Which Comes First? Collapse of Commodities Prices, or the Crumbling of BRICs?

Common wisdom assumes that commodity prices, including oil prices, will continue to rise on exponential demand from emerging nations, such as China, India, Brazil, Turkey, Russia, etc. But under the sheen of those rosy projections, exists a growing excremental stench of corruption and decay. If the magical trajectory of the BRICs should falter, how far would commodities prices fall? And what would be the repercussions for already stressed world financial markets, desperate for safe havens and hedged to the hilt?

China's property bubble is set to implode, and when it does, the Chinese economy will cool far more than anyone thinks, taking commodities along for the ride. Commodity producers like Australia and Canada are at extreme risk as well. _Mish

Not just Australia and Canada are at extreme risk. Two BRICs -- notably Russia and Brasil -- are gambling on continued high commodity prices into the indefinite future. Corruption in all of the BRICs is hampering genuine market-based growth, but economic dependence on raw commodities prices is particularly bad in Russia.

When commodity prices dive, Russia may well grow desperate.

Prime Minister Vladimir Putin, the country's uncrowned czar, has linked his legitimacy to the economy's performance by offering the Russian people a grand bargain: submit to his increasingly autocratic rule and the state will compensate with economic goodies like higher incomes and hefty social-welfare spending. Now that the economy is faltering, Putin is under intensifying pressure from a discontented public to restore Russian democracy, potentially destabilizing Russian politics. He has already faced protests in Moscow against his rule amid the economic downturn. There's also a risk that leaders in Moscow will resort to nationalistic appeals to distract the public from problems at home, escalating tension with Russia's neighbors, the rest of Europe and the U.S. _Time

Russia's ongoing demographic collapse, and the threat of losing much of Eastern Siberia to Chinese influence, is not helping the mood in Moscow. But without the clout that comes from high energy prices, Russia becomes an angry dancing toy bear with nuclear weapons.

Venezuela, Iran, the Arab states of MENA, Mexico, and many countries in tribal Africa and Asia, are also pathologically dependent on high commodity prices, due to internal corruption having squeezed natural markets to death. How will their people deal with the many difficulties and hardships they will face when their governments cannot feed, clothe, house, or water them?

Even the US is vulnerable to a fall in commodities prices. The US is the world's third largest oil producer. The recent boom in US shale oil & gas production is one of the few bright lights in an otherwise dim Obama economy. And although the jobs, housing, manufacturing, and other sectors in the US economy continue to sag, Obama has not had enough time to entirely destroy the US private sector.

Few readers of this blog understand the precarious state of China's economic house of cards. That is because almost all of the economic information coming out of China is closely controlled, and coated with a shiny facade. But it is time for readers to begin asking themselves about the global repercussions of a more sustained commodities price slump than they have seen.

Taken from an earlier article at Al Fin

Warfare Between Generations Still Largely Covert

...young Japanese and Italians pursue increasingly cautious lifestyles. Nearly 80 per cent of unmarried Japanese between the ages of 18 and 35 live with their parents. The ratio is nearly as high in Italy.

Such unadventurous living means people do not grow up, and do not take risks – such as having children or starting a business. _WRM

Italy and Japan are the leading edge of this global demographic transition within developed countries. Russia is experiencing much of the same phenomenon, as is much of Europe, North America, and Oceania.

In Italy and Japan, companies are reluctant to hire young people on what American universities call “tenure track”; unsure about their future needs and resources they don’t want high cost employees that can’t be fired. The older workers are too powerful to dislodge — just as in American universities the tenured professors are too powerful to give up tenure. So younger workers increasingly are hired if at all on temporary contracts, with lower benefits and fewer prospects for promotion. _WRM

The problem is the most dire in countries and regions which have transferred power from the individual and the private sector to the public sector. This willful concentration of power reduces opportunity for newcomers.

To succeed today, many young people need to recognize that no job will be waiting for them when they finish studying. They are going to have to create their own opportunities. It is a good time for creative entrepreneurs. _WRM

Unfortunately, in such aging societies there is little opportunity for entrepreneurial initiative. Paralysing taxes, regulations, and public debt leave little room for meeting the real needs of a healthy population.

The welfare state grows and grows, concentrating on meeting the needs of the weak, the old, the diseased, the dispossessed, and the illegal alien outsider. Meanwhile, the young and gifted are shunted aside, unwelcome. People with new ideas and new ways of solving problems are an unwelcome distraction and threat to the political class, and must be struck down and removed from the public stage.

This is happening routinely in Russia, and other dictatorships. But it is also happening less overtly in Canada, the US, and other developed democracies.

The war between the generations -- and between styles of thinking -- remains mostly covert. But that could change quickly. If you do not want your nation to flare up in outright inter-generational warfare, consider changing the way your government solves problems.

Europe and America: Demographics and Dumbing Down

The gravity of Europe’s demographic situation became clear at a conference I attended in Singapore last year. Dieter Salomon, the green mayor of the environmentally correct Freiburg, Germany, was speaking about the future of cities. When asked what Germany’s future would be like in 30 years, he answered, with a little smile, ”There won’t be a future.”

Herr Mayor was not exaggerating. For decades, Europe has experienced some of the world’s slowest population growth rates. Fertility rates have dropped well below replacement rates, and are roughly 50% lower than those in the U.S. Over time these demographic trends will have catastrophic economic consequences. By 2050, Europe, now home to 730 million people, will shrink by 75 million to 100 million and its workforce will be 25% smaller than in 2000._JoelKotkin_Forbes

When a welfare state is in the throes of a shrinking demographic, the implications are extremely dire. Guarantees of benefits in these nations is based upon a pyramid scheme, with the older pensioners near the apex and the younger taxpayers near the base. If the positions are reversed due to a collapsing demographic, national debt tends to grow to massive proportions rather quickly.

The fiscal costs of this process are already evident. Countries like Spain, Italy and Greece, which rank among the most rapidly aging populations in the world, are teetering on the verge of bankruptcy. One reason has to do with the lack enough productive workers to pay for generous pensions and other welfare-state provisions.

Germany, the über-economy of the continent, has little hope of avoiding the demographic winter either. By 2030 Germany will have about 53 retirees for every 100 people in its workforce; by comparison the U.S. ratio will be closer to 30. As a result, Germany will face a giant debt crisis, as social costs for the aging eat away its currently frugal and productive economy. According to the American Enterprise Institute’s Nick Eberstadt, by 2020 Germany debt service compared to GDP will rise to twice that currently suffered by Greece. _Forbes_Kotkin

The United States under Obama has been trying to imitate the European style of government -- a designed expansion of the public sector at the expense of the private sector. Fortunately for Obama -- in one sense -- the US is not suffering the same demographic collapse as Europe. The US is instead still growing demographically, due to immigration and due to higher birthrates among immigrants.
But in another sense, the US population growth is not as fortunate as it appears. The new replacement populations coming into the US are, on average, of lower aptitude in a cognitive sense. Average IQ of the US population is almost certain to drop as a result, and US global comptetiveness will be strained, consequently.

Trends in SAT test scores are an early warning of this very phenomenon:

"The scores are disappointing, and it seems to be a trend over the last five to six years, with drops across the board," said Jim Hull, senior policy analyst for the National School Board Association's Center for Public Education.

He called 10 points "a pretty significant change."

"It raises a red flag," he said. _WashingtonExaminer

Test score drops will be blamed on a number of factors, but the studiously ignored central cause of this trend is the lowered cognitive potential of modern students. And it is only likely to get worse. And the repercussions of this cognitive decline will spread throughout society -- and will be magnified tenfold by affirmative action policies.

The SAT has already been "dumbed down," perhaps in anticipation of this very phenomenon, but apparently it was not dumbed down enough. It will probably not be long before the ACT follows suit, in politically correct fashion. More: Steve Sailer takes a closer look at changes in SAT scores over the past several years, with stratification of scores by race.

A dumber population will place greater demands on governmental infrastructure. Law enforcement, welfare, education, housing, food subsidies, etc. will all have to grow more productive to compensate for a population of lower cognitive aptitudes.

National debt will increase even faster than at present, as the underlying society grows less capable of repaying their own debt on top of the debt of previous generations. Economic hardship will increase.

Multicultural societies are low-trust societies, which require much larger police forces to maintain order. As police forces are downsized due to the exponential growth in public sector union pensions and benefits, civil disorder will expand to fill the void.

Youth gangs made up almost entirely of immigrants, children of immigrants, and "minority" populations, will range the landscape virtually unimpeded by a law enforcement infrastructure that will grow more corrupt as it takes on the multi-cultural form of the new dominant populations of society. The initiation ritual for many of these gangs is likely to be an act of violence against the shrinking population of the formerly dominant, European descended people.

Can you and yours find a place of safety in this coming world? That depends upon what you do between now and then.

Hope for the best. Prepare for the worst.

Willpower and Stupidity

Is the ancient virtue of willpower still relevant in the modern age?

We eat, drink, smoke and gamble too much, max out our credit cards, fall into dangerous liaisons and become addicted to heroin, cocaine and e-mail.

...In experiments beginning in the late 1960s, the psychologist Walter Mischel tormented preschoolers with the agonizing choice of one marshmallow now or two marshmallows 15 minutes from now. When he followed up decades later, he found that the 4-year-olds who waited for two marshmallows turned into adults who were better adjusted, were less likely to abuse drugs, had higher self-esteem, had better relationships, were better at handling stress, obtained higher degrees and earned more money. _NYT

A more scientific term for willpower is executive function (EF), coordinated in the prefrontal lobes of the brain. Together with intelligence (IQ), levels of EF powerfully determine life success over the years. EF can be improved by training in children, but such training should occur between the ages of 4 and 7 for maximum benefit.

The interaction of willpower and stupidity is more complex than most people understand. First, what do we mean by "stupidity?"

"A stupid person is a person who causes losses to another person or to a group of persons while himself deriving no gain and even possibly incurring losses."

"Always and inevitably everyone underestimates the number of stupid individuals in circulation."

"Non-stupid people always underestimate the damaging power of stupid individuals. In particular non-stupid people constantly forget that at all times and places and under any circumstances to deal and/or associate with stupid people always turns out to be a costly mistake."

"Our daily life is mostly, made of cases in which we lose money and/or time and/or energy and/or appetite, cheerfulness and good health because of the improbable action of some preposterous creature who has nothing to gain and indeed gains nothing from causing us embarrassment, difficulties or harm. Nobody knows, understands or can possibly explain why that preposterous creature does what he does. In fact there is no explanation - or better there is only one explanation: the person in question is stupid." _Science20

Stupidity arises from multiple causes. Low intelligence, spite, ignorance, laziness (lack of willpower), miscalculation, and unavoidable constraint propagation (bad luck) are just a few of the many causes of stupidity and stupid people.

In the United States, stupidity has become concentrated near seats of power such as Washington DC, New York City, Los Angeles, Chicago, etc. Government is one obvious host and purveyor of mass stupidity, along with all other institutions which are closely involved with government -- such as labour unions, news media, education, financial and economic institutions, law enforcement, the courts etc. Even the military -- which believe it or not is the most competent branch of government -- has been infiltrated by politically correct stupidity via social promotion of PC-favoured officers and the enforcement of politically correct policies.

Labour unions have become the seat of stupidity in a particular way recently, thanks to the union-friendly Obama regime. A violent storming, vandalism, and assault of a port in Washington state goes unpunished by government officials. While warming up a crowd for President Obama, Jimmy Hoffa Jr. tells Obama to "take out the son of a bitches," referring to Tea Party members and Republicans, and neither Hoffa nor the Obama White House will apologise for this rather blatant lapse of civility in the midst of an official Obama event. AFL-CIO head Richard Trumka dictates to Obama what he needs to say in his jobs speech before a joint session of congress -- encouraging the president to "go to the mat" -- and is rewarded for his presumption by being seated next to Michelle Obama for the president's speech.

These are all examples of stupidity by labour union officials and thugs. But many more similar examples occur on a regular basis. If the general public were to become widely aware of this stupidity, the political fortunes of Mr. Obama and those close to him would deteriorate even more quickly than at present. But for now, the news media continues to overlook and cover up the mistakes of Obama and his friends.

Mr. Obama's stupidity is not only in his friends and hangers on, but is engrained in every policy that he has pursued since being inaugurated. His war against the private sector, his war against energy, his promotion of a bankrupting "green jobs agenda," his vilifying of national allies and his cozying up with national antagonists, his diverting of scarce national assets into the purses of political cronies, his irreversible expansion of government mandate and government debt, his unprecedentedly divisive effect on society -- all of these evidences of stupidity and more should be enough to portray Obama's administration as "the stupid regime."

It should be obvious that willpower is not a simple antidote to stupidity. In fact, stupid people often pursue their stupid agendas with the utmost will.

It is true that if the masses had exerted more willpower in their oversight of government and government officials, that this massive clusterfuck could have never grown so bad so quickly. But that was then, and this is now. What do we do now?

Can the example problem -- the rise of stupidity in US government and society -- be solved within the political and societal structure, or will entirely new structures and forms of organisation be necessary?

This question will be explored in future articles.

Cross-posted from Al Fin blog

Vladimir Putin's Russia a KGB State: What Does it Mean?

The Russian economy is dependent upon the world markets for oil & gas. As long as world oil & gas prices are high, the Russian economy will do well, and the Russian government will be able to buy the grudging obedience of its people.

Why cannot Russia grow a prosperous economy that is more independent of its massive oil & gas reserves, and mineral resources? The answer to that question rests in the way Putin's government controls Russian industry and resources: like a KGB state.

Under Putin's direction, a "state mafia" has replaced the street mafias of the chaotic Yeltsin years. At the bottom of this mafia's pecking order, armies of corrupt tax, fire and health inspectors have taken the place of the brawny young street thugs and racketeers of the Yeltsin era. They can ruin any small or medium-sized business that does not cooperate with them. At higher levels, municipal and regional officials allocate contracts, receive bribes from local businesses, wipe out fines or indictments, and look the other way in the case of unsafe cruise ships. At the top of the ladder, ministers and deputy prime ministers have replaced private oligarchs as heads of gigantic energy and mineral concerns. They deal with their victims politely in fancy hotels and modern offices, but the result is a classic shakedown worthy of the New Jersey mafia. _econlib

In other words, companies do not prosper on the basis of good products, services, and customer relations. Rather, companies in Russia prosper on the basis of whose palm is greased, and whose political interests are not being threatened.

The KGB state has created a thug economy. Its directors use businesses as personal wealth-generating machines; they quash potential competitors and take over legitimate businesses once they become big enough to attract their interest. The directors of the KGB economy have accumulated incredible wealth. Putin himself is said to be the richest of the bunch, with a fortune likely in excess of $30 billion.5 There are more Russian than American billionaires on the Forbes lists, although private wealth in Russia is a tiny fraction of that in the United States.

Many praise China's state capitalism and use high Chinese growth rates to justify its one-party state and political repression. Can we make similar claims about Russia's KGB economy? Does it yield returns that somehow justify its negative aspects?

The directors of the KGB state praise their economy as an example of state capitalism that nurtures "national champions" (a term Putin introduced in 1997) like Gazprom, Rosneft, and Aeroflot. They remind the public of the "wild capitalism" of the Yeltsin years, when pensions were not paid and inflation was rampant. They point to the crises of the United States and Greece. They claim that wise leaders like Putin and Medvedev, as well as their ministers and civic-minded oligarchs, protect and promote the economic interests of society.

The KGB state controls the commanding heights (Lenin's term) of energy, commerce, minerals, media, and transportation. Small and medium-sized businesses can operate if they keep their noses clean and heads down and buy off the lower levels of the state mafia. _Paul Gregory_econlib

By controlling the upper echelons of important Russian industries, Putin's Russia prevents significant improvements in management, technology, and services, from upsetting the carefully balanced apple cart. Such control also assures a quasi-permanent dependency on world commodities markets, and an exquisite vulnerability to outside technology breakthroughs or resource discoveries.

By preventing the growth of a healthy private sector, Russia's KGB state maintains solid control over a permanently stunted economy. Better to rule in hell than to serve in paradise, as the head demons tend to say.

This cozy little cesspool is doomed, of course. Demographic decline at both ends of the lifespan insure an ever-shrinking population. The abysmal state of Russian medicine and public health continues to worsen. Massive quantities of capital are being rushed out of the country every week. And anyone with any talent or appeal to outside interests is pushing her case for foreign employment, marriage, or just plain emigration out of the doomed KGB state that Putin has built.

Again, we have to ask the question: Will a country with such a massive stockpile of nuclear weapons go quietly into the dark night of failed states, when the time comes to exit the stage? Not likely. Expect Russia to resurrect the role of global troublemaker which it performed so well when the USSR had its KGB state.

How Could a US President Be So Abysmally Ignorant of the Nature of a Market Economy?

Mr. Obama has increased the US national debt by $4 trillion with very little to show for it in the way of employment or jobs. Obama's jobs program has become a program of political payoffs to cronies and supporters, while drowning the private sector under more and more layers of taxes and regulations. How could a US president be so utterly stupid as to how market economies work?

The heart of the problem is that Obama's idea of job creation largely revolves around public works projects that are rooted in Keynesian economics and driven by government funding and political payoffs.
What's needed now is a blood transfusion of self-funding jobs in the private sector that will enlarge the tax base and begin shrinking the deficit. Fortunately, there are four initiatives already in motion that could quickly create jobs and have a ripple effect throughout the economy.

First, the president could support the Freedom to Invest Act of 2011 (HR 1834), which would allow American multinational corporations to bring back to the U. S. some of the $1 trillion in cash they are hoarding offshore to avoid onerous U.S. corporate tax rates.

Why not allow those funds to be repatriated at greatly reduced tax rates, provided the money is invested in jobs, plants and equipment in the U.S.?

Second, the president can ask his appointees at the National Labor Relations Board to fast-track the hearings and decision-making that would allow Boeing to open its 787 Dreamliner assembly plant in South Carolina....

Third, President Obama can direct his Interior Department to cut through the red tape and renew the permit granted to ExxonMobil to develop the largest oil discovery in a decade located in the Julia field in the Gulf of Mexico. That discovery -- a deep reservoir of some 1 billion barrels of oil -- would reduce America's dependence on foreign oil and create thousands of jobs.

According to the American Petroleum Institute, by 2013 the ripple effects of this discovery and the lifting of the drilling moratorium imposed after the BP oil spill would cause "total employment supported by the Gulf of Mexico oil and natural gas industry to (approach) 430,000 jobs or a 77 percent increase."

Fourth, jobs are just waiting to be created by American companies eager to help tap the third largest proven oil reserve in the world, located in Alberta, Canada. These oil sands are now technologically and economically viable, provided the heavy crude oil can be transported by a new pipeline to refineries on the Texas Gulf coast.

Eighty percent of that 1,660-mile pipeline would be in the U.S. and put 20,000 people to work in construction and manufacturing. Most of the planning and permitting for the proposed Keystone XL pipeline has been done.

The major holdup now is President Obama. He needs to approve the project and shepherd it through final State Department formalities.

So far, President Obama's jobs initiatives have relied on stimulus spending of public money that is largely borrowed. The debt ceiling debate and S&P downgrade shocked the nation into facing the fact that we must reduce the trajectory of borrowing and spending. The virtue of private sector job creation is that it is largely self-funding and that it provides a return on investment, which in turn generates new tax revenues. _MercuryNews

Mr. Obama knows how to read from a teleprompter, and look down his nose at his royal subjects. He can also put in a lot of time on the golf course, and puts on some impressive taxpayer-supported vacations and parties.

But if you ask Obama voters why they voted for him, it is unlikely that they would say "to play golf," or "to go on long and expensive vacations."

Most of us knew that Obama could only be a figurehead, all along. His real world experience is completely lacking of any ingredients for making a strong, competent, practical leader for the world's only superpower and largest economy. What we didn't understand was just how disastrously poor Mr. Obama is at choosing advisors and decision makers. Too late now.

But if anyone within 100 miles of Washington DC does have any idea how a market economy can be allowed to thrive, perhaps he could try to get a message through into the "DC dead zone" that things need to be done in a more competent way, more in accordance with the needs of market economies. Otherwise, the ugliness is apt to get completely out of control.

Out of Control Debt An Important Sign of Global Instability

...leading economies, the U.S., Japan, and the E.U. are declining. That is, about one-sixth of the world's population is losing ground. These big economies are the ones that lead the rest of the world, including China. Countries like China, India, and Brazil, depend on the health of the big economies to keep buying their products and commodities so they can grow and generate wealth for their citizens. _ZeroHedge

Who will be the last man standing? In the coming clash over debt, both within and between nations, what country -- or portion of a country -- will survive and prosper? Difficult to say, given the ubiquity of the deadly duo: debt and demographic decline.

In Europe, one can locate particular problem points, where endebted nations are reaching the end of their borrowing capacity. These nations are coming flashpoints for a fire of unrest that could explode out of control with incomprehensible haste.

A visit to Spain the prior week demonstrated that Greece's financial woes were just the tip of an iceberg on a continent of debt -- the Greek national debt crisis seemed like the first card in a flimsy house. To be in a nation as it is unraveling has an eerie, surreal, mostly indescribable feeling. The storefronts in Athens outside of the tourist areas looked like they'd been through several rounds of a boxing fight, and were just waiting for the knockout punch. Other than the lights being on, the difference between shops closed indefinitely and those currently operating were hard to distinguish. Unless they were pushing merchandise, people wore saddened expressions as they walked by decaying and graffiti-covered buildings. _thetyee

In such environemnts, deadly, destructive riots are always just a spark away. There is no telling where the next upsurge of violence and mayhem would end.

The situation can only get worse, since nobody's interests align. The Greeks want more time to meet their budget targets without having to make more cuts that would cause more public angst. The Germans, whose opinions arguably matter the most since they have the financial ammo, are already in a huff with German Chancellor Angela Merkel about expanding the eurozone's bailout fund. More pushback from Greece about meeting its current austerity measures only fuels the fire. _Time

Towards the end of the last decade, it was popular to proclaim Europe as an example of what we in North America could achieve. This notion was led by books such as Jeremy Rifkin's The European Dream, which described the difference between North American and European values. He argued that on the other side of the Atlantic, citizens found security not through individual accumulations of wealth but through connectedness, respect for human rights and sustainability. _the tyee

But now, as Europe's demographics collapses in on itself, we can see that not even utopia can escape the twin demons of debt and demographic decline and collapse. Europe's states are like teetering dominos, as long as they are coupled together economically. But if Europe is smart enough to decouple, still only a portion can survive the coming wildfire.

In the third world, we will have "The Coming Anarchy." In the developed world, the anarchy will focus on the third world enclaves, the multicultural cities and non-assimilating banlieus, and spread out from there.

Consider the relative places of safety, where you might find a place for yourself and your families. Hope for the best, prepare for the worst.

Two Strikes Against China, Europe; Global Economy Deterioriates

China's two strikes for today are:

1. China's aging population: a demographic time bomb. China is not ready for the demographic sledge hammer rapidly descending upon its head.

2. Massive overcapacity: the limits to government dictate. China's economy was unable to adjust properly to the radical drop in export income dating from 2008, 2009. Bubble trouble in spades.

Europe's daily double:

1. The birth of gangland: Unwise immigration policies lead to societal fragmentation and rising crime

2. Crash of the nanny state: Welfare state economics confronts the shrinking taxpayer demographic collapse. Welfare states are pyramid schemes. They do not work in aging populations. Hence Europe's rapidly growing economic problems.

The US is facing many of the same problems as Europe, and is also burdened with the Obama administration -- arguably the most destructive US presidential administration ever.

Globally, the economic situation is even worse, since the world economy needs for the US and Europe to thrive, to have someone to buy the emerging world's exports. Mish has more about the economic problems from the BRICS to Canada to Asia. There is very little in the global economic picture about which to feel encouraged.

You Know You Love It, Baby!

There are many reasons that America should be grateful to President Obama. Here is a short list (read the entire article for much more)

1. The staggeringly high unemployment rate – 9.1%, not counting the Americans who have given up looking for work or who are underemployed.
2. The still-tumbling housing values, now worse than the Great Depression.
3. The inflation indicators, with uncounted sharp inflation in food and gasoline.
4. The debt and the deficit, now too big to even fathom without an advanced degree in mathematics.


5. The unfunded future liabilities –Social Security, Medicare and Medicaid, public worker pensions, and the like.

When the S&P downgrade is thrown into this cliff-hanging mix, our fiscal situation goes from bad to worse. _PJM

Before the Teleprompter Was the Toke-a-Prompter The author of the article linked above refers to Mr. Obama as the "Pass the Buck President." But if things get much worse, he may be forced to revert to being the "pass the toke president." Think about it: Someone who is high on marijuana is far less concerned about all the poor decisions being made on his behalf by his overlords in government, central banks, and crony-capitalist government-connected industry and labour unions.

If Mr. Obama were to legalise marijuana and make it freely available to everyone, Americans may not even worry about the fatal incompetence of America's coming Obamacare health care system, the breakdown of border integrity along the Mexican border, or the growing threat of collapse of the mainstream US economic system.

Marijuana is the answer to all of America's worries. And for those who worry more, rather than less, under the influence of marijuana, there are plenty of under-capacity mental institutions where they can be placed.

Mr. Obama has plenty of solutions up his sleeve. He is just getting started. He deserves at least 4 more years. You know you love it, America! Pass the toke, pres.

Global Economy: Problems, Problems, Problems

The North American and European investment markets are behaving as if they are oblivious to the way the global economic cookie is crumbling. They are due for a very rude wakeup call.

My basic sense is that we are at the end of one of the six or so major globalization cycles that have occurred in the past two centuries. If I am right, this means that there still is a pretty significant set of major adjustments globally that have to take place before we will have reversed the most important of the many global debt and payments imbalances that have been created during the last two decades. These will be driven overall by a contraction in global liquidity, a sharply rising risk premium, substantial deleveraging, and a sharp contraction in international trade and capital imbalances.

To summarize, my predictions are:

1. BRICs and other developing countries have not decoupled in any meaningful sense, and once the current liquidity-driven investment boom subsides the developing world will be hit hard by the global crisis.
2. 
   Over the next two years Chinese household consumption will continue declining as a share of GDP.
3. 
   Chinese debt levels will continue to rise quickly over the rest of this year and next.
4. 
   Chinese growth will begin to slow sharply by 2013-14 and will hit an average of 3% well before the end of the decade.
5. 
   Any decline in GDP growth will disproportionately affect investment and so the demand for non-food commodities.
6. 
   If the PBoC resists interest rate cuts as inflation declines, China may even begin slowing in 2012.
7. 
   Much slower growth in China will not lead to social unrest if China meaningfully rebalances.
8. 
   Within three years Beijing will be seriously examining large-scale privatization as part of its adjustment policy.
9. 
   European politics will continue to deteriorate rapidly and the major political parties will either become increasingly radicalized or marginalized.
10. 
    Spain and several countries, perhaps even Italy (but probably not France) will be forced to leave the euro and restructure their debt with significant debt forgiveness.
11. 
    Germany will stubbornly (and foolishly) refuse to bear its share of the burden of the European adjustment, and the subsequent retaliation by the deficit countries will cause German growth to drop to zero or negative for many years.
12. 
    Trade protection sentiment in the US will rise inexorably and unemployment stays high for a few more years.

_MichaelPettis_via_Mish

Here are the six key ideas that Mish is emphasising, out of Michael Pettis' analisis:

1. China Will Slow Much More than China Bulls and Commodity Bulls Think
2. 
   Non-food Commodities Take Big Hit
3. 
   Eurozone Experiment Ends in Breakup
4. 
   US Protectionism Takes Hold
5. 
   Deficit Countries Control Demand, Thus Have the Best Cards
6. 
   Disaster Hits BRICs

_Mish

If the BRICS are hit hard by blowback from the twin "debt and demography" crisis hitting the developed world, the panglossian investors of North America and Europe will be hard-put to find any rays of hope whatsoever.

As long as world leaders in the EU and the US are caught up in political correctness, welfare state dogma, and the faux environmental ideas of carbon hysteria and resource scarcity, they will be unable to make the necessary changes in course to free their economies from the twin curses of "debt and demography."

Until those crucial changes are made, the economic future looks bleak, globally.

Obama's Grand Green Jobs Strategy a Total Disappointment

Besides healing the planet and returning the rising seas to their natural beds, then-Senator Obama promised that his administration would create beautiful green jobs: well paid, stable, abundant jobs, unionized, with full benefits and making the earth healthier and the American people richer. As President, he stayed on message: even after the truther-enabling “green jobs czar” Van Jones left the administration, green jobs have been one of the President’s signature policies for putting the American people back to work. _GWPF_WalterRussellMead

Cranach: Garden of Eden (Wikipedia)
Something unexpected happened on the way to the Garden of Eden. Despite massive spending and stimulus, the green jobs revolution fizzled. Wind energy failed to meet expectations, as did solar. Electric vehicles were not ready for prime time, because electrical storage batteries are still 3 breakthroughs away from being up to the task. And the "smart power grid" is proving to be one more way that government and malicious hackers can monitor private activity, and shut it down.

Obama promised to create 5 million green jobs within ten years. Investors’ Business Daily has a list of that plan’s successes so far.

- On his recent jobs tour Obama stopped at a Johnson Controls plant in southern Michigan, which received $300 million in green grants and plans to create a whopping total of 150 jobs, at a cost of $2 million per position.

- Evergreen Solar Inc., which received unknown amounts of green stimulus funds on the hope that it would create “between 90 and 100 jobs” two years ago, filed for bankruptcy this week, $485.6 million in debt. Their Massachusetts plant once employed 800 people; in March it was replaced with a factory in Wuhan, China.

- Green Vehicles, an electric car “maker” in Salinas, California, took $500,000 from the city and almost $200,000 from the state but has failed to produce even one car.

- And as reported earlier on this site, Seattle was one of a handful of cities that received $20 million in federal grants as part of Retrofit Ramp-Up, a program designed to refit houses with more energy efficient materials. Unfortunately, as KOMO4 of Seattle reports, after more than a year “only three homes had been retrofitted and just 14 new jobs have emerged from the program.” _WalterRussellMead

As noted above, many of Obama's expensive green stimulus programs cost $1 million to $2 million per job. Unfortunately, these were largely make-work, administrative jobs, rather than the entry-level practical jobs as promised.

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…

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. _NYT_via_WalterRussellMead

A very sad commentary on what was once considered a grand crusade. Read the entire article at the link above.

The ongoing Obama recession has not helped the green revolution take off, of course. But if you look at the green revolution as just one more way for Obama to divert government spending from the private sector, into the pockets of friends and supporters, the entire effort makes a lot more sense.

...green trends suffer when a listless economy sends old-energy prices into a rollercoaster spiral.

This possibility is reflected in the less-than-impressive growth in the “green jobs” sector, which was supposed to lift America out of the recent recession. The New York Times’ Bay Citizen project surveyed the field and found some rather disappointing numbers in job growth, job training programs and even something as simple as weatherization projects. _PopSci

Perhaps the green revolution was always just about appearances, and not about results, like so many other aspects of the current US administration. Just enough hoopla! to satisfy the rubes, without the need to accomplish anything productive.

In the eyes of such political machinations, it is enough just to get re-elected. If the news on the street is not as good as the public wishes, a great communicator can always make enough excuses, cast enough blame in other directions, and toss out enough goodies, to keep the plantation operating.

Adapted from an earlier article at Al Fin

Russian Society and Economy Suffering Under Putin

‘The country and society are seriously sick and may already be untreatable,” Gennady Gudkov, deputy head of the Russian parliament’s security committee, told the Komsomolskaya Pravda paper....

“The country is wallowing in corruption, theft, and hypocrisy, and all of this is reflected in incidents like the one in Tula,” he went on. “We need to understand very clearly that this is a reflection of the general symptoms of the degradation of the nation.”

...A recent poll by the Levada Center found that just over half of respondents believe corruption among the country's leadership is higher now than it was in the notoriously “lawless” 1990s. Almost 40 percent of respondents thought corruption was greater the higher you went up the political ladder, with 50 percent saying all officials were “equally” corrupt.

Polls also reveal an equal distrust of police, and with good cause. One of the clearest examples of the malfeasance of the country’s law enforcement agencies is the death of lawyer Sergei Magnitsky in a Moscow pretrial detention center. Magnitsky had uncovered massive fraud by police officials in the days before his arrest on trumped-up tax evasion charges and – as the Kremlin’s rights council has suggested – he was simply thrown into jail to die as punishment. _rian.ru_via_laRussophobe

Russia's economy is susceptible to fluctuations in the international price of oil. The Russian stockmarket is in a downward spiral, reacting to a recent fall in oil prices and ongoing economic troubles in Europe and the US. Capital continues to fly out of Russia at a high rate, with no end to capital flight in sight.

Russia's demographic collapse among its core population is continuing, as non-Russian immigrants continue to move into Russia, along with their higher birthrates. Russian crime is high, public health is poor, public spirits are low as are birthrates, and anyone who can get out is doing their best to do so, and taking their money.

The situation overall is quite dire, since the people of Russia have never known anything other than oppressive, corrupt, and incompetent leadership.

The Netherlands Finally Grows Aware of Multiculturalism Threat

Ms. Kuhlman has lived in the Slotervaart neighborhood for 36 years but says, “I no longer feel at home.” Built in the 1950s, Slotervaart is now about 60 percent immigrants or their children, most from Morocco or Turkey. Crime rates are high, especially among the second generation....Then she laughed bitterly. “He doesn’t work; I work. I work all shifts. I pay taxes. I work for them!”

Willem Stuyter, nursing a beer, broke in. “It’s already too late,” he said. “In 10 years this will be a Muslim state.” _NYT

The recent multicultural festivities in London may be added to the long list of reasons why the Dutch are feeling increasingly wary about creeping multiculturalism. And where the Dutch lead, much of Europe is likely to follow.

You know that the Dutch are getting serious about the coming war against the third world invaders, when their scientists are developing bullet-proof skin. Imagine the advantage in a firefight for any ethnicity possessing bullet-proof skin! Revolutionary.

Europe certainly needs something to knock it out of its twin funk of debt and demography. If core European populations would begin replacing themselves via higher birthrates, half their escalating economic problems would be solved. Many other problems could be solved by putting an end to the importation of future criminals and lifelong welfare recipients. You would think that this would be common sense, but in an era of political correctness, common sense has been largely stamped out.

Hope for the best. Prepare for the worst.

50 Years of the Most Lavish Welfare State Comes to This?

The mass criminality in the big cities is merely a speeded-up and concentrated version of life on most large estates – fear, intimidation, cruelty, injustice, savagery towards the vulnerable and the different, a cold sneer turned towards any plea for pity, the awful realisation that when you call for help from the authorities, none will come. _Peter Hitchens

At times like this, one must ask the question: what is the purpose of the welfare state? It seems as if the outcome of the welfare state is a helpless dependency on government handouts, and a growing resentment against the shrinking numbers who try to succeed on their own. This resentment against both authority and against those who actually work for a living, has grown so strong that it explodes into open violence from time to time.

All that is missing for it to grow into full-scale insurrection, is larger numbers of rotten members, and a catastrophic event of opportunity that could serve as the trigger for an all-out rebellion.

Just look and see how many shops are protected with steel shutters, how many homes have bars on their windows. This is not new.

As the polluted flood (it is not a tide; it will not go back down again)...washes on to their very doorsteps, well-off and influential Left-wingers at last meet the filthy thing they have created, and which they ignored when it did not affect them personally.

...The great majority of the looters, smashers, burners and muggers have not been arrested and never will be. Our long-enfeebled police were so useless at the start that thousands of crimes were committed with total impunity.

Now we know why they don’t call themselves ‘police forces’ any more. But they aren’t ‘services’ either, for they certainly don’t serve us or do what we want them to do, preferring to arrest us for defending ourselves. The criminals, who are cunning without being intelligent, all know this. They will wait for the next chance.

...The loping, smirking, shuffling creeps who eventually appeared before the courts were the ultimate losers – the ones who came late to the looting and who were too slow or too stupid to run before they were put in the bag.


Ransacked: Looters targeted many shops

And what courts they are. In the one I sat in last week, self-confessed thieves are courteously addressed by magistrates and clerks as ‘mister’ and asked politely to stand up or ‘accompany the officers’ back to the cells or – more often – out into the street on bail. In the part of the dock reserved for those already free on bail, nobody has bothered to clean up the scribbled and disrespectful graffiti.

Why should anyone respect or fear this chamber of indifference? The wall-hangings behind the magistrates are scruffy and scratched.

There is no sense of awe or determination or of much purpose. There is only a strong sense of going through the motions for the sake of appearances.

Nobody is directly punished for what he has done. Excuses must first be sought, and indulgence arranged where there should be cold rage. There will be ‘social inquiry reports’ and ‘youth offender teams’ who bustle smilingly in and out ready to start work on yet another ‘client’.

...the more encounters you have with our justice system, the less you fear it. A few ‘exemplary’ sentences – none of which will be served in full, or anything near it – will only help to spread the word that arson, robbery, violence, spite and selfishness are not punished here any more. Indeed these are the things we are now famous for around a world that once respected us.

And that is why we have many more nasty surprises waiting for us, here in The Country Formerly Known as Great Britain. _PeterHitchens

A welfare state might have survived if the UK had been sitting on a Saudi Arabia of light, sweet crude oil. But even Saudi Arabia is beginning to discover the follies of unchecked welfare-ism. The kingdom is also facing the threat of insurrection.

For the UK, the rebellion is coming from multiple directions. But every front of the coming rebellion will have been fed, watered, and kept alive by the welfare state.

Only 2% of Britain's Population Black? Seems Like More Somehow

Multicultural Events Across Britain
The UK Labour Party has been straining for many years to make the UK more multicultural. They are achieving this goal through having altered immigration laws to make it easier for penniless and uneducable third world immigrants to move to the UK, and receive generous public benefits paid for by UK taxpayers. The Labour Party assumes that a more multicultural UK will help them to achieve and maintain power, since a multicultural UK will be more dependent upon big government and public benefits.

According to Wikipedia the black population of England constitutes only around 2% - 3% of the total population. But as was seen in the multicultural events of the past week, when concentrated into sections of cities such as London, Manchester, Birmingham, etc. this mere 2 to 3 % can pack quite a punch. Imagine the impact of a 10% black UK on multicultural celebrations, or perhaps higher?

The UK police did little to dampen the enthusiasm of the events as they were unfolding, and the citizens who did step in to protect private property often suffered the consequences. If concerned citizens were not beaten or killed by the celebrants of multiculturalism, they were harassed by the police -- who may have been more comfortable confronting law-abiding citizens than standing up to multiculturalists.

As the growth of multiculturalism in the UK, Europe, North America, and Oceania continues, we absolutely will have to expect more jubilant street celebrations of this type throughout the developed -- but naive -- world.

What you just witnessed in the UK was indeed a party, compared with some of the events likely to be coming your way. This time, the anarchist left and the jihadist muslim populations were not ready to join in the party. Don't expect to be so lucky next time.

Hope for the best, but prepare for the worst.

London Police More Laid Back Toward Multiculties than Vigilantes Are

A man in his fifties was badly beaten up after apparently remonstrating with rioters who had set fire to a bin; he is now fighting for his life. Police are unable to identify him because they suspect his attackers stole his wallet and any other items which might have provided information about him.

There were reports of hooded youths barging into restaurants and making off with diners’ wallets and credit cards. We were told about gangs roaming the streets carrying rolls of toilet paper, which they doused in petrol and set alight under cars. As far as the rioters were concerned it was a party; for the victims it was a nightmare. _EturboNews

Image Source
London multiculturalists decided to take a relative break from their festivities Wednesday night, generally satisfied with the quality of celebration. London police have taken a "live and let live" attitude toward the multicultural activities of the week, but the ugly face of vigilantism may be peeking round the corner.

After four nights of violence, many are saying enough is enough and they will stop the looters themselves if the authorities cannot.

Police have warned that vigilantes are putting their own safety at risk and could make matters worse. The risks were highlighted by the death of three Muslim men run over by a car while protecting their area in the central English city of Birmingham on Tuesday. _NP

The police are clearly taking the high road here, and if the rest of Britain would only follow the lead of UK police forces, the multiculturalists will eventually wind down their celebrations in good time.

Some outsiders are trying to paint this multicultural holiday as some sort of "failure of multiculturalism," but it certainly seems that the multiculturalists are having it mostly all their own way. What are these critics on about?

The death of multicultural society and the economic crisis are to blame for the riots that have convulsed London and other British cities this week, head of the Russian upper house's international affairs committee Mikhail Margelov said on Wednesday.

"I think the events occurring in the English cities have at least two reasons. One is fundamental: it's the death of multiculturalism, a eulogy which the heads of Germany, France and Great Britain have recently delivered. The value of tolerance, or in other words the value of difference, has been accepted neither by 'indigenous' Europeans nor by immigrants," Margelov said. "The two sides merely tolerate each other. And patience is the kind of thing that runs out from time to time." _rianru

Crazy Ivan clearly doesn't know what he is talking about. There is very little standing in the way of similar multicultural celebrations due to take place across European cities generally. Multiculturalism is far from dead, despite what those crazy Russkies may say.

Australians are similarly critical:

AT the risk of being politically incorrect, is it possible that the current rioting in England is a result of embracing a multicultural society at a rate faster than the Anglo-Saxon community can cope with? If this is the case, are there lessons here for Australia? _TheAustralian

No, John, there are no lessons for you there in Australia. Just relax and enjoy. Multiculturalism is already there and growing larger and more festive every night while you are sleeping. Resisting only makes you look like an old fogie who is unable to change with the times.

PM Cameron has pulled thousands of extra UK Police to London from other areas, to observe the multicultural festivities from a distance. These extra police have convinced many multicultural celebrants to relax and perhaps take a night off. Others may decide to take their celebrations to other UK cities, outside of London.

Some observers are comparing the mass celebrations in London with the mass killings that took place recently in Norway. If Anders Breivik was celebrating his own brand of multiculturalism, that would put the Norwegian police in the role of the vigilantes -- who took the law into their own hands to stop Breivik's celebration. That just doesn't make sense. And only a handful of people have died in the UK celebrations so far, as opposed to several dozens in Norway.

No one knows what is in store for the happy multiculturalists of the UK in the coming days and weeks. But we can be fairly sure that these celebrations will continue to pop up in cities wherever multiculturalists take their light-hearted approach to living seriously. Perhaps next week, in your home town?

Fun-loving UK multiculturalists of the muslim persuasion are hoping to revive the festivities, and spice them up with something "really special." To each multi-culti, his own reason to party hardy.

Amsterdam Researchers Reveal US President Obama's Secret

US President Obama burst on the international scene as a political wunderkind, while still in his 40s. Having already written two autobiographies by the age of 45, Mr. Obama has clearly been on the fast track to power from the time he was elected to the Illinois Senate. And yet Mr. Obama had never actually accomplished anything substantial in his entire life -- certainly nothing worthy of two autobiographies nor warranting being elected to the most powerful political position in the world. What is his secret?

Narcissists rise to the top. That's because other people think their qualities -- confidence, dominance, authority, and self-esteem -- make them good leaders.

..."Our research shows that the opposite seems to be true," says Barbora Nevicka, a PhD candidate in organizational psychology, describing a new study she undertook with University of Amsterdam colleagues Femke Ten Velden, Annebel De Hoogh, and Annelies Van Vianen. The study found that the narcissists' preoccupation with their own brilliance inhibits a crucial element of successful group decision-making and performance: the free and creative exchange of information and ideas. The findings will be published in an upcoming issue of Psychological Science, a journal of the Association for Psychological Science.

... "The narcissistic leaders had a very negative effect on their performance. They inhibited the communication because of self-centeredness and authoritarianism." _SD

US President Obama is the narcissist's narcissist. Among all the world's narcissists, Mr. Obama would surely rank at the top. So in a perverse sense of logic, it is fitting that Obama has reached the world's top political ranking.

But for the people who must suffer from Obama's arrogant incompetence, the news is not so good.

The question is, are there enough Americans left with above average intelligence, awareness, and wisdom, to remove this narcissist among naricssists from a position of world power? If not, the doom we experience could rightly be dubbed, "The Revenge of the Narcissists."

London Braces for Fourth Night of Horrors, Violence Spreads to Other Cities

Rioting in England’s biggest cities spread further on Tuesday night, with the first trouble in Greater Manchester.

Stone-throwing youths confronted police at the Salford shopping precinct near the city centre and looted shops including Bargain Booze and a pawnbrokers.

Police in Liverpool, Bristol, Birmingham and Nottingham were braced for a second night of violence after shops were attacked and cars burnt. _FT

Rioting and mayhem is spreading across the multicultural parts of the UK, as a preview of coming attractions for much of the rest of the multicultural western world. Poorly considered immigration policies are beginning to bear a bitter fruit.

...city centres were also targeted with looting of shops including an Armani store in the Mailbox centre in Birmingham and a Tesco supermarket in Liverpool.

Shops shut early in Birmingham, Liverpool and Salford as police struggled to contain sporadic bursts of violence co-ordinated by mobile phones and Twitter.

After reports that some rioters were as young as nine, police called on parents to keep their children at home. Chief Constable Chris Sims of West Midlands police said some were “astonishingly young”.

...Shops in Birmingham and Bristol shut early on Tuesday for fear of further violence. West Bromwich, a town to the west of the city, saw a crowd of several hundred gather in the afternoon before police could disperse them.

In Toxteth, Liverpool, many youth and community centres closed and shops shut early. Andy Ward, assistant chief commissioner of Merseyside police, blamed a criminal minority for the violence. He said it would use CCTV images to track down offenders and asked for the public to send in any images taken of offenders.
_FT

Multicultural areas of western cities have always been the weak link of western civil society -- ever since these nations began importing uneducable, unassimilable third world migrants. When the human substrate of a culture cannot maintain the high levels of performance necessary for a high technology civilisation, the society begins to break down.

The ongoing UK rioting demonstrates how enthusiastically the multicultural residents of western cities will participate in the destruction of their host societies' infrastructure.

Be forewarned and forearmed. Hope for the best. Prepare for the worst.

Welfare States Must Choose Between Hard Landing and Crash Landing

The welfare states of Europe, North America, and Oceania, are growing old and unable to finance generous benefits to citizens. Hence the mounting crises of debt and demography which threaten to overwhelm these formerly prosperous and stable democracies.

America's multicultural crisis

Convulsions as the Welfare State Dies

How does a civilised society control its roving bands of young thugs?

It is becoming dangerous to go anywhere in multicultural cities -- either by day or by night. Roving bands of flash mobs may select you to make an example of, leaving you beaten, punched out, or worse.

Try not to go anywhere alone -- particularly in the city. But even in a quiet neighborhood you may be chosen to be a victim, for reasons which are not politically correct, and thus cannot be mentioned. Team up whenever possible, to watch each other's backs. Be careful out there.

The Deep Murky Mystery of China's Inscrutable Debt

The depth of China's debt problem is impossible to fathom. China's balance books are made intentionally inscrutable so as to allow the CCP to make almost any economic claims it wishes. But what is the truth, and why does the truth matter in the case of China's debt?

China’s own system is jammed with rotten debt held in off-balance sheet state enterprises. Its countryside is littered with eerie, empty ghost towns. And Moody’s Investors Service says last month that China’s local debt was understated by hundreds of billions of dollars.

Despite that, the People's Daily said S&P’s downgrade of the U.S.'s credit rating "sounded the alarm bell for the dollar-denominated global monetary system.” China owns an estimated $1.16 trillion in U.S. debt. China prints yuan to hold down its value so as to keep its exports dirt cheap. It then uses that extra printed currency to buy U.S. debt.

Here are estimates to keep handy as this debate rolls along:

*China’s debt-to-GDP higher than Portugal’s ratio: China likes to say its debt-to-GDP ratio is 17%. Not so fast. The respected Beijing-based research firm Dragonomics says it is 89% of GDP, worse than Portugal’s 83% of GDP, and the U.S.’s 79% by 2015. Stephen Green, China economist at Standard Chartered Bank, figures China’s total debt, including contingent liabilities, is 77% of GDP. China’s balance sheet is notoriously murky.

*China's local government debt understated: It may be 3.5 trillion yuan ($540 billion), bigger than its state auditor has estimated, Moody's said last month.

Moody's said it discovered more potential loans after it found discrepancies in figures given to it by Chinese authorities. China's central bank alone holds an estimated $1.16 trillion in debt, and the government has already increased credit in the system to a reported 200% of GDP.... _Elizabeth MacDonald

The leadership of the CCP is heavily invested in dysfunctional state-owned enterprises, and badly overextended regional banks. China's environmental collapse -- poisoned rivers, air, soil, food, consumer suplies etc -- lead to popular protest and demoralisation.

China's leaders must constantly be on guard against popular unrest and the threat of political schisms that might develop into fullscale insurrection. The popular perception of China as a stable nation -- politically and economically -- must be maintained at all costs, else all is lost for the monolithic dictatorship.