Quote of the day: Shiller on economic delusions

Economists who adhere to rational-expectations models of the world will never admit it, but a lot of what happens in markets is driven by pure stupidity – or, rather, inattention, misinformation about fundamentals, and an exaggerated focus on currently circulating stories.

- Robert Shiller, "Debt and Delusion"

Ritholtz on the rise of the Corporatocracy

Over the past 30-years both Republican and Democratic parties have drifted from their traditional positions towards extreme stances. Throughout this period pro-corporate policies that catered to the balance sheets of multinationals and those with enough cash to pay-to-play, have defined the legislative agendas of both federal and state politicians. Left-wing political activists, like Ralph Nader, have been calling Washington D.C. "corporate occupied territory" for the past two decades. Consider the following:

• The revolving door between corporate officers and government employees has become the norm.
• A study conducted in 2005 by Public Citizen found that from 1998, "43 percent of the 198 members of Congress who left government to join private life have registered to lobby."
• Politicians have become indentured servants to special interest groups and major lobbyists in the financial/insurance industries, the military-industrial complex, the energy/ chemicals sector, big-pharma, corporate agricultural, and the communications/ electronics industries.
• Legislation is often written directly by lobbyists and submitted to congressmen and state legislators for direct approval.  Google CEO, Eric Schmidt, told The Atlantic magazine, "The average American doesn't realize how much of the laws are written by lobbyists... It's shocking how the system actually works."
• "Corruption, in its institutional sense, denotes the degeneration of republican forms of government into despotism, and typically comes about when the private ends of a narrow faction of citizens succeed in capturing the engines of government." (Harper's, Speak, Money, Oct. 2010)
• The Brookings Institute calls "The 5-4 conservative majority decision in Citizens United vs. the Federal Election Commission that struck many decades of law and precedent [to] likely go down in history as one of the Supreme Court's most egregious exercises of judicial activism."  The Roberts court, "dismissed the legitimacy of laws... equated the free speech protections of individuals and corporations in spite of countless laws and precedents that insisted on meaningful differences."
• A USA TODAY/CNN/Gallup Poll taken Dec. 16-18, 2005 found that 49% of American adults say they believe "most members of Congress are corrupt."
• The Republicans K-street project, was a project by now convicted former congressman Tom Delay to coerce lobbying firms to "hire Republicans in top positions, and to reward loyal GOP lobbyists with access to influential officials."
• Super-lobbyist Jack Abramoff, was sentenced in 2006 for conspiracy, fraud, and tax evasion related to his lobbying efforts

Barry Ritholtz, CEO of FusionIQ (an investment firm) and primary blogger at The Big Picture tells his readers that:

In 2009 and 2010, I learned that Corporate America took over the political process via their exhaustive lobbying efforts. What was once a Democracy is now a Corporatocracy... Politicians do the bidding not for the people, but for the corporate establishment. Those people who want to blame the barking, snarling government for all the woes of the world do not want you to look further up the leash to see who is giving the commands. These corporate apologists pretend to be philosophers, but in reality they are mere Fellatrix, bought and paid for by their lords and masters.

We've reached a turning point.  When growth was evident, jobs were available, and cheap accessible credit abounded, everyone was happy and willing to keep dancing to the same tune. Now that the bill is past due and we're looking at decade of low growth or worst, investors and everyday persons on both the right and the left are seeing the system for what it is.  Ritholtz acknowledges that we were warned by the founding fathers, Eisenhower on the military-industrial complex, and countless other critics about the perils of what philosopher Sheldon Wolin has described as inverted totalitarianism.

The corporate state does not find its expression in a demagogue or charismatic leader. It is defined by the anonymity and facelessness of the corporation.

The viciousness and lawlessness of the corporatocracy knows no bounds. Like Orwell's 1984, those in control have no interest in the betterment of mankind or pursuing nationalistic agendas, they are solely interested in power for power's sake. And in the polluted materialistic cesspool that is modern existence, that power is obtained through the collection and amassment of wealth and money.

Interesting People: Joumana Haddad

The title of the Guardian newspaper's (UK) article is Joumana Haddad: 'I live in a country that hates me.'

Ms. Joumana Haddad is a citizen of Lebanon, where she is an author, poet, editor of a local newspaper, and according to the article, a subversive element.   Assailants have taunted her with the threat of having acid being thrown in her face and murder, all for publishing and openly discussing matters of sexuality.  She edits the the cultural section of a newspaper that "contains serious reportage about polygamy, virginity and forced marriage, but also erotic stories and personal testimony."  Her most recent work, a book called I Killed Scheherazade: Confessions of An Angry Arab Woman, contains in her words, a "vivid assertion of individuality, free speech, free choice and dignity against religious bigotry, prejudice and the herd instinct both within and outside the Arab world, and within and outside Islam."

The article expands on her upbringing, beliefs, and personal philosophy.  She describes the Islamists as:

"These backward-looking obscurantists" – Arab defenders of chastity – "are thieves. They are desecrators. They are murderers. And, on top of everything, they are stupid. And this is perhaps the cruelest blow."

It also describes her state of being:

She also knows, however, that she is damaged, rudderless in a profound way, and that one of the results is that she is attracted to transgression for transgression's sake. Her achievement is to tether that instinct to her cause and to enact her beliefs; her recklessness in doing so is brave and immensely admirable, but also makes one slightly worried for her. Behind the laughter and defiance lurks a sense of what her unconventional path might have cost.

Unlike the typical puffery that is found in most biographical articles, this one is introspective and multi-dimensional.  Ms. Haddad's experiences, life struggles, and philosophy provide insights into the difficulties faced in challenging established cultural norms in modern Middle East countries.

American Idiots: Deep South Edition

One of the great paradoxes of America is that although more Americans have won Nobel prizes in the fields of science and medicine than any other nationality, and given the fact that the nation has the best universities and some of the greatest research and development centers in the world, Americans as a whole remain woefully ignorant, if not completely hostile, to basic scientific knowledge and rationality.

Over the past twenty years repeated surveys have found that as much as 95% of the American population is scientifically illiterate.  A recent study conducted by the California Academy of Sciences found that 47% of Americans did not know how long it takes Earth to revolve around the sun, and 41% believed that dinosaurs and early humans coexisted.  Another recent poll done by the Pew Research Foundation, found that only 52% of Americans understood the basis of stem cells in relation to normal differentiated cells and a mere 46% knew that atoms are larger than electrons.  As described in the Boston Globe, "On a highly contentious issue like global warming, meanwhile, the gap between scientists and the public was vast: 84 percent of scientists, but just 49 percent of Americans, think human emissions are causing global warming."

So it should come as no shock to discover that only a mere third of the population "believe" in the theory of biological evolution.  Worst, more than 50% of the population "believe" in literal creationism.  It is this latter group of simians that I wish to highlight.  In the state of Alabama, a state that is ranked as having the largest percentage of obese citizens and least educated persons in the country, the local Republicans managed to achieve a new intellectual low through a primary election campaign commercial.  According the online political news-blog TPM,

[An Alabama] state PAC recently went on the air with an ad attacking one of the Republican gubernatorial candidates for supporting the teaching of evolution in schools and for saying that parts of the Bible aren't true.

The candidate, Bradley Byrne, responded with a lengthy press release vehemently defending his belief in creationism and the infallible truth of the Bible.

The aggrieved Republican pol went on to further dismiss every piece of scientific analysis in the past 4,000 years -from the ancient Babylonians who studied astronomy to 19th C. scholars who developed theories of electromagnetism and nuclear chemistry to modern 21st C. molecular biologists- by making the ludicrous claim of "I believe the Bible is the Word of God and that every single word of it is true ..."

All these dunces and like-minded inbred yahoos south of the Mason-Dixon line are a burden to the rest of humanity.  They are idiots, who are morally debased, scientifically illiterate, and lacking in any common sense.  Just watch the following clip as evidence.

The Cult of Personality- Mr. Obama & Liberals

Glenn Greenwald has a wonderful post explaining how those on the political right, with George W. Bush, and on the left, with current US president Obama, voluntarily abdicated rationality and independence to engage in hero-worship of their beloved leaders. He elaborates

Those who venerated Bush because he was a morally upright and strong evangelical-warrior-family man and revere Palin as a common-sense Christian hockey mom are similar in kind to those whose reaction to Obama is dominated by their view of him as an inspiring, kind, sophisticated, soothing and mature intellectual. These are personality types bolstered with sophisticated marketing techniques, not policies, governing approaches or ideologies. But for those looking for some emotional attachment to a leader, rather than policies they believe are right, personality attachments are far more important. They're also far more potent. Loyalty grounded in admiration for character will inspire support regardless of policy, and will produce and sustain the fantasy that this is not a mere politician, but a person of deep importance to one's life who -- like a loved one or close friend or religious leader -- must be protected and defended at all costs.

A year into his administration, Mr. Obama appears either unable or unwilling to exorcise the demons of corporatism, militarism, and crony-capitalism that have long possessed congress and made any real reform, in favor of the public interest, impossible. Whether it is the promised reforms to Washington's corrupt and as usual politics or putting an end to the many reckless and undemocratic Bush era policies, a great many of those on the left who once believed Mr. Obama's exhubrant rheotric, are seething at the lack of change. As Bob Herbert of the New York Times said in his column, "Policies that were wrong under George W. Bush are no less wrong because Barack Obama is in the White House."

Propaganda Alert: The World is Not Cooling!

I'm sure you've heard the recent claims made by Climate Change skeptics that much of the data and arguments pointing towards global warming are little more than bulk conspiracy theories. The BBC ran an article a month ago by Paul Hudson, asking "What happened to global warming?" It makes the declaration that "the warmest year recorded globally was not in 2008 or 2007, but in 1998" in the past decade and further states that skeptics believe "there are so many other natural causes for warming and cooling, that even if man is warming the planet, it is a small part compared with nature."

While it is true that global temperatures reached a high point in 1998, it is not true that temperatures across the planet have been in decline since. Given the controversy, a re-analysis of the existing data led by the US NOAA's (National Oceanic and Atmospheric Agency) climate data center was conducted and no statistically significant cooling trend was found. An AP story quotes the agency as stating:

"The last 10 years are the warmest 10-year period of the modern record," said NOAA climate monitoring chief Deke Arndt. "Even if you analyze the trend during [the skeptics] 10 years, the trend is actually positive, which means warming."

Furthermore, in relation to ocean temperatures, NOAA asserts that of the 10 hottest years recorded, "eight have occurred since 2000, and after this year it will be nine because this year is on track to be the sixth-warmest on record."

What skeptics have done is what they always done: manipulate the truth. Depending on the starting year of their so-called ten year interval and the robustness of the data set, one can get one of three different outcomes: temperatures trending upwards, constant, or downwards. So which one is correct? According to David Peterson, a retired Duke University statistics professor, the methodology used by the skeptics to claim a downward cooling trend is "not scientifically legitimate." AP quotes Ben Santer, a climate scientist at the Department of Energy's Lawrence Livermore National Lab, who calls their efforts, "a concerted strategy to obfuscate and generate confusion in the minds of the public and policymakers" prior to the international climate talks in Copenhagen this December.

People need to stop listening to these hucksters who are peddling refuted arguments prettied up with bogus statistical data for political gain. These are not trivial matters. For example:

• Heat waves in Europe in 2003 caused nearly 40,000 people to die.
• Global warming is more than a third to blame for a major drop in rainfall, that includes a decade-long drought in Australia and a lengthy dry spell in the United States, according to researcher Peter Baines of Melbourne University in Australia.
• Forest fires that have decimated parts of Australia, the Mediterranean, and Western North America in the past few years have been linked to a "positive feedback loop" caused by increased global temperatures.
• Glaciers across the world continue to melt at an unprecedented rate. Many of the world's most populous regions including India, China, and nations along the Andes are highly dependant on these bodies for water utlized in agriculture. Displacement of these massive bodies of ice has also been predicted by geologists to lead to an increasing number of earthquakes, tsunamis, and volcanic eruptions in unexpected places.

A world that is less stable and less able to sustain human habitation, is simply a world with less humans.

***

I have additional blog entries about recent public opinions shifts in America on Climate Change (here) and a brief discussion on scientific research confirming CO2 concentrations and global temperature increases (here).

Becoming More Stupid: Climate Change Disbelievers

Once again, the forces of human ignorance and absolute stupidity are on the march. According to:

The latest national survey by the Pew Research Center for the People & the Press, conducted Sept. 30-Oct. 4 among 1,500 adults reached on cell phones and landlines, finds that 57% think there is solid evidence that the average temperature on earth has been getting warmer over the past few decades. In April 2008, 71% said there was solid evidence of rising global temperatures. Over the same period, there has been a comparable decline in the proportion of Americans who say global temperatures are rising as a result of human activity, such as burning fossil fuels. Just 36% say that currently, down from 47% last year.

That is a startling drop of common sense. It means that 14% of the US population, despite thirty years of research, innumerable scientific studies, irrefutable empirical evidence, and the Nobel Prize for Peace being given to the IPCC (Intergovermental Panel on Climate Change), have in the period of a year changed their minds. The only possible answer to this disturbing regression is that the forces of corporate propaganda coupled with the mainstream media's indifference to articulating facts about the subject and the persistent aloofness of the general population to basic science have given ample opportunity to dissuade the ignorant masses that it is once again acceptable to pollute their way to prosperity.

I've exhausted all patience with these evolutionary dead-enders who shriek at the slightest increase in taxes and the cost of beer, yet are incapable of rationalizing the simplest of scientifically determinable facts. I expect nothing of substance to come out of the Copenhagen Climate Change Conference in December and furthermore expect that those who prevented change, impeded consensus, and disseminated propaganda will once again be amongst the first to demand that government save them and their businesses when the full effects of climate change occur.

Roubini: into the buzzsaw

Our dried voices, when

We whisper together

Are quiet and meaningless

As wind in dry grass...

(T.S. Elliot, The Hollow Men)

I have long chided those who persistently have advocated that contrarian 'realists', to which I include Nouriel Roubini, were somehow less sophisticated and learned than the Svengali's of high commerce that opportunistically advertised and sold the benefits of casino-capitalism. Whether those persons were the Chairman of the Federal Reserve, the droves of market speculators, or propagandists in the business news departments, their understanding of the "free-market" and predictions have been proven to be at best abysmal and at worst criminal. It needs to be said and repeated frequently, that the world we were promised was the exact opposite to what we in fact received. Individual retirement accounts vaporized, long-term investments liquidated, businesses laid to waste, economies decimated, and in a few cases like Iceland, whole nation states brought to financial ruin.

So when Roubini, who constantly has been calling a spade a spade talks, I think everyone should listen. In yesterday's Globe and Mail (Canada) he summarized what he thought were the underlying weaknesses in the global economy that make the momentary upticks in growth irrelevant given the scope of future problems.

First, he outlines his reason for pessimism:

U.S. data – rising unemployment, falling household consumption, still declining industrial production, and a weak housing market – suggest America's recession is not yet over. A similar analysis of many other advanced economies suggests that, as in the United States, the bottom is quite close but has not yet been reached. Most emerging economies may be returning to growth, but they are performing well below their potential.

He then outlines four topics that will constrain future growth:

1. Individuals forced to save and re-capitalize themselves.

2. A financial system that remains both broken and inherently unstable

3. Business still face overcapacity, weak profits, and deflationary pressures

4. The re-leveraging of the public sector through large fiscal deficits and debt accumulation risks

He concludes that a double-dip recession is highly possible, given the existing uncertainties. Merely because one's position is unpopular does not make it any less factual or prescient. In that vein, I would also add that given the current retreat from globalization and the looming Malthusian resource threats (eg. water, commodity prices, & ecosystem instability) we should prepare ourselves for long-term stagnation and dismiss the boom-years as an artifact of irrational exuberance.

Hooker with a Penis: The Great Scam of China

Week-after-week, the mandarins of high economics have sought refuge from the capricious whims of the Gods of Finance by issuing glowing anodynes that predict that the Great Chinese Juggernaut remains healthy, virile, and still emergent. The World Bank has decided that due to the expansionary fiscal and monetary policies employed by the People’s Republic of China (PRC), that their economy will grow 7.2% in GDP for 2009. OECD predicts a growth rate of 7.5% and Goldman Sachs chimes in with a rate of 8.3% (rather than the 6% previously expected) in 2009. Economist Lu Ting, Bank of America-Merrill Lynch, states that growth could reach a grossly improbable 9% in Q3 and 10% in Q4.

I’ve already outlined in a previous post a number of the obvious discrepancies with existing economic data relating to this current recession and a few of the underlying structures of world finance (where credit markets remain frozen), which indicate that all is neither well nor necessarily improving. Besides the pedestrian kowtowing that is a requisite employment condition for all elite banking economists, is the fact that financial institutions across the world have an incentive to deceive. Whether it is Jack Grubman at Salomon Brothers (Citigroup) hyping garbage IPO’s to clients, mutual fund scandals arising from crooked brokerage houses, insurance scandals (that included Marsh & McLennan and AIG), the pervasive and wide-reaching executive option scandals, weekend at Bernie Madhoff’s, or the perennial excesses of the investment banks (Bear Stearns, Lehman Brothers, Citibank, or Goldman Sachs), the underlying trend is that deceit remains profitable; as long as one isn’t caught.

Taxpayers across the industrialized world have become virtual vassals of these super-national entities that have become “to-big-to-fail” (TBTF). Your tax dollars, Euros, and Yen have been extracted to prop up the extravagancies of casino-capitalism and the perfidy of the greatest criminal minds of our generation. To generate their windfall profits, whether it is through socialized corporate-welfare schemes or through general deceit, these corporations require that investors believe that their input will result in individualized profit. As a truism, few invest to lose. Hence, specific social and economic conditions must be advocated to prod and cajole reluctant investors that they need to be separated from their money. This psychological determinant is why bankers, economists, and governments rarely state the truth. Without “hype” and the continual selling point that profits are just lurking around the corner and they alone have the inside-edge, people simply will not take the risk.

The numbers offered by the Chinese government and their acolytes have rarely been accurate. For example, a survey conducted in the final half of 1994, uncovered 70,000 fraudulent statistics, of which 20,000 involved "blatant falsification" of government reports. Zhu Zhixin, former head of the Chinese National Bureau of Statistics (NBS), admitted in 2002 there were persistent discrepancies in their current growth numbers because, "Some [Chinese] regions intentionally make false reports." Few economists have made an attempt to reconcile published economic data with the distorting effects of a weak financial sector, acute pollution, rampant corruption, and their underground black economy. With the world economy still in a tailspin, a growing and unsubstantiated chorus of China experts has been selling us of the grand feats the PRC has been achieving in promoting global growth.

Let’s review a few numbers that aren’t in question: In 2008, 6.5-9.1 million migrants were laid off in coastal areas and industries. As of May, Chinese exports have fallen 25.2% year-over-year. The average Chinese family saves approximately 30% of its disposable income, “partly because China's social security net is weak; people have to rely on their own resources to pay for a hospital stay, for example, or for a child's education.” The average person in China has seen their confidence in the economy diminish and a resurgence of greater thrift. Perhaps the most significant economic data to emerge disputing current growth trends is the national 4% contraction in electricity consumption in the Q1 2009. Historically, electricity usage statistics have been a better proxy for GDP growth than the officially published government figures.

The communist regime has declared that as a result of the global recession, the nation is realizing a shift from an export-led to a domestic-consumption based model. The same people who cooed about being the manufacturing engine of the world, now want us to believe that they are moving the ‘miracle’ to another level and switching to a service based economy with its remaining manufacturing industries servicing their nouveau-rich middle class. Optimistic estimates of this transition have placed it at taking at least ten years to complete.

Therefore, what is not in dispute is that there are far more unemployed persons, most of which have been forced to return to rural enclaves; greater social instability is evident; further demands are being placed on the Beijing government to funnel reserve funds to prop up ailing and inefficient government owned or subsidized businesses; and environmental degradation and pollution continues. One can then infer that the economy, based on current patterns, is in a long-term decline commensurate with the rest of the globe. The growth rates being offered by the Chinese, investment bankers, and lackey organizations like the World Bank are completely bogus. If we take a contrarian’s perspective, I believe we are witnessing a serious decline in China as a potential world power and economic powerhouse. The ability of the Chinese to pull the rest of the world out of this prolonged economic malaise, to a great extent like Chinese economic data, is unsupported by facts.

Bring it on!

In the Beginning...

Skepticism of our political leaders, religion, establishment ideology, and pretty much what Harry Frankfurt described in his 2005 book, "On Bullshit", has become my thing. Of course there is the point that you can't define yourself on all the things you don't like or believe in. However, that lazy indifference to reason and logic and the persistent characteristic of most people to not pursue knowledge, unless it has some sort of tangential commercial or career oriented value, strikes me as the central reason we are in the dire straits we are today.

Simply put: we are all morons, but some are more moronic than others.

If I have something of value to exchange with others, I'll share it. If there is something that illuminates the vast duncery of the adherents of any canned ideology, I will make an effort to exhibit.

The revolution won't be televised, but my hope is that this blog can be reached and equally held in contempt by propagandists everywhere.

Carpe Diem!