Fed is opting to push through it's own economic program irregardless of who get's into the Oval office. Right now economic policy is being made by the Fed and not the WH, exihibit the futility of Snow Treasury Secretary.

The plan of the Fed is to try to make us an exporter to Europe the same way that Japan and Asia were curency pegged exporters to us. The plan of the Fed is to force a revaluation of the currency pegs from Japan and China to the USA and so renegotiate our debt. The plan of the Fed might have worked if we had in fact brought more oil supply to the market so that the Fed Funds rate would stay linked to the inflation adjusted bbl oil price.

As it is the Fed's plan will almost work and then result in the loss of America's reserve and petro-commodity currency status - within possibly as soon as two years. Right now the Fed is forcing money into the stock market and the real estate market to reinflate them by it's policy of letting the dollar drop against the euro, since from the spread on corporate bonds and the drop in the ten year note we can see that the bond market is super-saturated and simply cannot absorb any more money supply meaningfully.

That means we will experience a bubble which will give us pseudo-prosperity for about a year and then it will all start coming apart. Look for a strong january effect rally (beginning in December of course) and then a turbulent sidewise trading market in summer '05 and then a potential bear market in late fall '05.

But unless more oil comes on the market it will all start coming apart. The Fed has just bet "the farm" on the proposition that availble world oil supplies will grow faster than demand (adjusted by economic slow-down) by this time next year. This is a very interesting proposition to bet everything on, seeing as Iraq continues to deteriorate and the tighter oil supplies are the more incentive individuals in the producer chain have to destabilize it as political or economic leverage.

However the industrialization of China will not slow-down. People have forgotten what happens when an industrializing country is starved of commodities or has a growth slowdown. Energy consumption doesn't decline, what declines is everything else as the economy is cannibalized in order to feed the driving energy consumption of industrialization. This is why the neo-cons in their idiocy can't understand why North Korea hasn't fallen apart yet even though history shows how long it took for the Soviet economic machine to wind down - and even then at the end it was a political failure of will rather than an outright economic failure. If it had been pure economics driving the situation the Soviets could have kept on cannibnalizing their own economy until they too were reduced to North Korean levels of austerity.

No the oil consumption from China will not moderate. If their economy is slowed by the central bank, it will get taken out of the hide of small commodity producers like farmers and labor wage improvements - not the best thing for stability. The Machine as always will roll on, because it will go last because everything else will be sacrificed to keep it going.

Why should we expect it to be any different for them then history has shown it for others or in fact ourselves? Has American made any politically inconvenient initiatives to lessen oil use or increase efficiency? Or has America simply diverted resources and cannibalized other parts of its economy to continue its pattern of oil consumption? It is ridiculous to presume the Chinese will act any different.

If anyone believes that China's growth in oil demand will substantially decrease contact me personally because I have some swampland in Florida that I want to offer you at a very reasonable price.

So what we have is an unrealistic plan by the Federal Reserve to shift the export base of our economy to Europe in order to renogitate our debt and balance the current accounts deficit betting everything on oil-supply outpacing demand growth, a completely schizophrenic political system not of right against left but of the wings against the middle, what we can call euphemistically deteriorating standards of democracy worldwide, and in the meantime our world is about to get cooked by global warming and experience drastic commodity shortages.

Oh and if you include food, energy, substitute in real housing costs into the CPI and then subtract real inflation from GDP and then subtract the hedonically enhaned components then we're "growing" at about negative three percent yearly.

That's a headline you won't see soon: Real GDP "growing" at -2% to -3% yearly.

If you're a big rich country, and the USA was a big rich country, then you can endure 2% deterioration for a long time. Things just keep on getting tighter and tighter ever more gradually. The reason why it's not readily apparent of course is that we have borrowed to maintain consumption. That is why consumer buying this past quarter was a robust 4.6%. All of it essentially borrowed against tomorrow in the form of personal debt, national debt, deteriorating asset values, or reduced future growth prospects ... but it was 4.6% so we enjoy the illusion now that we are not just not deteriorating but are growing...

I've already voted for Kerry in the form of absentee ballot because I believe that the chances for a better future are better under him and further more I believe that the responsibility for such a better future lies not on Kerry's shoulders but on ours.

I am not voting for Kerry because I think he will do a better job, but because I know that under Bush my every attempt to do something positive has been frustrated.

As I take up posting again, I want to concentrate on what I perceive are the real issues of this country and the world. I think I am finally ready, psychologically speaking, to discuss the full extent of the fraudulent GDP numbers. Combining that with the real adjusted CPI calculation and we can discuss the real rate of deterioration in American finances. We can also discuss the necessity of switching to a more economically profitable energy infrastructure (alternative energy). My argument is that if you look at the baseline costs of alternative energy against fossil fuels yes currently and for the near future fossil fuels are cheaper. However fossil fuels will become more expensive, as we invest capital into research and economies of scale alternative energy costs will drop, and if the fundamental argument is that alternative fuels are more expensive nominally then that has to be matched that the fossil fuel economy is nationally net unprofitable.

Even a small positive profit margin is better than a negative one. It is more economically rational to switch to alternative fuels now (and not in the future) not because the per unit cost is cheaper (it will be soon) but because the overall economic model of one is profitable and the other is not.

Economic Warfare via Currency

Our Cuba policy is once again reaching idiotic heights.

The dollar was legalized in Cuba in 1993 after the fall of the Soviet Union plunged the island into deep economic crisis and forced it to open up to tourism and foreign investment.

Dollars became the dominant currency and are used to buy most consumer goods in stores that will now only accept the local currency.

The decision will effect cash remittances from the United States, a major support for the cash-strapped Cuban economy that amount to an estimated $1 billion a year, unless they are sent in other currencies.

The government encouraged Cubans living abroad to send remittances to their relatives in Cuba in euros, British pounds, Swiss francs or Canadian dollars, to avoid exchange costs.

Castro, wearing his trademark military uniform, said his communist government was not banning possession of dollars, just their use in the economy.

"We are not restoring the penalization of holding dollars; it will not be a crime," he said.

The move to eliminate use of the greenback was prompted by U.S. moves to squeeze Cuba financially, the decree said.

A four-decades-old U.S. trade embargo against his government prohibits the use of dollars in transactions with Cuba unless they are licensed by the U.S. Treasury.

Foreign banks were put on guard in May when the Federal Reserve fined UBS, Switzerland's largest bank, $100 million for illegally transferring freshly printed dollar notes to Cuba and three other countries subject to U.S. sanctions, Libya, Iran and Yugoslavia.

Foreign bankers in Havana said this had created serious problems for Cuba to deposit its dollars abroad and renew bills in circulation.

Existing dollar accounts will be "totally guaranteed" and their funds can be withdrawn in the U.S. or local currency at any date with no charge, the decree said. Dollar bank transfers will also be accepted, but not cash deposits.

Foreign companies operating in Cuba, as well as Cuban state enterprises, will no longer be able to make dollar bank deposits in cash.

Cuba's tourism is based on the dollar, though euros are accepted as currency in some resorts. Tourists will have to exchange their currency into convertible pesos, though the 10 percent charge will only apply to dollars, the decree said.

The commission will not affect credit card payments. Cards issued by U.S.-based banks are not valid in Cuba.

Cuba took the first step to curb dollar circulation last year when it banned state corporations from using the U.S. currency in their domestic operations.

President Bush launched a strategy in May to undermine Castro's government by tightening restrictions on travel from the United States and the amount of dollars that licensed visitors could spend on the island.

If we wanted to economically destroy Cuba what we would do is drop all trade restrictions and flood Cuba using our "free market" and "international capital investment" system. In no time the economy of Cuba would be in shambles, its agricultural products undercut by subsidized goods, and unemployment would skyrocket while its workers were converted to starvation wages to make goods for Walmart. Hey, it's worked in every other country it's been tried in right? With the exception of those that catch on and insist on massive subsidies, dollar pegging, and convert their economy to a parasitic export based petroconsumption economy of course.

In the meanwhile Bush's brilliant policy is actually driving Cuba into the arms of the euro. I swear that man is dumb as a post. Back in the days when the US was the only international trading currency around, restricting dollar flows into or out of Cuba would cause a liquidity crunch hobbling Cuba's economy.

Now all Cuba has to do is switch to the euro, further accellerating the dollar's fall:

Spreads on junk bonds have actually fallen lately. They now yield about four percentage points or so over Treasuries. In October 2002 the spread was over ten points, not that the numbers meant much, given the panic in the markets at that time. Perhaps all the issuers of such bonds are indeed much healthier now than they were then. Perhaps, on the other hand, they are simply the beneficiaries of ultra-loose monetary policy and a huge appetite for risk among investors. After a panic in May, emerging-market debt recouped most of its losses. In recent days this market, too, has wobbled but it still looks horribly expensive by historical standards.

The dollar has also been falling out of favour in recent days. This week, it reached its lowest level in eight months on a trade-weighted basis, according to the Fed, and is within a whisker of an all-time low against the euro. Foreign-exchange traders seem to have discovered what everyone else already knew: that America’s huge and growing current-account deficit is unsustainable, and that two things are required to correct it. First, Americans must save more (which will slow growth, perhaps sharply); and second, the dollar needs to fall more than it has done already—perhaps a lot more.

Alan Greenspan, the Fed’s chairman, and a man with a somewhat Panglossian view of the world, thinks that all these fears are overdone. His message is: don’t fret about America’s current-account deficit, consumers’ huge debts or the surging oil price; none of them matters, or at least not much. But your columnist does worry about such things, not least because the financial markets seem to be frighteningly sanguine about them: fears in the markets look about as overdone as a steak haché.

The dollar looks in danger of plunging, the price of oil continues to surge, gold is going up and world growth is slowing. Oh, and America is about to hold an election that could create as much uncertainty as it removes. Small wonder that there are a few growls from financial markets. Buttonwood has a nasty feeling that something worse is in store.

Unless we change fiscal and monetary policy, quickly, the dollar is danger of breaking through a technical support level in trading with the euro. If it does that it may free fall to the next sustainable level. Oil would rise even higher in price and we would take one more irreversible step toward oil being dedollarized and then denominated in euros. We never had much time to begin with but steps like this eat up what little time we have left.

Now is not the historical moment to try squeezing economies off the dollar standard. Cuba's economy by itself isn't a big deal but if it dedollarizes and then eurosizes its economy and others realize that they can too then it may start a movement toward the exit far sooner than it would have otherwise occurred.

Invincible?

Kevin drum writes about how the Armed Liberal has decided to vote for Bush. Armed Liberal's reasoning is as follows:

Much of my decision making and thinking comes from what are - to me, at least - illuminating parallels between the decision before me and things I know and have seen in my own life. This is no exception.

Last month I had lunch with a dear friend from grad school; he's a monstrously successful real estate developer and a staunch and senior Kerry supporter here in California. We argued about the election, and the war. He understands the war, but isn't convinced that Bush is smart enough to pull it off.

"I don't think that matters as much as you do," I told him. "I'm probably smarter than you are - in terms of IQ tests and grades in school. You're a multimillionaire, and I'm not - even though I've been in businesses parallel to you for as long as you. Why do you think that is?"

"Because I'm more determined than you are," he replied.

"Exactly," I responded.

Success in any enterprise is only partly determined by skill and intelligence. Luck plays a large part. But the largest role, I believe, is played by commitment and determination to reach a goal. My friend wanted to be successful more than I did. He was.

There are a large number of holes in Armed Liberal's thinking. Putting aside the poli-sci snark, he's making what is called Fundamental Attribution Error (Wikipedia):

In attribution theory, the fundamental attribution error (sometimes referred to as the actor-observer bias) is the tendency for people to over-emphasize dispositional, or personality-based, explanations for behaviors observed in others while under-emphasizing the role and power of situational influences on the same behavior. In other words, people tend to have a default assumption that what a person does is based more on what "kind" of person he is, rather than the social and environmental forces at work on that person. This default assumption leads to people sometimes making erroneous explanations for behavior. This general bias to over-emphasizing dispositional explanations for behavior at the expense of situational explanations is far less likely to occur when people evaluate their own behavior.

For instance, Armed Liberal's friend's success probably is due in part to his hard work and determination. It is also true that he is operating in a super-heated California real estate and development market with a historically low accomodating interest rate environment created by the central bank. This is not to diminish Armed Liberal's friends success - there are many people in California who aren't multi-millionnaires - but it is to say that attributing his success to "determination" wholly neglects the contribution that his environment provided.

It would have been probably been more difficult to become a real estate multi-millionnaire if for instance he had been living in the early eighties in the same location. Not impossible but certainly more difficult.

Our success in life comes in part from talent, in part from hard work, and in part from an nurturing environment that provides opportunities and support. There are very few truly "self-made" men who triumph over both personal inadequacy and overwhelming hardship to succeed.

It is in this manner that Armed Liberal's analogy falls apart. Iraq is not a "nurturing" environment. It is an extremely hostile and unstable environment. Mere "determination" is insufficient.

The second cognitive error that Armed Liberal engages in the Vividness error (from the CIA Psychology of Intelligence Analysis manual).

The impact of information on the human mind is only imperfectly related to its true value as evidence.91 Specifically, information that is vivid, concrete, and personal has a greater impact on our thinking than pallid, abstract information that may actually have substantially greater value as evidence. For example:

Information that people perceive directly, that they hear with their own ears or see with their own eyes, is likely to have greater impact than information received secondhand that may have greater evidential value.

Case histories and anecdotes will have greater impact than more informative but abstract aggregate or statistical data.

Events that people experience personally are more memorable than those they only read about. Concrete words are easier to remember than abstract words,92 and words of all types are easier to recall than numbers. In short, information having the qualities cited in the preceding paragraph is more likely to attract and hold our attention. It is more likely to be stored and remembered than abstract reasoning or statistical summaries, and therefore can be expected to have a greater immediate effect as well as a continuing impact on our thinking in the future.

Intelligence analysts generally work with secondhand information. The information that analysts receive is mediated by the written words of others rather than perceived directly with their own eyes and ears. Partly because of limitations imposed by their open CIA employment, many intelligence analysts have spent less time in the country they are analyzing and had fewer contacts with nationals of that country than their academic and other government colleagues. Occasions when an analyst does visit the country whose affairs he or she is analyzing, or speaks directly with a national from that country, are memorable experiences. Such experiences are often a source of new insights, but they can also be deceptive.

That concrete, sensory data do and should enjoy a certain priority when weighing evidence is well established. When an abstract theory or secondhand report is contradicted by personal observation, the latter properly prevails under most circumstances. There are a number of popular adages that advise mistrust of secondhand data: "Don't believe everything you read," "You can prove anything with statistics," "Seeing is believing," "I'm from Missouri..."

It is curious that there are no comparable maxims to warn against being misled by our own observations. Seeing should not always be believing.

Personal observations by intelligence analysts and agents can be as deceptive as secondhand accounts. Most individuals visiting foreign countries become familiar with only a small sample of people representing a narrow segment of the total society. Incomplete and distorted perceptions are a common result.

A familiar form of this error is the single, vivid case that outweighs a much larger body of statistical evidence or conclusions reached by abstract reasoning.

When Armed Liberal states that "Much of my decision making and thinking comes from what are - to me, at least - illuminating parallels between the decision before me and things I know and have seen in my own life. This is no exception." then he is openly engaging, embracing even, this error.

Therefore I could argue all day until I am blue in the face about how GWB is not truly committed to winning the war. I could point out the failure to commit enough troops and its overwhelming corroborative evidence. I could point out the statistically increasing number and severity of attacks on Americans in Iraq. I could point out how increasing military costs in damaged vehicles and the increase in ammo usage clearly are evidence (the troops aren't using up all that extra ammo target practicing) of a active and widespread military operation rather than a steadily improving security.

Those are numbers and they don't lie. The number of attacks. The amount of ammo used. The increases in repair requests. It isn't about good press or bad press or clever arguments by pundintry or anecdotes from Iraq. It's a simple question of logistical calculation. The logistics are speaking in evidentiary terms of a steadily worsening and not improving situation.

Is that the picture of a war effort in which one is committed to win? Yet it is abstract while the visceral impact of GWB as being determined and confident is concrete. Armed Liberal can use his social intelligence to diagnose a defensive less aggressive posture in John Kerry's words, and he compares this to the aggressive determination in Bush's words. He chooses the later, even though the fact is that we know that there are regular shortfalls of military supplies that have been noted at the highest levels of military command. Yet because of his cognitive errors, of which he is manifestly unaware or he would not make a point of pride of them, Armed Liberal ignores the later evidence in favor of the former.

Because of the cognitive error Armed Liberal engages in this sort of fact based and statistical evidence is useless.

Why? Because Armed Liberal's vivid personal impressions of a determined-seeming George Bush, his confirmation and overconfidence bias. George Bush seems determined and confidence to him while John Kerry does not. However if we present abstract evidence that GWB is in fact not committed to doing what it takes - black and white troop deployment and budget allocation numbers - then he will ignore this abstract data in favor of that which is concrete which confirms his biases formed on recently available experience and attributing it to personality rather than weighting the contribution of circumstance.

These common types of errors are why the reality-based community or the community who "believe that solutions emerge from your judicious study of discernible reality." is losing the argument in the public sphere. To be part of the reality-based community one has to accept the premise that success is determined only in part by individual choices, and must for the rest depend upon an external independent reality whose nature must be studied to optimize success. The reason of course why it must be studied is that because of cognitive biases very few people can naturally learn to come to conclusions correctly on their own. Facts are not obvious or self-evident. They must be ascertained through systematic and abstract study to determine statistical patterns. It is for this very reason that we created science - because physical reality is not self-evident.

The consequences of our choices are relative to our environment. Our environment is not in its true nature apparent immediately to us. Therefore we must train ourselves to discern its true nature before we can understand the full impact of our choices. It seems incredibly obvious to baldly assert this, but Armed Liberal is departing from this way of thinking in an equally obvious way.

It was in that aspect that I wrote Shaula, who ironically has accused me of metaphorically abusing my authority to analogously sexually harrass her, wrote the following:

oldman, I was thinking about Germany (again) today. The people of Nazi Germany who were "true believers" went through the experience of watching the official Nazi myths destroyed before their eyes (which didn't cure all of them, but certainly remedied the cognitive dissonance on a national scale); and afterwards, of course, the partition and occupation of Germany was about, among other things, building a new, "reality-based" Germany.

It got me thinking...how do we return the cognitive dissonants here to the real work? Will it take a national public failure on the magnitude of the fall of Germany?

Let me clarify that I'm not indulging in wishful thinking or schaudenfreude; I don't want to see the US destoryed (otherwise I'd be working for, not against, the Republicans). But if Hitler had not declared war on other countries and their violence had been strictly internal and discrete...would the Nazi's still be ruling Germany today?
Shaula Evans

For the record I have never groped a woman without her prior and later confirming assent that she wished to be in fact groped by my person.

My response to her is that I'm afraid that something similar must happen. It is in the nature of hubris to push one's luck until in overextending one goes too far and must fall. I love my country but it seems that they are in love with their self-flattering myths (and here I include the myth of a viable progressive Democratic party) and we must fall into the darkness before people will come to their senses.

Bush appeals to the prejudices in our way of thinking, that sheer determination and American might will infallibly carry the day. The reason why people are breaking away from Kerry is that he is the voice of caution that reminds them that we are not inexhaustible. They find comforting the notion that if we keep on pushing forward we will triumph and be vindicated.

However in the real world we all know that no one, and I mean no one, is invincible. Germany was not invincible and neither are we. Without the ability to learn from our mistakes we are not just doomed to repeat them but to push them to the breaking point.

For it is the definition of madness to attempt the same thing over and over again but expect a different outcome from what reality shows us.

As the case of the Armed Liberal shows, there are a lot of people running around out there who basically don't know shit. Unfortunately they get to vote to elect someone to office to take care of matters which as mentioned before they not just merely know nothing about but are completely and disasterously wrong about. GWB is smart enough to play to these cognitive errors, which charming or harmless in the context of an ordinary citizen's life, become monstrous in the context of choosing an executive to conduct official policy.

Damn I was supposed to stop writing for a while wasn't I?

Under the Weather,

I'm sorry all for the interruption in my writing. I've had the flu and then a nasty secondary respiratory system complication arising from the initial illness. I'm mostly focusing on recovering and getting some work done at home until I get better. I still hope by the end of the week to help volunteer for the big get out the vote push, since Iowa is a swing state this year. I've done all I can on other fronts for now, and for better or worse we have to let this all play out straight up.

If the American people decide to re-elect GWB for 'four more years' in a clean and clear(even if not likely to be large) margin of victory then there's nothing to do for it but wait around to pick up the pieces. If we've done all that we can do - voted and volunteered or donated or spoken out - then we just have to trust that in the end the truth will win out.

I have many sincere friends who are not unintelligent but whom are going to vote for Bush. I haven't tried to dissuade them since I have seen that they have already made up their minds. I do have to say that some of them most discourteously did not extend the same respect to me and I had to cut them off while they were eagerly repeating RNC talking points to me. I did not attempt to prostelyze them and I wish they had just let it drop as well.

I think they are misguided but it is not my place to shout them down or attempt to wheedle or badger them into changing their minds.

Clearly things are not bad enough yet to convince them that something is terribly and horribly wrong going on.

If there are election "irregularities" that attempt to steal the election of course that should be contested. However if in an actual majority of votes the American people re-elect GWB then truly we must abide and wait for things to get so awful that it penetrates the fog of propaganda and official denial and shatters it. This doesn't mean that we should give up or that there is nothing to be done. There will be much that is needed to be done.

Sometimes people just have to learn the hard way. People aren't voting for Bush in so much that Bush is appealing to their point of view. People are voting that they think their idea of the world is right. Unfortunately it's terribly wrong, but that won't be apparent for a few years. Sometimes people just have to hit rock bottom before they can admit that they were wrong and need to change how they think.

I'll get back on the writing horse as soon as I can get caught up with my work.

The Capitalist Philosophy of Alternative Energy

Damn you Ian and Stirling - I'm feeling under the weather and didn't want to expend the energy to write anything - but you have practically forced me to say something with your own writing.

Yes. Unfortunately it's a question of decentralization and marginal costs. The essential problem is that the marginal cost of petrofuels is higher - but the cost is not priced into the market because of government distortion. When people say that oil is cheaper than solar, what they mean is that it's cheaper if you don't take into account the economic cost of:

1. The first Gulf war
2. The second Gulf war
3. The opportunity cost of lost growth from imposing dictators on various states
4. The capital flight induced when the Federal Reserve manages the Fed Funds against the bbl price of oil for leverage.
5. Pollution and global warming effects

If we were to take all these costs and charge them to the account of our use of fossil fuels I don't think that it would be cheaper at all. We can see this by noting historically that whenever the system designed to keep oil prices low fails, it immediately spikes in price. The natural cost structure of oil - expensive technical digging and then shipping a substance halfway around the world in huge quantities and then complexly chemically treating it and then redistributing those petrochemical products - is inherently capital expensive on a commodity which should give it a low rate of return because of its higher marginal costs.

On the other hand, the price of semiconductors has dropped massively because of general increases in technology.

Don't you find it odd that DRAM has become commoditized because of mass production and huge advances in technology - but that solar cells haven't nearly approached this level of change?

Of course they are not the same thing, computation is different from solar energy conversion. However it suggests a difference in capital investment and that there are economies of scale that are not being exploited.

The reason why they are not being exploited? Subsidy and market distortion by government both regulatory and intervention such as the Fed.

We take it for granted that the marginal cost of petrofuel consumption is lower than the marginal cost of alternative fuels. If one takes a serious look at the structural costs of either approach, I think that any sane person would have to question that assumption.

As Holmes said, once you have eliminated the impossible then whatever left however improbable is the answer. It seems difficult to me to argue anything other that the marginal cost of petrofuel consumption, even neglecting environmental costs, is higher.

Yet it is not in practice. Whenever you see a product being sold on a market at lower than its cost structure indicates one must always suspect subsidy and/or marketshare undercutting efforts.

I would argue that it is already, and probably has been for at least five maybe ten years to switch much of our consumption to alternative fuels.

The problem has been that the initial capital needed to fund investments and create economies of scale in production and distribution have not been invested. The reason why they have not been invested is that the market has been price distorted. The reason why the market has been price distorted is that A) a legacy system for maintaining low oil prices when it was necessary has become a political mandate and B) the political system had become habituated to protecting the oil industry.

When we compare alternative energies and the petrofuel economy we are comparing babies and oldtimers. The petrofuel economy is mature, entrenched, has a political constituency, is able to pass its costs off to others in numerous ways, and has had huge amounts of capital invested to capture economies of scale. The alternative energy economy is decentralized and requires a collabortive distribution network instead of the current branching hierarchy system.

You see the petrofuel economy starts with producers and then processors and is then distributed through hierarchial arrangements to local retailers. This system is especially prone to the centralization of profits. By controlling the energy distribution in a top-down manner, it is easy to make a lot of money in a few places with most of the rest of the network being relatively low-profit as they take small cuts of the revenue stream as a charge for passing on the commodity.

However a diverse multi-technology alternative energy fuel economy is going to be much more flat and dispersed. In order to store energy when it is in excess there are going to have to be a lot of fuel-cell batteries sitting around owned by a lot of people to feed back into the distribution net. In order to produce energy there are going to have to be a lot individual homes and businesses that produce wind and solar energy and then feed their excess back into the net in exchange for pulling energy off the net in low-production times. In order to stabilize the system there are going to have to be next-generation nuclear power plants - which won't really be profitable given their high safety and pollution treatment costs - but will have to be subsidized by the rest of the network in order to provide peak consumption megawatts to anchor the entire system. There are going to have to be a lot of regional hydrogen producing and local fuel-cell charging centers to distribute to local retailers or drive-in customers.

What all of this spells is a system which it is very hard to monopolize the profit stream.

And this is one of the reasons why we haven't moved to such a system and why the capital investment is commerically and politically being disincentivized. As Ian pointed out economic activity is not just about wealth it's about domination or what most people refer to as power.

A lot of people who have wealth but more importantly gain their wealth by dominating the present system, have a lot to lose by a switchover to a system where the profits may be greater but they will be more evenly split among many different mouths.

Therefore I would argue that the greatest impediment to a change of our energy-basis and economic restructuring is not as most people assume "marginal cost". The conventional wisdom on the topic is such that when the price of oil rises high enough then alternative fuels become more economically viable. (CSM)

With the price of oil hovering above $55 per barrel, demand is rising for a wide array of alternative energies - from wind turbines to cars fueled by corn oil.

While such devices and fuels always capture attention during spikes in oil prices, the alternative-energy movement is moving well beyond the novelty phase. It is becoming more ingrained in the nation's power grid and in middle-class homes as technologies improve. Consumer demand has Toyota predicting the sale of 100,000 of its Prius hybrid cars in the United States next year.

But this is foolish because you are comparing a mature technology with established capital investments and economies of scale and distribution networks, with a nascent technology without capital investment and lacking economies of scale or distribution networks.

It's like comparing a local minor league player with Babe Ruth - when he was five.

If you look at the extrapolated marginal costs of two mature industries then its clear that the alternative energy economy would have lower and not the higher marginal cost - not at some future unspecified future date of technological advancement but as of the 'state of the art' since perhaps as long ago as the early nineties.

When you look at the real GDP numbers - declining since the mid-nineties and now flat in real adjusted terms - it's clear that once you get past the bullshit accounting that nothing whatsoever is wrong in the real world of non-academic economics. Things are just exactly where you would predict them to be if you kept on subsidizing an antiquated technology with decreasing profitability due to higher costs, kept on basing a national and international currency on it, kept on using the advantage of being the commodity trading currency for petroleum to borrow heavily against the future to maintain an unsustainable level of consumption created by the failure to shift from a energy-balance deficit.

If you ran a business on one technology and started losing money on the trade you could A) borrow in order to maintain a while longer the present losing game B) or invest in a new more profitable technology while you still have the cash or credit to do so in order to get back in the black.

One could argue that if we switched a alternative fuel technology that the demand for oil would drop and the price would drop and others would undercut us using cheap oil. This is false because it neglects two things. The first is that if we were no longer dependent on fossil fuels we could take the money we spend subsidizing and stabilizing the entire world network and invest it in doing something more productive with it. The second item that needs to be mentioned is that the costs of maintaining the network would fall on others and they would be made less competitive by this burden. Without the US to be the "world's policeman" or more accurately "the world's oil security officer" the price of oil would rise precipitously over time.

More concretely imagine all the regimes that would collapse because of the withdrawal of US support and aid. Think of the Kyoto Accords - freed from the shackles of oil addiction the US could stop being the roadblock to worldwide implementation but turn around and press for more stringent standards. It would clearly be in our best interests to do so at that point, because it would make the petrofuel economy less competitive compared to our high tech one. It would be at that point in our best economic interests to see that the carbon emissions would be correctly priced into the market in order to prevent them from undercutting the alternative fuel technologies.

All the economic signals are screaming that it is not just time to make a change, but that we are paying a heavy market penalty for not having started the switch already.

Dead Money Vs. Investment, Monetary Policy

The first thing to understand is that dead money always involves speculative bubbles. Moral hazard is when regulatory or lending institutions create the danger of people not properly allocating capital. This occurs when people feel that they are protected or that the authorities will bail them out from any mistake however atrocious. There is always big money or easy money (they are not the same thing) to be made in risky speculation - most people call it gambling.

Moral hazard creates the systematic incentive to move capital from productive investment into gambling because they think that someone else will cover their bets for them.

Nominally Central Banks are supposed to avoid even the appearance of favortism and impropriety in order to avoid moral hazard. This is the theory of central bank neutrality and independence that you will read about in textbooks. In practice a central bank operates through dynamic equilibrium, it is always tap dancing its way through the impromptu jazz rhythms of the shifting economic landscape. Therefore while neutrality and independence often invoke detached or static connotations the practice of a central bank is to be engaged and adaptive to present circumstances.

Every central bank however must deal with political and social realities that it must accomodate that are irrational and therefore outside the framework of economic theory. These are often cultural features that are deeply embedded and the central bank must bow to these realities. When a central bank humors or accomodates these political and social realities it is already departing from the model of the central bank as neutral and independent.

Still the job of a central banker is in fact very hard and without a great deal of sympathy from outside critics or the beneficiaries of the work. Everybody is a critic, as someone said.

The job of a central bank is on order to foster long term productive capital investment while in the short term managing the liquidity needs of practical socio-economic transitions. The problem is that either through complacency or through a constant 'crisis management' mode of thinking that central banks often let the latter mission - managing the liquidity needs of short term socio-economic tranisitions - interfere with their mission to promote long term productive capital investment.

The reason is corruption but not in the venal sense of taking bribes, abuse of authority, or having close associaties form a conflict of interest. It is corruption in the sense that Lord Acton inferred, that power is its own policy and one can become so immersed in the technical details of power that one forgets the long term reason that one is exercising it for in the first place. To forget why one wields power because one becomes lost in weilding it, that is corruption.

In the long term, the economy can not be healthy and grow unless the central bank promotes capital investment. That may seem like a no-brainer. However in the short term the path of least resistance in managing liquidity needs for the economy always lies in working on the side of issues that have political favortism - the protected industries and special interests. Whenever a central bank works with one of these it is not creating investment but it is instead creating dead money.

A central bank fosters a more efficient market and a more productive economy when it fosters real capital investment. But the easiest and fastest way to get things done at any moment in time is not to encourage social change toward more productive investment needs - slow, fraught with setbacks, and expensive in terms of political capital - but to just go along with what the politicians want in order to do it the "quick and dirty way".

So there can be a temptation in order not to just occasionally accomodate the reality of political favortism (protectionism) of various socioeconomic participants but to facilitate it - because its easier.

Every central bank has a limited amount of political capital. This political capital stems from its history of institutional competence in managing both short terfrom which it can signal politicians just what it favors or will tolerate insofar as fiscal freedom and protectionism.

A weak central bank like the BOJ is forced to almost always act in a way that favors protectionism and special interests. This vicious circle fosters a lot of dead money and poor capital investment, creating later liquidity crisis in which the temptation is once again to take the quick and easy protectionist way out rather than attempting to create an incentive for real capital investment. This is why Japan has been floated for the last two decades from one liquidity crisis to another as the BOJ is unable to promote real capital investment but forced to facilitate more protectionism to get through the present crisis only to see a failure of capital investment that creates yet another liquidity crisis.

However the US Federal Reserve Banking system is not weak. It is instead corrupt - not in that it abuses its authority but in that its become addicted to "quick and easy" liquidity fixes favoring protected industries to get through the crisis. This is the "Dark Side" of Central Banking if you will.

Luke stopped as he heard mention of the man, the one who'd killed his father. But, but he was his father wasn't he? He listened as his voice spoke despite his thoughts. "Vader. Is the dark side stronger?"

Quickly his master spoke, emphatic to impress the point upon his pupil. "No! No, no.... Quicker, easier, more seductive."

Luke thought on his words, and the dillemas they presented. "But how am I to know the good side from the bad?"

"You will know," Yoda insisted. "When you are calm, at peace. Passive. A Jedi uses the Force for knowledge and defense, never for attack."

Dead money is not a difficult concept. It comes from considering just four things: supply, demand, currency, and price.

For a constant liquidity of currency, supply and demand will generate a price that reflects the momentary market consensus for that good or service. However if you start adding more currency in circulation, then if supply and demand remain the same the price will rise without anything else changing. That is called inflation.

However in a marketplace where many things are being priced, you could avoid inflation from adding liquidity if instead of all the prices rising just one or a few prices rose very high. As long as that price didn't suddenly decline. Then the extra currency would stay "locked up" in that item. That is it is very hard for social or economic reasons to get cash for that item class. When it is very hard to convert the price of something into raw currency, it is called "illiquid".

So that's dead money, it's just a way of soaking up extra liquidity added to a marketplace by skyrocketing the price of a handful of items far beyond what their supply-demand balance indicates. In practical terms the item being used as a liquidity sink must be illiquid or the effects won't last very long. Housing for instance is illiquid. Yes you can sell your house, but most people selling their house use that value toward buying another house. So housing is an illiquid and can be used as a liquidity sink.

The military-industrial complex can also be used as liquidity sink. Of course when you put money into it, the labor and commodity components generate "economic activity" and so circulate. So does the labor and components of the housing market however - carpenters spend what they earn and buying wood rev's the economy. The housing market however is a good liquidity sink because the prices of the homes can be bid up by much more than the marginal cost - labor and commodities - of production. Remember: location, location, location!

So in the same way the labor and commodities expended in the military-industrial complex also generate "economic activity" and can contribute toward inflation by recirculating liquidity. However the items produced by the military complex can be bid up very high and are illiquid. The Pentagon may be willing to pay $100 for toilet lid covers but would you give somebody a $100 for such a toilet bowl cover? In addition the capital cost structure of their industrial capital infrastructure coupled with generally low efficiency of production all contribute toward making any money you throw at the military-industrial complex "dead money" or money sunk into building big expensive things you can't really sell to anyone for cash.

Right now Alan Greenspan is caught between not one, not two, but three liquidity crises with another on the way. The past liquidity crisis was that in order to finance the economic restructuring of the "new economy" and to smooth over millenium fears he flooded the economy with liquidity. This boosted the stock market, but the stock market was not sufficiently illiquid. The economic downturn caused a stock market correction and suddenly a lot of money started coming out of it.

Taking the quick and easy way, Greenspan dropped interest rates to historic forty year lows. Given the protectionism of the housing market, this caused a real estate and development boom and eventually bubble. However without an economic restructuring -because the economy is in transition- this couldn't lead to an economic recovery but only a stagnation kept afloat by a liquidity injection.

The reason why of course that the economy was in transition is that the petro-economy facing higher competition (demand) for scarce oil commodities and dealing with a moribund capital investment infrastructure in America switched to "cannibalization" mode where it is liquidating or selling off parts of the economy to sustain a bit longer an unsustainable net negative ongoing cashflow problem for the USA.

The low savings rate, the current accounts deficit, the national debt issue, the energy-balance deficit, the capital flight issue, and the regulatory protectionism system are all therefore bound up in the same problem.

The logical conclusion would be to attempt to create capital investment by reforming the regulatory system and removing moral hazard from the marketplace. However this would be politically difficult. Government cannot on one hand protect and openly subsidize petro-companies like Hallburton while successfully incentivizing new capitalization of energy-efficiency and alternative-energy investments. The reason why it is politically difficult is that it is always easy to buy off the public with a boondoggle for a special interest or protected industry but it is hard to convince them to restructure economic patterns even if in the long run that would be more healthy.

However the failure to do so means that the "quick-fix" will be temporary and make the situation worse the next time around.

Now the economy is teetering and not having been fixed and brought up to date from the first petro-correction has seen since 2003 a historic break from the Fed Funds correlation with inflation adjusted oil. What that means in practical terms is that the economy is about to go wobbly again in the coming year. This is why Greenspan is doing anything he can to favor Bush, because to get him through the next crisis he needs a forced savings program like Social Security retirement savings accounts or healthcare savings accounts so that he can make their asset values spiral upward and in so doing so inject enough liquidity into the economy (without generating general price inflation) so that it can get through the next pratfall in 2005 that it is about to undergo.

However while he is doing this the currency value of the dollar is dropping, oil's price is rising - but not rising as much against the Yen or the euro. What that means is that we're running out of time. Over time the Yen and the euro don't see as much of a price increase in the price of oil. That means that over time their economies suffer less from the same price increases. Furthermore it means that other countries will favor putting more and more of their money obtained from exporting to us into Yen and euros.

If this trend continues America will lose its petro-currency commodity trading status and reserve currency status within perhaps five years.

Of course Greenspan is not an idiot. He understands that a switch to either a basket of currencies or a yen/euro standard for oil is probably not only inevitable but perhaps desirable. The globalist concept as I mentioned is to try to export to Europe and get offshoring jobs from them the way that Asia exported to us and got offshoring jobs from us (while trading being the policeman of the world in exchange for them financing our debt). The problem is that the unproductive and inefficient capital investment environment combined with the above outlined problems of debt, political will, etc. make it highly unlikely that we can make such a transition without a sharp drop in aggregate demand, higher interest rates, and super-inflation.

In historical terms the plan isn't working and both the domestic-side application and the foreign-intervention are both going sour. Perhaps they think they can salvage it but already in proven quantities and facts the idea is starting to smell like old fish. Greenspan is however not an idiot. His plan for managing this problem is to promote a super-beyond-porn-sized "dead money" liquidity sink in the USA so that he can inject obscene amounts of liquidity into the system and finance that transition more or less smoothly.

Are you starting to get the pattern? Without confronting the issues that make productive capital investment, the long term mandate of the Federal Reserve, then the Federal Reserve Banking system is forced to go from one liquidity-"dead money" binge/fix to the very next one generated by the waning of the previous one. It truly is a vicious circle.

I'm starting to think that someone should have a talk with Bernacke's and Greenspan's friends and maybe stage an "internvention" because this isn't healthy.

"Dead money" isn't the same thing as investment. As a matter of fact, it's the exact opposite. In a further post I'll explore the inflationary and deflationary aspects of the military-industrial complex, the fundamental basis of capitalism, the role of surpluses versus debt, and begin discussing how various (quite excellent) suggestions of what investments we should make to break out of this liquidity-"dead money" addiction that we've gotten hooked on.

As my readers have astutely pointed out, the truly logical course if one needs a liquidity sink to tide one over is to just bite the bullet and make large long term capital investments. The regulatory changes and the formation of capital can then healthily allow new liquidity to enter the monetary supply without increasing inflation. The capital investment is the very opposite of "dead money". This choice to invest in productive capital rather than use "dead money" is called an "economic restructuring". However economic restructuring is politically difficult, because by definition it means that you have to stop favoring the protected industries and special interests. And the reason why those became protected in the first place was that it was easier to buy them off by favoring them then get a real electoral mandate and voter constituency for change.

So it all comes down to tough choices.

While I completely agree with Stirling, Barry, and my readers as to what the general task must be the reason why I've explained all of this is to outline the institutional motivations and cultural barriers which explain why the logical and rational course of action to remedy the situation has not been taken.

If there's one over-riding economic reason to vote for Kerry over Bush it's simply that Bush stands for using "dead money" to try to prop up the old economic system while Kerry at least opens the possibility (with his proposed energy "Manhattan Project") of beginning to take the necessary steps toward restructuring the economy and productive capital investment. There's no guarentee that Kerry will be able to break the addiction, but it's highly unlikely given Bush's track record that he will even try to grapple with tough choices.

Heating Costs for This Winter,

A friend of mine working on his Ph.D., who has a newborn and lives in a mobile trailer, asked me a few weeks back about whether or not to accept a utility company offer to "budget in" his energy costs - or lock them in at a fixed monthly rate for a year.

I unhesitatingly told him that yes he should do so and that I already had.

When he asked me how much I thought prices would go up I estimated at about 25% nationally on average. He seemed surprised and mentioned how he'd seen a figure of about 15-20% on the upper end. However I assured him between falling inventories and metereological reports that 25% was a modest prediction rather than an upper band.

Since then I've seen a WaPo article that quoted estimates for price increases in the North East USA to be up potentially 28% but I thought that was low.

Now we see this:

Crude futures are now 81 per cent more expensive than a year ago, while the average American residential price of heating oil is $1.99 per gallon countrywide, up 60.5 cents from a year ago, according to U.S. government statistics.

Crude would need to climb to $80 per barrel in order to reach the all-time pinnacle, in inflation-adjusted terms, set February 1981.

Buying was triggered Wednesday by an Energy Department report showing a 1.9 million barrel drop in distillate fuel last week, bringing U.S. inventories to 119 million barrels, or 9.5 per cent below year ago levels.

The decline came amid falling imports of distillate and in spite of increased production from U.S. refiners, meaning domestic demand growth outstripped supply growth.

Daily distillate demand for the week ending Oct. 15 was 4.2 million barrels - a level that analysts said is more typical of the dead of winter. One explanation is that with prices high all summer many heating oil distributors delayed making their winter supply purchases, creating pent-up demand.

"This is the time of the year when you're usually building inventories," said Tom Bentz, a trader at BNP Paribas Futures in New York. "It seems we probably peaked on inventories a month or two early. The weather is getting colder, so it's unlikely that stocks are going to be able to build from here."

The Energy Department also reported that crude oil stocks grew by 1.2 million barrels to 279.4 million barrels, or 3.7 per cent below last year.

So if you haven't locked in your heating costs and you still can, do so. Whatever price they charge you now, it's probably not going to be as bad as when the market fully prices in this winter - which by all signs to the weatherwise and official metereological forecasts is going to be a chilly one on the North American continent. Gonna get real cold out there.

The Mind of Greenspan and the Coming WWIII,

In my previous post, I mentioned how Japanification was an unlikely scenario for reasons both structural and cultural. However to give them their due, the globalist neoliberal and neoconservative movements that championed Japanification did have a plan to make it work. This plan was built upon two central concepts.

The first was that the American tendency to save at unsustainably low rates could be reversed as a first step toward creating a liquidity sink. This would require two essential ingredients. The ingredients were the proposed privatization of Social Security and Medical Health Savings accounts. The real reason why Greenspan favors Bush over Kerry, is that Greenspan understands that only in the creation of forced savings accounts can a liquidity sink of sufficient proportion be created to absorb future injections of liquidity or drops in demand for US debt.

The reason why this is necessary is that Greenspan has already tried once, and failed, to create a Japanification scenario. If you examine the relationship between the Fed Funds rate and the inflation adjust bbl price of oil you can see that in 2003 the historic correlation between the two was broken - a relationship that had been in place since the move off the gold standard.

This was in essence the thinking behind Greenspan's now infamous testimony to Congress promoting ARM's or Adjust Rate Mortgages. At the time, and still presently, many observers including yours truly scratched their heads as to why a Fed Chief would suggest that people forgo fixed rate mortgages at a time when we were at historic forty year low interest rates. The reasoning behind it was that Greenspan was trying to encourage demand that would sustain a real estate inflation bubble.

You see when you purchase a fixed rate mortgage, the bank takes the long term risk of inflation. For this reason they charge a premium in the form usually of a higher rate of interest. When you obtain an ARM it is you and not the creditor that takes the front-line risk of inflation and so you get a lower rate - at the risk of rate increases later on.

In a Japanification scenario where Greenspan would attempt to flood the market with dollars while attempting to prevent inflation using a liquidity trap he would need an asset class to sink excess circulatory dollars into. ARM's make mortgages more affordable since if assuming interest rates remain low you pay a smaller debt service over time compared to a fixed rate mortgage. Alternatively you can afford to service the debt of a larger house payment monthly on the same income. By using his best nod, nod, wink signalling, Greenspan was attempting to signal home-buyers and the markets that it was okay to take on ARM's because it was defacto Fed Policy in order to maintain or even lower rates from the present level into the ongoing future.

If it had worked it would have caused home prices to skyrocket from their present levels. Indeed given his comments about a lack of a distortion in the housing market and the comments as to how well Americans "manage their debt" we can see that Greenspan would like to see this approach succeed still. If we had seen a continuing escalation and sustaining of home prices Greenspan would have used it as his anchor point to reinflate the US economy.

However it didn't work. It didn't work because you finance home-buying based upon income. Because of offshoring wages have been at best slowly increasing at far less than the rate of inflation or in fact stagnant. This meant that despite all the chicanery of the Federal Reserve that the housing market itself failed to be sufficient as a liquidity sink in order to create the Japanification scenario.

Given that we know now in historical terms that the real estate market bubble failed to absorb enough liquidity to prevent a break from inflation-adjusted oil and the Fed Funds rate we can see why the original plan of neoconservative and neoliberal, that is to say the post-modern political movements, were doomed to failure. It is not a matter of speculation, they attempted it once and in quite direct terms it failed.

But to give it its due we should basically state what the plan was. The plan was to smoothly transition from the US being the currency of the petro-trade to the Euro. Just as previously countries exported to the US in order to get dollars to buy oil, now the US like other countries would export to Europe in order to get Euros to buy oil - but only on more favorable terms. The more favorable terms and the reason why the postmodern political movements expected to avoid an economic shock from a drop in the demand for US debt was the US military.

While the US had been the economic and military superpower, the first Gulf War had introduced the need to transition to a new paradigm. In the new proposed globalist paradigm the US would remain the paramount military power and its military-industrial base would be maintained by continued debt purchases of Treasuries by other countries. The new economic center of the globe would then be Europe, and Europe would see its livings standards deteriorate in exchange for financing the world's economic development. In the first Gulf War it was America that provided the muscle and other countries that provided the cash to fund it.

This was to be the new globalist paradigm for their "new world order".

On the domestic side in order to finance the switchover between economic regimes, between a dollar based petro-currency to a euro based one, there would have to be a large liquidity injection and that would require a liquidity sink in order to soak up otherwise inflationary and price-raising circulatory dollars. Hence Greenspan's support past and present for Bush. If it had worked the correlation between the Fed Funds rate and the price bbl of inflation-ajusted oil would not have been broken.

What history proved was that the structural market pricing of real estate prices, interest rates, and incomes proved insufficient to absorb enough of the new money supply. In order to try again, two things would be needed. The first is as we mentioned a government mandated force savings program. The fact that there would be gross inequities to the savings program would be secondary to the consideration that it would be a vast liquidity sink.

Right now Social Security is not a savings program. Dollars go into a revolving door and they go out the same day to pay for current entitlement benefits seniors are receiving. Currently more dollars go into Social Security than go out for entitlement payments, but these are spent elsewhere right now this moment by being added to the General Fund expenses. Ironically these are not counted against the budget deficit - as it turns out if the budget were adjusted by the amount of money drawn from the "Social Security surplus" it would be another 200 billion in the red. Later on when Social Security pays out more than it takes it, not only will this 200 billion not be available but General Funds will have to be diverted to maintain the balance.

The important point to grasp here is that Social Security is not a savings program and therefore can not act as a liquidity sink - unless it is converted into private retirement savings accounts.

The same logic applies essentially to healthcare savings accounts.

In response to my previous post a reader, Ed, astutely notes another difference between the US and Japan.

At 10/20/2004 10:39:24 AM, Ed Tayter said...
Thanks for the post. I now understand why you don't think that Japanification is likely here, and I agree with you. What do you think that the likely scenario is?

The only thing stopping an immediate petro-currency switch to euros is the US military. Bushco hoped that the lesson of Iraq would be allow petro-euros and your government will be otherthrown. Saddam switched to euro pricing in 2002 the US invaded in 2003. This is the point where things stopped going according to Buschco's plans.

Iraq was not easy or cheap to occupy. However, even with the slow weakening of the American military in Iraq, I don't think that there are currently many leaders of oil exporting countries who are willing to risk the US intervention that a euro-switch would provoke. Let the military weaken more and some minds may be changed.

The US commitment to militarism also makes a Japanification scenario considerably less likely in America. The US does not need failing businesses and opaque banking regulation to absorb excess liquidity; we have the military. The military-industrial complex can absorb any excess liquidity that American tax payers want to throw at it. I see ever increasing militarization as a much more likely outcome than Japanification, based on the cultural mores of us Americans.

Having an enormous military makes it much more likely that we will take the military solution when it is presented. Whether the military solution works or not, is an entirely different question. The US deflating its way to more oil is alot less likely to occur than the US trying to militarily sieze the remaining oil supplies.

Typically empires just don't fall apart though it may seem that way. What happens is that an unsustainable situation requires maintenance by some sort of expansion to refinance a net negative status quo. This expansion leads to over-reach which trades off a temporary injection of commodities in return for a deterioration of the structural economic infrastructure. At the point where the negative returns deteriorate the economic infrastructure beyond minimal cohesiveness, the economic infrastructure of the empire disintegrates and the empire or hegemon seems to suddenly and without "apparent" warning collapses within a short period of time - or fragments into smaller viable economic units.

As the empire or hegemon attempts to maintain its past cost-structure with its attendent invested social relationship network it shifts to progressively more cannibalistic forms of economic activity that use up the capital asset and labor pool value that could be used to generate new growth. The consumption of the "seed corn" of tommorow to feed the hunger of today in order to maintain the social order of yesterday is the classic symptom of the peak of an empire or hegemon right before its decline.

If the US finds that it cannot transition smoothly to a euro-based petro-currency while maintaining its net negative consumption it will likely go to war. The alternative or potentially complement to the forced savings liquidity sink is the destruction of value created by the military-industrial complex.

Most people think money is pieces of paper or a bit more abstractly zeroes and ones in a computer account. However this is patently not true. Try cutting out a few pieces of paper from stock and see if anyone will give you valuable for it. Currency is legal tender only if participants are willing to trade it for tangible goods and services. This in econ-speak is called "economic activity".

So the fact that little pieces of paper pile up in a leather billfold or the bits in a digital computer are adjusted upwarded does not actually mean that the monetary supply actually increased. This is something that is difficult for most people to grasp. If you print out dollars and people go out and spend and use them, then you run into the trouble of price inflation - because that liquidity was translated into ongoing "economic activity". You would have the problem of the same of everything else and more little pieces of paper, which just means that the pieces of paper are individually considered worth less - classic inflation.

You can avoid this problem while still having the freedom to inject liquidity into the monetary supply - printing out and dumping new pieces of paper into the economy or adjusting some digital bits upward - if you can have a source of "dead money". The little pieces of paper are still there but as long as someone is hoarding them away or they just push up the nominal prices of a select asset class like real estate then they aren't considered "in circulation". Which means they aren't generating ongoing "economic activity". Which means you aren't generating price-inflation, just specific asset-inflation.

So you can push out more pieces of paper, get the temporary one time hit of them hitting the street, and then see them sucked into an upward asset value spiral that takes them off the street. This has a pro side and a con side. It means that the economy is on lifesupport. By definition "dead money" that doesn't generate self-sustaining economic activity won't revive the economy of buying, selling, and trading goods and services. On the other hand you can dump more money in any time you want, and it won't destroy the underlying market pricing of most economic transactions and the purchasing power of your currency.

One way to do this is to have a culture and regulatory sustem that acts as a money trap - continually sucking up more currency but doing nothing productive with it. This is the route of Japanification and it worked in Japan because for social reasons the Japanese were willing to tolerate a lot of permanently non-performing assets and were willing to sock away ever more money into their savings accounts that had practically zero return rates of interest - coupled with price deflation because the economy was net hemmoraging money in order to compensate for the bubble run-up in the eighties.

Attempting to create the American version of this is what Greenspan's solution was to the end of the nineties. However he and the free trade/ neoliberal market deregulator/ globalist gang failed because the culture and economic structure of America was simply too different. I'm sure they will try again with a forced savings program but for similar reasons that is likely to be insufficient.

So what is the last resort? Well as my reader Ed pointed out America has a large military-industrial complex. Like in the eighties, as long as we have someone willing to buy our debt this can be used to put continued fiscal stimulus into the economy to keep it on life support. It is also an excellent monetary sink and liquidity trap. By definition, most of the uses of military money meets the definition of "dead money" - that is money expended without seeing any productive return for the investment. Destructive return yes, but not productive return.

As a matter of fact the only "productive" return that a military has is in seizing and annexing productive resources and commodities from others. A military fed a lot of liquidity that would turn it into "dead money" and use some of it to bring in new commodities to shore up the otherwise unsustainable internal consumption of the US economy is probably going to be their next solution. It is an almost certainty that at least in the short run that the military-industrial complex - responsible for over two thirds of a trillion in government spending last year alone - would provide a sufficiently large monetary sink in order to pump out and spend dollars without producing purchasing power declines associated with price-inflation.

Of course in order to keep the money "dead" it will have to using the assets it purchases with the liquidity provided by the Fed. That means more wars. This is the ultimate reason why the Rumsfeld doctrine of lighter, faster, etc. has not been rejected for the US military. The tool of the military in economic terms requires many small frequent wars where large amounts of material are used up - so that the military can purchase more to prop up aggregate demand but at the same time act as a dead money sink.

This was why Rumsfeld was brought on in the first place, and why he in perpetuating this theory was only carrying out the legacy of the Clinton Administration which had already come to the same conclusion and had been retooling the military toward this end. Clinton was not above using the military as an economic sink for dead money. As Al Franken noted to Wolfowitz, Rumsfeld triumphed in Afghanistan using Clinton's military.

Rumsfeld's job however was to expand the use of the military-industrial complex as an active role in order to justify continued purchases of US debt moving toward and after a euro petro-currency transition. To justify paying the US for being the world's policeman the US was going to have to keep up a litany of continuously justified and foreign subsidized wars. The fact that we were going to hit bad men running other countries was just incidental, the superficial justification for the transition of the US to a miliary based economic engine.

Whereas Clinton had merely prepared for this enventuality, Rumsfeld's job would to implement it. This is why the Bush Administration kept and expanded the corrupt and pointlessly ineffective by all reports "missile defense shield". The purpose was of course rhetorical but it had an additional dead money sink property - it allowed the Fed to introduce new pieces of paper or revise upward digital bit values without generating sustained economic activity. I mean can you think of anything more useless and less likely to feed back into the economy than a $100 billion boondoogle "missile shield" that by all technical tests and expert estimates probably cannot work?

This is of course why Greenspan is supporting Bush over Kerry. It's not that he likes Bush or the Republicans, but the "ownership society" policies of the Republicans while overwhelming helping those who "have" in our society also create an opportunity for Greenspan to restore his control over monetary supply. In addition Greenspan understands that Bush is for political reasons more likely in order to engage in wars and otherwise use the military-industrial base for fiscal stimulus - generating another liquidity trap that Greenspan can use to create dead money. Greenspan needs this dead money so he can buy his way out the current economic downturn without a) having to undergo painful structural economic changes that would create social upheaval and b) destroying US purchasing power.

Greenspan is probably aware of the neoconservative and neoliberal agenda of using the military to justify debt purchases and bring in new commodity supplies to the market place on terms favorable to the US, and considers Bush more likely to promote that end than a Kerry Administration which might possible care about stuff like "social justice" and scruple at wasting large numbers of US lives just to stimulate the economy.

Of course this same logic leads us to conclude that the above path would be a direct step toward engaging in WWIII but hey you can't make an ommelette without breaking a few eggs right? Certainly I've broken a few eggs in my time making ommelettes so why not right? You save what you can.

Of course the above logic is premised on an assumption of despair. The fundamental difference between me and Greenspan is not that I am more scrupulous than him but that I have still the hope and expectation of the potential for a brighter American future. The logic leading to Armageddon is the logic of the acceptance of failure, the unwillingness to change, and the calculus of hopelessness.

I do believe that the ends justify the means. I however also believe that if you are justifying means by ends then by golly you had better deliver since you can't very well claim that you had meant well. I also think that if you are going to justify the means by the ends that you might as well play for the prize. What is the point in being ruthless and unscrupulous if you are going to just settle for a future that is ... depressing? You might as well shoot for the stars while you're at it, because nothing less than extraordinary ends can justify extreme measures.

This post is dedicated to my late father. I disagreed with you then but I see how right you were now. I didn't know how little I esteemed you until it was too late to make ammends. The only thing now that I can do is keep the promise I made to you right before the end.

Whimper or Bang? Central Bank Economics

Over at Bop-news Stirling has been writing recently of "Japanification" and why this is the "plan" of the Establishment (that's "The Man" to you) for the future of the US economy.

For this to work we have to be at Japanification - namely that the future is going to be forced to save - not by privatization of social security. We already have done that in the form of housing. You don't save, whoever is going to buy your overpriced house will be forced to save.

But for this to work, as in Japan, all retirement has to be dropped into a form which is purely internal. That is, we have to force people to sink their retirements into local Bushbuck only assets. Like say, the mortgage market. Only if there is an endless supply of Bushbuck forced dollars to feed the forced market will this work. In short, sooner or later, sooner from the look of it, we will have to have the rivetization of social security - it has to be bolted in place to, as Japan's savings accounts are - prop up the dollar and soak up any glutted dollars that foreigners dump. Remember, it isn't the total number of dollars that matters, it is the dollars in circulation.

In short, the society is about to go into a lock down, where the young are going to be serfs to the old, being forced to marry later, raise children later, and consequently we are going to go down the road of Japan and have bigger and bigger incentives to breed. The "middle class tax cut" that everyone is talking about is the "child credit". We aren't helping the middle class, we are helping the breeding class. Japan has to do this too by the way, they are a decade farther down the road than we are, but we will catch up.

I am appreciative of Stirling's body of work and there is no doubt that many offshoring proponents would like this to be the outcome that occurs but there are reasons why it can't and won't happen. Let us review them.

First while offshorers are always touting the "new economy" it's clear we're still stuck with a petro-economy. Information is only worth what you can turn around use it to purchase fossil fuel with. The simple fact is that oil is holding above $53 bbl currently and that even with higher prices China has an estimated 8-10% growth in demand next year for crude.

The head of Asia’s biggest oil refiner, China’s Sinopec Corp., predicted on Tuesday that domestic demand in the world’s second-biggest oil consumer would moderate in 2005.

“We expect China’s oil products demand growth to slow slightly from this year to 8 percent to 10 percent,” Sinopec President Wang Jiming told reporters in Beijing.

Chinese oil demand this year is up about 15 percent, but consumption is expected to ease as the government moves to prevent the economy from overheating.

The reason why prices on crude are floating up is the very real and practical expectation that even if Iraq's oil were to miraculously come back online, that it can't keep up with demand growth.

Proponents of offshoring often point to jobs imported to the USA from Europe as an example of offshoring "working" or being a "two-way street". This just covers up the real facts. To see why we need to discuss what happened in Japan in the original Japanification scenario.

Japan thanks to puchases of US debt putting leverage on its currency, the yen, was able to advance a way of imports to the United States that penetrated key market share levels in various sectors. It was followed by the various Asian "Tiger" export-based economies that attempted to emulate it. By issuing a great deal of debt Reagan was creating the opportunity for Volcker and Greenspan to lower interest rates, which they did, and in flooding the market with dollars brought the commodity price of oil down. This lowering of interest rates then created a boom in the US economy - but at the price of increased debt.

For Japan the essential trade was to leverage their currency against the US, export like crazy to America, and then turn around and buy oil with these US dollars.

Japanification happened because in order to push down the yen compared to the dollar and enhance its export prospects, the BOJ pursued a profligate monetary policy. This huge amount of liquidity flowing through the system created all sorts of speculation, asset bubbles, price inflation, and corruption. Eventually the price-bidding of major asset classes became a pyramid scheme, going upwards in a classic bubble on pure momentum buying. At some point it had to stop, and it did once the scheme collapsed.

At that point the BOJ had a huge problem. On one hand it had large amounts of liquidity that it had to evaporate to correct the system. On the other hand it had a collapsing asset market that couldn't absorb that liquidity and in fact was shedding it. Finally it was faced with a recession that it wanted to solve by injecting some new money, and all the while it still had the need to continue pushing down the yen to the dollar in order to continue exporting to the USA and buying oil with the dollar proceeds.

The problem was solved by the BOJ simply lowering the interest rates to zero and creating a liquidity trap scenario. As prices fell on assets, this introduced deflation and people had an incentive to save. In Japan, saving is a strong ethic. They also have vaarious institutions that enable saving. For instance the Japanese Postal System allows the Japanese to deposit on guarantee an unlimited amount of cash. As the economy tightened, the Japanese collectively began conserving more.

This allowed the BOJ to turn the individual Japanese savings accounts into a huge liquidity sink. All the money that was being set free into the system, both from asset liquidation and further BOJ liquidity injections from monetary policy could have a large part absorbed by the Japanese savers. In addition the BOJ encouraged banks to continue lending to corrupt and money losing institutions. This is counter-intuitive but the idea is that just as a profitable company can make money, that unprofitable one propped up by continuing credit can destroy value and act as a monetary black hole indefinitely. No matter how much money you lose on that company, you can always lose more.

By encouraging banks to not close bad loans, the BOJ was able to use non-performing assets in order to anchor the monetary sink. The BOJ could throw more money at companies, confident that they would either lose it or the difference would be soaked up by citizen savers.

Of course the reality of a nation of citizens saving and not spending and riddled with corrupt unprofitable companies is not one of prosperity and growth, but of decay arrested only by constant infusions of credit.

During the boom era, the fact that prices were rising were accepted because you could expect to get even more money as it came barelling down the pipeline. If prices rose a yen today if you got two yen tomorrow you were happy. However this kind of inflationary growth could not be forever sustained. The Japanification scenario allowed the BOJ to both continue a net positive liquidity inflow from monetary policy while maintaining a net negative economic liquidity. That is the BOJ needed to continuing putting two yen in today just so long as the economy hemmoraged three yen tomorrow.

This meant that new or younger entrants to the economic system were penalized. The older participants, having had a chance to build up their asset values and economic opportunities during the inflationary growth period were okay because they had saved value and were moving into an era of lower and lower prices. The new or younger participants struggled because having not yet become established, their cost structure dictated that they not save but spend in order to accumulate enough economic capital to make saving a net benefit. The young are not in the business of saving for the future. They are in the business of spending - spending time and money - to make themselves more valuable in the future so that they can take that higher income and then save.

The fact that deflation or economic liquidity hemmoraging had become the defacto official policy of the BOJ meant that they had no pricing power - because the goods and services being sold were the income that the young would have in turn needed to turn around and trade/sell/spend again until they were established themselves.

In an inflationary environment if you buy high, since prices are going higher you can turn around and sell even higher. And it goes around and around with each step someone taking a cut of the difference. In a deflationary environment the reverse occurs, and it is hard to build up capital because each time you trade a good or service the price environment is spirally lower so you take a small cut each time. This means that the net economic growth is the actual GDP minus the deflationary trend. In an inflationary environment without a constant growth of commodities or even higher monetary influx you will lose purchasing power, but in a deflationary environment you will lose pricing power.

For the average person to lose pricing power means that they have to work more for less or take a crappier job.

This then is the future that offshoring proponents would offer us when they remark that oh yes we are now getting jobs coming to us from Europe. Their plan, such as it is, is to continue the petro-economy debt trade but only to switch it over. A necessity of course to the money supply expansion is the influx of more commodities - which is why Iraq oil needed to be online.

The plan then was to allow European jobs to be shipped stateside, making us the Japan and Europe the new high rent capital flight/asset stripping/job offshoring center. There is every reason to think that the other countries in the world will succeed in switching from exporting to the USA to exporting to Europe but unfortunately it probably won't work as well here.

The simple reason why is that for the Japanification scenario to work here in the USA the USA would need to bring in oil using Euros. As the USA brings in more and more oil using Euros this will create immense pressure for oil to be priced in Euros. This is demonstrated to be occuring already as the dollar is declining over time against the Euro.

At the point that oil begins being priced in Euros then other countries will have much less incentive to export to us preferentially and to buy our debt. At that point the USA will because of its debt, the rise in debt service in the Federal Budget because of the lowered demand for debt being translated into higher interest rates, and the collapse of the dollar against other currencies - this would prove a sharp economic shock. It would be a period of high interest rates and high inflation in basic prices - the same imported goods that are cheap now would be very expensive then.

Even if this were not true the US Banking system hasa a stronger bankruptcy and creditor system than Japan, as well as more transparent capital markets. Normally you would think of this as an advantage but it effectively means that it is much more difficult in order to continue floating bad companies with increased credit-lines to non-performing loans. The markets here would likely punish such arrangements harshly compared to Japan.

In addition the US population is a consumer population with a declining savings rate and not an increasing one. Even if this were to adjust somewhat, in all liklihood the cultural pattern could not be changed sufficiently fast enough to generate the necessary consumer end of the liquidity trap. Americans like to spend what they get and unfortunately in a deflationary environment that adds up to adding pressure to the liquidity surge and not acting as a net brake to counter-balance central bank policy.

In the past, the Federal Reserve has for decades encouraged a low savings rate among Americans. This has been credited as a "virtuous circle" or "multiplier" effect that has made monetary and fiscal stimulus policy more effective. As soon as Americans get their hands on some money, they are likely to spend it. In the past this has boosted the economy, but in the future when the Federal Reserve needs to increase its injection of liquidity for instance to buy into a Treasury market with sharply falling demand it will not act as a counter-balance but indeed an amplifier for inflationary effects.

This fundamental cultural difference of being a spending consumer rather than a saver between here and Japan while enhancing US growth in the past is likely to make the gradual deflationary scenario of Japanification unlikely as an achievable goal here.

So while Greenspan and Bernacke would readily acquiesce to such a policy if they could, from the evidence this is pretty clear, the underlying new supply of commodities, the smooth transition to another major currency purchasing oil, the cultural differences between the USA and Japan - all of these and more make it highly unlikely that the globalists will have their way in the end.

There is likely going to be a sharp correction rather than a "rivetized" solution.

The more relevant example is probably the Russian Ruble devaluation and the market crash of the nineties. All in all America in ten years is more likely to look like the Russia of the last decade than the Japan of the last decade. Of course America has a much more advanced economy than Russia had, which is why the fall when it comes will be all the more dramatic.

Greenspan Desperate?

The latest Fedspeak is that Greenspan sees no distortion in the housing prices.

U.S. Federal Reserve Chairman Alan Greenspan said Tuesday that he did not foresee big price distortions developing in home prices and said Americans were handling their debts well.

Speaking to America's Community Bankers, Greenspan conceded there were concerns about "the exceptional run-up in home prices" but said hefty debt burdens seemed to be under control, provided that incomes and home prices did not tumble.

This while central banks in different countries like Britain with comparable prie run-ups have issued cautions. It shows you how truly insidious and widespread the favortism has spread - not a favoritism for Bush particularly but favoring the candidate that will prolong the status quo.

In a previous comment, a reader of mine commented about gas prices so I decided to post a link to inflation-adjusted historical gas prices. Of course Republicans aren't the only ones willing to manipulate markets in order to get a hoped-for political gain. Just as Bush agreed to dip into the Strategic Oil reserve so did Clinton in a late summer attempt to moderate gas-prices and assist a Gore campaign.

My take is that Greenspan isn't so much trying to help Bush as he simply is attempting to "keep a lid on things". By denying the incipient but not yet undeniably obvious, Greenspan is attempting to delay market adjustments to new realities. He is in the common parlance attempting to buy time.

I am somewhat sympathetic to this point of view since I attempted to buy a decade of time myself before on a more personal level, but the whole logic behind buying time is that sometimes by delaying issues you can formulate a better response. In other words you try to hold out until the calvary can ride in and rescue you and slaughter the indignant displaced indigenous peoples. In cases where there is no white knight that will rescue you, buying time is often counter-productive in the end.

I could understand Greenspan trying to buy time, but what is he trying to buy time for? For Bernacke to consolidate his hold and take over? For Iraq to straighten out and oil prices to drop and the historical Fed Funds and inflation adjusted oil price to realign once more? What is he holding on hoping for?

Otherwise his actions would be to me bespeak the smell of desperation. Only the desperate hold out as long as they possibly can, trying to get that one crucial break that will bail them out. Of course, statistically speaking, such hold outs do not when historically considered often escape their fate.

Florida the Swing State,

If you look here, Kerry is ahead in the projected electoral college count.

However, and this is a big however if you look at the score while Kerry is at 257 and Bush is behind at 247 two states- Iowa and Florida are up for grabs. While I expect a close race again in Iowa, Iowa is not the hinge upon which this election swings.

It is, once again, Florida.

Florida's 27 electoral college votes would put Bush at 274 giving him victory. With most of Florida's votes counted by machine this time without a paper trail, there will be no possibility of a manual recount.

Assuming no outside events occur to swing the race momentum, I think we can look forward to Jeb Bush fudging the difference and delivering Florida to the BC'04.

As much as I hate to say it, it's looking more and more like 'four more years' may indeed prevail.

Dictator's Choice: Putin Endorses Bush for 4 more,

CNN brings us the news:

Putin urges voters to back Bush
By CNN Moscow Bureau Chief Jill Dougherty

Monday, October 18, 2004 Posted: 7:08 AM EDT (1108 GMT)

MOSCOW, Russia (CNN) -- Russian President Vladimir Putin says terrorist attacks in Iraq are aimed at preventing the re-election of U.S. President George W. Bush and that a Bush defeat "could lead to the spread of terrorism to other parts of the world."

Putin, speaking Central Asian Cooperation Organization summit in Tajikistan Monday, made his most overt comments of support so far for the re-election of Bush for a second term.

"Any unbiased observer understands that attacks of international terrorist organizations in Iraq, especially nowadays, are targeted not only and not so much against the international coalition as against President Bush," Putin said.

"International terrorists have set as their goal inflicting the maximum damage to Bush, to prevent his election to a second term.

"If they succeed in doing that, they will celebrate a victory over America and over the entire anti-terror coalition," Putin said.

"In that case, this would give an additional impulse to international terrorists and to their activities, and could lead to the spread of terrorism to other parts of the world."

Putin noted that American voters will not decide the election just on Iraq.

"Because of this we must take a realistic approach and be prepared for any development of events," he said. "We respect any choice the American people will make."

Besides the amusement factor, this is seriously creepy. However it is not as creepy as several poll showing Bush holding a narrow but detectable edge. I understand that some of the polls are biased in their sample, and others have unrepresentative samples based upon cell-phone usage, assumptions about voting participation, etc. that won't hold this year ... but it is nerve wracking all the same. Furthermore with vote suppression and rigging attempts ongoing I just don't expect Kerry to be able to open up a surprise last minute lead.

I mentioned in BOP news this morning in a comment that over the weekend I picked up some sentiment showing some momentum for Bush on the margins, enough to make the vote a complete deadlock, and that's what I see now.

Right now Bush is poised to pick up the electoral victory with his buddies ready to "smooth" the way with removing any "inconvenient" results and nobody in the general public would know the wiser.

Undecideds in several polls have come down markedly against Bush, so I'm not really buying this lead business. It is disturbing however to see media organizations and Establishment figures like Alan "Oil will cause no inflation" Greenspan lean over backwards to create a favorable environment for Bush. The polls themselves are if you think about it part of the voter suppression methodology.

A person looks at them, and trained by previous experience to regard them with some validity, becomes discouraged and doesn't bother to go and vote. This takes the edge off of Democratic turnout - some polls have shown Democrats already less enthused than Republicans - and this is just enough to give Bush the advantage in tight race. Polls predicting a Bush edge therefore become a self-fullfilling prophecy.

In such a way the First Ammendment and the media become an electioneering gimmick in the hands of the powerful establishment elite.

It's not over until it's over but there's a lot of handicaps for Kerry to overcome in order to scoop this one.

Why did Christine Todd Whitman Roll?

There are many commentators talking about Ron Suskind's brilliant article on Bush's faith and its shortcomings in the NYTM.

However I have yet to see any of them, mired in their yes amusing but myopic ABB snark, comment on the most alarming piece of information in the piece.

The disdainful smirks and grimaces that many viewers were surprised to see in the first presidential debate are familiar expressions to those in the administration or in Congress who have simply asked the president to explain his positions. Since 9/11, those requests have grown scarce; Bush's intolerance of doubters has, if anything, increased, and few dare to question him now. A writ of infallibility -- a premise beneath the powerful Bushian certainty that has, in many ways, moved mountains -- is not just for public consumption: it has guided the inner life of the White House. As Whitman told me on the day in May 2003 that she announced her resignation as administrator of the Environmental Protection Agency: ''In meetings, I'd ask if there were any facts to support our case. And for that, I was accused of disloyalty!'' (Whitman, whose faith in Bush has since been renewed, denies making these remarks and is now a leader of the president's re-election effort in New Jersey.)

Let me remind my dear readers of Whitman's creds. She resigned on principle from the Bush Administration EPA posting. She then published correspondence and gave interviews criticizing Bush. These are on public record from multiple sources. This is a person that the White House froze out.

Now she is denying her comments and working on Bush's re-election campaign. Clearly she was rolled. In a way it's reminiscent of the party embrace that McCain, literally, gave Bush in front of crowds earlier this year. In sci-fi parlance we have a pod-people problem here: where is the real Christine Todd Whitman and what have you done with her?

While thinking that is amusing, for a moment, the truth is far more insidious. CTW clearly has been offered a path back into the fold, and a chance at future power. For this she rolled. The necessary reciprocal of this is that she must be convinced that those who offered her such a "reconciliation" with the party can deliver. Like McCain's conversion, it must have been affected by the conclusion that as a matter of fact that not only would the GOP "win" the 2004 election but that it would be the only game in town. That's the kind of monopoly it takes to get people to roll like this.

I think this is a very bad sign. Nominally in the polls the race is very close. Anecdotally there are a lot of fire-breathing ABB new voter registrations out there not being picked up by polling sampling so it should be on the ground even more Kerry skewed than the numbers show.

But we have people, previously alienated from Bush, now acting with complete certainty as if he's a shoo-in.

If you ask me, the fix is in. The Establishment couldn't ignore a large popular mandate. But a close race, that they can fudge. Given the passivity of the American people to public-media manipulation regarding Iraq, WMD, and 911 connections I don't think that there can be any reasonable question that they will succeed in carrying off the coronation their desired leader.

Right now my p-value of Bush victory is at 80% and growing. The more I see the more I am convinced that the winner of this election has already been pre-selected.

Commodity Futures Market for Vaccines?

I was reading Kevin Drum's article on the vaccine shortage, when a thought occurred to me.

The flu (and other diseases) are recurring costs that need to be hedged against medically. Right now scarcity is not tied to price increases. If a commodity futures market existed for vaccines, vaccine producers could lock in prices ahead of time - a key feature necessary to vaccine production - and could therefore guarentee profits to production schedule commitments. Others would be willing to do this, in order to speculate against the future demand in vaccines.

For instance, a commodity trader thinks that the future price of vaccines is under-priced. So he offers a futures contract to buy an order of 2005 general flu season vaccine. Chiron (assuming it's relicensed)then sells a contract to produce so many batches of vaccine at that fixed contract price. When the 2005 flu season rolls around, Chiron get's paid its fixed sell contract price but if the demand is higher than anticipated and the price goes up then the trader pockets the difference.

This is a time honored, time tested, and if well regulated successful way of moving capital into the hands of commodity producers while insuring producer income against future risk.

It may sound odd to propose a vaccine commodities market, but the alternative is a public health subsidy. We need those vaccine and it is on a statistical scale literally a question of life or death, even if actuarial tables will be needed to be consulted to discern it. We can either put into place a system that locks in producer prices and guarentees them capital and income, or we can make vaccine production a non-profit regulated production for public health consumption.

They only other option is to put up with occasional shortages and chronic market limitations- and people dying when they shouldn't. I'm sure that HMO's and insurance coverage people would start bidding against a vaccine commodity market if it were available to ensure supply and lock in costs.

And six billion while pocket change compared to the overall drug market is sufficiently large (but not too large) to start a commodity futures trading market.

Hmmm ... maybe I should read some more about NASDAQ and NASD and talk to some people who know how it started up.

Neomodernism and Bond Pricing,

MSNBC reports that 30 year and 15 year bond prices fall over the past week.

WASHINGTON - Interest rates on U.S. 30-year and 15-year mortgages have moved lower following last week’s disappointing jobs report that suggested economic growth had slowed, mortgage finance company Freddie Mac said on Thursday.

U.S. 30-year mortgage rates fell to an average of 5.74 percent in the week ended Oct. 14, down from 5.82 percent a week earlier. Freddie Mac said 15-year mortgages averaged 5.14 percent this week, compared with 5.24 percent last week.

One-year adjustable rate mortgages also followed the downward trend as they fell to 4.01 percent from 4.08 percent a week ago.

“The decline in mortgage rates was primarily due to a weak employment report for September, which suggested economic growth is still a bit subdued,” Freddie Mac Chief Economist Frank Nothaft said in a statement. “Of late, there has been no compelling economic reason to believe mortgage rates would climb out of their recent range.”

U.S. employers hired 96,000 workers in September, according to a government report last Friday that fell well short of expectations.

The Labor Department report showed the unemployment rate held steady at 5.4 percent in September. But the unexpectedly small payrolls gain raised some questions whether a mid-year economic “soft patch” was persisting and might force the Federal Reserve to halt its campaign of incremental rate rises sooner than expected.

The Fed has raised short-term interest rates three times this year -- from a 46-year low of 1 percent in June to 1.75 percent at its last meeting on Sept. 21.

Next week the Commerce Department will release U.S. September housing starts.

A year ago, 30-year mortgage rates averaged 5.95 percent, 15-year mortgages 5.26 percent and the ARM 3.69 percent.

Freddie Mac said lenders charged an average of 0.6 percent in fees and points on 30-year and 15-year mortgages and the ARM, all unchanged from a week ago.

Freddie Mac is a mortgage finance company chartered by Congress that buys mortgages from lenders and packages them into securities for investors or holds them in its own portfolio.

Copyright 2004 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters.

If you take a look at their handy dandy chart of 30 year bond rates you can see that you have a pattern of higher lows and lower highs. This is from a purely technical point of view, a convergent pattern. You can see the rates hit about 6.5% and then drop to 5.5% and then hit about 6.25% and then drop to 5.75%. If the convergence continues it's not hard to see that if Fed tightening continues on its advertised course, that the 30 year bond - an instrument for much speculation - will converge to about 6%.

Given that the Fed Funds rate, the short term rate, is set at 1.75% and might be estimated to rise to 2.0% within a few months all other things being equal, that's a spread of 4% between the 30 year rate and the short term rate.

That doesn't seem bad on the surface. However let us view this historical chart of both nominal and inflation adjusted (2004) oil prices bbl.

If you compare the two charts - it would be an exercise in simplicity to feed the two charts into an Excel spreadsheet and order up an insta-graph - we can see some interesting trends. First is that cutting interest rates seems to have a correlation with the price of oil.

The second interesting thing to note is the historically inflation adjusted price of oil bbl. From the very beginning of the historical table it is about $20 (2004) inflation adjusted dollars and stays at or thereabouts that level (or lower) right up until 1973. Then from 1974 onwards for the rest of the seventies it's in the mid to upper twenty dollar a barrel range.

Contrary to conventional wisdom and popular folklore, the highest price for inflation adjusted average annual prices will in fact be reached during the eighties and it is not until 1986 that suddenly the price of oil drops in inflation adjusted terms by half back to about twenty dollars a barrel. If we were judging economic perforance solely by oil, we could argue that when Reagan asked people "Are you better off than you were four years ago?" that the Carter era while not a peach was preferable from the point of view of petro-consumption.

Alan Greenspan is appointed in 1987 to finish Volcker's term, and thereafter we see a pattern where oil only nears $30 a barrel twice for the rest of the millenium - in 1990 and in 2000. However in 2003 crude prices again near thirty dollars per barrel and as we know the spot prices are beginning to think about flirting with $60.

I'm not going to try to argue causation between the interest rate numbers and the oil numbers from this rather brief data sketch, but I will try to argue policy and consequence. My thesis is that the prosperity of the American people for the last several decades has been to zeroeth order based upon a petro-consumption economy. Periods of high oil prices, sometimes even when they only appeared as one year of elevated annual oil prices, are associated with poorer economic performance and hardship.

If we look back at Reagan's first term, we can argue that the primary difference between Reagan and Carter was not the underlying oil prices but that Reagan ran a fiscally stimulative budget. Lots of defense sector spending, lots of agricultural subsidies, and lots of tax-cuts that basically floated the economy on a sea of debt until about 1986. This is the reason why even though there was a recession in the early eighties, and a hard one, the economy picked up in time for Reagan to win a second term. However this increased debt came at a cost.

It allowed countries to increase their currency leverage and effectively undercut the Greenback to export heavily to America. It should also be noted that while Volcker was taming inflation, that fiscal policy by politicians completely undermined any impact that Federal Reserve policy was having as far as managing debt demand. But along the way a magical formula had been discovered. America kept on borrowing and borrowing, and instead of creating inflation the price of oil actually dropped and created a surge of prosperity.

Of course the reason why it worked is that other nationals eagerly took up the debt in order to invest in either the high US rates of return or to leverage the currency rates in order to export more to this country.

You have to remember that Nixon had only taken the country off gold back in the seventies, and the reason why he'd had to do it was that the US was getting arbitraged to death by a fixed gold standard. Part of the reason why that had to happen was that the US currency really wasn't backed by gold anymore, but by the strength of petro-consuming industry or commerce. It would only be the early eighties however that the Federal Reserve would get it's act together enough to realize that by manipulating interest rates it could manipulate economic activity through the US monopoly on the transactional liquidity for oil.

At the same, the Reagan short term fiscal stimulus of defense spending, agricultural subsidies, and tax-cuts in a "Voodoo economics" or trickle-down theory. Of course the irony was that Reagan policy wasn't supply-side theory at all because he in fact was undermining the means of production in the country. Reagan's theory was quintessentially Keynesian, in that he was applying central government boosts to aggregate demand. However because of the demand for US debt for reasons of speculation, arbitrage, and currency leverage it created a period of out-sourcing and export-based marketshare capture in the United States. This created a brief shot of prosperity that would last until the 1990's when like an addict America needed a hit again and so Greenspan who had been observant and learned the magic formula could depress oil prices by jacking up money supply in order to manufacture a false boom.

Here are some longer term Fed Funds numbers to make the point.

Let me clarify part of what I have just reasoned. If you have a house with built up equity asset value in it, a bank may come along and offer you a home equity loan. In return for signing over the accumulated value of part of the home equity, and then agreeing to pay it back with interest later, the Bank will give you a quick infusion of cash liquidity now. Of course if you haven't spent the money as part of a debt restructuring program or cashflow adjustment to your budget you will run out of money again. At which time if you have any home equity left that lender or another may proffer you yet another quick cash hit that will float you for a while until you need another.

That is a bad enough analogy but imagine for a moment that the bank is also lending to a corporation that is selling you stuff. The lending institution notes that when you get your big hit of cash, you tend to go spend it on the stuff from this institution. As a matter of fact, it may give you coupons that make it "cheaper" to buy merchandise from that corporation. Of course in actuality the bank is just milking you. It's not really cheaper at all. Not only is it extracting your built up asset value from you, but it is making you work to pay off interest to it as it goes along - aka wage slave.

Of course it's not entirely the bank's fault that you are silly enough to go along with this, like most predatory lending agencies it is merely smart enough to spot someone who has a problem but would rather borrow than face up to that problem and restructure their income or expenditures to get back in the black.

The early part of the eighties were a period of fiscal stimulus keeping the economy afloat that turned into a temporary burst of kickback money as Americans literally sold the equity asset values underneath them in return for a quick cash hit. Clinton you will note was part of the parade and an extension of it rather than a period exempt from it.

If we get back to the original topic, it's clear then that the 30 year Treasury rate is just forecasting a renegotiation of the terms of the long term liquidity extraction or asset stripping or asset liquidation (such euphemistic terms for such an ugly process) rates that will be charged for such a process. Like most debt bubbles one could imagine that it could go on forever, and it might except for one thing.

The whole process depended that the monetary supply increases could be absorbed by liquidity transaction economic needs of petro-economies that traded in oil by the dollar. In 2003 the magic formula stopped working, and oil prices stopped conveniently stepping in line with the interest moves of the Federal Reserve. There are many proximate causal explanations, but it is sufficient to note that for all the hand-waving that we are not near "peak oil" inflation-adjusted levels that we in fact have already surpassed the economy-busting and recession-inducing levels of the seventy's oil shock. It is also notable that given the break between the usual relationships between oil and the short term rates we must not take for granted that previous relationships and transformations must necessarily predominate this time around.

It is clear that a break in the old pattern has been established and the markets are in search of a new equilibrium. The cables connecting Greenspan's usual levers have been snapped or sheared off, overwhelmed by the stresses that he has attempted to put them under.

In addition the political drama of the season features a referendum not on Bush but ironically the reality of Carter versus the ideology of Reagan. This time around the failure of the central government to stimulate aggregate demand has been made clear by the break in the past historical patterns. It is probably true that the debt binge could not give a strong pick-me-up this time around simply because of the "law" of diminishing returns. As more and more of America get's asset stripped you are going to see less and less of a bounce for each wave of off-shoring that goes on.

In other words as you borrow away the value of your house, the bank is going to come back and give you less and less leash each time you are forced to renegotiate terms. I don't think that the present renegotiation is based upon the terms of complete liquidation. I think rather that perpetual debt slavery is more of what the loan sharks have in mind.

It is said that each time Sisyphus rolls the boulder up the hill and then at the last moment it tears itself from his grip and tumbles back to the bottom that it just a tiny bit harder to get it back up the hill the next time around. Yet he still tries. That is the definition of insanity colloquially is it not? Trying the same thing over and over again but expecting a different result each time?

Bush43's Administration in the first term has been attempting to replay the basic Reagan economic playbook for a quick pick-me-up rather than trying to stretch things out like Clinton did. However the ground had been played out already, exhausted by the strip mining of American value. The low hanging fruit had already been taken off the tree by Reagan and Bush41, and then Clinton had gotten on a tall ladder and had pretty thoroughly picked off all the fruit except the ones at the very top. There was going to be no each pick-me-up hit for the addict this time.

That is what people are voting for when they vote for Bush - a renegotiation and sale of accumulated value in order to stave off the wolves at the door until tomorrow. He is trying to replay Reagan's play and they're cheering him along because, well, it worked last time didn't it?

When I looked at the thirty year treasury prices that's what I saw, among other things. What did you see?

Neo-mordernism applied to Economic Theory,

Ellen has a question about the current Nobel prizes in economics.

This is the sixth year in a row that an American has won the Nobel in Economics. If we're so smart...

...why ain't we rich? Or rather, why are we going to hell in a handbasket? (Rhetorical...BOP is all about answering those questions!)

Here are a couple of real questions about the Nobel-quality economists themselves: if they are breakthrough thinkers (or does the Nobel go to the pedestrian?) who, if anyone, is listening? Or do their theories cancel each other out? You'd think, on the face of it, that we'd have at our fingertips the best damned economic models known to man.

Edward Prescott is going to be on CNBC in a few minutes, to discuss how his work "has influenced public policy." I think I will get a more thorough understanding from my colleagues here.

Stirling then has this response back and forth with Ellen severally and here joined for convenience:

Stirling: The ECB runs on K&P - which is to day rigidly focused on defined goals. It's the way I would have central banks run, because I believe that economic cyclical management should be in the hands of elected politicians. Others don't agree with this (and some very smart others, so you should read their views on this as well). It is the monetary policy that they got the award for.

The business cycle research is more important because no one else was doing it at the time, right at a moment when the nature of the US business cycle was about to change to a long "island of complacency".

Ellen: Prescott is saying that employment is right on track and that taxes should be cut more. Says that economy suffered from Clinton's raising taxes in 1993, that we're still where we were then, Bush hasn't "done enough" in cutting taxes. Advocates privatizing Social Security. He sounds as far to the right as you can get and still be on this planet.

Stirling: That's where it is important to draw the line between the work and the person recommending policies. K&P realized that central banks have to follow through on their promises, which, in fact, is the case. And their work, while intended to buttress the conservative contention that downturns are the "fault" of people who just don't want to work for what the market is willing to pay, ends up being useful in looking at why conservative economics produces economies that "fall down and can't get up".

I thhink they deserve the award, but I wouldn't vote for either of them in an election.

Which is the weakness of liberals - they praise the work when conservatives would damn the man for being politically incorrect.

Which goes back to post-modern epistemology arguments below...

With all due respect to Stirling I think he is making a grave error in drawing a distinction between the man, his economics, and the policy proscriptions.

In a pragmatic metaphysics, one would have to point out that there is no such thing as a completely independent Central bank. The central bank will always have an institutional interest in managing demand for debt instruments issued by Treasury in order to maintain their influence over the yield curve. On the other hand, politicians have a political interest in the Fed's handling of the yield curve because it effectively controls the premium paid on lending to the government and debt service. A looser monetary policy effectively signals a looser fiscal restraint, because politicians are by their position interested in minimizing trade-offs between resource distribution between constituency groups and electorates are constitutionally dispositioned in order to properly price future costs of current borrowing.

The independence central banks is a myth honored profusely by rhetoric in the breech - indeed there is not a single central bank in modern history that does not accomodate both fiscal policy and fiscal stimulus.

Once we take this into account, we can see the Nobel was given for a bunch of garbage. Neither the Austrian or Keynesian schools can be correct. You cannot avoid intervening because there will always be overwhelming incentive to do so, and such intervention will have continually unpredictable affect primarily because changing boundary conditions with regards to crucial commodity, labor, market, and regulatory conditions. The oil economy for instance was the death of classic Keynesian economic theory about central fiscal policy stimulating aggregate demand, because it created inflation under the new commodity conditions.

Bringing the discussion back to point, the man and his thinking on policy cannot be separated from his economics. His economics while supposedly sterile of his political beliefs, is premised upon false assumptions that inevitably act as a stalking horse for such beliefs. After by down-playing the rather active role in engineering economic conditions that every central bank constantly and continuously plays day in and day out, he sets up a condition where government is responsible for fiscal stimulus and therefore sleight of hand creates a justification for constant fiscal immoderation and extension of regulatory interference into the marketplace -

what is widespread government investing of managed accounts into the stock market but a regulatory asset redistribution of marketshare?

What is a rabid position that a moderate tax raise on a prosperity created not by whether taxes were marginally lower or higher but principally because of low commodity prices and central bank manipulation of debt instrument demand - what is that position but an argument for constant stimulus by tax cuts in disguise?

What is a justification of the current job market but an endorsement of capital flight and the regulatory trade and implict central bank manipulations that make such an arbitrage of labor not only profitable but inevitable - and so therefore an endorsement of further government action that would further that aim?

The man is not seperable from his economics and this post-modernistic distinction of policy and consequence from theory by the introduction of artificial assumptions is the real weakness of liberal argumentation.

In a neo-modernistic philosophy one demands that each theory be considered not in its ideal form but in its operational form, and that having done so one is culpable for embracing all the consequences of that theory if implemented over all domains of experience.

If considered in that light, the man, his economics, and his policy prescriptions become clearly revealed in their full light - that the Nobel committee has been buffaloed into giving a prize in economics to two second rate hacks who by introducing false assumptions framed the entire discussion in such a way to be a stalking horse for their otherwise unacceptable public policy prescriptions.

So therefore in this light it is clear that there is no gap between the theory and its consequences. It is merely that we have not recognized the theory as directly implying of a necessity the consequence. Things are in other words going exactly as planned. The current economy is precisely the result that one would predict after the adoption of such a model, and as a matter of fact over time will converge more and more strongly instead of as of now merely approaching it.

The great gimmicry of post-modernism was to substitute one set of consequences that were directly consequential of a theory of causation and replace them with expectations of another - and then to manage the gap between reality and expectation by rhetorical slight of hand. There is nothing wrong whatsoever with the theory, it is doing precisely what one would expect it to do in the real world. The expectation gap comes in because the initial framing of the argument included a suspension of disbelief that introduced unrealistic assumptions that led others to conclude that different results would be brought about by following this course of action.

If Prescott still sounds so surprisingly right-winger and wing-nutty to our ears it is because we have been taken in by the scam that it was some sort of neutral economic analysis in the first place.

One need not condemn a man or his work for being impolitic - that is the way of post-modernism. In neo-modernism one need only apply a pragmatic metaphysics to strip away the presentational optical illusions and then having revealed the inner heart for all is beastial ugliness condemn it for what it truly has as its core essence. Or in a neo-modernistic fashion one could alternatively embrace it - provided one has first seen fit to accept all the revealed necessary and implied consequences of the complete impact of such a theory of causation.

So by all means endorse Prescott, so long as you understand that he is merely another shrill completely out-of-touch lunatic fringe anarcho-capitalist and is not even bothering to disguise it because of his contempt for your intellectual ability to see through his patently ridiculous charade that he is suggesting some objective, neutral, and politically unbiased theory.

If you study scientific history of nature of science philosophy, then you learn right away that one of the great myths regarding intellectuals and scientists in particular is that they are in some what "neutral" or "objective". A good scientist is never neutral - he is heavily biased - it is just that if he is a good scientist is he heavily biased in favor of process, review, and feedback and if he's not then he's just another ideologue pushing his point of view.

Globalization Failure: What Is the Tipping Point?

A reader asks this question:

I've asked this question in a dailykos dairy before, which unfortunately has disappeared, but this jist of it goes like this:

Given rising, or at least volitile, energy rates, where is the threshold where energy costs outweigh labor savings in globalized markets? For finished goods to make it from factories to market, raw materials must be transported to the factories, these materials transformed to goods, and then the goods shipped. All of this requires energy. However, shipping materials and goods shipping halfway around the world - back and forth - to gain entry to market is only sustainable as long as the labor differential between local-to-market workers and third world labor is cheaper than the energy costs associated with transport.

So, what is that threshold whereby energy rates rise beyond the labor savings of globalization? Can this be calculated?

--Maynard

Another reader writes:

I agree with the Oldman that this round of globalization is on its last leg. Even if the Bush plan of controlling all of the ME oil reserves were to have worked out flawlessly, global oil production is scheduled to peak in the next 5-10 years (optimistically, some argue that global oil production has already peaked and we just haven't noticed). Since this era of globalization (just like the previous coal powered era of globalization in the 19th century) is built around cheap energy (shipping good thousands of miles prior to consumption, the energy intensive green revolution in agriculture, and the growth of megacities and sprawl) the end of cheap energy is the end of this round of globalization.

Interestingly on Brad Delong's site, we have this comment:

World oil production has already peaked.
The market knows it, just not the general
public. Not yet. It's what's driving Bush
and Cheney grey, doing things their way,
gaining control, but getting no respect.

When the price of gas just keeps going up
and up and up, how will the House of Kerry
keep the White House lights on?

Wind power?

"As that little mind game shows, trying to imagine life after fossil fuels isn't easy. Hydrocarbons are the very lifeblood of modern, industrial society. They are so fundamental to our existence that their role in creating our quality of life often goes unexamined. What our great grandparents would have considered luxuries we think of as necessities. But as even a casual look at history and a quick review of physics reveal, we are living an aberration.

What will this mean for our lives? For one thing, cheap travel will become a thing of the past--goodbye backpacking trips to Bali and cross-country road trips. Our transportation infrastructure is utterly dependent on oil. Forty percent of all the petroleum we consume goes into our personal cars and trucks, and another 20 percent is burned by our trains, 18 wheelers and airplanes. As fuel costs rise, our freeways will crawl to a stop, our airports will be shuttered. The process of economic globalization, which is so dependent on inexpensive transport, will hit a brick wall. By necessity, economies will have to retrench and become more local, more self-centered."

http://www.martinweiss.com The Next Great Crash

Maybe now you'll have sympathy for the Devil.

Posted by Tante Ratatoskr

Personally I would have a great deal of sympathy for Bush co. if they had succeeded. If one is going to justify one's actions with a mind toward the notion that ends justify means, then one is obligated for producing results and delivering those ends no? If you deliver then a debate can be had about the relative merits of whether or not such means as used are an acceptable mechanism for producing said results. When one resorts to extreme means, and fails to deliver or produce results, then the debate about justification is inconsequential no? If you want to be ruthless you had better be very competent, because you are asking to be judged on your competence rather than your morality.

Incompetent and immoral does no one any good at all. But I tried... is not a sufficient justification.

Bush co. did not succeed. End of Story. Back to my reader's point they ask:

Low oil prices benefit every economy that imports more oil than it exports, don't they? No, I'm letting the money confuse me. A local economy benefits when it imports oil and uses a fraction of the oil to produce exports, and then has the rest available for its internal needs -- and its best alternative without that oil doesn't meet those internal needs as well. The issue is how much oil gets sold and who gets it, and price is only one of the mechanisms to establish that. [emphasis added]

The key point is to realize that everything is about energy consumption in the modernized and post-modernized world. For instance you'd think that taking cheap peasants and moving them to the city would be an energy free source of labor? Well you would be wrong. Consider:

Subsistance farmers can grow their own food. If you want to free up a bunch of them to do factory labor you have to use energy-intensive agriculture so that a few can grow enough food for many. You then have to spend energy transporting it.

Centralized production facilities require distribution and logistics transport systems for raw materials, component parts, and finished goods: this all takes energy.

To build and maintain the infrastructure of facilities and vehicles for transport takes energy for the above distribution and production system.

You now have to energy intensively construct and maintain housing for above workers- huts in the countryside consume little energy compared to city flats.

You know have to produce an infrastructure of electricity. You can burn natural gas or coal instead of oil, but you have to import oil to either get the coal or gas and package it for use - or pay someone else to use up oil to do it for you. Even if you burn wood you're going to use up oil collecting and transporting it. This infrastructure energy consumption leverages oil, but it requires it for basic operation of all its internal combustion engines.

As the above list illustrates, you cannot convert or maintain an industrialized state without energy supplies. When these supplies are imported, then the energy margin becomes the crucial point of the profitability of the venture. Namely are you getting more oil than you are using up to produce and ship whatever you're producing? As for whether it can be calculated, the answer is yes. It would require a lot of data entered into a database however, to estimate the energy margin across the entire GDP of a nation and its trade flows. The difference between what you bring in and what you use up for export production is the margin you have to live on- the amount of oil you get to use for stuff and services for yourself.

As Stirling has pointed out so many times, the US has been negative for some time. There is a concept called "cash flow", indicating that one's income at any moment should be balanced against outflows or one might experience a "cash crunch". You might be able to pay the bills, but not on the time schedule demanded by others to to meet contractual obligations. The US is always floating its negative "energy flow" by debt. This isn't good.

This is the real reason of course that the current accounts deficit and the national debt is short term dangerous- besides all the long term cumulative reasons. Some people have asked, what's to stop the US from just saying "fuck you!" and canceling all the debts we owe everybody. Well besides the rather mild sounding but very harsh terms of hyperinflation, capital flight, etc. the bottom line is that our country would literally grind to a halt because we would run out of oil. If we just reneged on all our promises (without the military power to enforce continued oil sales/tribute to us) nobody would agree to sell us oil anymore and we would literally run out - because we produce so much less than we consume. It would only take a matter of a few months for the Strategic Oil Reserve to be run out even with rationing schemes and our domestic oil production would probably be reserved for extremely high priority usages such as military usage and the rest of the economy would again literally sputter to a halt.

We need a constant inflow of oil to keep our economy functioning. Those who suggest we are out to steal Iraq's oil are speaking either crudely or out of ignorance. We have never, at least so far in America, made our money by seizing outright foreign sources of oil for national consumption. Instead what we have done is used force to promote and guarentee overall production supply stability.

Invading Iraq was our way of getting Iraq's oil back on the market without having to deal with the regional nuisance of a militarily resurgent Saddam Hussein. By getting back on the market, we would drop the price of oil and correspondingly reap the economic benefits as the lower commodity price would translate into more investment in American debt and equity securities. If the price of oil had dropped at the same time that the value of the dollar had dropped, that would have been an acceptable solution to the rest of the world. That was because the major thing you need to buy petrol with is dollars, so they really wouldn't have lost its fundamental value. Anyone concerned about losing purchasing power against other currencies could have converted dollars first into oil futures and then traded in or against those contracts for other currencies. But the value of the dollar went down as the price of oil went up, meaning that all dollar holdings shrank across the board in values. Rahter than just being a currency shift it became an absolute and objective shrinking of value.

This is of course the fundamental reason why the Federal Reserve continues to raise interest rates even in the face of anemic aggregate demand and employment growth in the US. They had to raise interest rates now to prevent the formation of a momentum bubble in the ten year bonds, and so depress their yields, before the rising price of oil created sufficient speculation about long term inflation in order to create a swelling yeild curve which would have begun a dimple leading to an implosion of the American dollar. That of course was necessary to facilitate continued dollar pegging by other central bank purchases of Treasuries to maintain the system which would have been discombobulated by the currency impacts of a rising yeild curve environment. To maintain their institutional power over the markets, the Fed was forced into raising interest rates in order to maintain its influence to act as a meta-credit agency and the market mover.

The reason for all of this of course is that most of the US debt is in the short end of the curve, but a rising long term yield rate environment would have eventually raised interest rates on the short end of the curve and diminished the Fed's institutional power to act there. Once a yield curve bubble had become a run-away affect it would have been impossible to stop the Federal Reserve from being forced to accomodate higher overnight rates or to effectively force the short term yeilds down in order to loosen monetary policy without hyperinflationary effects.

Ironically even though the Fed's actions were ultimately motivated by the imported energy commodity issue, it is acting again with profligate moral hazard. One of the reasons why the market has not yet fully corrected capital investment in oil supply is that there is an artificial inefficiency in the market - one created in part by Fed intervention. In holding down the ten year bond yields effectively the Federal reserve is heightening the price of the bonds and the demand for them upwards. With a demand for these bonds up, it creates a general environment that is inherently bullish for the dollar all other factors being equal.

As with gold, a bullish dollar keeps oil as a commodity price under downward pressure. So by intervening in the market for dollars, by heightening market demand for ten year bonds, the Fed is also exerting long term pressure against the futures price of oil. Since in the past, the price of oil as a commodity has actually declined in inflation-adjusted terms then it becomes clear that long term investments in oil production are actually being discouraged by this policy. Why would you invest long term in the production of a commodity whose returns are by government policy being actually diminished in inflation adjusted terms? You wouldn't of course.

The last time the oil companies played that game in the nineties, Greenspan flooded the market with dollars while simultaneously engineered a demand in US debt instruments to shore up the dollar. The result combined with production investment caused the floor to fall out from underneath oil as it declined astonishingly to just barely above $10 bbl. Having played that game once and been burnt, the result is that oil producing companies would rather charge a large margin on a smaller production supply than lose money on a larger inventory sale. While this effectively brought a brief spurt of extreme prosperity to American society and the world at the closing half decade at the end of the twentieth century. it was only a brief suspension of the otherwise downward march of the American economy.

Ranks of the Shrill Grow: MSNBC Answer Desk,

As any of my readers know, I regularly bash the pabulm that is the MSNBC Answer Desk. I bash it for giving technically correct answers to real readers concerns, that use technically correct language to deceieve them into thinking that their concerns are not justified. Usually they can be expected to give misleading answers to questions like this.

Spinning the numbers
Is it true that unemployment numbers nationwide are false? I have heard that once a person “exhausts” their benefits, then they are no longer counted as “unemployed”. They just fall into a big dark hole! … No wonder the numbers keep dropping: all the people out of work for more than 26 weeks are not being included in the numbers! So the economy is NOT turning around!
Cliff D. -- Kansas City

Actually, no. The national jobs data that are reported every month aren’t based on state unemployment insurance claims. And no one would suggest that the monthly numbers are “false” in the sense that unemployed workers are somehow being deliberately undercounted for political purposes. If they were, you’d expect to see much bigger increases in new jobs reported every month.

But the national numbers are being slanted, primarily because they are hiding increasing numbers of people out of work by increasing the non-labor participation rate. You can read Barry about writing about the weak jobs market here and aout the relationship to the labor participation rate here. Stirling talks about the structural aspects of why these jobs losses are not "temporary" here.

Stirling also reports on the possibility which the oldman has commented upon as well of a currency crisis, quoting a Fed insider, here.

However prophets crying in the wilderness are rarely heard. Which is why it was so shocking to see MSNBC Answer Desk descend to the depths of Shrillness. Read it for yourself.

Deconstructing the deficit
I’m a college student and am confused about something. How exactly does the federal budget deficit affect me as a civilian just try to live my life and pay my bills?
Sara Jasnow, Smithtown, N.Y.

You have every reason to be confused. There’s been an awful lot of hand wringing and doomsday predictions about the swelling federal budget deficit — despite very little agreement among economists about whether there’s really any reason to worry. Even those who are worried are a little fuzzy on just why...

It’s also important to look at where the money is coming from to pay for the federal budget deficit. If Uncle Sam borrows from you and me, and we buy Treasury bills with savings from our paychecks, that’s not such a bad thing. The interest we earn on those T-bills goes back into the economy and keeps it growing. And eventually we can cash in our T-bills and buy more stuff.

But what’s happening now is that more and more of those T-bills are being bought by people outside the U.S. — who are making more and more of the stuff we buy. That means 1.) Americans aren’t saving as much as they used to and 2.) we’re basically financing our appetite for imports with debt held by foreigners. In other words, the American economy is running up its credit card with money borrowed from the rest of the world.

That’s OK for now: much of the money foreigners lend to us goes right back to their economies when we buy stuff made somewhere else. So they like to keep lending, and we like to keep borrowing. But the trend is not sustainable. It could take decades, but sooner or later Americans will have to 1.) pay cash for what we buy from abroad and 2.) pay back all those foreigners who lent us money.

If that happens gradually, there’s no reason to think it will hurt the U.S. economy. But if the process happens too quickly — if for example, the dollar plunges and foreigners decide they’re not that interested in buying T-bills any more — that wouldn’t be good. A rapidly falling dollar could spark inflation (because you have to use more dollars to buy the same German car or Asian-made cell phone.) And the solution to inflation is higher interest rates. Which, once again, makes it harder for you to open up that new business or find one that’s hiring.

It's hard to read into text, but if you read this passage it begins with a long winding benign tone and then toward the end becomes increasingly and surprisingly shrill as it mentions that which the media has not dared mention to the American public - that yes Virginia that the party can not go on forever. That is surprising enough but the previous question fielded by MSNBC Answer Desk is similarly revealing that it begins in calm measured tones and by the end begins in sentiment stating increasingly high pitched "alarmist" outcomes when examined closely.

Sixth Grade solution
"Why can't the government just print more money and solve the U.S. deficit and debt problems?" I'm a middle school teacher, and every year a student will ask me this. Is there an easy way to explain why printing more money isn't an answer?
Roberta -- Kokomo, Ind.

The simplest answer is: it might work, but the cure would be far worse than the disease.

If you create more currency without raising the value of the whatever backs that currency, the value of the currency drops. That’s called inflation — you'll need more and more dollars to buy the same loaf of bread.

Currency is really just a piece of paper that stands for something of value. Increasing the amount of currency without increasing the value it represents just makes the currency worth less than when you started.

Here’s one way to get the message across. Tell your class: “I’ve got the last two tickets to a show starring (insert their favorite pop idol here). Suppose you could spend as much as you want on those tickets. Don't worry, your parents won’t mind. How much would you give me?” (Let them bid and then write down the winning price on the board.)

“Now, it turns out the star has canceled, but the principal has kindly agreed to stand in and play the saxophone. He's pretty good. I’ve got a ticket for every one of you. How much would you pay me now?” (Write down that price.)

“Okay, now I just went to the copier and made thousands of tickets for the same seat. What will you pay me now?”

My hunch is that the prices on the board will fall.

To show how the value of currency increases, tell them: “Wait a minute: I just looked at the tickets more closely. On of them is actually a VIP back stage pass … What would you pay for that?”

In the case of a country, the value backing its currency is (roughly) the strength of its economy and the size of its GDP, or all the goods and services it produces. (The dollar used to be backed by gold and silver; you could go to a Fed bank and exchange your paper for precious metal.)

If our economy grows, our dollar stays strong compared to other country’s currencies. But if we just started printing paper, the value of those dollars would fall and we’d see prices rise at the same rate.

So printing more dollars might help you pay a debt that was incurred in “old dollars,” but everyone would get hurt. People holding debt would lose because they'd get paid in worthless currency. Consumers would have to go shopping with a suitcase instead of a wallet. And the U.S. Treasury would have a hard time ever borrowing again. So as bad as deficits and debt are, inflation is worse.

Don’t forget to quiz them at the end of the week.

Now I don't think that something as Establishment as MSNBC Answer Desk has suddenly converted to revolutionary socialism. What is more likely is that people are starting to get scared, and as they get scared as they start contemplating the train-wreck that is American fiscal policy their anxiety begins to leak out - almost subconsciously they stop obscufating and obstructing the issues and lay them out clearly. Because it's easy to poo-poo the trainwreck when you are miles and miles away, but as the rushing thunder of the locomotive careens toward the dangling shattered bridge even the most cynical and jaded commentator when they realize that while they have a luxury car they are still on that doomed train then they can get, well, a bit shrill.

Watch out! OMIGAWD?!?! OH THE HUMANITY! Hyperinflation! Austerity Programs! Hyperinflation! OH THE TAX INCREASES!!! WHY GAWD WHY?!?!

Ahem. And if anyone has been wondering, yes it's been going on the whole time Clinton was in office. Kevin Drum's charts on family income and income volatility show unfortunately ironclad trends. The 90's were jsut a respite, a slowing of the carnage. Democrats are modestly more competent than the Bushies, but mostly their competence lay in covering up the threadbare robes of majesty that clothed America and being smart enough to realize that America had grown hollow so as not to push the limits. America had grown weaker than her reputation suggested, but the Clintonites were careful to perpetuate the illusion of American superpower status.

The post-conservative movement called the "neo-conservatives" were fools enough to actually believe their own press about American exceptionalism, unilateralism, and superpower status. They then tested their belief through Bush to destruction, revealing for all the true poverty of American power in the 21st century. Soon it will not just be poverty but bankruptcy.

Philosophy Sunday: The Introduction of Neo-modernism,

Marcy at BOP-news has an interesting philosophical-ethical argument on post-modernism.

I think the example of Vaclav Havel, probably the person who has been in the best position to do something with post-modern theory, is instructive. Havel was a great and important leader of the dissident movement under communism. His work, most notably his essay "The Power of the Powerless" made the ideas of post-modern theory accessible AND applicable. If you, as a greengrocer, continue to put a sign in your window every day that supports communism (even though you don't support communism), you will be reinforcing that system. But if you stop putting that sign in your window one day, the apparatus of ideology will begin to crumble. And crumble it did.

But there are two problems with Havel's career. First, even at the same time as he was writing Power of the Powerless, Havel had a very academic notion of leaders and followers. He had a well-publicized fight with others in the Charter 77 group in which he insisted that the movement had to be led by a small group of leaders. They were the ones who would do the writing. The majority would come along, but only through reading. Thing is, even while they were having the fight, Ludvik Vaculik circulated their arguments outside of that narrow group of leaders, and--lo and behold--members of the majority started writing. They were acting as Havel imagined only the leaders could!

The other problem with Havel's career is even more apparent. He was brilliant as an opposition figure. But he was mediocre, if honorable, as president. Most notable, to me, is the way he discarded his formerly strident criticism of the United States. When he was a dissident, it was easy for him to point out that the US was led every bit as much by ideology as was the communist world. But he did not manage to translate that belief, as President, into a course of action that might have spared the Czech lands from the shock therapy and consumerism that largely turned the Czech economy into crumbling house of cards, shored up by affluent American tourists.

The failure of post-modern theorists to translate their theory into a plan for action (Foucault's admirable prison work aside) is all the more problematic given that the Right has learned the lesson of post-modern theory AND put it into practice. Some foolish commentator noted (I think on Stirling's Derrida post) that Derrida had long been dismissed, and philosophers like Strauss were, instead, the dominant influence on our time. Look. You can't get Strauss without deconstructing Plato. Straussians are practitioners of Derridian language games rather than theorists of it (but boy do they understand the theory!) And those games have put them in a powerful position where they have, up until recently, succeeded in immunizing their power from efforts to deconstruct them. The left has continued reading while the right has been constructing its own postmodern narrative of power.

As Stirling pointed out however, liberals can't be better post-modernists than the Republican party. What liberals can do however is become neo-modernists. In the frame game, the post-liberal and post-conservative movements cloaked their true activities - a market feudalism and corporate fascism - by applying the label neo when they knew full well that they were a post-modernist movement.

When Kerry debates Bush it is the post-liberal philosophy clashing with the post-conservative philosophy. Both political movements have abandoned their roots. Neither side can muster more than a faux tribute to either state socialism or laizze faire capitalism. Indeed both sides steal as needed in order to support their political power structures.

The post-liberal philosophy called itself the neo-liberal movement and proposed that populist agendas could be met by enacting markets that liberalized - deregulated - markets so that corporations could act more freely. The post-conservative moment which is called the neo-conservative movement proposed that elite agendas could be met by liberalizing government - by removing the inherent checks and balances that prevented government from intruding on the private sphere.

If we examine the Renaissance we find that it is an age of humanism, of anthrocentric rationalism, of essentially at its core artificial aesthetic. This is why the great artistic masters of the age, Da Vinci and all who followed, had as their theme a heightened aesthetic of artificial reproduction. They could imitate all the forms of nature, and their art was in doing it better than nature - by finding and acentuating the order apparent within it such as the Fibbinoci series and sacred geometry. This is the age of Michel Angelo and the Sistine Chapel, of a Europe discovering that the glory of man was in his ability to discover the order within nature and to accentuate it so that it was made visible to all.

The modern age is the age of mass production and of scales of economy. At first as in the victorian age it is centralized. The factory, the centralized means of production requiring the concentration of social capital - financial, labor, and intellectual - is the symbol of this age. It is the age of coal and artists discover surrealism. Pointilism will come of age and so will the delicate visual illusions of Renoir, painting with light to show you can illusion to explore your perceptions of it. It is the age of that guy who cut off his ear and showed the world with his paintings in the very texture and swirling color his emotions.

If the Renaissance gave mankind a kind of glorified artificial reproduction of the natural order then the age of industrialism will explore how mankind can construct perception and compose appearances which are recognizable as forms but are wholly artificial. It is the age when "artificial" comes not to mean being created by artistry but a synonym for "synthetic" which also in an earlier age simply meant to construct by bringing together. The synthetic age allows artists and manufacturers to produce new realities, in the form of machines and art that owe only component raw materials to nature and whose form is completely processed and rendered malleable by human application of insight and force.

The Post-modern age with its post-modern art and literary trends of deconstructionism and historical revisionism however is the story of a jaded and cynical consciousness. Mankind has discovered that he can manufacture on scale his own environment, his own aesthetic experience, and his own political discourse. Tradition has fallen and classical modes of perception in all forms have become broken down. It is the age of analysis, of Freud putting you on the couch, of philosophers breaking down the foundations of thought. In art Jackson and Picasso will take forms and break them down into their fundmamental basic forms. Abstract art is nothing more than the deconstruction of the basic visual units of perception itself. History will be rewritten, reintrepreted, and the reframing of history in literature and academy will become a gun for hire - people will on the left revise retrospectively the entire history of marriage as patriachial rape on an oppressed gender. On the right, reality itself will be revised and reinterpreted - Creationism in all its manifold forms is entirely about trying to fit the square peg in the roudn hole. It is the attempt to reinterpret the natural order into a form that will agree with a few dozen allegorical and mystical metpahors written originally in a small Semetic tribal creation myth, and ignore the parts we don't like because it undermines the exceptionalist narrative we would like to tell about ourselves.

The hyper-exceptionalism of America is the very same anthropocentric view of the previous age, but warped and developed into a form beyond all recognition. Mankind has learned to revise his environment to conform to this wishes, and now he would like to reconstruct his own perceptions to fit into his own wishes. And he will succeed. It is the thinking of exceptionalism that will lead religious leaders of all stripe in order to absorb the metasticizing concepts that our religion must be the only one and correct religion, and fundamentalism and literalism will break out in a rash precisely because elites become adept at manipulative the symbols of reality and using them to control the less sophisticated members of their group bases. However the elites are as much puppets as puppeters, for the constituencies are using them to achieve ends which they cannot articulate and dare not - because the instinctive and base nature of humanity has not changed.

Humans have become clever machiavellian linguistic primates, but their behavior is still premised on drives as primitive as chimpanzees cannibalizing the young of low status members. That is why college students got worried about a draft, because they are the elites and shouldn't have to go to die and why they otherwise don't care about the number of casualties - because those dying in the volunteer army are low social status members. It happened in Vietnam and it is happening again. People can talk quite cleverly but they rarely think for themselves. They have intelligence but it is narrow and shallow, a mere trickle instead of a deep surging wave of awareness.

The reason why conservatives have succeeded around the world is that liberals have failed. Liberals attempted to construct a better society upon formal and explicit rules of engagement, attempting to idealize and optimize collective outcomes. This failed simply because while people could say stuff they hardly ever meant it. The gap between deeds and words was simply too large to bridge by a mere narrative or linguistic argument.

They found that they could seize power by analyzing - literally breaking information down into component parts - and by analyzing things in terms of the base concepts and paradigms that appealed to the baser nature of voters. By baser I do not mean violent, though violence is a part of it. I mean the undeveloped or ignorant parts of human awareness. This ignorance is not a intellectual poverty - but rather a poverty of discriminatory ontological experience run rampant modern philosophy and politics either right or left. Ironically by constructing his own experience, mankind had cut himself off from experience of reality. By learning to shape his interactions with it, mankind fell prey to the delusion that what he believed must be the reality because he could order events to accord with his beliefs. People are so in love with words that they can arrange as they wish and so impressed by how they can arrange the world as they wish that they have neglected how the feedback from the world itself can be a valuable lesson about the relative merits of various methodologies.

So the liberals in the form of socialists could break down by analysis and revolution traditional society, but they could not replace it with anything better. That should have told them something.

But conservatives have also failed, but they failed in a different way. They attempted to game human nature, to be the political confidence men cynically manipulating the crowd. The forefather of the post-conservative movement was PT Barnum and the legions of grifters that became rampant in the modern age. Through Madison avenue they realized they could sell politics as a brand and a consumer product just as easily as they could sell religion through televangelizing or skin care products. However they in their success became failures, because they could not in the end actually produce. They had become so much the parasites that they could not "get real" when needed.

The headlines weren't helping. A steady hail of bad news rained down on Bush—from the Duelfer report (which concluded that Saddam possessed no WMD for a full decade before the Iraq invasion), to the admission by the former Iraq administrator Paul Bremer that there weren't enough troops on the ground to secure the country, to a lackluster jobs report. For a time it seemed as though reality itself had suited up and joined the Kerry team...

As Hillary Clinton put it, Kerry may sometimes change his positions to fit the facts. But Bush changes the facts to fit his positionsAs Hillary Clinton put it, Kerry may sometimes change his positions to fit the facts. But Bush changes the facts to fit his positions. Yet Bush, ever the competitor, was not going gently into Friday night.

It is not that reality has chosen sides, it is that both sides have abandoned reality. When both sides traded power back and forth or uneasily shared it, they would always blame the other for obstructionism. Now that the post-conservative political movement has taken power over all three branches of government the bankruptcy of their world-view becomes immediately clear. These are guys that couldn't run a lemonade stand much less rebuild a ruined country from scratch. The United States is more or less running on autopilot and these people are just scamming from the top. However the bad news is that Democrats are only marginally more competent as post-liberals than the post-conservatives.

What we're talking about is "spin" of course, and this is the elephant in the room for "neo-liberal" or rather post-liberal economists and policy wonks. It is that George W. Bush is a President of catastrophism - his great error is that he took the myths and lies that were spun about America's power and took them literally. Because they were not real, because they were based upon a foundation of sand and debt, they shattered catastrophically. George W. Bush was simply too stupid to understand that like the Wizard of Oz, that it was all a scam and that he was about to break the suspension of disbelief it operated within.

The great illusionist William Clinton knew better. He understood the glass-jaw of American power and its fragile nature, and he perpetuated it by using it sparingly even as the overall conditions deteriorated. What George W. Bush did was tear away the illusion of the Clinton years, that we were getting richer instead of just pumping out a lot of inflationary dollars - that we were getting a "new economy" instead of just discretely using our military force to depress artificially the price of the key commodity of oil - that we were getting better jobs to replace our old jobs instead of actually progressively exporting our capital investment and economic growth overseas in return for cheap consumer products and credit to finance them

What do we get in a world of relative subjectivism and arbitrary perceptual analysis? "Spin" wars - battles of biased and epistemologically unrooted world views, because epistemology and its sibling ontology has been the big loser in the world of Neitzchean aesthetic ethics.

What is a neo-mordernistic philosophy? It is a philosophy where epistemology and ontology are given equal footing with aesthetics and ethics. It is a philosophy where the content of the philosophy is purposely sourced so that at least part of it is not linguistic. It is a philosophy that approaches self-contradictions by accepting frameworks that allow these to be tested against the outside world - the inhuman and nonhuman organic and inorganic world. It can not be called a realist doctrine because it recognizes mankinds power to construct realities both subjectively and through artificial manufacture. Instead it addresses a question how should we construct our realities by introducing a pragmatic metaphysics - where pragmatism is defined as a view that choices must be weighed with the thought of consequences to all domains of experience. A neo-modernistic philosophy is one that recognizes the power and limits of human interaction in order to dominate reality, and accepts that meaningful choices can be made over tradeoffs between different consequences over all domains of experience.

In other words it asks the individual to wed power and consequence by being consciously responsible for choice of metaphysical valuation of impacts over various perspectives.

This introduces a way to break the "equality of spin". Not all paradigms and not all methods are equal over all environments and with regard to all consequences. By forcing the individual to recognize and be responsible for ennunciating the trade-offs between various consequences, and by forcing them to consciously choose which ones to promote over others, it introduces a gradient upon which a new epistemology and ethic can be introduced - an epistemology and ethic of sentient culpability.

Conjectures and theories must be tested against the feedback one recieves in implementation, that is the essential meaning of consequence. An idea can not be judged except in its operationalized form. While the musings of communist ideals may seem great to socialists who claim "It has never been tried," all we can judge is the form that has been tried. Until someone comes up with a different form that can be tried and yield different consequence all we can know is that which has been proffered. In the same way, post-conservatism has offered us the "better and better" war of Iraq. Let us cede for a moment the linguistic argument that things are going "better and better".

If the current observed consequences of "better and better" are like this, then I reject better and better as sufficient. That is pragmatic metaphysics at work. It takes the idea and notes that while democracy in the middle-east sounds great, all we can judge is the operationalized form that we can perceive. Additionally, while it considers inconsequential enough any linguistic appellation - it judges based upon an accounting of choice for consequences. Therefore if this is "better and better" I having examined the consequence choose to reject as satisfactory "better and better" even if things are "getting better".

Linguistic norms of conversation or their perversion cannot be the standards of perception and judgement. We cannot say things are "getting better" and accept that, because in a neo-modernistic perspective we are responsible for whatever impacts in experience "getting better" implies. And being conscious of those impacts and culpable for choosing them, we cannot accept classifications that offer consequences that we cannot ourselves embrace.

This is a hard path to walk. It means I cannot look at my chocolate powder or bars and say "This was legally produced. I do nothing wrong by eating this." Full recognition of culpability of impact requires that I account that my act of purchasing these candy bars and powder acts as consumer demand for a product manufactured using physically and sometimes sexually abused abducted child labor. It does not however require that I condemn it or condone it, but it requires any ethical perspective I take must take into account the fact that my hot cocoa is produced by the tears and lashed backs of little children.

This is a harsh standard to live up to, but it must be aspired to. Only in a world of neo-modernistic philosophy and perception can mankind find a way to live thoughtfully without hyprocrisy and without destroying itself. Humanity has reached a point where if it does not practice neo-modernism, which is the philosophy of mankind being responsible for the world it chooses to live in, that irresponsible and unconscious impacts of mankind's collective behavior will end its civilization or reduce it to a steady-state stagnation of tyranny and poverty.

The myth of Freud which is the myth of the modern world is the myth of Oedipus - he who did what he wanted, who was a product of his environment, who then discovered his origins and his crime against nature - and who put his eyes out rather than deal with it. What mankind must become is the Oedipus who discovers the horrific truth of his own life and then turns to his wife and says "Honey, I have to get some anger-management classes in. Would you get the phone book and help me look for a counselour- and this is going to change our relationship maybe some marriage counseling would be good.".

The past is the past. We can learn from it, and we must be wary of attempts to redefine it conveniently by others, but it cannot be changed to suit our convenience and that is the ultimate lesson we must learn from it. Neo-modernism is the philosophy that takes as its starting point the full horrific state that is each person's life - the whole big messy and unfair history of how we got to where we are today - and takes charge of it by asserting the necessity of each person to understand that whatever they are given to work with they are responsible for how they work with it.

The Economic Failure of Globalization,

I wish to proffer a simple thesis which I hope to defend: that the Iraq war was the first (and last) war waged to sustain a failing Globalization, that its failure dooms Globalization, and that the fact that it "had to be waged" in the first place to sustain Globalization is strong evidence of the failure of Globalization as a sustainable economic and trading system.

I would like to thank Abby for giving me this idea with her thread and crystalizing a lot of disparate data I have been looking at.

As Stirling points out in his new article, ultimately wars are often about control or access to resources. Ultimately, this is what all wars come down to. War is highly expensive, and the only justification is either to defend oneself from attack or to use it to secure access to resources that are necessary to national economy.

What we invaded Panama for was to protect our access to the Panama canal, and to ensure the Atlantic-Pacific shipping way. I argued at the time that the risk of losing access did not justify the war, but I was on the losing side of that argument.

A primordial conservative truth is that war is ugly and expensive and tragic and generally we use it to secure access for ourselves. Economies only truly grow as they either secure more resources or more efficiently use the ones they have.

This war was the first war of globalization. It was a test case about whether it was possible to unilaterally secure resources by brute force in order to continue the present trade system. It was been a dismal failure and so globalization is failing. Why failing I say?

When the United States contracts its aggregate demand because it cannot grow it by borrowing any more, there will be a demand shock throughout the world. The trade system and international financial markets will be reconfigured and realigned along a radically new basis.

Asian countries will no longer be able to grow by exporting to us. Europe will no longer be able to afford subsidies that allow their socialized economies to tread water. Third world countries will find it harder to sell their commodities because of a lack of hard currency. (To understand why, remember that a third world country often trades its commodities as exports for hard currency which is then used to buy thigns the country cannot produce. If the US demand for commodities collapses, then either the Third world countries will have to sell less for the same money or more for less money - until someone new comes along to increase demand who also has hard currency. Uruguyans selling to Russians helps neither of them much, simply because neither of their currencies is very hard. Not all currencies are equal and commodity trade flows are heavily dependent upon bringing in hard currency as a motivator because of their superior purchasing power.) The entire world financial system will be disaligned, a lot of money will flee the US equity market and when it does it will bloat other markets.

Some of this will be beneficial. Some of it will be disasterous.

But globalization as we know it will be over, as the monetary basis that underpins the artificial trade flows that create globalization come crashing down. Fragmentation, spin-off, inflation, hyperinflation, trade barriers, etc. are all words that will become household terms.

The sad truth is that while Saddam had no WMD it is highly unlikely that a Gore Administration would have allowed him to remain in power in Iraq. Economic pressures would have eventually led Gore to commit to the same course of action, albeit probably with a global coalition and perhaps a more competent technocratic approach.

If you read Barry's analysis you will realize that the frame work he is talking about is party netural, and dependent only upon the globalized trade system as the common denominator. His main focus is on the predictability of the absent WMD programmes but read the following:

Thinking like a Strategic Analyst / Defense Planner
Which leads to our exercise in strategic “reverse engineering:” What conceivable threat scenarios could persuade an immediate U.S. military response? Our analysis generates three regional situations, any of which would be unacceptable to the United States for economic, political or military reasons:

• The political collapse of a major Oil producing nation (i.e., Saudi Arabia), with a subsequent fundamentalist extremist group taking control of the country and its oil reserves;

• The political collapse of a nuclear power (i.e., Pakistan), with a subsequent fundamentalist extremist group taking control of the country of its nuclear weaponry; A secondary threat would be provocation by terrorist groups of nuclear war between India and Pakistan;

• A bio/chemical terrorist attack on Israeli population center, producing casualties orders of magnitude (10,000-100,000 civilian deaths) than the present suicide attacks. In the event of such a catastrophic event, an Israeli nuclear response is a considered possibility.

Any one of the above described scenarios would have global consequences. Further, it would be imprudent to describe these events as “unlikely.” If foment in the region continues unimpeded, the evolution of these scenarios must be considered possible, even probable. Indeed, strategic planners may believe that a high probability exists (i.e., approaching 100%) that one of these three scenarios will occur over the next 10 years.

Why Iraq?
There are numerous geographical, political and strategic reasons for choosing Iraq as the nexus for US activity in the Middle East.

Geography: Iraq is centrally located in the Middle East (see map, below). The Persian Gulf, Red Sea, Arabian Sea and the Mediterranean Sea are within easy flight distance for attack sorties. Turkey to the North, Saudi Arabia to the Southwest, and Kuwait to the South all offer advantageous initial staging areas. Moving “men and materiel” into the combat theatre is logistically viable.

Political: There is no other country in the Mid-East which the United States could conceivably invade without causing a full blown diplomatic crisis. The vociferous opposition from some quarters to even invading Iraq and deposing Saddam is considerable. Consider what sort of response the US would engender if we invaded Saudi Arabia or Iran. Even amongst the rest of the Middle East, Saddam is feared and despised, though you won’t hear it discussed publicly. Politically, only Iraq makes any sense as an invasion target.

Strategic: Iraq’s entire Eastern border is contiguous with Iran; Pakistan and Afghanistan lay to the East of the Iranians, a mere 1000 miles away from Iraq. To the West, Israel is less than 300 miles away (on the other side of Syria and Jordan). Saudi Arabia, and Kuwait share borders with Iraq. As a staging area, Iraq is ideally located to support U.S. interventions in other countries, covert or otherwise.

Deposing Saddam and destroying Iraq’s WMD turn out to be a fortuitous justification; It would allow the deployment of a significant military presence in the region. Once established, Iraq then becomes a tactical staging area for missions to interdict and prevent the above (or other) scenarios from progressing.

The problem with Iraq is that Saddam was successfully evading the sanctions. Stirling has argued that the elites did not trust Saddam not to reconstitute a WMD program if sanctions were lifted, but this is still not a sufficient explanation. Qadaffi was if anything further along in some respects and had a history of interfering in other countries and his country has natural resources and he also supported terrorism - yet he was rehabilitated when convenient and Saddam was not. The key factor was that if allowed to economically reconstitute his war machine he could again dominate the Gulf region even with conventional arms. Removing him on the other hand provided the opportunity to become a dominating power in the region and to reshape it to an activist American political agenda.

Already the globalized world economic trade system is beginning to sputter. As the price of oil spirals it will begin to come apart at the seams. Third world countries are trading cheap labor for oil to industrialize their economies. The US is trading its future and intellectual assets for oil to maintain its current economic structure. The higher price of oil is not dangerous because it will "cause a recession".

It is dangerous because it makes the globalized trade arrangements increasingly untenable as positive return transactions. India and China need to export to the USA to get dollars to transform their economies. When the price of oil doubles, they get half the industrialization and economic growth for their effort. Similarly when the price of oil doubles, the US must sell off twice as much of its future to afford living at its present lifestyle.

Everything else- the agricultural subsidies, the intellectual property rights rent system, the third world industrialization program - it all comes to a screeching halt as oil marches steadily upward.

And ironically the more the price of oil increases, the more unstable the system becomes. The higher the price of oil, the more volatile the market and thinner the buffer has become. The more volatile the market and thin the buffer between supply and demand and the more political leverage anyone who can interrupt even a small portion of the supply has.

This is why Nigerian oil workers are striking. They know that now is the moment to squeeze their negotiations for maximally profitable terms. This is why the US oil markets quiver every time Chavez starts yelling. And it is also why he yells. This is why Russia wants us to fail in Iraq. Not because they hate us, but because they profit immensely from their own oil sales when it happens - and also why they're jerking the chain of Yukos.

The neoliberal globalized era represented low inflation brought about by increasing consumer gods produced by cheap labor in exchange for globalization, while the market and trading system through currency levers helped keep the price of oil low. The neoconservative concept was to perpetuate this system by monopolozing and dominating oil supply in the middle-east after the market and trade mechanisms failed to contain the growth of industrialization to the extent that it wouldn't overheat the oil demand side.

As Brad Delong explains trenchantly:

But as everyone who has ever taken the first three weeks of introductory economics--in any form, left or right, up or down, above or below, libertarian or Marxist, Friedmanite or Keynesian, Austrian or Swedish--knows, there is a unique virtue to inflation adjustment. When we measure people's incomes, we are interested not in how many little pieces of paper with pictures of George Washington on them people get each month, but in what things people can buy with their incomes. Suppose the government prints a whole extra bunch of dollar bills, doubles the quantity of money, and in response all wages and prices double. Do we want a measure of nominal income--not adjusted for inflation--that tells us that everyone's income is twice as big and that the economy is twice as prosperous as it was? Or do we want a measure of real income--adjusted for inflation--that tells us that even though everybody's monthly pay packet contains twice as many little pieces of paper with George Washington's picture on them, everybody can buy only the same set of commodities they could buy before the inflation and so their real incomes are unchanged?

The clear answer--given by all economists, left or right, up or down, above or below, libertarian or Marxist, Friedmanite or Keynesian, Austrian or Swedish--is that we are interested in the second, inflation-adjusted, real income number. We use money as a measuring rod, yes. But we do not want to confuse changes in the size of the measuring rod with changes in the real economic quantities that we are measuring.

If the neoconservatives hadn't have done it, eventually the neoliberals would have come to the same conclusion.

If we look at the underlying data, we can see that the BLS is lying through its teeth about job numbers. The BLS is set to release a jobs report that will report that 150k+ jobs were created last month.

The data I'm looking at - refinery shutdowns in the Gulf, millions at least temporarily out of work in Florida, stalled industrial output in August, only modest retailer gains, sharply up reported corporate layoffs - doesn't agree with this picture. That lefty rag known as Investors Business Dauily has this to say about the trend of retail sales.

Retail index ends lower after soft September reports
By Jennifer Waters
Last Updated: 10/7/2004 5:04:35 PM

CHICAGO (CBS.MW) -- The retail index fell flat Thursday as investors absorbed the mix of September sales results from the nation's largest chain stores.

The S&P Retail Index ($RLX) lost an earlier ride higher to finish at 414.48 as decliners took over from advancers..

September sales at stores open longer than a year -- an important industry measure -- climbed 2.4 percent, according to a final tally of the nation's largest chain stores compiled by the International Council of Shopping Centers. That's well below last year's 5.6 percent increase and is the fourth straight month of a slowdown in the growth rate of consumer spending.

It is true that construction is high, but that's only because of the incredible stimulus still chugging its way through the system that Greenspan provided.

Furthermore we're hitting the limits of artificial productivity gains from working less people harder, and it's starting to show in the statistics.

Workers feel overworked, overwhelmed
Nearly two out of three say workload has increased this year
By Martin Wolk
Chief economics correspondent
MSNBC
Updated: 4:35 p.m. ET Sept. 1, 2004

... and ...

Workers’ productivity increased at an annual rate of 2.5 percent in the spring, the smallest gain since late 2002, reflecting the economy’s slowdown.

Even though some of these items are one time items, it's clear that the BLS jobs numbers have been corrupt. There's no way that they can be true. The factories aren't hiring, the corporations aren't hiring, the retailers aren't hiring - who the heck is hiring? The construction industry is saturated and may even be shedding jobs in anticipation of a downturn from what I've heard on the ground ... The BLS unfortunately has just become another arm of the BC04 relection campaign. It's ugly because it means we have little idea what is actually going on out there.

This is why I've been working on the GDP hedonics and readjustment issue. I believe that now is the time to roll it out, because as a fudged statistic it has a somewhat abstract issue. However what was at stake was not merely a fuzzy measure of economic growth. The fudging was masking the fundamental economic failure - a failure measured in simple and brutal dollar signs - of the present trading and regulatory system we call Globalization.

I am not willing to speculate that if the Iraq war had been successful that it would be have successfully sustained globalization, but I am willing to say that now that it has all but failed that Globalization will surely share the same fate. Clearly he BC'04 campaign and the entire modern Republican movement is in denial about the true state of affairs both economic and military, and they are willing to manufacture evidence in order to mask their failure. However the neoliberal Globalization experiment that rested upon a four corner trade of:

paper representing intellectural property assets being sold for:

oil for transferring industrial eocnomic growth from America to Asia

in exchange for selling cheap consumer goods to America made possible by

countries exporting to America buying its paper debt and reinvesting that paper back into American equities to capture intellectual property asset values...

(with attendent protectionist commodity producer sudsidies in order to buy off politically important constituencies)

This all is about to end. This is not something that Clinton could have prevented, and his Administration had the virtue of better masking their failure toward the end and making less obvious blunders. The final nail in the coffin is the examination of the American GDP numbers, which when teased apart make it clear that the trade was a losing exchange and that aggregate demand could not be sustained much less grown in this system.

What the Bush43 Administration has accomplished is by bungling the Iraqi hostile takeover a shock to both the supply side of oil and the supply side for American paper. As these ripple through the system various actors magnify this resonance because their specific self interest is to profit from more volatility and price increases in the major modern energy commodity effected. This in return creates more incentive for other actors to gain political levereage by destabilizing the commodity supply, magnifying the supply shock. Meanwhile the poor conduct of the war and the economy is sending a supply side glut of American paper at precisely the time when supplies ought to be tightened to maintain long term demand.

As these play off each other and increase in their ripples in a sort of vicious circle of perversity, the system which underpins the maitainence of aggregate global demand called Globalization begins to become unwound. As it unwinds aggregate demand must fall at least until new trade alignments are reconfigured by the global financial markets. This will result in a fragmented, increasingly complex bilateral trade aggrements, and inconsistent trade barrier filters as governments attempt to dampen the supply and demand shocks rippling through the commodity and financial systems through regulation in order to maintain political stability. It will be the death kneel for Globalization when increasingly it becomes untenable for individual countries to opt out and continue to refuse to cut deals advantageous for themselves on the side.

And that's what it's all about.

Ghosts of Christmas Past, Present, and Future

Who is voting for Bush? Who is his base?

Let's look at some cold hard logic here. The "Greatest Generation" went off to war. They were the generation of the New Deal. They came back and built a socialized capitalistic society with welfare entitlement benefits.

Then they spawned the Baby-boomers. GWB is a Baby-boomer. His father, Bush-41 was a WWII Pilot afterall. The Baby-boomers were then the Vietnam war generation. They were living in a system built by their parents, and they didn't like it.

It was the conservative Baby-boomers who gave us Reagan. It was the liberal ones who gave us Clinton.

As they get older, people tend to become more conservative. They also tend to become more well off. Who is benefiting from the housing market bubble? Who has money to invest in stocks?

These things were enjoyed by the "Greatest Generation," first - who afterall is gonna deny Rosy the Riveteer her Social Security check. Now the Baby-boomers want their turn.

Only it's coming apart - at the seams.

Tom Paulsen worked for 36 years as a trucking executive, and when he retired two years ago, he thought he had secured a comfortable life. He had a 12-acre farm near Sacramento and a pension of $151,000 a year, his payoff for years of working 70-hour weeks.

Then three months later his company, Consolidated Freightways, filed for bankruptcy and the federal government took over its pension plan. Mr. Paulsen's pension fell to $22,000. To pay his expenses, which include $9,000 for health insurance, he has had to divide up the farm and offer most of it for sale.

Mr. Paulsen, 61, is just one of more than 500,000 Americans whose pension plans have failed in the last three years and been taken over by the federal government, leaving many without health insurance and some, like Mr. Paulsen - high earners who retire early - with pensions much lower than those they had counted on.

This is why Bush is promising big entitlement giveouts and taxcuts. This is why he's sending an all-volunteer army to fight a war to control a strategic resource location. I don't know if the man above is voting for Bush, he may well be not, but he is perfectly representative of the demographic that is Bush's true support.

We tend to demonize Bush supporters as red-meat social conservatives or rich selfish bastards, but those are just periphial. What this is about, all of this, is that the Baby-boomer generation lived in the shadow of their parents, they either went to Vietnam or did their best to oppose it, they supported the "Greatest Generation" and dammit now it's their turn. These are people who worked all their lives, and now they want what's coming to them.

Now you might interject, but doesn't John Kerry keep on saying he will support Social Security - why yes he does and that's precisely the problem.

These are people who are mostly immune - at least the ones voting for Bush - from the soaring layoffs that are occurring as monetary policy is tightened and government stimulus fades.

These are people who grew up in a world featured with American predominance, and want that feeling that America is "on top" back - a feeling threatened after 911.

I don't mean to blame it all on the Baby-boomers. Clearly Kerry has demographic problems with younger voters and slipping among women, at least before the most recent debate.

But at the heart of it is the fact that each household owes about half a million dollars in debt on average.

Now the party is gonna come to an end. And the younger generations are already resigned to the concept that they ain't never gonna see a penny of it. But the baby-boomers might see some of it. If they get good Social Security and Medicare benefits while they last, and see the cost pushed off on someone else - through lower taxes now and higher debt and debt problems later when they won't be around to worry about it.

You see the Baby-boomers have figured out that the party is gonna end too, and the only way for them to get theirs is if in fact the government is not responsible. Because a responsible government that intended to preserve Social Security would have to drastically increase the burden now. But that's not fair, they've worked all their lives - and now they want what's coming to them.

I am not here to demonize the Baby-boomer generation. They just want their turn. It's not a strange thing to think. I've thought it myself, many a time. This is the way all people are, when they have no hope. When things fall apart, each person looks to themselves. That's the way people are. No use blaming them.

The only way people can be brought to agree to sacrifice is to believe in something greater, and we can all agree that the Democrats have lost the "vision thing,".

This is why it doesn't matter that Bush is a chin-drooling idiot. It's better that way, because a Thomas Jefferson or even a JFK would never tolerate the present state of affairs. It doesn't matter that Bush was a priviledged draft dodger, because most people including me would have avoided the Vietnam war if they could have. It doesn't matter that he's benefiting the rich, it's okay if they get a bigger cut just as long as I get something - that's better than nothing.

John Kerry right now represents two alternatives. He either represents the liberal welfare state which will not allow people to get their cut, because it will overtax and overspend things into the ground. Or the represents the neoliberal responsible market state which will nto allow people to get their cut, because it will impose market realities upon the profligate and unsustainable balance sheet of America.

GWB represents the path where people get theirs, they get what's coming to them. He represents low taxes so they can stash their money away now, Social Security private account funds so they can get back their Social Security Tax money, an expanded Medicare drug benefit so they can get their money back through drug prescriptions, and wars to control oil real estate to keep the party going as long as possible. GWB is selling a failed America. If you think America is going to go bankrupt and you want to get out with as much as possible, you vote for GWB.

All Kerry can offer them is to go down with the ship or to never see what's coming to them.

GWB winks at you, smirks, and telegraphs the message look we all know this is going to end, why not get your cut too?

In the words of Col Lounsbury:

Late Breaking News from the old days
The corrupt bastid settled.

He settled, the slimy motherfucker fucking settled. Something under USD 2 mill. to walk away from the mess.

Fuck, fuck, fuck.

The slimey conniving bastid fucking kept the portfolio as well. This is just.... maddening. I want to drive a spike through something. Maybe myself.

Bloody hell, the bloody goddamned portfolio on exit easily was worth ... let me just use my company, I'll say 15. Maybe 30 if a good trade sale to a US firm had been set up, for an Arab property.

This is just unforgiveably corrupt. The deal fucking stinks. I can not believe the Feds walked away from this. I really can not. This really fucking stinks.

USD 2 mill to walk away from any and all fines, prosecution, and keep the assets. That's not a penalty, nor .... it's a bloody bribe. Someone back Stateside was dirty on this.

I need to go get drunk. Really goddamned drunk. Should have thrown in with the corrupt fucker, goddamned bastid was right.

That's right. That's why Harkin etc. is actually a pro-Bush Advertisement. When people vote for Bush, they know he has no qualms about cutting a shady deal.

This is what we are facing, an America not ideologically fixated but tired, and afraid, and is angry about being humiliated by 911, and just wants what is coming to them - dammit.

This is why Kerry is having a hard time getting traction. This is why McCain couldn't get elected.

Of course this isn't the majority of people, but it is enough. The rest will go along because they others sound like they know what they're doing. That's the true damage of the flip-flopper campaign against Kerry. Monkey see, monkey do. People will just go along with stuff if that's what they see everyone else doing.

There is this Gene Hackman movie called the Poseidon Adventure. In it he helps some people escape from a capsized cruise ship turned upside down. Along the way they meet a large group of people following a ship officer - going in a direction which leads deeper underwater instead of to the surface. They can't convince these people to go the other way, toward the surface.

Remember the Baby-boomers have been in the center of political gravity for some time now. When they move, other people will follow just because it's the trend.

These are the people pulling others back into Bush's corner already, even after his whiny debate performance. These are the people making Kerry's job uphill all the way.

People don't pay a lot of attention to politics, but this doesn't mean that they don't pay attention to what impacts them. The Clintonista gang placated this generation as well, they just did it differently. But Kerry isn't promising them Clinton part II, he can't - the terrain has shifted. Even if Clinton were re-elected for a third term, he couldn't recreate the nineties. Things are falling apart, and people want to get their share while they can. They don't believe Kerry can restore the ninetis, which is why surrounding himself with Clintonites is worse than useless.

GWB is selling the politics of cynicism and despair, and Democrats can't beat him there. They can't beat his post-modernistic revisionist interpretations of the most obvious events. Democrats however can become a neo-modernist party, a party that offers a "third way". GWB represents the asset liquidation approach to America. The party is gonna be over anyway, so get your cut while you can- hence the approval of the open looting. People who are looting will tolerate someone else getting a bigger cut so long as they get something - as opposed to nothing if they like Col decide to turn their noses up. It's the tragedy of the commons, all over again.

Those that are voting for Kerry all have one thing in common: they haven't given up hope for the future. If I had given up hope, I'd be voting for Bush myself.

Have you asked yourself yet why?

First please remember to register to vote. The deadline here in Iowa according to the webpage I consulted was October 23rd and I will register myself next week.

Second, if you want Kerry to win have you asked yourself yet why?

And please no trite answers. Some soul searching would be good. Maybe it isn't about Bush. Maybe Bush is just a means to an end. We tend to blame politicians, but politicians just cater to electoral bases.

And please no rants about selfish greedy plutocrats or frothing rabid at the mouth religious zealots. If that were all it was, then Kerry would effectively have won already. So think.

Ask yourself - why? Dwell upon it.

When we cariacturize the opposition we do ourselves a disservice. I'm preparing some levers which may or may not work, but it would be better if this election were won on the merits.

Think deeply. Why? When you understand why, it's a simple step to how Kerry could win. If you don't, it's likely that Bush and co. will try to squeeze and electoral college victory by any means necessary.

John Kerry came back from behind to at least contest the race, principally by following the advice I outlined - attack. Then he succeeded in the debates because he had the good fortune to have networks that ignored the most important provision of the debate agreement I opposed.

Why are these people getting out to vote - and it's not for Bush. He's just riding the wave. I'll give you a hint, it has to do with socioeconomic demographics.

Doomsday clock, not keeping time right

The Atomic Bulletin for Scientists has a famous "doomsday" clock, and currently it's set seven minutes to midnight.

The Bulletin of the Atomic Scientists has told the world what time it is since 1947, when its famous clock appeared on the cover. Since then, the clock has moved forward and back, reflecting the state of international security.

It's currently off, and needs to be reset - to two minutes before midnight.

Forget the debates, forget the economy, forget the stupid bickering of liberals and conservatives over who's doomed economic policies are better - forget even Iraq. There is only one story that matters, and it's not even on the front page as far as I can see.

Posted 9/29/2004 1:27 PM

Kyrgyzstan nabs man on plutonium charge

BISHKEK, Kyrgyzstan (AP) — A man was arrested for trying to sell plutonium in an undercover investigation, the Kyrgyz security agency said Tuesday amid rising worries of a growing black market trade in radioactive materials.

National Security Service agents posing as buyers arrested the man on Sept. 21 after confirming that he was in possession of plutonium-239, agency spokeswoman Chinara Asanova said.

Asanova did not say how much of the radioactive material — which can be used in atomic weapons and as a reactor fuel — was confiscated. But she said it was held in 60 small containers.

The suspect's identity was not released.

Plutonium-239 is not used in Kyrgyzstan, a former Soviet republic in central Asia, Asanova said, and it was not known where it was obtained.

Plutonium is officially on the black market. This was just a two bit buyer as well in a backwater, if he had it that means that it's pretty much available widely. It's like cockroaches, if you see one ...

There is no other story that matters right now. Sometimes I really hate people. How can they worry about whether or not their candidate is 'born again' or takes communion when Plutonium is available to terrorists? It's a definite derangement. This is another reason why I haven't bothered to talk about the debates. It's kind of irrelevant. Hopefully Kerry will win, but there are more important things going on.