Despite all the assurances by politicians that “things are turning around” and that while “we still have a long way to go”, we’ve “survived the disaster”, I’m not at all sure that’s true. Nor are a number of other people, to include Hale Stewart at FiveThirtyEight. He does an extensive analysis of why unemployment had “unexpectedly” stalled out after showing signs of recovery. He accompanies his analysis with a number of charts that demonstrate his point, but in essence his finding supports what we talked about last night on the podcast – the decline of the euro:
So, the central issue is a decreasing euro, which has led to an increasing dollar, which in turn has led to decreasing commodity prices. Recent reserve tightening issues in China have added downward pressure to commodity prices, which adds further evidence to the argument the US is facing an increased possibility of deflation.
That and a decrease leading economic indicators lead him to caution us that we may see a lack of further economic growth in the next 3 – 6 months unless a few things happen:
1.) A decrease in initial unemployment claims below the 450,000 level. In addition, the economy needs to keep up its current pace of job creation. Last month we had a great employment report. That needs to be repeated in the next report.
2.) The euro needs to stabilize. The European Union has proposed a massive $1 trillion dollar package, which was announced several weeks ago. However, the euro has continued to drop since that announcement. Markets are now concerned that austerity programs will hurt overall economic growth.
3.) Commodity prices need to rebound. An across the board drop in commodity prices indicates the markets think decreased demand is an issue going forward. An increase in commodity prices will indicate demand is picking up.
Keep your eye on number 2, because if the euro doesn’t stabilize the chances of 1 and 3 happening aren’t good. And that brings us to the second part of the story. Europe. It is there our fate lies at the moment. And it is a fragile thing:
If the trouble starts — and it remains an “if” — the trigger may well be obscure to the concerns of most Americans: a missed budget projection by the Spanish government, the failure of Greece to hit a deficit-reduction target, a drop in Ireland’s economic output.
But the knife-edge psychology currently governing global markets has put the future of the U.S. economic recovery in the hands of politicians in an assortment of European capitals. If one or more fail to make the expected progress on cutting budgets, restructuring economies or boosting growth, it could drain confidence in a broad and unsettling way. Credit markets worldwide could lock up and throw the global economy back into recession.
For the average American, that seemingly distant sequence of events could translate into another hit on the 401(k) plan, a lost factory shift if exports to Europe decline and another shock to the banking system that might make it harder to borrow.
“If what happened in Greece were to happen in a large country, it could fundamentally mark our times,” Angelos Pangratis, head of the European Union delegation to the United States, said Friday after a panel discussion on the crisis in Greece sponsored by the Greater Washington Board of Trade.
If you’re in the US that is not something you want to read. We’re talking, of course, of the possibility of a double dip recession with the second recession most likely more devastating than the first.
The writers of the Washington Post piece cited above don’t feel the “worst-case scenario” is a high probability noting that European countries have pledged hundreds of billions of dollars to fix the economic problems. And they repeat the assurance that the US economy “has been strengthening through the year” to include adding jobs and with higher consumer spending and better industrial output.
But, as FiveThirtyEight notes, that’s not at all what the leading economic indicators promise will continue. Manufacturer’s orders and supplier deliveries have dropped. Commodity prices have continued to slide (indicating demand has dropped) and building permits are way down. None of those promise that the economy is strengthening.
The Post goes on to paint Europe’s travail is at least temporary good news for the US. But I don’t see it – certainly not in the numbers Stewart cites. In fact I see it as more whistling past the grave yard. As they mention in their opening paragraphs, this all depends on a number of things going right among a group of European nations at financial risk for not doing what they should have been doing for years. My confidence in the ability of “the experts” to successfully negotiate the financial and economic mine field – given their history – is not at all as great as the Post’s. And, I’d further note, that while everyone is assuring everyone else that they have this crisis in hand, they’re winging it, having never done or had to do anything like this to the scale they’re now involved. The law of unintended consequences is sitting in waiting salivating at the possibilities this crisis presents.
Bottom line – keep your eye on the Euro and hope like hell the Europeans can pull off what they have to do to keep us out of a double-dip recession.
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I always love it when entertainers suddenly awaken and decide they must get involved in saving the planet.
This time it is Jeremy Irons. He’s decided there are just too many people on our little blue globe. Our lot’s numbers are “unsustainable”, although he’s pretty convinced some “big outbreak of something” will most likely happen because, you know, “the world always takes care of itself”. Of course, because Mother Gaia is a living breathing thinking world.
What he wants to do is make a film (naturally) which will be like Al Gore’s “An Inconvenient Truth”. A “documentary about sustainability and waste disposal in the vein of Michael Moore – but “not as silly”. Of course.
Irons describes himself as “deeply socialist” and is also concerned about world hunger. In a stirring and deeply touching (/sarc) call to action, Irons says on the website 1billionhungry.org:
“People around the world suffer hunger — 1 billion. Now that’s bad, worse than bad, that’s crazy! We’ve got to get mad. I want you to get mad. I want you to get up right now, stick your head out of the window and yell, ‘I’m mad as hell’.”
Original, edgy, a real difference maker. Of course it remains to be seen if Irons understands that the reason 1 billion are hungry has little to do with resources and much to do with politics.
Irons announced his new endeavor from one of his 7 houses:
The ultimate solution, he says, is for us all to live less decadently — growing our own food and recycling instead of replacing goods: “People must drop their standard of living [so] the wealth can be spread about. There’s a long way to go.”
James Delingpole shakes his head at the usual hypocrisy:
And just as soon as you show us the way by flogging at least six of your houses, foregoing air travel, subsisting on berries, wild garlic and road kill, and dressing in polyester cast offs from your local charity shop, we’ll take you more seriously still.
Exactly. Delingpole wonders:
Could it be that “sustainability” is a concept one only truly understands when one has grown so incredibly rich that one is able to shelter from the consequences of one’s eco-fanaticism in the seclusion and comfort of one’s many agreeable homes?
Apparently. Delingpole points out that the UK’s new enviroment minister, Chris Huhne has that number of homes. And we know that Al Gore, the Pince of Wales and Zac Goldsmith aren’t far behind. And how knows how many Michael Moore has.
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It begins with a quote from President Obama’s West Point commencement speech:
Mr. Obama all but declared victory in Iraq, crediting the military but not Mr. Bush, who sent more troops in 2007. “A lesser Army might have seen its spirit broken,” Mr. Obama said. “But the American military is more resilient than that. Our troops adapted, they persisted, they partnered with coalition and Iraqi counterparts, and through their competence and creativity and courage, we are poised to end our combat mission in Iraq this summer.”
It ends with our quote of the day from one of my favorite milbloggers, Greyhawk of the Mudville Gazette:
Speaking for myself only, you’re welcome. Ignoring who – besides the troops – does or doesn’t get the credit, it absolutely was a bitch to fight an enemy overseas while a lot of sh*tbags in our own Congress kept saying they had won.
And, of course, one of the “s-bags” in question was the speaker at the West Point commencement.
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In this podcast, Bruce, Michael, and Dale discuss Rand Paul, this week’s elections, and the stock market.
The direct link to the podcast can be found here.
The intro and outro music is Vena Cava by 50 Foot Wave, and is available for free download here.
As a reminder, if you are an iTunes user, don’t forget to subscribe to the QandO podcast, Observations, through iTunes. For those of you who don’t have iTunes, you can subscribe at Podcast Alley. And, of course, for you newsreader subscriber types, our podcast RSS Feed is here. For podcasts from 2005 to 2009, they can be accessed through the RSS Archive Feed.
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Yes, friends, it is a call-in show, so do call in.
Great week on Wall Street – What is going on in the world to drive the stock market down as has been happening lately?
Rand Paul and libertarianism – We talk about the controversy.
Tuesday’s results – Did they mean much for anyone?
Why the GOP is its own worst enemy – Republican Sen. Lamar Alexander says government should take over BP? Really?
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It’s something we’re ignoring, for the most part, as well:
Europeans have boasted about their social model, with its generous vacations and early retirements, its national health care systems and extensive welfare benefits, contrasting it with the comparative harshness of American capitalism.Europeans have benefited from low military spending, protected by NATO and the American nuclear umbrella. They have also translated higher taxes into a cradle-to-grave safety net. “The Europe that protects” is a slogan of the European Union.
But all over Europe governments with big budgets, falling tax revenues and aging populations are experiencing rising deficits, with more bad news ahead.
With low growth, low birthrates and longer life expectancies, Europe can no longer afford its comfortable lifestyle, at least not without a period of austerity and significant changes. The countries are trying to reassure investors by cutting salaries, raising legal retirement ages, increasing work hours and reducing health benefits and pensions.
“We’re now in rescue mode,” said Carl Bildt, Sweden’s foreign minister. “But we need to transition to the reform mode very soon. The ‘reform deficit’ is the real problem,” he said, pointing to the need for structural change.
The reaction so far to government efforts to cut spending has been pessimism and anger, with an understanding that the current system is unsustainable.
Reality can be a real problem – in the real world. And Europe has begun to bump up against it. Greece is simply the worst of the bunch. The “social paradise”, as European nations have fashioned it with some variations here and there, is unsustainable. There are a number of reasons, not all having to do with economic profligacy. And we face precisely the same future problems as they are beginning to face now. For instance, just like Europe, we have fewer and fewer people paying for the retirement of more and more people. Unlike Europe, though, we’re projected to have a positive population growth in the future (not that it will make what we have promised to pay in the future any more affordable), whereas Europe has a negative population growth among native Europeans.
This sort of a drop in workers vs. pensioners is not at all uncommon, even here in the US. Unless something is done now, we stand a good chance here of having the very same problem Europe is now facing in the not too distant future.
According to the European Commission, by 2050 the percentage of Europeans older than 65 will nearly double. In the 1950s there were seven workers for every retiree in advanced economies. By 2050, the ratio in the European Union will drop to 1.3 to 1.
One of the things the liberal side of the house likes to do is point to how little the Europeans spend on the various styles of government run health care they have. But since the financial crisis, which pushed the due date on all the debt they’ve piled up and promised to incur within their social welfare states, they’re talking about cuts to their health systems as well:
Figures show the severity of the problem. Gross public social expenditures in the European Union increased from 16 percent of gross domestic product in 1980 to 21 percent in 2005, compared with 15.9 percent in the United States. In France, the figure now is 31 percent, the highest in Europe, with state pensions making up more than 44 percent of the total and health care, 30 percent.
If you wonder why the Tea Party types and libertarians are screaming about cuts in spending and the size of government, it’s because they’ve been watching Europe, understand that’s the way this administration and the Democrats want to push us and are warning of the obvious eventual outcome of such an move. We have the opportunity now to stop what Europe will soon be going through.
But, as one French pensioner says:
“For years, our political leaders acted with very little courage,” he said. “Pensions represent the failure of the leaders and the failure of the system.”
And we’re in exactly the same position now for the very same reason.
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Rand Paul managed to raise quite a ruckus by honestly stating his views in response to a loaded (and irrelevant) question. In the process, the left and those who pose an intellectual moderates have seized the opportunity to tee off on libertarianism and the Tea Party movement. Dale capably dismantled one such effort by the New York Times editorial board. Today, a more subtle, concern-trollish effort graces the NYT in a piece from Sam Tanenhaus:
On the surface Mr. Paul’s contradictory statements [i.e. that he dislikes the federal government intrusion into private business affairs, abhors racism, and would have voted for the 1964 Civil Rights Act -- ed. - which aren't necessarily contradictory] might seem another instance of the trouble candidates get into when ideological consistency meets the demands of practical politics. This was the point Senator Jon Kyl, Republican of Arizona, made when he said, in mild rebuke of Mr. Paul, “I hope he can separate the theoretical and the interesting and the hypothetical questions that college students debate until 2 a.m. from the actual votes we have to cast based on real legislation here.”
But Mr. Paul’s position is complicated. He has emerged as the politician most closely identified with the Tea Party movement. Its adherents are drawn to him because he has come forward as a kind of libertarian originalist, unbending in his anti-government stance. The farther he retreats from ideological purity, the more he resembles other, less attractive politicians.
In this sense, Mr. Paul’s quandary reflects the position of the Tea Partiers, whose antipathy to government, rooted in populist impatience with the major parties, implies a repudiation of politics and its capacity to effect meaningful change.
Although Tanenhaus provides a fairly non-judgmental opinion here, he is also quite clearly trying to imply a racist undertone to the Tea Party movement. At best, he is suggesting that Rand, and thus Tea Partiers, are smugly indifferent to the vagaries of racial prejudice, and all too ready to sacrifice the well-being of those who suffer most from such discrimination on the altar of libertarian purism. While it’s true that libertarians can be just as prone to fits of utopianism as any good Marxist, Tanenhaus’ conjecture relies on at least two fundamental misunderstandings: (1) that adherence to principles of liberty can only be maintained from a standpoint of ideological purity; and (2) that distrust of government intrusion equals “anti-government.”
Taking the second point first, there has been a concerted effort by the left to portray libertarians in general, and Tea Partiers specifically, as some sort of “anti-government” force. Tanenhaus attempts to support this myopic view by equating Rand’s skepticism regarding certain portions of the ’64 Act with an unbending aversion to government in toto. In turn, all those in favor of limited government, and especially those opposed to the unnecessary and unwanted expansion of federal powers witnessed in the past couple of years, are labeled as anti-government ideologues, who mistake the theoretical for the practical. Yet, in truth, the views of libertarians and the Tea Party crowd are not terribly different from those of this nation’s founders in that regard. Distrust of government, after all, was what led to the formation of a constitution that limited its powers and explicitly placed the source of all such power in the hands of the people. That is not an anti-government stance, but a pro-limited-government and pro-liberty view. Tanenhaus’ misapprehension of that fact leads to a portrayal of Rand et al. as some sort of anarchist radicals bent on destroying government. Nothing could be further from the truth.
Turning to Rand’s comments on the ’64 Act, we should all have a problem with government intrusion into our private affairs. A good argument can be made that without such intrusion the invidious racist practices targeted by the ’64 Act would have continued for quite a while, but that is simply an end-justifies-the-means argument that misses the most important reason to be skeptical of such intrusions: once government has such power it rarely, if ever, gives it up, but instead extends its reach into other areas as well. Yes, that is a “slippery slope” argument, but one that in this case is well founded in fact. Indeed, the ’64 Act itself, based on Congress’ Commerce Clause powers, serves as the perfect illustration of why the slippery slope should be minded. Since the end of the Lochner era, and the concurrent expansion of Commerce Clause power, the federal government has arrogated to itself the ability to control almost every level of your business and personal activity, right down to what you may or may not ingest, and how you can can receive health care when you get sick. Again, whether some of these results are “good” is beside the point that the means of obtaining them requires a suppression of liberty and an expansion of centralize government power. For that reason, and that reason alone, Rand is right to question the necessity of certain provisions of the ’64 Act, even if eventually he would have voted in favor of it (and leaving aside the cogent, and certainly correct, arguments that federal government had the requisite power to enact those provisions through the 13th Amendment). And, again, none of that stance make he or anyone who supports him some sort of “anti-government” radical.
In the same way, questioning invasive government powers in defense of liberty does not make one an impractical ideologue. For starters, freedom isn’t just an idea or some sort of construct; government is. Like pure oxygen, it’s rare to find in the natural order of things, but that doesn’t mean it doesn’t exist. In contrast, government had to be invented from the ideas of man. Accordingly, it is not ideological to take the view that, as Justice Scalia once noted, individual liberty is the default position and government control over it must be constitutionally and specifically justified, not the other way around. Our very country was founded on this basic principle. Yet, the critics of Rand Paul, libertarians and Tea Partiers get this exactly backwards.
Moreover, just because something is practical, doesn’t warrant an eradication of individual liberty. Perhaps it is true that de facto Jim Crow would have lingered in the absence of those ’64 Act provisions preventing private discrimination. If so, then the practical application of those laws would seem to trump the individual liberty of the racists who tried to perpetuate that era. Yet, can it truly be said that the ’64 Act was responsible for bringing an end to discrimination, or since we know it still exists, its retardation? Isn’t there a much better argument to be made that Martin Luther King, Jr., Rosa Parks, Medgar Evers, and all those civil rights activists of the 50’s and 60’s who lent their blood, sweat and tears — and sometimes their very lives — to the cause had a much greater impact than the 88th Congress? In this sense, while the ’64 Act may have been practical in regards to expediency, was it really necessary especially in consideration of the cost to personal freedom? Even if the answer to that last question is a fully justified “Yes” (and maybe it is), raising it does not make one an ideologue impervious to the realities of life. It simply makes one a principled defender of liberty, which one can be without being a mindless utopian.
Looking at this whole issue from a broader perspective, the real problem here is a basic misunderstanding of freedom. One can love liberty and still support government. From a libertarian point of view, government is simply an ordered, less brutal means of securing to ourselves the ability to pursue freedom by donating limited powers to the governing organization. Instead of defending all property with the barrel of a gun, we look to the judicial system. Rather than depend on the will and wherewithal of individuals to defend our society from its enemies, we support a national defense. As opposed to having each and every transaction among people be subject to individual contract, we recognize the ability of legislatures to set certain standards for the conduct of society. We may disagree as to where the limits should be set on each of these governmental powers, but libertarians are fully cognizant of the fact that having some sort of governmental structure is more desirable than having none. And yet, we also unapologetically and jealously guard our freedom, ever mindful that liberty lost is rarely regained without serious strife and deadly consequences.
In short, although we may question authority, we do not seek to abolish it. While we may defend the liberty of even the most odious of individuals, that does not mean we support their anti-social behaviors. Libertarians, and all lovers of freedom, have firm, historical reasons for challenging intrusions into their lives. We do not need to be ideologues to do so, and the practical effects of that suspicion of power has led directly to the greatest expansion of wealth and prosperity for the largest number of people in history. Freedom, at times, may be ugly up close, but it is still the most beautiful thing that has ever existed, bar none. Defense thereof requires an adherence to reality, not flights of fancy.
I mentioned, a week or so ago, that it appeared the developing strategy the White House was going to use in the 2010 midterm elections was to again try running against Bush. The brain-trust behind this idea seems to think it will give President Obama the ability to “ride the wave of anti-incumbency by taking on an unpopular politician steeped in the partisan ways of Washington”. Except the most obvious partisan these last 16 months is Obama and he, in case he hasn’t noticed, is the “incumbent”.
I think Politico and Merle Black pretty much have it figured out when it comes to this sort of a strategy:
It’s a lot to ask an angry, finicky electorate to sort out. And even if Obama can rightfully make the case that the economy took a turn for the worse under Bush’s watch, he’s already made it – in 2008 and repeatedly in 2009.
It’s not clear that voters still want to hear it.
“If you’re the leader of a large corporation and you’re in power for a year and a half and you start off a meeting with your shareholders by blaming your predecessor, that wouldn’t go over very well,” said Merle Black, a political science professor at Emory University. “This is a very weak approach. … And I can’t imagine it having an impact on these very swing voters.”