The Keynesian Recovery Meme Is About To Get Mugged, Part 2

By David Stockman – Re-Blogged From http://davidstockmanscontracorner.com

Our point yesterday was that the Fed and its Wall Street fellow travelers are about to get mugged by the oncoming battering rams of global deflation and domestic recession.

When the bust comes, these foolish Keynesian proponents of everything is awesome will be caught like deer in the headlights. That’s because they view the world through a forecasting model that is an obsolete relic—one which essentially assumes a closed US economy and that balance sheets don’t matter.

By contrast, we think balance sheets and the unfolding collapse of the global credit bubble matter above all else. Accordingly, what lies ahead is not history repeating itself in some timeless Keynesian economic cycle, but the last twenty years of madcap central bank money printing repudiating itself.

Ironically, the gravamen of the indictment against the “all is awesome” case is that this time is  different——radically, irreversibly and dangerously so. High powered central bank credit has exploded from $2 trillion to $21 trillion since the mid-1990’s, and that has turned the global economy inside out.

Continue reading

Advertisements

Call for Wind Energy ‘Reality Check’

Re-Blogged From North American Platform Against Wind Power

The necessarily sprawling facilities, huge towers, and turning blades required to collect such a diffuse resource as wind degrades and fragments wildlife habitat and threatens the health and well-being of nearby residents. And the effectiveness of large-scale wind energy remains problematic.

  • Wind power’s contribution to reducing CO₂ emissions or fossil fuel use is limited, because other power plants must be kept on line — and used more often and less efficiently — to compensate for the intermittent and variable nature of electricity generated by wind turbines.
  • Increasing numbers of large wind facilities require thousands of miles of new high-voltage transmission lines and more control installations to maintain grid stability in the face of the erratic nature of wind energy. These add substantially to the already high costs of wind energy and further degrade the environment while also raising eminent domain issues.
  • Even after several decades of technical development, wind energy remains economically not viable. Wind power devours colossal amounts of public money and depends on artificial markets for its existence. Considering the minuscule benefit, our money ought to be better spent.

Continue reading

The End of Food

By Eric Worrall – Re-Blogged From http://www.WattsUpWithThat.com

“So, you’re awake. But you’re still going to die”. The first words I heard spoken by my surgeon, waking from general anaesthetic, after a horrific operation to try to repair the mess created by my ruptured appendix.

Don’t get me wrong, I’m very grateful to the surgeon, whose extraordinary skill undoubtedly saved my life. But that day I believed his warning. I thought I was going to die. After all, he was a highly qualified surgeon, a credible source of information.

I learned something that week about credibility and evidence. People who follow WUWT might be aware of the flimsiness of the evidence behind sensationalist climate warnings. But most people don’t pay much attention to climate issues. Many of them remain susceptible to authoritative sounding scare stories.

Continue reading

58 Facts About The U.S. Economy From 2015 That Are Almost Too Crazy To Believe

By Michael Snyder – Re-Blogged From http://freedomoutpost.com

The world didn’t completely fall apart in 2015, but it is undeniable that an immense amount of damage was done to the U.S. economy.  This year the middle class continued to deteriorate, more Americans than ever found themselves living in poverty, and the debt bubble that we are living in expanded to absolutely ridiculous proportions.  Toward the end of the year, a new global financial crisis erupted, and it threatens to completely spiral out of control as we enter 2016.  Over the past six months, I have been repeatedly stressing to my readers that so many of the exact same patterns that immediately preceded the financial crisis of 2008 are happening once again, and trillions of dollars of stock market wealth has already been wiped out globally.  Some of the largest economies on the entire planet, such as Brazil, and Canada have already plunged into deep recessions, and just about every leading indicator that you can think of is screaming that the U.S. is heading into one.  So don’t be fooled by all the happy talk coming from Barack Obama and the mainstream media.  When you look at the cold, hard numbers, they tell a completely different story.  The following are 58 facts about the U.S. economy from 2015 that are almost too crazy to believe…

Continue reading

Judge Rules Home Raid over Tea Counts as Probable Cause

By Joe Scudder – Re-Blogged From http://politicaloutcast.com

“This is not what justice in the United States is supposed to be.” – Addie Harte

Back in March of 2014, Mark Horne posted about how the Harte family was terrorized by police in a raid. The raid was based on the husband buying material at a hydroponics store, and the discovery of used wet tea leaves in the family garbage. The hydroponics equipment was perfectly legal and was purchased for a father-son science project. The tea was “field tested,” which is notorious for false positives. They never bothered to send it to a lab for a real test. (By the way, I thought marijuana was smoked. Why would someone soak it and then throw it away?)

The basis of the warrant was treated as a secret. The Harte family had to pay a lawyer to demand answers.

When they found out the flimsy basis for the raid, they sued the police for not having probable cause.

A judge has thrown out their lawsuit. Reason Magazine reports,

Continue reading

1800s Poverty Diseases, Malnutrition Surge in Green Britain

By Eric Worall – Re-Blogged From http://www.WattsUpWithThat.com

Impoverished British Family in London 1800s

Impoverished British Family in London 1800s

Falling living standards are contributing to a shocking surge in malnutrition, and diseases which were prevalent in the 1800s. My question – how much of this hardship is due to the skyrocketing cost of Britain’s green energy disaster?

According to the Independent;

Malnutrition and ‘Victorian’ diseases soaring in England ‘due to food poverty and cuts’

Cases of Victorian-era diseases including scurvy, scarlet fever, cholera and whooping cough have increased since 2010

Cases of malnutrition and other “Victorian” diseases are soaring in England, in what campaigners said was a result of cuts to social services and rising food poverty.

NHS statistics show that 7,366 people were admitted to hospital with a primary or secondary diagnosis of malnutrition between August 2014 and July this year, compared with 4,883 cases in the same period from 2010 to 2011 – a rise of more than 50 per cent in just four years.

Cases of other diseases rife in the Victorian era including scurvy, scarlet fever, cholera and whooping cough have also increased since 2010, although cases of TB, measles, typhoid and rickets have fallen.

Chris Mould, chairman of the Trussell Trust, which runs a nationwide network of foodbanks, said they saw “tens of thousands of people who have been going hungry, missing meals and cutting back on the quality of the food they buy”.

Continue reading

US Secular Stagnation?

By Steven H Hanke – Re-Blogged From http://www.Gold-Eagle.com

Stagnationists have been around for centuries. They have embraced many economic theories about what causes economic stagnation. That’s a situation in which total output, or output per capita, is constant, falling slightly, or rising sluggishly. Stagnation can also be characterized by a situation in which unemployment is chronic and growing.

Before we delve into the secular stagnation debate – a debate that has become a hot topic – a few words about current economic developments in the U.S. are in order. What was recently noticed was the Federal Reserve’s increase, for the first time in nearly a decade, of the fed funds interest rate by 0.25 percent. What went unnoticed, but was perhaps more important, was that the money supply, broadly measured by the Center for Financial Stability’s Divisia M4, jumped to a 4.6 percent year-over-year growth rate. This was the largest increase since May 2013.

Since changes in the money supply, broadly determined, cause changes in nominal GDP, which contain real and inflation components, we can anticipate a pick-up in nominal aggregate demand in the U.S. Indeed, if M4 keeps growing at its current rate, nominal aggregate demand, measured by final sales to domestic purchasers, will probably reach its long-run average annual rate of 4.8 percent by mid-2016 (see the accompanying chart). This rate of nominal aggregate demand growth was last reached in 2006, almost ten years ago. So, the current economic news from the U.S. is encouraging.

But what about the secular stagnation debate? The secular stagnation thesis in a Keynesian form was popularized by Harvard University economist Alvin Hansen. In his presidential address to the American Economic Association in 1938, he asserted that the U.S. was a mature economy that was stuck in a rut that it could not escape from. Hansen reasoned that technological innovations had come to an end; that the great American frontier (read: natural resources) was closed; and that population growth was stagnating. So, according to Hansen, investment opportunities would be scarce, and there would be nothing ahead except secular economic stagnation; unless, fiscal policy was used to boost investment via public works projects.

Hansen’s economics were taken apart and discredited by many non-Keynesian economists. But, the scholarly death blow was dealt by George Terborgh in his 1945 classic The Bogey of Economic Maturity. In the real world, talk of stagnation in the U.S. ended abruptly with the post-World War II boom.

It is worth noting that many Keynesians were caught up, at least temporarily, in the secular stagnation fad. Even Paul Samuelson, a leader of the Keynesians – thanks, in part, to his popular textbook — was temporarily entrapped. But, like Houdini, he miraculously escaped. That said, there were things in Economics that Samuelson probably wished he had thrown overboard, too. My favorite from the 13th edition (1989) is: “The Soviet economy is proof that contrary to what many sceptics had earlier believed, a socialist command economy can function and even thrive.”

Today, another Harvard University economist, Larry Summers, is beating the drums for secular stagnation. And Summers isn’t just any Harvard economist. He was formerly the president of Harvard and a U.S. Treasury Secretary. Summers, like Hansen before him, argues that the government must step up to the plate and invest more to fill the gap left by deficiencies in private investment, so that the economy can be pulled out of its stagnation rut. He is preaching the stagnation gospel beyond the ivy-covered halls at Harvard. And, he is picking up followers. For example, Canada’s new Prime Minister, Justin Trudeau, has latched onto Summers and the stagnation thesis. What better way to justify expanding government investments, or should we say white elephants?

For evidence to support Summers’ secular stagnation argument and his calls for more government investment, he points to the anemic private domestic capital expenditures in the U.S. As the accompanying chart shows, gross private domestic business investment, which does not include residential housing investment, has rebounded modestly since the great recession. But, most of this gross investment has been eaten up in the course of replacing capital that has been used up or became obsolete. Indeed, the private capital consumption allowances shown in the chart are huge. While these capital consumption figures are approximate, they are large enough to suggest that there is little left for net private business investment. This means that the total capital stock, after actually shrinking in 2009, has grown very little since then.

If we take a longer look, one starting in 1960, it appears that net private domestic investment as a percent of GDP has trended downward (see the accompanying chart). This is due to the fact that private capital consumption allowances as a percentage of GDP have trended upward. This shouldn’t surprise us. With the increasingly rapid rate of innovation, obsolescence and, therefore, capital consumption have increased. On the surface, these facts appear to give the stagnationists a reed to lean on. But, it’s a weak one.

To understand the troubling net investment picture, we must ask why businesses are so reluctant to invest. After all, it’s investment that fuels productivity and real economic growth. Are the stagnationists on to something? Have we really run out of attractive investment opportunities that require the government to step in and fill the void?

A recent book by Robert Higgs, Taking a Stand: Reflections on Life, Liberty, and the Economy, helps answer these questions. In 1997, Higgs first introduced the concept of “regime uncertainty” to explain the extraordinary duration of the Great Depression of the 1930s. Higgs’ regime uncertainty is, in short, uncertainty about the course of economic policy – the rules of the game concerning taxes and regulations, for example. These rules of the game affect the net benefits and free cash flows investors derived from their property. Indeed, the rules affect the security of their property rights. So, when the degree of regime uncertainty increases, investors’ risk-adjusted discount rates increase and their appetites for making investments diminish.

Since the Great Recession of 2009, regime uncertainty has been elevated. This has been measured by Scott R. Baker of Northwestern University, Nicholas Bloom of Stanford University and Steven J. Davis of the University of Chicago. Their “Economic Policy Uncertainty Index for the U.S.,” which was published by the Cato Institute in Washington, D.C., measures, in one index number, Higgs’ regime uncertainty. In addition, there is a mountain of other evidence that confirms the ratcheting up of regime uncertainty during the tenure of the George W. Bush and Barack Obama administrations. For example, a recent Pew Research Center survey finds that the percent of the public that trusts Washington, D.C. to do the right thing has fallen to all-time lows of around 20 percent.

So, contrary to the stagnationists’ assertions, the government is the problem, not the solution. Secular stagnation in the U.S. is just what it was when Alvin Hansen popularized it in the 1930s: Its bunk. Nothing more than a phony rationale for more government waste.