Sunday, March 21, 2010

Words of Warning

Words of Warning…

Greetings good citizen,

There’s rain in the forecast and yesterday’s summer like weather is gone, unlikely to return for another two months. It’s still mid-March and most of us (ski-bums excluded) are thanking our lucky stars that the 10 inches of rain that recently soaked the region wasn’t snow.

Conventional wisdom has it that an inch of rain equals a foot of snow. The absence of single storm (ever) dropping ten feet of snow (at least in this neck of the woods) casts some doubt as to the accuracy of that particular ‘rule of thumb’.

Naturally, tonight’s first offering provides us with a brief examination of the topic of ‘conventional wisdom’.

Curtain of Tragedy Will Be Raised Soon Enough, But Perhaps Not Next in Japan

"Ninety-five percent of Japan's debt is domestically owned. Fickle foreigners have almost no sway. Indeed, Japan's problem is still an excess of savings." (At abnormally low rates of return that serve to subsidize government mismanagement and mal-investment.)

An interesting piece from the Japan Times below, [not included here] raises the issue of a hyperinflationary collapse of their economy and the yen. As you know, I forecast in 2005 that a new school of economic thought is likely to rise out of the financial crisis that the world is in today. The crisis is certainly not over, despite the government propaganda and economic window dressing that is being applied. Quite likely we have only seen the end of the first Act in what is going to be a three-part drama lasting about nine more years. [Which begs the extremely optimistic outlook that we have nine more years to deal with this thing. Did I mention that ‘conventional wisdom’ is frequently wrong? Don’t worry, Jesse makes this same point himself later on.]

In particular, the understanding of money and monetary theory is still in its infancy, having been sidetracked by the ideologues in the service of corporatism and big government. In fairness, economics is difficult because there are an enormous amount of variables, and the time lags are highly significant and varied. The fact that economics is a social science with a profound impact on public policy decisions does not help advance academic research. It does seem that the field has a surfeit of economists for hire who often seem to produce studies in order to support pre-ordained conclusions and biases. The average person can only mouth the opinions given to them by television and these studies as 'proofs' of the opinions they hold so dear. Their judgement is easily led in this, since it has no depth.

Economics is a subject rarely taught in the general curriculum. [and most basic economics courses ‘assume’ you already understand the principles of money…big mistake!] A person reads a few articles by supposedly learned men, and thinks themselves in a position to pronounce broad judgements for or against anything. Those who would appear informed enjoy repeating slogans and cartoons of thought to support their biases, which they themselves do not really understand, but draw emotional comfort from them. The irony is that they are so often arguing nonsense, and against their own best interests. Such is the power of propaganda to hold up caricatures and denounce them, and energize the public to enslave themselves. [Um, in case you missed it, Jesse just ‘condemned’ conventional wisdom right there: the ‘central pillar’ of all ‘conventional wisdom’ is the assumption that ‘anyone can see’ when reality is, most can’t…as proven by the ‘worshipers’ of Adam Smith.]

Most discussions that I read get the Japanese economic experience all wrong. There’s a complete misunderstanding of the roots of their deflation, the bubble as it was occurring, their long deflation and national stagnation, the single party political system and oligarchic economic structure, and the tremendous psychological impact which defeat had on the Japanese national psyche at the end of World War II.

As I have pointed out before, deflation and inflation are part of a policy decision in a purely fiat regime. The bias is to expansion as it is in all Ponzi schemes. People constantly create artificial rules regarding the inability to expand the money supply at will. Their minds cannot accept that something which they value so highly is created out of thin air by the monied interests. [Yes, why is it so difficult for these rabid deficit hawks to come to terms with reality…that the two things they value most are produced from nothing. We all understand that even acknowledging this reality makes their position indefensible…but that’s not our fault/problem, is it? No, our problem is we don’t share their ‘belief’, and THAT is Heresy!]

The assumptions one makes when engaging in economic analysis are all important. Data is often sketchy and selective. People take naive examples and extrapolate them into real-life scenarios, crushing their complexity. This is due to the weakness of their model.

I think the field will progress more quickly once some new insights are made, and a new model, or skeleton if you will, is struck that allows the mathematicians to begin to flesh it out again. [Um, naturally standing in the way of any ‘economic progress’ is a new paradigm’s ability to support a ‘ruling class’ (and ‘in style’ too, no ‘rulers as peasants’…or power alone is NOT enough!) Think about it, capitalism was ideal because it gave the ‘owners of all they surveyed’ power over everything while removing the ‘bulls eye’ that monarchy had painted upon them.]

For now, at least in my opinion, most economic thought is impoverished since the revolutionary insights of Keynes and so many others in response to the world depression of the 1930's. The jargon that currently passes for knowledge is a sign of decadence. I find all of the schools to offer little more than caricatures of what is a highly complex and richly interactive system. [Jesse is not wrong to lament such a ‘poverty of ideas’, but, like many others he stops short of offering his own solution…maybe this is because he is a financial advisor and doesn’t want to, er, ‘slit his own throat’.]

My personal opinion is that Japan will not collapse until its export mercantilism collapses, or the average age of the overly homogeneous population strangles its ability to maintain a high savings rate and a ready market for government debt at artificially low prices.

I expect the UK and a portion of the European region to founder first, and then perhaps China, which appears to be an enormous bubble, an accident waiting to happen. Its collapse may be a precipitant to collapses in the developed world. The US dollar will have its day to devalue into a reissuance [resulting in massive riots, people no longer ‘trust’ the government.], but perhaps not until Europe and the UK are sorted out first. But the dollar is a doomed currency, the vanity of vanities. All fiat currencies are doomed; they are invariably the victims of human willfulness.

The adulation which the media and financiers had showered on Mussolini and Hitler and their economic recoveries in the 1930's was widespread, as it was for Japan Inc. in the 1980's, and for China today. The crowd always gets it wrong, but it is surprising how often the monied interests and the professionals get it wrong as well, and remain stubborn in their misjudgement until they are overwhelmed by its consequences. Or perhaps that is their intention. Who can say, who can truly 'think like a criminal?' You are a prisoner of reason, balance, and natural restraint. These are creatures of their own appetites, with a hole in their being which one can barely appreciate.

The Bankers will make the world an offer thatthey think it will not be able to refuse. One currency, and then one government. People being irrational are not likely to take that deal, once again. [Um, we can only hope Jesse is right in this because nothing is more frightening than a single currency backed by a totally out of touch government! We can’t restrain the governments we have now, how can we hope to restrain a Goliath with the armies of the world to defend it? The only ‘acceptable’ government is no government at all…rules without rulers.]

There are those who say that they very sure what is coming, what will happen, what the future will bring. For the most part they are speaking out of fear and false pride. The only certainty is that if they really knew what is going to happen, they would cast themselves down from high places in despair. [I’ll interpret this as recognition of the fact that none of what’s going on today will ‘end well’. There are rivers of blood and mountains of pain to overcome before we arrive once again at ‘The Promised Land’. Funny that there’s never anywhere else to go, not yet anyway.]

Grab something solid and hang on to it, and to the faith that sustains you. Do not be distressed if it feels as though the world has lost its reason, and is made blind, and all is deception and trial, for this is part of the process which has begun. If a war comes, then the world will lose its ability to reason in its temporary madness. We are in for a rough ride, and revelations of what is life and what is nothingness, what is true and what is false.

“When pride comes, then comes disgrace. But with disgrace comes humility, and with humility comes wisdom. The humility of the righteous will guide them, but the sly illusions of the proud will destroy them." Prov 11

People will ask, and I can only say that I do not know if this is the end time, as no one can know this. What does it matter, since surely we are all heading towards the last things and a judgement, at our own pace. But it may certainly feel like it is something more general, more momentous, at some point before our blasphemous generation puts itself back into balance with God and nature again, and the crisis has past.

As the song says, "You ain't seen nothing yet."

And then we have the other part of this proposition, what happens to your (widely held) beliefs when they are exposed for what they are?

Words fail to describe the ‘absurdity’ of the fact that 99% of our ideological differences can be reduced to mutual accusations of ‘heresy’.

But there it is.

You don’t believe like I believe (thereby making YOU wrong! Because I KNOW I’m right! So what if my ‘belief’ is based on ‘nothing’? You can’t prove your nothing is anymore valid than my nothing…which sort of redefines the term ‘stupid argument’…and remember, stupid is PERMANENT, only ignorance can be fixed.)

If you believe what you believe because you believe it…I got some bad news for you regarding an ‘incurable’ condition…but I think most of you can fill-in-the-blank. Those who can’t, ironically, are recipients of the same damning news.

It is with Jesse’s fabulous piece about ‘self-delusion’ still firmly in mind that we tackle tonight’s second offering

China Warns US Against Sanctions Over Currency
Published: March 21, 2010

Filed at 6:08 a.m. ET

BEIJING (AP) -- China's commerce minister warned the United States on Sunday against imposing trade sanctions over Beijing's currency controls, and said his country was likely to report a trade deficit in March. [To date, the only thing more unreliable than US economic data has been Chinese economic data…so, are you feeling lucky punk?]

Washington and other trading partners are pressing China [with a waterlogged Q-tip] to ease controls that have kept its yuan currency steady against the dollar for 18 months to help its companies compete amid weak global demand. [That’s not what the pundits have been saying…] Some U.S. lawmakers have demanded to have China declared a currency manipulator in a U.S. Treasury Department report due out next month, which could precede possible trade sanctions. [ And we COULD see an outbreak of rainbows and Unicorns too!]

Asked what measures China would adopt if the Treasury Department declared it a currency manipulator, Chinese Commerce Minister Chen Deming said China would not sit idly by and reiterated Premier Wen Jiabao's statement a week ago denying that the yuan was undervalued. [Hell, he has solid evidence, a yuan buys four times what a dollar buys…despite being able to buy 7 yuan for a single dollar!]

''If (the Treasury Department's) reply is accompanied by trade sanctions and trade measures, we will not ignore it,'' Chen said. ''If it is followed by any international legal lawsuit against China, we will take them on.'' [The question here is who do you think the global currency manipulators at the WTO, who created ‘the cheaper there’ for their developed world overlords, are going to side with some kabuki dancing politicians or their own overlords? Can you say ‘China wins again?’ Now contrast this outcome against the proposed ‘New Global Government’ from Jesse’s piece above…are you scared yet?]

Business groups say China's currency controls keep the yuan undervalued by up to 40 percent, giving its exporters an unfair price advantage and swelling its multibillion-dollar trade surplus.

Chen dismissed charges that exchange-rate controls are the cause of the surplus, blaming instead U.S. restrictions on exports of certain goods to China, such as high-tech items that could have both civilian and military use. [Yeah, that’s what’s fucking us…absolutely!] Chen also said the U.S. had politicized the currency dispute and exaggerated the level of the trade surplus between the two countries. [Um, how about that still hot, smoking gun of where the fuck did our jobs go? Are we ‘exaggerating’ that too?]

''Both in theory and in practice, the appreciation of a country's currency has a very limited role in adjusting trade,'' Chen said in a speech at the China Development Forum in Beijing, according to a transcript posted on the Web site of the China Economic Daily. [Um, you don’t suppose this was ‘common knowledge’ BEFORE China was granted a seat on World Trade Commission? Currency valuation is the sole regulator of world trade!]

The Obama administration, following the lead of the Bush administration, has so far refused to cite China as a currency manipulator, believing that a more productive course would be to convince China it is in its own interest to allow the currency to rise in value. [A strategy that has yet to bear fruit…but hey, if we can keep electing dingbats to public office, fully expecting things to change, for 230 years, I guess waiting for China to go bankrupt isn’t as crazy as it seems!]

But Chen pointed to the decline of China's global trade surplus in the January-February period by 50 percent from the same period last year -- despite the yuan's stability -- and said ''I personally expect that a trade deficit may occur in March.''

The narrowing of the trade surplus reflects surging Chinese demand for imports spurred by its quick rebound from the global economic crisis, while the United States and other key export markets are still struggling. [FULL STOP! The ‘cheerleaders’ never miss an opportunity to pump up this patently FAKE economic recovery. What you have to ask yourself is WHO is buying this JUNK China is ‘allegedly’ making…it sure as shit isn’t coming here! (Those ‘hundredths of a percent’ increases in retail sales figures do not an economic tsunami make!)]

China's global trade surplus was $7.6 billion in February and the combined January-February surplus was $21.8 billion. Its trade surplus with the United States in the January-February period shrank by 27 percent to $20.9 billion. The gap with the 27-nation European Union, China's biggest trading partner, widened by 34 percent to $22.3 billion. [Um, doesn’t look ‘so bad’ when you phrase it that way BUT it totally ignores the 2 plus Trillion dollar ‘warchest’ China has built up over the past couple of decades nor does it reflect the status of the ‘current accounts’ China has with its, er, numerous ‘trading partners’.]

China's combined trade surpluses with its major export markets were larger than its global surplus because it also ran substantial deficits with Australia, Brazil, Taiwan and other suppliers of iron ore, industrial components and other materials needed by its booming export manufacturers.

Naturally, there is a significant degree of ‘jiggery-pokery’ involved with the numbers cited here for the purpose of this report and the real ‘trade deficits’ being experienced by the largely exportless developed world.

Which leads to our next ‘snap poll’ question: How much of our ‘economic well-being’ is ‘psychosomatic’?

Sadly good citizen, there are those who believe what they believe because they believe it…not that this necessarily makes then ‘right’ (regardless of how convinced they are.)

I’m sure the crew aboard the Titanic did everything in their power to convince the (first class) passengers that ‘everything was under control’ and that ‘rescue’ was but moments away, just beyond the horizon.

Which brings us to our next ‘snap poll’ question; Can you really ‘shit a shitter’?

Thanks for letting me inside your head,


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