Free Markets, Free People


Patriot missiles found on China bound ship

Your odd and disturbing national security story of the day:

The MS Thor Liberty left port in Emden, northern Germany, on 13 December and docked two days later in Kotka, southern Finland, to pick up a cargo of anchor chains, said Finnish Customs spokesman Petri Lounatmaa.

It was bound for the Chinese port of Shanghai but there was no indication for whom the military cargo was destined.

Routine checks by Finland’s traffic safety authority revealed a load of up to 160 tonnes of improperly packed nitroguanidine, a low-sensitivity explosive with a high detonation speed.

"Actually in our investigation at the moment, we have got the information that we found 69 Patriot missiles on the ship and around 160 tonnes of explosives," said Detective Superintendent Timo Virtanen from the Finnish National Bureau of Investigation.

69 Patriot missiles is not some minor load.  That’s a bunch of missiles.  Were they hijacked?

They belong to somebody.   Of course, remember we provide Patriot missiles to our “allies” too. 

How in the world do 69 Patriot missiles go missing and end up on a ship bound for China (why spend the money to develop technology when you can steal it and reverse engineer it)?



Twitter: @McQandO

Former SEIU boss: We should emulate Chinese economic model

You can wade through all the trash he throws up there as a preface to his central point, but I’ll save you the trouble.  Writing in the WSJ, Andy Stern says:

The conservative-preferred, free-market fundamentalist, shareholder-only model—so successful in the 20th century—is being thrown onto the trash heap of history in the 21st century. In an era when countries need to become economic teams, Team USA’s results—a jobless decade, 30 years of flat median wages, a trade deficit, a shrinking middle class and phenomenal gains in wealth but only for the top 1%—are pathetic.

This should motivate leaders to rethink, rather than double down on an empirically failing free-market extremism. As painful and humbling as it may be, America needs to do what a once-dominant business or sports team would do when the tide turns: study the ingredients of its competitors’ success.

No poisoning the well there, huh?  The “conservative-preferred, free-market fundamentalist, shareholder-only" model?  Really?  Where? 

And why was it “so successful in the 20th century” and why is it having problems now?  Well that’s a fairly easy question to answer.   What happened increasingly in the 20th century that is at an all time high now?

Answer?  Government.  It has increased dramatically in both size and intrusiveness.  We don’t have a “free-market” system anymore.  Haven’t for quite some time.   It’s a convenient shibboleth used by opponents of free markets such as Stern.  We have a government that has, in the century cited, turned it into crony capitalism.  Any resemblance here in the 21st century to a “free market” model is purely coincidental.  And we now have a debt drag imposed by out of control government spending that has finally topped our total yearly GDP.

As usual, with those who think China has figured out how to build the socialist dream, they never figure in the damage done to the model that was “so successful in the 20th century” because doing so kills their entire premise.   Government is their vehicle to both wealth and social justice.   They have no concept of how markets work so are gullible enough to still believe that central planning, properly done, can work.  And they take the fact that China has risen economically as proof of their premise.

What they don’t do is look behind the curtain.   Stern talks about his trip there, “a trip organized by the China-United States Exchange Foundation and the Center for American Progress—with high-ranking Chinese government officials, both past and present.”

Yes indeed, very likely to see the underside of the economy is a show tour aren’t you?

A caller to Rush Limbaugh who spends a lot of time in China lays out the reality there:

CALLER: Because once you get outside of the main cities, there are still people plowing fields behind cows and oxen, still hand harvesting corn, grains, rice. I mean, it’s still very much a Third World economy once you get outside of the main cities.

RUSH: With a First World military.

CALLER: Yeah, that’s true.

RUSH: That’s where much of their spending goes. Their infrastructure is built on the cheap, too. Doesn’t take much wind to bring down some of their so-called powerful infrastructure. But, you’re right, and this is what President Bush was telling me, that the big challenge is keeping those peasants behind the oxen. Don’t [let] them into the city. The cities can’t handle them. The cities are teeming with people already. But it’s always been the case that there is this romance — the left has romance — with the romantic attachments to all these tyrannical communist regimes, and now they’re looking at China and you’ve got this Andy Stern guy and other people telling us, "This is what we need to be. We need to emulate the ChiComs. The ChiComs are doing it right."

This is simply the usual nonsense wrapped up in a little different packaging.  It is the leftist dream – a strong central government planning the economy in which it ensures social justice as its highest priority (btw, China is an environmental disaster area, but you won’t hear that from the likes of Stern).  And that doesn’t mean market capitalism, even if the Andy Sterns of the world want you to believe that.  

While he avoids the obvious problem of government intrusion and its disastrous effect on the economy, he does touch on the political problem we still endure.   We have politicians who prefer being Santa Claus to the Grinch and whose whole political horizon never goes beyond the next election.

But the central problem we have isn’t needing a new economic model.  Instead we need to go back to the old one before it was corrupted and distorted by government.   Instead of more government, as Andy Stern wishes, we need precisely the opposite – much less government.

If we want to regain our economic footing and dominance, what government needs to do is get the hell out of the way, get spending under control and pay down the debt (which should become its primary focus over the coming decades) to eliminate the debt drag it has created.

Other than that, it’s job is to be the night watchman, not Santa Claus.  Our problem isn’t economic models.  Our problem is exactly what Stern wants more of.

Obviously economics wasn’t his strong subject in whatever schooling he received and history was apparently completely skipped.  How else to explain the utter nonsense he pushes in his article?


Twitter: @McQandO

It has come to this–China mocks West’s political system and economics

And, at the moment, rightfully so.  That’s not to say theirs is a superior system by any stretch.  Theirs just happens to be thriving at this moment in history.  But that doesn’t change the correctness of the basic kernel of their assessment:

In extensive talks with a series of Chinese leaders, an oft-cited point of criticism is the gridlock and “dysfunction” they see in Washington. They say fawning by U.S. political leaders seeking re-election has created an “entitlement culture” where the public has grown dependent on government largesse. Now, with the United States facing monumental economic and debt problems, the political system has been unable to curb generous entitlement programs or counter the economic downturn.

I really hate to say “I told you so”, because a) as Megan McArdle said yesterday it is “so … bleeding … obvious” and b) it really doesn’t take a rocket scientist to figure this was going to happen.  No, not China mocking us – they have their own economic problems ahead of them so I’m not particularly impressed with their mocking attitude.  The idea that running huge deficits, encouraging an entitlement culture, redistributing wealth and running up unpaid future welfare obligations was sustainable.

Heck, people like me and other authors on this blog have been saying that for years – decades even – that it was just a matter of time before it all collapsed like a wet paper box.  And we always get the hand wave from the so-called enlightened that we just don’t know what we’re talking about.

To them I say, “welcome to reality”.   Like gravity, the laws of economics will finally assert themselves.

And they have.

However, the performance of the Chinese economy in the global recession has had a beneficial effect for them among other nations.

China is now at a pinnacle of global leadership and influence as a result of its emergence as an economic superpower, even as the U.S. and other major industrial powers fell into disrepair as a result of the 2008 financial crisis, said Guo Zhenyuan, an analyst at the institute.

China gained the admiration of developing nations around the world with its ability to weather the crisis emanating from the U.S., even emerging from the downturn as the world’s main engine of growth, while its superior economic performance provoked jealousy in the U.S. and other developed nations, he said.

With that said, here’s what they’re now selling:

Mr. Chan said U.S. political leaders are so focused on short-term gains that they fail to make the painful long-term choices and changes in social programs needed to ensure the solvency of the government and vitality of the economy.

Chinese leaders, by contrast, lay out plans for the long term and systematically achieve them, producing unprecedented gains in living standards and a remarkable two decades of uninterrupted growth at nearly double-digit annual rates.

This proves that the Chinese system is better than the democratic system that the U.S. promotes around the world, Mr. Chan said.

And the dictators and totalitarians around the world take heart.  

Only because Western leaders, decades ago, perverted the true meaning of Western democracy and did exactly what the critique above says – began trading goodies for votes and created the social welfare state which was destined for failure.

Whether or not you agree that democracy is the problem is a rather moot point.  That’s what China is pitching and apparently there are eager listeners.  And we all know there are those out there who think they too can implement the Chinese model.    As Dr. Kissinger said they call it, “Socialism with Chinese characteristics”.   The rest of us call it totalitarianism, but like I said, in the face of the epic failure of Western Social Democracy and the rise of China, it’s a tough argument to fight at the moment.


Twitter: @McQandO

Chinese lecture Europe on the corrosive effect of the welfare state

Irony of ironies.  The Chinese lecturing the supposed capitalist West on economics and the welfare state.  Of course, as we’ve discussed many times, Crony Capitalism and/or Corporatism aren’t Capitalism.   At best the West has a mixed economy with various levels of intrusion and market distortion caused by governments.  In effect, what this gentleman is saying to Europe is the intrusion and distortion levels are such that they have caused a cultural malaise which is finally coming home to roost:

"If you look at the troubles which happened in European countries, this is purely because of the accumulated troubles of the worn out welfare society. I think the labour laws are outdated. The labour laws induce sloth, indolence, rather than hardworking. The incentive system, is totally out of whack.

"Why should, for instance, within [the] eurozone some member’s people have to work to 65, even longer, whereas in some other countries they are happily retiring at 55, languishing on the beach? This is unfair. The welfare system is good for any society to reduce the gap, to help those who happen to have disadvantages, to enjoy a good life, but a welfare society should not induce people not to work hard."

Jin Liqun, the supervising chairman of China’s sovereign wealth fund

Of course that just touches the surface of the problems Europe faces, but essentially Jin is saying that the system in Europe, i.e. state welfare, is not only unsustainable, but discourages hard work – a vicious and self-defeating cycle.

Go figure.   Most rational people understand that human beings respond to incentive.  And that a good portion will always choose the easy way.   Human nature 101.   So when given the option of hard work or being a slacker and getting paid to be one, those who tend to slack will always choose the latter if an incentive to do so is provided. 

His point about labor laws that require rules such as featherbedding for instance is true.  And, by dictating wages, etc., government intrudes on market dynamics which properly price labor.   Instead we see the distortion of labor’s worth, rules that cut into productivity and spiraling costs which kick up the price of goods and services beyond what a market would dictate.

And that’s just a very small part of the problem.  Europe decided decades ago that it could use a mixed economy to somehow pay for a large welfare state.  It thought it had it all figured out and then this crisis hit.  But it was clear to many that it isn’t this crisis that precipitated Europe’s current  financial problems, it just hastened them.  Much like the revenue shortfalls we see here for the trillions in unfunded obligations for Social Security, Medicare and Medicaid, Europe has seen those for years.  Its day of reckoning is at hand.

Greece was the weakest member of the Eurozone.  But Italy, Spain, Portugal and Ireland aren’t far behind.  What critics of the welfare state have said for decades can no longer be hidden.   And, unsurprisingly, the culture that sort of a state breeds is fighting tooth and nail to preserve it, even if they really know that’s not possible.

But the irony is unquestionable.  Lectures by communists on the dangers of the  welfare state.  Snowballs in hell are obviously possible.


Twitter: @McQandO

Keystone XL pipeline: Energy security held hostage

One of the arguments you consistently hear from the left is we can’t become “energy independent”, or said another way, we can’t become independent from “foreign oil”.

Well, there’s foreign oil and then there’s “foreign oil”.  While it is true, at least at the moment, that we’re unable to fully develop and use our own national fossil fuel assets to make us independent, there is certainly a way we can pick and choose from whom we buy our oil to lessen the possibility that we’ll become hostage to unfriendly foreign powers.   Friendly neighbors who are close are the solution to our energy security.  But only if we recognize that fact and understand how strategically that lessens our energy vulnerability markedly.

Obviously two close neighbors, Mexico and Canada, fit that profile.  So it seems a no-brainer to exploit those relationships and do all that is possible to make sure it is the US that secures the bulk of what they’re willing to produce and offer on the world market, no?

No, apparently.

It seems there’s an expectation on the part of the left that President Obama and his administration will block the Keystone XL pipeline that would transport oil taken from Canada’s oil sands to the US.  A means of tying up secure oil from a safe, secure and friendly neighbor are in the air because of absurd environmental concerns.   And those protesting the pipeline fully expect Obama to back their demands.

Of course, unsaid, until now at least, is Keystone XL isn’t the only pipeline Canada will build, and it certainly isn’t going to wait on the US to make up its mind:

Considering geography, exporting oil from Canada to a non-American market doesn’t sound easy; Canada’s tar sands are close to the U.S. border, but not much else. So we asked John Baird — Canada’s new foreign minister, who was in Washington recently to speak with Ms. Clinton — which nations would buy oil that America decided not to take. His answer was quick and unequivocal: the Chinese. New pipeline infrastructure will transport oil between the tar sands and Canada’s west coast, from which tankers can ship it across the Pacific Ocean. And, even now, Chinese firms are buying stakes in Canadian tar sands.

Ron Liepert, energy minister of Alberta is crystal clear about which nation is most interested:

He noted China is poised for action, investing $15 billion in the province over the past 18 months. "There is a long-term plan to get oil to the East," he said.

That investment isn’t being made for grins.  It is being made by China to secure their energy future at the cost of ours.

As usual, when it comes to this administration, we dither about our energy future and security, while others act aggressively. Another reason to have them join the growing ranks of the unemployed in 2012.


Twitter: @McQandO

Green jobs? There’s just no market

If you don’t believe me, look at the California experience to this point.   If there’s any state in the union more amenable to and focused on providing green jobs, it has to be the Golden State.   Governor Jerry Brown pledged to create 500,000 of them by the end of the decade.

But as often the case when the central planners make their pledges, they are woefully ignorant of what the market wants.  And so rarely does what they envision ever come to fruition.  Green jobs in CA is a good example.

Remember Van Jones?  Well, when Jones left the Obama cabinet as his “Green Jobs Czar” he landed in California and has been what the NY Times calls an “Oakland activist” apparently pushing for the creation of green jobs.   And it’s not like California hasn’t tried.   It has simply failed.

For example:

A study released in July by the non-partisan Brookings Institution found clean-technology jobs accounted for just 2 percent of employment nationwide and only slightly more — 2.2 percent — in Silicon Valley. Rather than adding jobs, the study found, the sector actually lost 492 positions from 2003 to 2010 in the South Bay, where the unemployment rate in June was 10.5 percent.

Federal and state efforts to stimulate creation of green jobs have largely failed, government records show. Two years after it was awarded $186 million in federal stimulus money to weatherize drafty homes, California has spent only a little over half that sum and has so far created the equivalent of just 538 full-time jobs in the last quarter, according to the State Department of Community Services and Development.

So a “stimulus” program that spent over $93 million dollars to create 538 jobs.  Why so little in terms of takers?  Well it seems the market wasn’t interested.

The weatherization program was initially delayed for seven months while the federal Department of Labor determined prevailing wage standards for the industry. Even after that issue was resolved, the program never really caught on as homeowners balked at the upfront costs.

“Companies and public policy officials really overestimated how much consumers care about energy efficiency,” said Sheeraz Haji, chief executive of the Cleantech Group, a market research firm. “People care about their wallet and the comfort of their home, but it’s not a sexy thing.”

You don’t say … the government didn’t have a clue at what the market potential of their boondoggle actually had, so they ended up spending $172,862 for each job.  And you wonder where the money goes?

Example two:

Job training programs intended for the clean economy have also failed to generate big numbers. The Economic Development Department in California reports that $59 million in state, federal and private money dedicated to green jobs training and apprenticeship has led to only 719 job placements — the equivalent of an $82,000 subsidy for each one.

“The demand’s just not there to take this to scale,” said Fred Lucero, project manager atRichmond BUILD, which teaches students the basics of carpentry and electrical work in addition to specifically “green” trades like solar installation.

Richmond BUILD has found jobs for 159 of the 221 students who have entered its clean-energy program — but only 35 graduates are employed with solar and energy efficiency companies, with the balance doing more traditional building trades work. Mr. Lucero said he considered each placement a success because his primary mission was to steer residents of the city’s most violent neighborhoods  away from a life of crime.

You see you can fund all the job training centers in the world and run umpthy-thousands through it.  But if there is no market for the jobs, you end up spending a whole lot of money for nothing.   Again, ignorance of the market and its demands means expensive mistakes.  Of course Mr. Lucero thinks the program is a success – he got to spend free money, was employed and it didn’t cost him squat.  It cost you.

Example three:

At Asian Neighborhood Design, a 38-year old nonprofit in the South of Market neighborhood of San Francisco, training programs for green construction jobs have remained small because the number of available jobs is small. The group accepted just 16 of 200 applicants for the most recent 14-week cycle, making it harder to get into than the University of California. The group’s training director, Jamie Brewster, said he was able to find jobs for 10 trainees within two weeks of their completing the program.

Mr. Brewster said huge job losses in construction had made it nearly impossible to place large numbers of young people in the trades. Because green construction is a large component of the green economy, the moribund housing market and associated weakness in all types of building are clearly important factors in explaining the weak creation of green jobs.

Market timing is pretty important too, isn’t it?  If you introduce a product into a market in the middle of a market downturn, chances are slim you are going to be successful.  While it may all look good on paper and sound good in the conference room, the “buy” decision is still made in the market place, and in this case it is obvious that the market has no room for these workers.  Something which should have been, well, obvious.  In fact, there is precious little market for traditional construction jobs in a “moribund housing market”.   Yet there they are spending money we don’t have on job skills that are simply not in demand.

Finally there’s this bit of word salad to feast upon:

Advocates and entrepreneurs also blame Washington for the slow growth. Mr. Jones cited the failure of so-called cap and trade legislation, which would have cut carbon pollution and increased the cost of using fossil fuel, making alternative energy more competitive. Congressional Republicans have staunchly opposed cap-and-trade.

Mr. Haji of the Cleantech Group agrees. “Having a market mechanism that helps drive these new technologies would have made a significant difference,” he said. “Without that, the industry muddles along.”

You have to admire someone who tries to cloak central planning jargon in “market speak”.  Imposing a tax on thin air to drive, from above, a behavior government wants is not a “market mechanism”.  And beside, California passed it’s own version of this “market mechanism” with AB 32 in 2006.  How’s that working out?

This is how:

A SolFocus spokeswoman, Nancy Hartsoch, said the company was willing to pay a premium for the highly-skilled physicists, chemists and mechanical engineers who will work at the campus on Zanker Road, although the solar panels themselves will continue being made in China. Mayor Reed said he continued to hope that San Jose would attract manufacturing and assembly jobs, but Ms. Hartsoch said that was unlikely because “taxes and labor rates” were too high to merit investment in a factory in Northern California.

Irony … central planning fails in CA while jobs end up in increasingly capitalistic China.  Again, ignorance of the market causes disappointing results.  Somehow I feel this came as a surprise to Mayor Reed … after he’d spent whatever of your money he’d committed to this project.


Twitter: @McQandO

Our major creditor’s name also ends with a vowel

One of the irritating things about being deeply in debt is dealing with your creditors. Happily, if your creditor is, say Wells Fargo, they tend to stay within strict legal bounds when dealing with you. If you’ve been unfortunate enough to seek credit from fellows whose last names end in vowels, they tend to be more…forceful in delivering their messages to you. As it happens one of the United States’ creditors also has a name that ends with a vowel: China.

And they have a message. The more or less official organ of the Chinese Communist Party—which is to say the Chinese Government—is the newspaper People’s Daily. So, it is with much interest that I read an op/ed piece in that fine journal with the title, "China must punish US for Taiwan arm sales with ‘financial weapon’". As messages go, this one’s pretty simple.

Now is the time for China to use its "financial weapon" to teach the United States a lesson if it moves forward with a plan to sale arms to Taiwan. In fact, China has never wanted to use its holdings of U.S. debt as a weapon. It is the United States that is forcing it to do so.

The U.S. House of Representatives just passed a debt ceiling bill on Aug. 1. On the next day, a total of 181 members of the House of Representatives signed a letter sent to U.S. President Barack Obama stating that the federal government should approve the sale of F-16 C/D fighter jets to Taiwan as soon as possible to help ensure peace and stability across the Taiwan Strait…

Despite knowing that major creditor countries, especially China, would be the main buyers of its new debt, certain arrogant and disrespectful U.S. Congress members have totally ignored China’s core interests by pressuring the president to sell advanced jets and even an arms upgrade package to Taiwan.

U.S. treasuries will lose value if China stops or reduces its purchases of them on a large scale, which will also affect the value of China’s U.S. treasury holdings. However,as the situation has gotten out of hand, allowing Washington politicians to continue their game might lead to more losses.

U.S. arms sales to Taiwan can only create more jobs for the United States but cannot improve the ability of Taiwan’s military force to compete with the Chinese mainland. The essence of the problem is that some U.S. Congress members hold a contemptuous attitude toward the core interests of China, which shows that they will never respect China. China-U.S. relations will always be constrained by these people and will continue along a roller coaster pattern if China does not beat them until they feel the pain.

I am mildly amused by the claim that such sales both threaten "China’s core interests", but "cannot improve the ability of Taiwan’s military force to compete with the Chinese mainland." Both of these arguments cannot simultaneously be true.

Less amusing is the common attitude of loan sharks to their creditors displayed here using much the same language that Tony "The Shark" would use: Namely, if creditors don’t do what they’re told, you have to "beat them until they feel the pain."

With the recent rise in bond prices and drop in yields, the Chinese have a number of options. The least damaging to the US would be to sit out a few bond auctions, which would force interest rates up. But they’ve also got the nuclear option of selling off as much paper as the market could bear. Yes, they’d forego some yield payments, but they’d probably make a nice tidy premium over the original purchase price to make up for it. Rising interest rates now, at a time when the economy is weak, and short-term rates are already effectively zero, would slow the US economy. At the same time, a massive repatriation of renminbi to China would cause a steep drop in the value of the dollar in foreign exchange markets. This would raise the price of imports equally steeply. This would cause something very similar to the oil price shocks of the 1970s, that plunged the US into stagflation.

Naturally, the Chinese would be hurt by the reduction in their export capability. The question then becomes, "Which of the two political systems, China or the US, is more concerned about democratic pressure to change policy in order to improve the economy?" Who is more responsive to public pressure: our government, or the government that initiated the Tiananmen Square massacre?

I don’t know about you, but I wouldn’t expect Hu "The Kommissar" Jintao to be the one that blinks first.

Of course, if we weren’t $14 trillion in debt, we wouldn’t be very vulnerable to this sort of thing.

Dale Franks
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Oxfam predicts world food shortages by 2030 mostly because of “climate change”

In advance of the December climate summit in South Africa this year, the scare-factory is ramping up its efforts to sell the need for “drastic action” to prevent “climate change”, the current euphemism for AGW.   The stories are beginning to flow.

Last year, a record 30.6 gigatonnes of carbon dioxide poured into the atmosphere, mainly from burning fossil fuel – a rise of 1.6Gt on 2009, according to estimates from the IEA regarded as the gold standard for emissions data.

"I am very worried. This is the worst news on emissions," Birol told the Guardian. "It is becoming extremely challenging to remain below 2 degrees. The prospect is getting bleaker. That is what the numbers say."

Of course the not-so-hidden premise here is that any increase in temperature is driven by our carbon dioxide emissions, even when the science doesn’t support the theory and models which make such a claim (about CO2 amplification) have been shown to be wildly inaccurate.  That doesn’t stop the scare-factory from ignoring the discredited nonsense to make their claims:

Professor Lord Stern of the London School of Economics, the author of the influential Stern Report into the economics of climate change for the Treasury in 2006, warned that if the pattern continued, the results would be dire. "These figures indicate that [emissions] are now close to being back on a ‘business as usual’ path. According to the [Intergovernmental Panel on Climate Change’s] projections, such a path … would mean around a 50% chance of a rise in global average temperature of more than 4C by 2100," he said.

Except the IPCC’s report, as anyone who has read this blog knows, has been mostly discredited, thereby yielding this result:

Added to that, the United Nations-led negotiations on a new global treaty on climate change have stalled. "The significance of climate change in international policy debates is much less pronounced than it was a few years ago," said Birol.

Consequently, the scare-factory must crank up its stridency to new levels.  So expect to see more of this as December approaches.  The formula is pretty predictable:

By 2030, the average cost of key crops could increase by between 120% and 180%, the charity forecasts.

It is the acceleration of a trend which has already seen food prices double in the last 20 years.

Half of the rise to come will be caused by climate change, Oxfam predicts.

Can you guess what the other cause is?

In its report, Oxfam says a "broken" food system causes "hunger, along with obesity, obscene waste, and appalling environmental degradation".

It says "power above all determines who eats and who does not", and says the present system was "constructed by and on behalf of a tiny minority – its primary purpose to deliver profit for them".

It highlights subsidies for big agricultural producers, powerful investors "playing commodities markets like casinos", and large unaccountable agribusiness companies as destructive forces in the global food system.

Oxfam wants nations to agree new rules to govern food markets, to ensure the poor do not go hungry.

Or “capitalism”.  Oxfam’s “solution” is no different than the AGW alarmist’s solutions:

It calls on world leaders to improve regulation of food markets and invest in a global climate fund.

Of course it does.   And those “improved regulations” and the “global climate fund” will shift power where?  To centralized authorities.  And we all know how well central planning works don’t we?  After all, under the USSR and Maoist China, central planning adequately fed their citizens for years, didn’t it?


Twitter: @McQandO

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China drives the price of commodities and inflation waits in the wings (update)

As China’s middle class expands and as its business and manufacturing sector continue to grow, it is driving the price of commodities higher because of increased aggregate demand for relatively scarce commodities:

While China’s GDP is only 9.4% of the global economy, and its population is 19% of the world population…

  • Cement demand represents 53.2% of global demand
  • Iron ore = 47.7%
  • Coal = 46.9%
  • Pigs = 46.4%
  • Steel = 45.4%
  • Lead = 44.6%
  • Zinc = 41.3%
  • Aluminum = 40.6%
  • Copper = 38.9%
  • Eggs = 37.2%
  • Nickel = 36.3%

Some of that demand is relatively stable, like food consumption. The world’s largest country has a middle class that can afford meat for the first time…..

Obviously this means that competition for these commodities will push prices higher and higher.  It is these sorts of numbers that cause me to doubt seriously those who claim inflation is not a threat.  Certainly the price for commodities is going to go up based on nothing more than China’s demand.   And if it costs more for those commodities, that means costs for products based on them are going to rise as well – everywhere.    Add in the money supply woes (i.e. literally dumping trillions in dollars into the economy to no real effect) and debt problems and you have a mix of reasons why, while it may not be evident just yet, inflation seems to be a certainty in our near future.

UPDATE: More on food commodities.  Interesting article.  Much that is produced in China in terms of grain is going toward feeding livestock.  So that puts even more pressure on costs for grain, etc.

China was until recently self-sufficient in soybeans, for example.  But now they are producing the same amount as they always have (15 million metric tons) but importing 3 times that to keep up. Corn, wheat and rice are headed in the same direction:

Xiaoping said that most of the land in China that can be farmed profitably is already under cultivation and that available land is actually shrinking in the face of development. In addition, yields are beginning to plateau, he said, with little expectation of major gains.

He said he expects China to increasingly import corn to keep up with demand resulting in part from dietary changes and its use in producing biofuels.

That means upward pressure on prices for everyone.


Twitter: @McQandO

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Obama no leader and would prefer "easier" job as president of China

John Hinderaker at Powerline hits on something I’ve been saying for quite some time about the man in the White House:

Last night Col. Ralph Peters was on Bill O’Reilly’s show, talking about Libya. Peters thinks we should act on behalf of the rebels there, but he expressed skepticism that President Obama will ever do anything. "Obama loves the idea of being President," Peters said, "but he can’t make a decision."

I think there is a lot of truth to that, even in domestic policy, where Obama has passively deferred to Harry Reid and Nancy Pelosi on all legislative matters. One can debate whether action is appropriate in Libya or not, but Peters is certainly right when it comes to foreign policy–it is a safe bet that Obama will do nothing, because doing something would require a decision.

Now it just so happens that I think we ought to stay out of Libya, so this is a stopped clock moment for me.  I essentially agree with Obama’s non-decision.

However, to the larger point.  I agree with Peters completely when he says “Obama loves the idea of President, but he can’t make a decision”.  I might have said it a little differently.  Obama loves the idea of being President and the trappings and perks.  What he doesn’t like is the job.

I think that should be abundantly clear to anyone who has closely observed the man and taken a look at his background.  I always remember the words of the managing editor of the Harvard Law Review who said that Obama loved the title of Editor of the Law Review, but he didn’t want to do the work.  The managing editor said he rarely saw him except when it was to glad hand or take credit (and praise) for what was being done.  Additionally, Obama never wrote a thing for the review during his tenure, something almost unheard of.

In all cases, his problem is a leadership problem – a familiar topic for regular readers here.  He’s simply not a leader.  He has no idea how to be a leader.  But that doesn’t keep him from wanting leadership roles that offer him prestige, perks and pleasure derived from simply from being in the position. 

The reason Obama can’t make a decision is he can’t reason like a leader must.  He has no experience.  And he doesn’t understand the decision making process as practiced by a leader.  He’s never really had to make leadership decisions. So he simply tries to avoid making them.  One way he does it is to ignore the problem.  Another way he does this is to appoint commissions and panels concerning problems the country faces in order to defer the problem (and decision).  He also like to defer to the “international community” on foreign policy or the Democratic leadership in the legislature on domestic things.  Again, the avoidance of decision making.

And, in the end, he lets them make the decisions for him and then he jumps on the bandwagon with a speech full of rhetoric about how they (whichever party he is deferring to on whatever issue) have listened to him and decided on a course much like he recommended.  Or something like that.

Even the Democrats are noticing how poor a leader he is.  They’ve been hollering for weeks, some of them very vocally, that he needs to step up and show some leadership in the budget process.  To this point he’s done much of nothing.   Today he gave a press conference on energy because gas prices have increased.  Essentially his line of argument, concerning domestic oil, is we’re doing fine and we shouldn’t worry.

And where has he decided to try to take a little leadership? 

School bullying.

Umhmmm.  That boiling, roiling top tier controversy that threatens to tear the world apart.  On the turmoil in the Middle East, yeah, uh, not so much.  France is doing just fine and besides, Hillary will be by to see you soon.

Instead of a leader, we’re stuck with this:

Mr. Obama has told people that it would be so much easier to be the president of China. As one official put it, “No one is scrutinizing Hu Jintao’s words in Tahrir Square.”

Amazing. "Easier". See Peters’ words above.

I say we cut him loose in 2012 and let him take the “hope and change” show to China to make his case.  They’ll be bankrupt inside of 2 years.