Iran: Brain Drain, Drug Addiction, Capital Flight, . . .

In ... the latest available data, Iran was losing more than 150,000 of its educated and skilled citizens annually, according to the IMF. – Reuters _Iran Unemployment and Brain Drain

...heroin use is now at a global high in Afghanistan and Iran, where opium and poppies are grown, while it has dropped in Western Europe. _Drug Use Spiking

Educated young people and professionals are getting out whenever they can:

Following the controversial 2009 presidential elections, a wave Iranians left the country because of the widespread government crackdown on protesters.

Meanwhile, the brain drain has been a longstanding issue facing the country as many students leave Iran to continue their studies and often end up settling abroad and not returning to Iran. _EurasiaReview

The Iranian government is attempting to put a brave face on a developing disaster:

Oil production has shrunk to 800,000 barrels a day, a level not seen since the 1980s, during the war with Iraq (who bombed Iranian oil fields and tankers). Inflation is making items like meat, medicine, and imported goods too expensive for most Iranians. Inflation is out of control and the value of the rial (Iranian currency) against the dollar and other foreign currency continues to decline. It costs nearly three times as much to buy dollars with rials versus a year ago. Even with more currency being printed, the government cannot get everyone paid on time. _Economic Collapse

As the defiant Iranian government rushes ahead in an attempt to develop nuclear weapons, the tactics taken by nations opposed to a nuclear Iran continue to evolve:

Iran recently reported that security troops outside a new underground nuclear enrichment plant went to investigate a suspicious looking rock and the rock exploded. Later investigation revealed that the rock was, indeed, not a real rock but an electronic device that was apparently monitoring activity around the nuclear facility (that enriched uranium sufficiently for use in a bomb) and transmitting it, via satellite, back to somewhere. The rock was also rigged to self-destruct if anyone got close.

The usual suspects for such a ploy were the Americans (who have been using the fake rocks thing for decades) and the Israelis (who also use fake rocks, and use them quite a lot in Lebanon). The Iranians are not only upset with the exploding rocks, but also with how someone was blowing up electrical transmission towers and cutting off electricity of the underground nuclear facility. This happened twice last month. On top of all these explosions, Iran is also alarmed at the unending attacks by Cyber War weapons. _Smart Exploding Rocks

Iran's military is being forced to contract maintenance work on advanced imported weapons systems with local contractors, in an attempt to save money and to maintain control of the systems within Iran. But that may mean that formerly sophisticated systems are losing some of their sophistication, stealth, and reliability:

Iran recently put one of its three Kilo class submarines back into service after a period of refurbishment by an Iranian shipyard. Russia insists that refurbishment and upgrades of its Kilo class subs be done in Russian shipyards. But the Iranians believed the Russians were charging too much and feared the Russians would not return the sub.

So the Iranians did it themselves, even though the Russians would not provide the technical data normally needed for such an upgrade. According to the Iranian press release, Iranian technicians fabricated replacement parts for internal (pumps, compressors, engines, and the like) and external (sound absorbent tiles, control surfaces) components and installed them. While some of the technology needed here (pneumatic, engines, electronics) is pretty common stuff, other items are not. So it's unknown how adequate the Iranian replacement parts were.

...The new Iranian components have probably made these boats louder and easier to find. U.S. and allied anti-submarine forces will be keen to play with the refurbished Kilo when it ventures out into international waters (which it may avoid doing to prevent anyone from "hearing" how this Kilo has changed). _Klunkification of Kilo Submarines

Iran is paying a high price for its determination to build and maintain its own nuclear weapons arsenal. More specifically, the people of Iran are paying a high price for the determination of Iran's wealthy religious and secular elite to possess a nuclear weapons threat.

The ongoing covert war against Iran may serve as a test case for the future treatment of militant powers which wish to wield massively destructive weapons systems. Certainly no modern nation can afford very many military actions along the line of the 2003 US invasion and occupation of Iraq.

Obama: A Whimsical Destructor You Couldn't Make Up If You Tried

Obama does not live in the same world as everyone else. Obama is constantly inventing his world, every moment of every day. You couldn't invent Obama or Obama's world. No one could, no one but Obama.

"When I came into office, I inherited the biggest deficit in our history.1 And over the last four years, the deficit has gone up, but 90% of that is as a consequence of two wars that weren't paid for,2 as a consequence of tax cuts that weren't paid for,3 a prescription drug plan that was not paid for,4 and then the worst economic crisis since the Great Depression.5 "Now we took some emergency actions, but that accounts for about 10% of this increase in the deficit,6 and we have actually seen the federal government grow at a slower pace than at any time since Dwight Eisenhower, in fact, substantially lower than the federal government grew under either Ronald Reagan or George Bush.7" ***

Footnote No. 1: Either Mr. Obama inherited the largest deficit in American history or he won the 1944 election, but both can't be true. The biggest annual deficit the modern government has ever run was in 1943, equal to 30.3% of the economy, to mobilize for World War II. The next biggest years were the following two, at 22.7% and 21.5%, to win it. The deficit in fiscal 2008 was a mere 3.2% of GDP. The deficit in fiscal 2009, which began on October 1, 2008 and ran through September 2009, soared to 10.1%, the highest since 1945. Mr. Obama wants to blame all of that on his predecessor, and no doubt the recession that began in December 2007 reduced revenues and increased automatic spending "stabilizers" like jobless insurance. But Mr. Obama conveniently forgets a little event in February 2009 known as the "stimulus" that increased spending by a mere $830 billion above the normal baseline. The recession ended in June 2009, but spending has still kept rising. The President has presided over four years in a row of deficits in excess of $1 trillion, and the spending baseline going forward into his second term is nearly $1.1 trillion more than in fiscal 2007. Federal spending as a share of GDP will average 24.1% over his first term including 2013. Even if you throw out fiscal 2009 and blame that entirely on Mr. Bush, the Obama spending average will be 23.8% of GDP. That compares to a post-WWII average of a little under 20%. Spending under Mr. Bush averaged 20.1% including 2009, and 19.6% if that year is left out.

Footnotes No. 2 through 4: [Obama continues] to claim that the main causes of the current fiscal mess are tax rates established in, er, 2001 and 2003 and the post-9/11 wars on terror. But by 2006 and 2007, those tax rates were producing revenue of 18.2% and 18.5% of GDP, near historic norms. Another quandary for Mr. Obama's apologists is that he has endorsed nearly all of these policies. The 2003 Medicare drug benefit wasn't offset by tax hikes or spending cuts, but Democrats expanded the program as part of ObamaCare. The President also extended all the Bush tax rates in 2010 for two more years in the name of helping the economy, and he now wants to continue them for people earning under $200,000, which is where 71% of their "cost" resides. The Iraq campaign was won and beginning to be wound down when he took office, and he himself surged more troops in Afghanistan.

Footnote No. 5: Mr. Obama keeps dining out on the excuse of the recession, but that ended halfway through his first year. The main deficit problems since 2009 are a permanently higher spending base (see Footnote No. 1) and the slowest economic recovery in modern history. Revenues have remained below 16% of the economy, compared to 18% to 19% in a normal expansion.

The 2008 crisis is long over. The crisis now is Mr. Obama's non-recovery.

Footnote No. 6: Even at face value, Mr. Obama's suggestion that he is "only" responsible for 10% of what the government does is ludicrous. Note that in addition to his stimulus, what he calls "emergency actions" include his new health-care entitlement that will cost taxpayers $200 billion per year when fully implemented and grow annually at 8%, even using low-ball assumptions.

But the larger point concerns executive leadership. Every President "inherits" a government that was built over generations, which he chooses to change, or not to change, to suit his priorities. Mr. Obama chose to see the government he inherited and grow it faster than any President since LBJ.

The pre-eminent political question now is whether to reform the government we have to make it affordable going forward, or to keep growing the government and raise taxes to finance it, if that is even possible. Mr. Obama favors the second option, though he pretends he can merely tax the rich to do it. Nobody who has looked honestly at the numbers believes that—not his own Simpson-Bowles commission and not the Congressional "super committee" he sanctioned but then worked to undermine. At every turn he has demagogued the Romney-Ryan proposals to modernize the entitlement state so it is affordable, and he personally blew up the "grand bargain" House Speaker John Boehner was willing to strike last summer.

Footnote No. 7: Mr. Obama's posture as the tightest skinflint since Eisenhower is a tutorial in how to dissemble with statistics. The growth rate seems low because he's measuring from the end of fiscal 2009, after a one-year spending increase of $535 billion. That is the year of his stimulus and thus spending is growing off a much higher base. The real annual pace of government growth is closer to 5%, and that doesn't count ObamaCare.

*** In another news-making bit with "60 Minutes," which the program decided not to air, Mr. Obama conceded that "Do we see sometimes us going overboard in our campaign, mistakes that are made, areas where there's no doubt that somebody could dispute how we are presenting things, that happens in politics."

Note the passive voice, as if the President's re-election campaign is disembodied from the President. If Mr. Obama's campaign seems dishonest enough that even Mr. Obama is forced to admit it, this is because it's coming from the top. _WSJ

President Obama is more than a bit surreal. He may be the first fractal president, the first complete presidential construct. But as long as he is in the running against anyone outside the "progressive coalition," expect the US news media to cover up his mistakes, to obscure his obvious deceptions and self-deceptions, and to promote him as a gift from the heavens to an undeserving planet and nation.

This level of whimsical dissembling slathered over a reign of blatant destruction and stagnation, will have consequences down the road.

Hope for the best. Prepare for the worst.

You Didn't Build That: Obama-Style Tough Love Parenting

Obama's approach to tough love parenting is illustrated below, in an average American family setting. Observe, and learn.

And just to reinforce that you will not be building anything in the future -- and that everything will be built by replicators -- this Wired feature spotlights The Replicator 2 by Makerbot.

Imagine children learning to program such 3D printers to create all kinds of objects and machines. As children grow older, the "toys" they create can grow more sophisticated -- and more dangerous.

As replicating "inks" grow more varied and more capable, the limits on types of objects which can be created will retreat into the horizon. From weapons to vehicles to adventure toys to shelters and more, the list of things "you didn't build" is apt to grow very, very long.

From Monkeys to Muslims: Evolving Primate Excitability

Previously published at Al Fin blog


The differences between the minds of monkeys and the minds of men are differences of a graded evolutionary nature. Natural selection follows a forked and winding pathway, diverging and converging unpredictably. The range of primate emotions is remarkably similar from monkeys to humans. All primates -- from monkeys to higher species -- are excitable to a greater or lesser degree.

Monkeys Attacking Automobile

Monkeys are excitable, like all primates. Monkeys experience rage reactions -- like apes and humans -- but they do not typically organise in up close and personal group attacks like common chimps and people are wont to do. When they flock together, it is more likely in search of food or out of curiosity.

Evolving Apes on Rampage

In an evolutionary sense, apes are much closer to humans, and ape behaviour has many more parallels with human behaviour. Apes have been known to carry out sustained genocidal wars against competing groups of apes. The superior size and organisation of the ape brain makes it capable of organising and sustaining rage for longer periods of time on a larger scale.

Excitable Muslims

The human brain is larger yet, and formed in such a way to allow for even more complex levels of societal organisation than is found in ape societies. Human groups have been aroused to violence and warfare for as long as there is recorded history.

Human excitability -- particularly in groups -- can be a serious problem for human societies, and for the ability of humans to get along in non-violent ways. Religious excitability and violence has been a problem ever since disparate human tribes began to assert the superiority and dominance of their particular tribal gods over the gods of rival tribes.

Some forms of relgion - instigated rage appear indistinguishable from caricatures of rage as portrayed in feature films such as "28 Days Later." In that film, a "rage virus" escaped from the lab to infest human populations, leading to cataclysmic violence.

Human rage will often build in normal circumstances -- as in "road rage," "computer rage," and other common situations where other humans may act to frustrate or oppose the wishes of a protagonist (that would be you).

Opinions vary widely, as to what should be done to manage human excitability and rage, to prevent out-of-control violence. Would it be better -- for example -- to release one's anger in a real life "fight club?" Or is it better to salve one's anger in meditation, yoga, or even a "laughter club?"

One interesting suggestion is the creation of "rage clubs," as a means to purge the inevitable anger and rage that tend to build over time.

This is how they would work. People first gather together in a large open space (a barn or warehouse type area – incidentally, no alcohol would be allowed), then several passionate speakers incite the crowd with stories of injustice and exploitation inter-cut with biased news reports (there could even be a standard canon of examples; Bhopal, Gaza, The Crusades, Big tobacco. For ‘light hearted rage’ the subjects could be narrowed down to, poor user interface or badly designed electronic equipment or non existent customer service). The speakers would then lead the crowd into demonstrating their wrath and frustration with screams, tears and rending of shirts (bought specifically for the event from charity shops). A percussion ensemble or rock band will create a throbbing soundtrack of primitive trance like rhythms building in volume. The crowd will simultaneously produce various implements of noise making capability and commence to create a cacophony of sound so powerful it would even make Lemmy from Motorhead stop his ears.

Areas will be set aside where crockery seconds can be hurled furiously at a brick wall. Effigies of slippery political criminals will be stuck on poles and aggrieved victims given fifteen minutes with a baseball bat to put their point across to them (this is contentious I know, but it is meant to be purely symbolic. The signal sent out will be that such behaviour will only be tolerated at the Rage Club but at the same time it will also be a reminder to the authorities and multinationals: “we people know of our power, so don’t screw with us and ignore us at your peril.”)

Ultimately, an energy of pure rage will be created and each individual will experience a catharsis which will lead to exhaustion, reflection and a reasoned course of action to methodically change those things which enrage them. _Rage Club

Would this work? Consider that some of the most spectacular rage displays put on by groups of Muslims often occur immediately after Friday noon prayer at the mosque. Religious clerics often learn to work a crowd into a righteous frenzy. If the group is then released directly onto the streets in the form of a mob, the results can sometimes be quite photogenic.

But what if these excitable primates were steered into a rage club instead? Allowed to vent their rage in a controlled and relatively private manner, such frenzied zealots might gradually ease into a more controlled mental state. Their internal rages may even be satisfied -- at least until next week's Friday noon prayer at the mosque.

It is something to think about.

Necessary Forerunners to the Obama Nightmare

A disastrous presidency such as the Obama regime could not have come out of nowhere. A lot of people worked very hard to make it possible for such a president to be elected.

Across the US, universities, media organisations, foundations, and large lobbies, activist groups, Federal Courts, and politically connected organisations were largely taken over by persons of collectivist and anti- US Bill of Rights perspective. It has gotten so bad that in many places of employment in media, academia, or anywhere with political connections, a person cannot express pro liberty (as per the US Constitution) points of view without being shunned -- or sometimes dismissed.

It is into that increasingly monolithic, collectivist milieu that unknown politician Barack Obama made his triumphal march from obscurity to domination -- without ever once having been thoroughly examined for the benefit of the voting public.

Here is a short glimpse into part of the decades-long preparation that went into making such a debacle possible. Keep in mind that the term "conservative" is used to cover a broad range of anti-leftist POVs including libertarian -- and the term "liberal" is used to refer to leftists, collectivists, "progressives", and the broad range of ideology that opposes the individual liberties as expressed in the US Bill of Rights and Constitution.

Recent studies have confirmed that American universities have become bigoted and biased against the expression of conservative views. One new study documents bias against the expression of conservative views among social and personality psychologists, including those at universities:

We find that respondents significantly underestimate the proportion of conservatives among their colleagues. … that conservatives fear negative consequences of revealing their political beliefs to their colleagues. Finally, we find that conservatives are right to do so. In decisions ranging from paper reviews to hiring, many social and personality psychologists admit that they would discriminate against openly conservative colleagues. The more liberal respondents are, the more willing they are to discriminate.

Also note this passage, from the 2009 book The Politically Correct University:

Substantial anecdotal and quantitative evidence indicates that there is a decided leftist bent to colleges and universities, particularly the most prestigious institutions … Moreover, as several of the following contributions discuss, this political imbalance likely stems from practices within the academy that discourage conservatives from pursuing academic careers. … We maintain that the relative absence of conservative, libertarian, and neoliberal thinkers and thought from the academy is in part caused by discriminatory academic personnel practices.

And read this passage from “A Crisis of Competence,” a 2012 report for the Regents of the University of California by the California Association of Scholars:

This report is concerned with the corruption of the University of California by activist politics. … The condition we investigate is now a well-documented pathology of the modern university. … According to a recent (2007) Zogby poll, a majority (58%) of the public now believes that the problem of faculty political bias is a very serious one.

These are the very institutions that were to promote freedom of speech. How were they taken control of in the first place, to the point where the documented intolerance could be permitted?

Professor David Gelernter’s new book America-Lite: How Imperial Academia Dismantled Our Culture (and Ushered in the Obamacrats) addresses the history behind the transformation of many universities to a system biased in favor of liberal views. He describes how leftist intellectuals were brought into the universities, and how the previous guardians of conservatism in these places bowed out. Gelernter observes that such views spread elsewhere from their new home in the university, including to the mainstream media.

Gelernter believes that the old conservative guard voluntarily stepped aside:

Intellectuals didn’t conspire to make the cultural revolution happen. They could not have forced the Great Reform if they had tried, because the WASP elite colleges were private institutions in the age before massive federal grants let the government sink its teeth in permanently. The reform happened because the WASP elite stepped aside. It was a remarkable event — either a heroic, self-effacing embrace of justice for its own sake, or an act of exhaustion.

But perhaps he is being too kind to the intellectuals. Is it possible that indeed there was a mechanism by which leftists forced out those who didn’t agree with them?

I propose that there may indeed be such a mechanism, and will make this case beginning with a quote from Gelernter himself:

Among intellectuals, the left-liberal religious faithful are often not merely pious but zealous, even fanatic. To conservatives, they seem irrational and intellectually unserious, unable to hold their own in political argument, often unwilling even to try — all too apt, when pressed, to slouch off in a sulk or flare up like a burnt-out lightbulb with no more watts to spare on you. There is a frazzled flash, a silence, then “let’s talk about something else.” Many conservatives have had the experience.

Gelernter is, perhaps, understating the case. Many conservatives have found that expressing their political views around friends and family can lead to harsh insults, to loss of friendships, and even to a weakening of family ties.

Here are two recent examples from my own experience. I have an email list of 50 close friends and relatives that had previously been used by another member of the list (not myself) for expression of political views. I sent out some pro-conservative viewpoints to this list. One response came back from a dear, life-long friend:

I figure that, at best, this [a view I had expressed] reflects a desperate wish that the economy and life are that simple. A more damning explanation — intellectual laziness. Worse than that — willful intent to distort for political gain.

This friend later emailed me to make sure we continued on terms of strong friendship — and I replied that indeed we do. On Facebook I have posted a number of views critical of Obama but devoid of insulting language. A friend of more than a decade responded:

Your posts and commentary are literally making me sick.

He has since “unfriended” me and failed to reply to a recent sociable email I sent him on a non-political subject. I would gladly continue to be on good terms with him, and have reached out to him with a friendly email as noted. The behavior exemplified by these two events is not generally the behavior of conservatives: conservatives believe in a free exchange of views; conservatives believe in public debate. This Alinsky-style behavior appears to be primarily in use among liberals.

Take this kind of behavior that conservatives encounter so often in our daily lives, the sudden rudeness and hostility from friends and even family in response to an expression of conservative views, and imagine that in the context of academia or a media organization –won’t the effect be to drive out those who have conservative views?

Perhaps conservatives have failed to realize that this hostility of liberals is not limited to the sphere of public debate. Conservatives, believing in a free exchange of views and in public debate, welcomed liberals into the universities, the media, and into other organizations as well. Liberals, hostile to a free exchange of views and hostile to public debate, then drove conservatives out.

This appears to explain how our universities and media first became not merely inclusive of liberal views, but also subsequently exclusive of conservative views.

While conservatives have been treating liberals’ insults and hostility as a mere inconvenience to public debate, it has also been a tool used by liberals to drive conservatives out of their places of business, their chosen professions. As Professor Gelernter recently observed on Powerline:

While conservatives worry about debt and taxes and huge problems abroad, the left is busy pulling the whole country out from under them. While conservatives fiddle around on the roof, robbers are rifling the house and stealing the children.

The rightful goal of the media is to permit the public to be aware of all facts relevant to public debate, including facts supportive of liberal views, conservative views, and any and all other views. When things have reached the point where, as Roger L. Simon points out, reporters are afraid of being fired should they report facts supportive of conservative views, then we have a “Zombie Media,” one no longer serving its rightful function. It has been taken over by a hostile organization, shows merely the semblance of life, and is in fact supporting a purpose inimical to that which it is properly expected to perform.

If we now understand how our media and universities first became bigoted and biased against conservatives, we can at long last begin to consider steps intended to affect a turning of the tide.

_Collective Zombies of the Media, Academia, Etc.

Malthusian Doomers Appear Totally Ignorant of Basic Economics

Two recent articles in the economic blogosphere point out the basic ignorance in economics of Malthusian doomers:

The neo-Malthusian extrapolation in doom-laden pieces like “Welcome to Dystopia” never ceases to amaze me (I sometimes think such articles can be best understood by applying psychology rather than economics. Most – including Grantham’s latest – could be productively revised through the author asking themselves the simple question: ”Why is the lamp by which I am writing this not lit by whale oil?”).

For starters, Grantham has never heard the warning of a former a British Chancellor of the Exchequer, “Beware of extrapolation: it can make you go blind” (even though he quotes Kenneth Boulding to the same effect at the start of the article). Again and again, Grantham holds one item constant, and draws a straight line to chaos, doom, starvation and war.

Like many business leaders today, Grantham is also not afraid to release his Inner Authoritarian, writing that the only people who seem to understand what is going to happen to future commodity prices (Up! Up! Up!) and the world economy (Down! Down! Down! – though how that squares with Up! Up! Up! is not explained), are the Chinese Government and the military forces of the US and UK. I know that fear sells, and this is an investment newsletter, but Wow! – for a man who’s made millions, Grantham sure lacks faith in the price mechanism. (Grantham also fails to recognize the limits of developmental autocracy in China, but he’s hardly alone there).

Truly, “Welcome to Dystopia” is a catalog of self-contradiction and error. Like many “The world is running out of X” pieces, Grantham cites Leading Authorities about dwindling supplies of various essential commodities, and paints dire straight lines between present trends and doom. He fails to explain convincingly, however, why this time innovation, spurred by price, won’t drive substitutes and solutions. Hasn’t he heard of the Simon and Ehrlich bet? Oh. I forgot: ”This time is different”. I suppose he gives fair warning by using the terms “paradigm shift” and “phase change” right off the bat.

As close friend pointed out to me a few years ago, “When you buy commodities, you’re selling human ingenuity.” I may not be as wildly optimistic as some, but I certainly don’t think Grantham makes a persuasive – or even logically consistent – case for a coming commodity dystopia. _Strategy, Surprise, and Disruption

Much more with informative price trend graphics at the link above. The concept of the "price signal," and the effect it has on future behaviour of people in the marketplace appears to have escaped most doomers.

Interestingly, the author of the piece above has challenged doomer Jeremy Grantham to a 10 year bet on future trends in commodities prices, a la the famous Julian Simon : Paul Ehrlich wager. Another article pointing out the lack of economic savvy among doomers looks specifically at peak oil doomerism:

Every few years, another author comes out and says that we just reached peak oil and should begin preparing for the onslaught that will be starting to occur -- then, of course, it doesn't occur, mostly for the following 3 reasons.

Problem 1: Innovation Changes Economically Recoverable Oil Supply

When economists begin formulating theories, they often make one of the most critical mistakes possible -- something, thankfully, the Austrian school doesn't do. They begin assuming that economics involves static numbers.

George Soros's theory of reflexivity is probably one of the most important concepts investors should learn to understand. It's the notion that people react to people and change their actions, and the other people react to the changes, creating an endless feedback loop.

This feedback loop is why it's impossible to assume that trends are constant when they are about society. This includes economics, innovation, demand for certain goods and services, and other things.

Peak oil might make sense if we were stuck with a set amount of oil, people were not going to begin shifting away from oil consumption 'in time', if innovation didn't exist, and if economically unrecoverable oil couldn't become recoverable with higher prices.

Of course, all of the above aren't true. In fact, this is one reason researchers at Harvard are making the opposite predictions of the oil-peakers.

From Harvard's Kennedy School website on June 26th:

"Oil production capacity is surging in the United States and several other countries at such a fast pace that global oil output capacity is likely to grow by nearly 20 percent by 2020, which could prompt a plunge or even a collapse in oil prices, according to a new study by a researcher at the Harvard Kennedy School...

Contrary to some predictions that world oil production has peaked or will soon do so, Maugeri projects that output should grow from the current 93 million barrels per day to 110 million barrels per day by 2020, the biggest jump in any decade since the 1980s. What's more, this increase represents less than 40 percent of the new oil production under development globally: more than 60 percent of the new production will likely reach the market after 2020."

Far from reaching peak oil and seeing prices increase forever, we're seeing a very real possibility of the opposite. Innovation exists. Oil supply can increase. Not forever, of course, but certainly long enough for society to transition to another energy source altogether, like electric or something else.

Companies like Exxon (XOM), Chevron (CVX), and BP (BP) are dedicating huge amounts of money to make sure that innovation and exploration get better every year -- not static.

Problem 2: Higher Prices Change Economically Recoverable Oil Supply

Innovation makes some oil sources economically recoverable that used to not be recoverable. For example, according to the Economist last year, we were seeing demand outstrip supply. But that doesn't mean we were seeing peak oil. Even with increased demand, we were seeing a boost in production.

When demand begins to outstrip supply, this has an important impact on the market. It makes some oil that wasn't economically recoverable suddenly more recoverable because of the higher prices.

Just look at shale oil. As prices begin to increase, as well as technology, more and more oil is suddenly recoverable and can be put on the market. Apparently, supply and demand still work.

Problem 3: Higher Prices Automatically Cut Demand For Oil Products

This is probably the most important concept we need to understand. Higher oil prices make non-oil based fuels more economical. This means electric cars or something else entirely. We're decades away from even needing electric cars, but if there are long-term trends of oil price growth, then we'll see people transition to fuels that are cheaper. It's the way the market works.

This is one reason having higher fuel standards on cars actually is an economically destructive thing, because higher gas bills for consumers can end up pushing billions toward developing new fuels, allowing us to move to more economically friendly fuels decades earlier than with higher fuel standards.

Once again, government action misses the point of "higher prices" in the first place. Governments often miss the fact that ignoring prices with policy is economically destructive. _Shaun Connell

The author of the second piece above likewise points out the importance of the "price signal" in changing economic behaviour.

If a person cannot even comprehend the most basic concepts of economics and economic behaviour, their prognostications about the future are unlikely to reflect what will actually occur.

Advice to Obama on Jobs Formation

President Obama has had a disastrous effect on US jobs and household income. If Obama were open to constructive advice, what would you tell him?

Here is one man's list of positive steps Obama might take, if he were serious about the problem:

Measure No. 1: Prove that you are not anti-business. Rebuke your National Labor Relations Board for persecuting Boeing for building a plant in a right-to-work state, place the burden on regulatory agencies to prove that the benefits of new regulations exceed their costs using realistic estimates of benefits, redress for the blackmail of secured Chrysler creditors during theDetroit bailout, and pass free trade agreements that have already been negotiated. Whatever you do, cease and desist talk of “you did not build that.” That insult revealed your true feelings about the business community, more than any other of your public statements.

Measure No. 2: Do everything in your power to reduce energy costs. Lower energy costs create jobs by reducing production costs and improving international competitiveness. Stop stalling and make drilling leases available on government land, call off frivolous environmentalist attacks on new fracking technology, and cease and desist on your plans to regulate coal fired electricity out of business.  Drop ethanol mandates for gasoline.

Measure No. 3: Create conditions that encourage businesses to hire and the unemployed to seek and accept jobs. Do not extend unemployment benefits beyond a generous date certain, lower the minimum wage especially for youths, and stop the rampant approvals by the Social Security Administration and the administrative courts of lifetime disability for minor illnesses, both physical and mental. Withdraw executive orders that overturn the signal achievement of the Clinton Administration, the welfare reform act of 1986.

Measure No. 4: Reduce uncertainty of households and businesses caused by unsustainable deficits and uncertain future tax liabilities. Extend all of the Bush tax cuts  until Congressional  passage of  broad tax reforms that eliminate all tax preferences and lower tax rates, eliminate the unnecessary and duplicative federal programs identified by the Government Accounting Office, bring  the proposals of the Bowles-Simpson deficit commission to Congress for serious discussion, include the one hundred trillion dollars of unfunded liabilities of Medicare and Social Security in the budget deficit to show the urgency of entitlement reform, and replace  the convoluted and partisan Obama Care bill with bi-partisan health-care reform. Until these fundamental issues are addressed, business will not hire and people will not spend.

Measure No. 5:  Free the housing market from government intervention to work off excess inventories quickly. Government-decreed mortgage modifications, subsidies, and threats against mortgage companies prevent the housing market from finding its bottom from which recovery begins. Announce credible plans for the liquidation of Freddie Mac and Fannie Maeto remove the federal government from the mortgage business, where it does not belong.

Measure No. 6: Cease and desist promoting crony-capitalist government-private partnerships that serve political agendas rather than earning profits and creating jobs. Let private markets, rather than the energy department, allocate capital to companies that make products people wish to buy, rather than to Solyndras, Volts, and other green energy boondoggles. Let regular courts navigate failing companies like GM and Chrysler through bankruptcy proceedings so that they can emerge as competitive companies unbeholden to organized labor or government diktat.

Measure No. 7: Seek and accept the resignations of die-hard Keynesian advisors behind the failed trillion dollar stimulus and who favor more stimulus.  They are out of touch with modern economic analysis’s consensus that temporary fiscal measures are ineffective. Keynesian advisors have made the President look foolish and inept with ludicrous arguments that more expenditures on transfers for food stamps and unemployment benefits create jobs and generate recovery. (I guess we should all go on food stamps to promote recovery).

If Obama had enacted these policies (which would have garnered strong Republican support) a year ago, a strong recovery would be underway, the U. S. economy would be on its way to regaining its competitive edge, and jobs would be expanding. He would be sailing to an easy electoral victory by reaching across the aisles to get things done for the American people.

Instead, with two months until the election, Obama presides over the worst economic recovery in history, despite a catastrophic increase in federal debt under his administration. The unemployment rate is stuck at 8.3 percent, of which 40 percent are long term unemployed. The 13 million unemployed are joined by another 10 million, who are underemployed or have given up looking for a job. The poverty rate is the highest since the mid 1960s, and a half million workers have joined the ranks of the disabled, many as their unemployment benefits expired.

Obama’s enactment of a real jobs program a year ago would have been the equivalent of Bill Clinton’s 1986: “We must end welfare as we know it.” Clinton was a pragmatic politician who knew where the center lay.  Obama does not. He will not budge in his ideology or support of his special interests. His intransigence will likely cost him reelection.

In his stump speeches, Obama asks the crowd: “Do you want to go back to the failed policies of the past?”  Well, his economic policies have failed, and he is not offering any new ideas. In asking for votes, he is promising more of the same “failed policies.”_Paul Roderick Gregory in Forbes

Anyone who has studied the formation of Obama's mindset -- from his earliest memories onward -- will understand that Obama is not open to the advice offered above. He has other plans in mind, which do not allow for any strengthening of the US private sector, vis a vis the government.

Obama's Cronyism Destroys America's Future

Previously published on Al Fin blog

US Incomes Drop More In Obama "Recovery" Than During the Great Recession

Wall Street Journal

American incomes declined more in the three-year expansion that started in June 2009 than during the longest recession since the Great Depression, according an analysis of U.S. Census Bureau data by Sentier Research LLC.

Median household income fell 4.8 percent on an inflation- adjusted basis since the recession ended in June 2009, more than the 2.6 percent drop during the 18-month contraction, the research firm’s Gordon Green and John Coder wrote in a report today. Household income is 7.2 percent below the December 2007 level, the former Census Bureau economic statisticians wrote.

“Almost every group is worse off than it was three years ago, and some groups had very large declines in income,” Green, who previously directed work on the Census Bureau’s income and poverty statistics program, said in a phone interview today. “We’re in an unprecedented period of economic stagnation.” _SFGate

This may be why more and more US children and adults aspire to become cronies and parasites, rather than doctors, engineers, and architects. More in the video below:

Children these days may be dumbed down, but they are not totally stupid. They understand that in an economy run by Obama and the Chicago mob, being a crony may be their best opportunity to succeed.

Crony Chronicles website growing in relevance

What You Need to Know About China

1) China’s economy is not just slowing, it is entering a serious correction.  The investment bubble that has been driving Chinese growth has popped, and there are no quick “stimulus” fixes left.  There is the very real possibility of some form of financial crisis in China before year’s end.

2) China is in the midst of a once-in-a-decade leadership transition that has not been going smoothly.  The transition will take place, but it has paralyzed the Chinese leadership’s ability to respond to the country’s growing economic troubles.  China’s leaders believe time is on their side; they do not “get” how serious and urgent the situation is, and that what has always “worked” is no longer working.

3) China’s economic problems spell trouble for the U.S. on several fronts.

• First, China is flirting with devaluing its currency to boost exports—a move that will put it in direct conflict with Mitt Romney’s commitments on this issue.
• Second, China is already dumping excess capacity in steel and other products onto the export market, a tactic that is likely to inflame trade tensions and reinforce imbalances in the global economy.
• Third, in a worst case scenario, China may be tempted to provoke a conflict in the South China Sea to redirect popular discontent onto an external enemy.

_Patrick Chovanec

China has had a run of good luck. But China's leaders do not understand that their good fortune is likely to change, given the level of corruption and outright criminality in high places within the government and country.

Most outside observers remain in a daze, infatuated by China's rapid rise, its rumoured capital reserves, and its rush to build shiny and dazzling -- although largely empty and soon to collapse -- infrastructure.

Investors want to be told how to make a lot of money in China, when that wave may have already broken.

The True Obama Legacy: A Widespread Misery

Unemployment is up in 44 US states.  No Improvement seen nationally in 2012.

Unemployment jumped to 8.3 percent in Alabama from 7.8 percent in June, and climbed to 7.7 percent in Alaska from 7.2 percent, today’s report showed. Nevada, where the rate rose to 12 percent from 11.6 percent, remained the state with the highest level of joblessness in the country.

Rhode Island, at 10.8 percent, was second, followed by California at 10.7 percent.

North Dakota had the lowest unemployment rate in the nation, even as it rose to 3 percent from 2.9 percent the prior month.

Two states, Idaho and Rhode Island, showed a drop in their unemployment rates. Joblessness was unchanged in four states.

Unemployment in New York rose to 9.1 percent, the highest since 1983, and payrolls dropped by 3,700 workers.

The jobless rate has exceeded 8 percent for 42 consecutive months, the longest stretch in the post-World War II era. _Mish

Exactly as predicted by Al Fin back in 2008, the legacy of Obama's policies has been a reduction in opportunity, jobs, and income. It is becoming more difficult in the US to find jobs, to buy a house, and to support a family.

If Americans re-elect this incompetent clown poseur of a president, they will deserve their increasingly desperate future.

A Global Decline; A US Choice

China's banking system is a mess. And it is not reassuring to foreign observers that China's super-rich are exiting the country in record numbers.

If China continues to scale down its importation of commodities, a large part of the support for inflated oil prices will be removed. Should that happen, the main thing holding up oil prices would be continued fears over a war between Iran and Israel.

But it is more likely that Israel will wait and see what is likely to happen in Syria, before it pulls the trigger on an all-out attack against Iran's nuclear bomb-making facilities. Much of the Arab and Muslim worlds appear to be self-destructing, and no one knows how things will look if the dust finally settles.

Iran is being held together by bubble gum and baling wire, with a bit of duct tape around the edges for appearance' sake. Without the support of Russia and China, the main axis of Islamic terror -- Syria and Iran -- would collapse. Should that happen, dismantling Saudi support for global Islamic terrorism should be relatively easy, using modern tools of information warfare.

But the relationship between Russia and China is beginning to show signs of strain, as China increasingly eyes the resource riches of Eastern Siberia -- while the population of Russia shrinks and Russia's military decays.

Things could go very badly wrong if the leaders of China and Russia react irrationally to the changes in fortune which seem to be approaching for both nations.

Someone needs to tell Putin that Russia is not Stalinist USSR any longer. And someone needs to tell China's leaders that the current state of politico-economic limbo is unsustainable.

Europe is heading into recession. Unless Germany retreats from its insane Energiewende policy, Europe is headed into catastrophe.

And finally, the US faces a choice in November between a chic stasis and a staid dynamism. If the US makes the dynamic choice, the rest of the world is likely to fall in line. If the US chooses stasis, the resulting power vacuum will likely lead to dire global consequences, as already bad choices grow worse.

China: Blustering Its Way Into the Economic Future

China's Leading Indicator Decline

Leading Indicator:

It contains information on money supply, foreign direct investment contractual value, andShanghai stock market turnover, as well as:

Interest rate spread is the difference between the weighted-average yield of the seven-year or above Treasury bond with those of one year or less.

Consumer Expectation Index is compiled by the CEMAC using a monthly survey conducted in thirty major cities covering 70,000 individuals.

Ratio of industrial sales to production is the ratio of the total value of industrial sales divided by the total value of industrial production in the same month. This ratio tries to capture the inventory cycle in the industrial sector. Industries included are mining and manufacturing.

Number of new investment projects started tracks the number of new fixed-asset investment projects started. The government uses this as a leading indicator for future investment growth and economic expansion.

Index of Logistics refer to the volume of freight transportation and total tonnage of cargo reported by sixteen major coastal ports. _PragCap

China Steel and Iron Ore Prices

If China's leading economic indicators are pointing toward a downturn, once could find no sign of hesitation in China's all-out pursuit of high value foreign acquisitions:

As the map below from Stratfor shows, ever since 2010, when China pledged over $100 billion to develop commercial projects in Africa, the continent has now become de facto Chinese territory. Because where the infrastructure spending has taken place, next follow strategic sovereign investments, and other modernization pathways, until gradually Africa is nothing but an annexed territory for Beijing, full to the brim with critical raw materials, resources and supplies. So while the "developed world" was and continues to deny the fact that it is broke, all the while having exactly zero money to invest in expansion, China is quietly taking over the world. Literally. _Zerohedge

China in Africa

Besides Africa, China is buying assets in Canada, the US, the UK, and elsewhere across Europe, South America, and beyond.

This may well represent an attempt to preserve capital assets which are no longer completely safe inside China. The political stability of China may be just as overstated as the economic stability inside the middle kingdom.

The short term effects of China's commodities buying spree may be bullish on markets. The long term effect may be quite different, if China begins to come unglued. Watch and see.

Little Old Lady Ejects 5 Armed Punks from Jewelry Store in Only 15 Seconds!

It took this elderly white haired lady just 15 seconds to clear her jewelry store of 5 armed robbers -- intent on a "smash and grab" quick in and out robbery.

Five young energetic punk robbers, full of their oats, against 1 little old lady from Pasadena California. Guess who turned tail and ran?

Handguns have always been considered a "great leveler," negating advantages of height, weight, age, and sex. In this case, the little old gray-haired lady illustrates the point nicely.

Russia's Rustbucket Navy; China's Faltering Economy

The only way Mr. Putin can project power is with his navy and perhaps some permanent ports of call.

“Putin would like to do it because right now the navy is the only force that he has to demonstrate Russia is still a world power,” said Norman Polmar, a naval analyst and author of several books about the Russian navy.

“He can’t send the army anywhere. He can’t send his airplanes anywhere without over-flight rights, and people don’t like to let military planes fly over their countries.”

...the Russian navy “is in very poor shape because of finances.”

“It has very few ships that are operational. Very few submarines that are operational. Everything is behind schedule, all of their new construction. The country was for several years essentially bankrupt after the fall of the Soviet Union. The shipyards fell into disrepair. All of the services fell into disrepair,” Mr. Polmar added.

Mr. Russell said the problem is worsened by corruption. Money meant for the government is siphoned off by organized crime.

“The country’s balance sheet looks good right now because it has lots of oil and natural gas, but the profit from this bonanza is being looted by the organized crime-apparatchik kleptocracy that is ruling the country,” he said.

“Much of the money is just being stolen and not being invested in the people and the state. If it didn’t have nuclear weapons, why would anyone take Russia seriously today, except in a negative sense?” _WT

So much for Russia's ability to project conventional power around the globe.

As for China, much of its international clout is based upon its image as an economic juggernaut. But is such an image just a bit out-dated?

Industrial output growth is decelerating , and perhaps more quickly than the government data suggests. _WSJ

Pay particular attention to the graphs in the WSJ piece above.

China's global power play will come to nought if its economic infrastructure collapses like many of its buildings, bridges, tunnels, towers, and other constructs.

Both China and Russia are struggling with out of control corruption at all levels of government -- and no one can guarantee that either nation's government will win their respective battle.

To top it off, although both nations would like to project an image of close cooperation and allied goals, in the long run the two countries are on a collision course. And it is likely that China will be the last man standing, of the two.

Russia's Death Agony

In the article excerpted below, Alina Smyslova takes an agonising look at the death struggles of her mother Russia.

...unless the Russian government begins to address the factors causing the population decline, Kremlin’s economic goals will not only become unachievable but will experience a setback, and the country’s role as a key player in the world will diminish.

One of the biggest causes of the decline in population is the shift in family dynamics away from marriage, and the corresponding decrease in child birth. Russia is experiencing a revolution in family values with a significant decrease in the number of couples choosing to get married, and a significant increase in divorce. Since the 1990s, more women have opted for cohabitation before marriage, and often forgone marriage altogether.[3]

In addition to the decline in marriage rates, there is a significant decline in women choosing to have children. The lack of financial security is forcing many Russian women to choose abortion instead of motherhood. Andrei Akopyan, the head doctor at a Moscow reproduction and family planning clinic, predicts that the number of abortions will increase by approximately 11%, which he attributes to current economic woes. In fact, based on results from the Russian Public Opinion Research Center, VCIOM, only 5% of women polled in November 2008 are planning to become pregnant in the next two years.[4] The numbers become even more desperate when considering the rising number of unhealthy babies being born. Only 30% of children born in Russia are healthy; 50% of newborns lack either iodine or calcium, the leading causes of brittle bones and mental retardation;[5] seven in every ten newborns suffer from some kind of disorder; and one in twelve babies is born underweight.[6]

Those women who do choose to give birth face many risks, from losing a job to dying in childbirth. According to the World Health Organization, a Russian woman is six times more likely to die in childbirth than a German woman.[7] Combined with the high chance of giving birth to an unhealthy child and the unstable finances of the majority of the population, it is no wonder the birth rate has decreased.

The crisis only worsens as the death rate (16.06 per one thousand) continues to outnumber the birth rate (11.03 per one thousand). One of the dominant and rising killers is the HIV/AIDS virus. According to 2007 estimates, approximately 940,000 Russian citizens, or 1.1% of the population, are living with HIV/AIDS and the number is increasing exponentially. [8] Most unfortunate, 80% of the population that will die from the disease will be between 25 and 39 years of age—the prime age for family formation and labor production.[9] In addition, Russia is facing a quickly increasing rise in tuberculosis cases, which nearly quadrupled in the 15-to-17-year-old age group between 1989 and 2002.[10] The death rate from cardiovascular disease is four times, and the death rate from accidents, injuries, homicides, suicides, and other “external causes,” is five times higher than that of the European Union. [11]

Majority of these health problems and deaths are linked to the biggest problem facing Russia today: alcoholism. Alcoholism or alcohol dependency is a significant factor in two-thirds of deaths for men under the age of 55, given the life expectancy for Russian men is about 61.5 years. Russian women fare slightly better with a life expectancy of 73.9 years.[12] The Russian government is almost blissfully unaware of the health crisis afflicting its citizens; does not have accurate data on the number of people suffering from the major diseases; and is doing very little to curb this horrifying death trend. _My Dying Mother Russia

Full article PDF download (click for download manager)

H/T Mercatornet

We hear a lot of happy talk about how Russia has turned the corner on its demographic decline. But what has actually happened is that muslim immigrants are flowing into the country so rapidly that they are skewing the overall population statistics. If the numbers are stratified by ethnicity, the sad truth of the ongoing decline of Russia's core population would be clear.

Bonus: Putinism Under Siege: A collection of articles from Journal of Democracy

How Long Can You Live Without Electricity?

It is estimated that in the case of a long term loss of electrical power across a continent-wide area, as many as 90% of urban populations might be lost within one year, due to violence, loss of modern medical care and pharmaceuticals, lack of proper food and clean water, poor sanitation, and a general collapse of order and morale due to the loss of societal support structures.

How many ways can an electrical power grid be put out of commission? Here are a few, but the number is limited by the human imagination:

1. A broad-based cyber attack on power infrastructure
2. A high altitude electromagnetic pulse attack
3. A barrage of high power solar flares
4. A series of graphite bomb attacks
5. Targeted terrorist attacks on grid infrastructure using explosives, missiles, and small arm

More information at the Vulnerability of Electric Power Grids Analysis Project

Here is a look at one possible form of low-tech terrorist attack against power grid infrastructure:

The most vulnerable structure, system or component for large scale coal plants is the main step up transformer – that component that handles electricity at 230 or 500 kV. They are one of a kind components, and no two are exactly alike. They are so huge and so heavy that they must be transported to the site via special designed rail cars intended only for them, and only about three of these exist in the U.S.

They are no longer fabricated in the U.S., much the same as other large scale steel fabrication. It’s manufacture has primarily gone overseas. These step up transformers must be ordered years in advance of their installation. Some utilities are part of a consortium to keep one of these transformers available for multiple coal units, hoping that more will not be needed at any one time. In industrial engineering terms, the warehouse min-max for these components is a fine line.

On any given day with the right timing, several well trained, dedicated, well armed fighters would be able to force their way on to utility property, fire missiles or lay explosives at the transformer, destroy it, and perhaps even go to the next given the security for coal plants. Next in line along the transmission system are other important transformers, not as important as the main step up transformers, but still important, that would also be vulnerable to attack. With the transmission system in chaos and completely isolated due to protective relaying, and with the coal units that supply the majority of the electricity to the nation incapable of providing that power for years due to the wait for step up transformers, whole cites, heavy industry, and homes and businesses would be left in the dark for a protracted period of time, all over the nation.

The economy would collapse, regardless of how much good will and positive hope there was among the ruling elite. The hard facts of life – America in the dark – would soon become apparent to everyone, and the economy wouldn’t be able to absorb it. _Captain's Journal

Surviving under such conditions would be very difficult, particularly if other forces antagonistic to the US continued to attack vital infrastructure and supply lines after much of the power grid had collapsed for the duration.

Useful information on "grid-down survival"

People do not typically do well on their own -- they need families, friends, and social support structures. Modern, technology-dependent humans do very poorly indeed when on their own, without their support technologies and societal infrastructures.

It would cost over $1 trillion to harden the power grid structures of North America against these various forms of attacks. That money is unlikely to be spent for such purposes, since it is being spent for politically expedient reasons instead.

That leaves the ball squarely in your court.

Flogging Round the World

The economies of the globe are receiving a flogging, one by one. Under Obama, the largest economy, the USA's, cannot even rescue itself, much less help the large numbers of other nations beginning to drown under debt, demographic decline, and green faux environmentally motivated energy suicide.

The United States, by far the world's biggest economy, has long pulled the global economy out of slumps. Now it needs help. Three years after the Great Recession officially ended, the American economy can't maintain momentum. For the third straight year, growth has stalled at mid-year after getting off to a promising start. _Bloomberg

Europe's populations are beginning to show the signs of low birthrates among core populations. The problem of insufficient young people to support the growing numbers of old people is adding to the continent's problems.

Europe's obstacles are even more severe. It's faced with crushing government debts, struggling banks and scant economic growth. Unemployment in the 17 countries that use the euro is 11 percent, the highest since the euro was adopted in 1999.

Greece, Portugal, Italy and Spain are in recessions. Germany and France are faring better, but both are likely to grow more slowly this year than America. _Bloomberg

As for China, we have seen over the past weeks and months that China is not immune from the economic problems of Europe and the US.

Chinese growth has decelerated for eight straight quarters. That's the longest slowdown in records dating to 1992, according to Yu Bin, a government researcher.

China is also feeling Europe's economic squeeze. Chinese exports to Italy dropped 24 percent in June from a year earlier. Exports to France fell 5 percent, those to Germany nearly 4 percent. Europe buys about 17 percent of China's exports. The impact of weak European demand for Chinese-made furniture, shoes, toys and other goods has fallen hardest on export-oriented manufacturers along China's southeastern coast. Some companies have closed. Others are cutting staff. _Bloomberg

From China, the problems flow downhill to Brazil, and to India. Brazil's government and people have been betting that the good times would never end, and the time to pay the piper is approaching.

"The current pace of credit growth in Brazil remains unsustainable — and the longer it continues, the bigger the risk of a messy ending further down the line," Capital Economics warned.

Similarly, the outlook has dimmed for India, the world's fourth-biggest economy. Its growth slowed to a 5.3 percent annual rate in the first three months of 2012, the slowest rate in nine years. _Bloomberg

Russia has its share of problems from rampant corruption and capital flight to widespread drug and alcohol abuse, and suicide. Still, some Russians see the country's source of economic support -- its energy wealth -- as the equivalent of Russia having won the lottery:

Lottery winners find it psychologically hard to accept that their winning is a completely random event. They tend to see it as their "achievement," the result of them being special or chosen by providence. Remarkably, this is also the case with Russia, where the government ascribes the country's relative economic prosperity not to the inflow of petrodollars — and the luck from an extended period of high global oil prices — but to its supposedly wise, prudent economic policies. Ordinary Russians similarly see the wealth that is flowing into their country as somehow the result of their hard work, not circumstances beyond their control.

Winners' greatest victims, however, are their own children. Very rarely are the lottery winnings used to ensure good education for winners' kids. Many end up spoiled, morally corrupt and traumatized by their parents' good fortune. This could be seen as a metaphor for Russia's lack of investment in its future. Russia has done little to wean its economy from oil or revive the education and research infrastructure that existed in the Soviet Union. Most alarmingly, lottery money usually ends up as an easy-come-easy-go fortune. Even enormous jackpots have been squandered completely. It is a cautionary tale for Russia, which could end up back in the indigent 1990s if oil prices fall. _MoscowTimes

The Earth's national economies are being generally flogged round the world, and even the winners too often end up losers.

Tables Turned on Florida Internet Cafe Armed Robbers

Image Source

The Internet cafe patron who shot and injured two men as they tried to rob the business will likely not face any criminal charges.

“Based on what I have seen and what I know at this time, I don’t anticipate filing any charges,” said Bill Gladson of the State Attorney’s Office for 5th Judicial Circuit.

Gladson said he has reviewed the security surveillance video from the cafe. While he still awaits final reports from the Marion County Sheriff’s Office, he said the shooting appeared justified.

Samuel Williams, 71, who fired the shots, has a concealed weapons permit, according to the Sheriff’s Office. Under Florida law, a person is allowed to use deadly force if he or she fears death or serious injury to themselves or others. As long as the person isn’t committing a crime and is in a place where he or she has a right to be, they are considered to be acting within the law. _Source

One never knows when President Obama or Reverend Sharpton will take a personal interest whenever Florida thugs are shot. I suppose it depends upon how closely the perpetrators resemble the US president's nonexistent son.

Below you see a short video of the armed robber thugs being chased down by an indignant 71 year old cafe patron, who turned the tables on a pair of punks.



The perpetrators had not expected anyone in the cafe to be armed.

Rampant spillover crime in places such as Florida tend to induce a counter-reaction within ordinary citizens. Concealed carry permits and armed neighborhood watch captains make criminal activity outside the 'hood more dangerous. Previously soft targets may be hardening.

Americans Support Big Defense Cuts?

Over the past 3 years, US federal budget deficits have averaged over $1 trillion per year, and there is no sign of reduction in federal spending -- nor any sign of significant increased revenues -- for the next decade. Where should a more frugal government start to cut spending? Defense? Social Programs? Environmental Agencies? Interest on debt?

Here are projected annual increases in spending categories for the US federal budget from 2012 thru 2022:

Annual rates of increase in major spending categories budgeted for the 2012-2022 period were: Defense: 1.8% Non-defense discretionary: 1.6% Social Security: 5.8% Medicare: 6.6% Medicaid: 8.5% Net interest: 14.2% Total spending: 5.0%[6] _Wiki

You can see that the big losers in future budgets are defense and non-defense discretionary. Mandatory spending is skyrocketing.

http://www.truthfulpolitics.com/http:/truthfulpolitics.com/comments/how-the-federal-government-spends-money/
Given the above, it may seem odd that American voters are not more angry about government over-spending across the board. Instead, the ire of American voters is directed mainly toward defense budgets.

Americans of all stripes have had enough of massive Pentagon budgets and want significant cuts in defense spending, according to new survey data released on Monday.

In Republican and Democratic districts across the country, 74 percent and 80 percent of respective voters said they want less defense spending, the study found.

On average, voters indicated that they wanted a budget for fiscal 2013 that would be nearly 20 percent less than current defense spending.

With $645 billion enacted for total defense spending this year, the average voter’s preferred budget for next year, an 18 percent cut, would translate into a $116 billion savings—money lawmakers trying to balance the budget could sorely use.

“The idea that Americans’ would want to keep total defense spending up so as to preserve local jobs is not supported by the data,” said Steven Kull, director of the Program for Public Consultation, which conducted the survey with the Stimson Center and the Center for Public Integrity, a nonprofit investigative journalism group. Read more at http://globaleconomicanalysis.blogspot.com/#DVLKMb5AuvElZi3a.99 _NatJournal

H/T Mish

What voters do not understand is that defense spending has been decreasing as a proportion of total spending, for quite some time. The image below demonstrates how mandatory spending is growing, at the expense of discretionary spending:

Source

Mandatory spending is growing exponentially, and is destined to crowd out all discretionary spending including both defense and non-defense discretionary. So why isn't the skankstream media -- both news and entertainment -- informing the public about the truth of budget trends? Because media executives see no benefit to themselves in keeping the public informed. Yes, they are happy to indoctrinate the public to their own benefit, but objective information that is crucial to average citizens lives? Not so much.

US Federal Budget Doomed to Swamp US Economy

Spend-happy US politicians have put the US economy into a huge bind, and the clock is ticking down.

The US defense budget should certainly be given a good trimming, but the same thing is true for the US government budget as a whole. If things go on as under the current administration, the US will not be able to afford its defense infrastructure quite soon, anyway. It will be slashed, regardless, by necessity.

The US public is quite naive about the nature, extent, and rate of growth of US government spending. And so far, no one seems willing to paint a clear, broad, objective picture -- not even Mish.

Spain: A Cautionary Tale from Michael Pettis

Beijing-based economist Michael Pettis has family roots in Spain. Michael's personal experiences with friends and family involved in the Spanish real estate bubble provide object lessons on a much wider scale:

I remember in 2003 my mother had a New Year’s Eve party at our family home in Málaga, in southern Spain, at which over 80 people sat for dinner, including most of my old friends still around from high school days. That night I had one of those epiphanies (as you often do on New Year’s Eve, I guess) about the real estate market when I suddenly realized that nearly every one at the party was involved in one way or the other in real estate. Most of the people there (including my Persian sister-in-law) were real estate developers, real estate agents, real estate lawyers, architects, or owners of building and construction companies. All of them lived off (and had prospered mightily from) the real estate boom in southern Spain.

But this cannot be, I thought in my naiveté. If the only industry around is real estate, then we must be living through a real estate bubble of enormous proportions.

Later that night I spoke to one of my old high-school friends, Andy, who was at the time a prosperous real estate agent with houses in Marbella (purchased on borrowed money, naturally), a Mercedes, and all the trappings that accrue to an immensely charming and self-confident real estate agent during a real estate boom. In our conversations, and ones that took place subsequently over the next few years, I warned him that the property market in the south of Spain looked out of control, and it would be a good idea from him to diversify his savings out of real estate.

Same old same old

Of course Andy didn’t. He explained to me that what we were seeing in southern Spain was not a bubble because there were very strong reasons to believe that real estate prices were undervalued and were going to rise a lot more. Europe, he told me, is aging rapidly, and old people, as everyone knows, like nothing better than to retire in some warm and sunny place, preferably on the beach. With an infinite supply of European old people and limited European beachfront property, mostly in Spain, Italy, and Greece, where in addition you had great food, warm-hearted people, and plenty of immigrants to keep the prices of services (and servants) down, it was certain, Andy explained, that real estate prices would not decline. The demand was insatiable at almost any price.

This seemed like a perfectly reasonable argument on the face of it, and it was widely proposed to justify ever-soaring Spanish real estate prices for many years, not just on the Spanish coast but also, perhaps a little bizarrely, in every nook and cranny of the country, including some pretty gray and inaccessible building projects outside cold, northern industrial cities.

The weakness in the argument, of course, was that although there might have been near-infinite demand, this could not justify near-infinite increases in prices, especially since the demand itself was likely to be highly pro-cyclical because the Spanish economy had itself become dependent on real estate development. As long as the economies of the cold northern European countries were booming, in other words, the demand from retirees for beach houses would stay high, but any slowdown in the economy would reduce demand in Spain at the worst possible time.

And as Spanish real estate slowed, the impact would be exacerbated by a much sharper slowdown in the Spanish economy caused by the slowdown in real estate, which had become a major driver of the economy. If a substantial portion of the Spanish workforce depends on a booming real estate market – and not just those directly dependent, but also those indirectly dependent, like bankers, restaurateurs, retailers, travel agents, and so on – then any slowdown in the real estate sector is itself seriously self-reinforcing.

We have now seen how this works in Spain, but in China we are still using a similar argument to explain why real estate prices cannot drop significantly. Our Chinese version of the old-people-love-to-live-on-the-beach argument is the urbanization argument. As long as Chinese workers continue to move from the country to the cities – and urbanization has been one of the most dramatic consequences of Chinese growth in the past three decades – then there is likely to be a near infinite demand for city property, and so prices can only go up. And because prices can only go up, speculative demand for real estate is not speculative, it is precautionary.

This claim seems at least as plausible as the Spanish argument justifying infinite price increases, and was probably true a decade ago, but it runs into the same problem that the Spanish story ran into (and indeed that nearly every previous case in history of a real estate bubble, which has always started with a plausible story). First, no matter how much demand we can project into the future, rising prices can nonetheless outpace rising demand because rising prices can themselves stimulate further demand, in which case rising prices are unsustainable. This should be obvious, but the point is often lost in the giddiness that accompanies rapidly rising prices.

Second, and this is key, the rising demand is itself pro-cyclical. This is the most dangerous part of the process and perhaps the least well understood. Rising demand driven by the urbanization process is itself subject to underlying growth in the economy, since it is growth in turn that drives the urbanization process.

What’s more, when we reach the point as we did in Spain several years ago, and have reached in China too, in which a substantial part of the growth that drives the urbanization process is itself created by real estate development, then any slowdown in underlying growth is likely to be seriously exacerbated by a corresponding slowdown in real estate development. This is because the economy is caught in the reverse side of the feedback loop that helped drive prices on the way up – slowing growth leads to slower demand for urban real estate, which leads to slower real estate development, which itself leads to slower growth. _Michael Pettis

Patrick Chovanec explains why his cautionary language about the Chinese economy is not just empty words

Walter Russell Mead remarks on the falling Chinese growth numbers, and wonders what they portend for the future of the global economy.

Most of the developed world is caught up in the twin destructors of exponentially rising debt, and demographic decline. Up until recently, it was thought that China, India, Brasil, and Russia were exceptions to this widespread decline. But that rosy viewpoint may be wrong.

In fact, it seems that the Anglosphere may be in the best position to weather this lengthening global recession, if the US can rid itself of the parasitic regime that is currently sucking the life's blood out of the US private sector.

Good luck, Yanks, this November.