The Lull Before The Storm: What’s Coming in 2011

Correction below, 12/30/10.

This week—what with Christmas on one end and the new year’s celebration on the other, and everthing in between covered in snow—nothing much is gonna happen: It’s a week that’s about as dead as Dillinger. So I figured I should take stock of where we are—and more importantly, where we’re going.

To me, the biggest macro-economic story of 2010 was Europe: It’s falling apart, and there doesn’t seem to be anything that’s going to stop this collapse.

The second biggest macro-economic story of the year—though not by much—was the successful monetization of 75% of the U.S. Federal government deficit by Ben Bernanke and the Federal Reserve. I use the word “successful” in a morality-free, completely pragmatic sense: Bernanke achieved monetization with minimal market disruption. In fact, a lot of people would argue that QE-lite and QE-2 were not policies of debt monetization—that is how successful Bernanke has been. (Talk about “reality distortion field”! Steve Jobs ain’t got nuthin’ on Benny!)

This “success” has allowed the U.S. Federal government to continue to avoid making necessary, critical budgetary decisions—paradoxically accelerating the U.S.’s deteriorating fiscal situation.

The third biggest macro-economic story of 2010 has been the inexorable rise in commodity prices. Everyone’s been paying attention to silver and gold, but the real story has been industrial metals—especially copper—and agricultural commodities—especially grains—especially wheat—and corn, corn, corn!

To be sure, there were other important stories in 2010—the Mortgage Mess, Wikileaks, Wayne Rooney. But these three issues—auguries of EMU collapse, successful Fed monetization, and commodity price rises—are the ones that mattered on a macro-economic level this past year.

In 2011, every other financial story will be either a cause or consequence of one of these three issues: Guaranteed.

Now then—to specifics:

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A Christmas Gift for My Readers: The Trooper

Dear Readers and Kind Fans, 

I’ve mentioned here and there that for the past several years, I’ve been writing a monster called The Green of the Republic—but I’ve also written other fiction. 

Back in July–September 2008, while taking a break from my monster, I wrote a highly experimental novel called The Trooper. 

It’s about a State Trooper, patrolling a suburb in a post-Crash, Millennial Depression wasteland. It’s a dark, scary, creepy book—a horror story for thinking people. 

Between its formal experimentation and its black-as-outer-space tone, mainstream publishers would never touch such a book, no matter how good it might be—not in a million years. 

But it is pretty good. I know it’s arrogant of me to say that about my own work, but, well, you all know that I’m an arrogant shit. More to the point, if I didn’t think it was good, I’d never mention it—I’d keep it locked away like an unloved adopted child. 

But I do love The Trooper. It seems such a shame that—because of publisher timidity—no one will get to read it—

—so I’ve decided to make it available to people via a blogspot site. 

Every Saturday, I’ll be posting a ten-to-twenty page chunk of the novel—today, for your Christmas pleasure, I’ve posted the first two such chunks, 

So without further ado, here it is—The Trooper. 

Enjoy!

GL

As Godzilla Says . . .

©Mary Wells

Has American Military Spending Really Been a Form of Keynesian Stimulus?

In my recent post, Falling Forward, I discussed the failure of the American economy to de-militarize once the Cold War ended in 1991. 

This is a major issue—major like a hole in the head: The United States spends over 6% of its GDP on the military—more, if you add the money spent on wars in Afghanistan and Iraq. (And by the way: The self-delusion that keeps those two wars “off the books”? Astonishing—but that’s for another time.) 

Since the U.S. is the largest economy in the world, that +6% means that America spends more on the military than the rest of the world combined—with room to spare.

Right there, you know something’s gone horribly wrong. 

In Falling Forward, I argued that this enormous military created the need to find a new enemy, now that the Soviet Union is no more, and the nations of the former Warsaw Pact are busy trying to join NATO, rather than fight it. 

But there’s another thing we should be looking at, when we examine this enormous military spending, especially over the last 20 years: Shouldn’t we really be thinking of it as an enormous stimulus program—a Keynesian stimulus program of the first order?

Military spending as a form of Keynesian stimulus is not an original argument—in fact, it’s been advocated, even by a few non-Keynesians: 

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Falling Forward: America’s Loss of Direction Since the End of the Cold War

You know how when you’re pushing against something heavy and unyielding—a heavy door, say, or maybe a car stuck in a ditch—and all of a sudden, the thing you were pushing against abruptly yields? What happens?

Why, you fall forward, of course.

Especially if you’ve been pushing for a good long while: You were so hell-bent on pushing at the thing—the car stuck in the ditch, the heavy door that wouldn’t budge—that when it finally does move, you over-balance. You fall forward. You might even trip up. You might ever fall on your face—and painfully, at that.

This is what’s happening to the United States: After the long struggle of the Cold War, America is falling forward.

And this falling forward is turning into an epic tragedy.

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Want To Ruin Your Own Country? Assume Your Banks’ Liabilities

Recently, I read up on how Iceland is doing—surprisingly well, actually. Unemployment is down, the Krona is going back up. Good balance of trade, good fiscal balance sheet. Quite the turnaround, after its troubles over the last couple of years—

—so then if Iceland is doing OK, why then are we in the hole that we’re in?

Why is the American economy slogging along? Why is Europe circling the drain? Why are the bond markets queasy as a patient with a low-grade malarial fever? Why is Ben Bernanke’s chin quivering and his voice quaking on 60 Minutes? (And by the way: Was that a terrifying spectacle or what?) Why has the conversation turned from bond market risk to sovereign debt risk? Why are commodities rising, equities moving jagged and irrational, and all of a sudden silver is now the new darling of the retail investor?

What the hell is going on? Why are things getting worse, instead of better? 

The answer is so simple, it hurts:

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A PUBLIC SERVICE ANNOUNCEMENT: Prosecuting the Banksters, and the Mortgage Mess

As many of you know, I’ve written a lot about the Mortgage Mess—see here in my blog’s directory, for a rundown of the posts I’ve written on the subject.

Yves Smith, whom I respect, posted the following at naked capitalism:

Tomorrow, a group of homeowners is meeting with Iowa’s attorney general Tom Miller, who is leading the 50-state effort which is investigating foreclosure and mortgage lending abuses.

This group is presenting a letter to Miller asking them to prosecute bank executives for mortgage fraud and wants to show broad-based support for this idea via having concerned citizens sign it.

Here is the text of their letter:

Dear Attorneys General,

We, the undersigned thank you for investigating fraudulent and illegal foreclosure practices by the nation’s biggest banks.

Your investigation is the best hope for homeowners and communities since this crisis began. Americans are watching. Our expectations are high that we will see justice for the millions of families who have lost their homes, the millions more who are at risk of foreclosure, and the neighborhoods across the country devastated by falling housing values and vacant properties as a result of widespread mortgage fraud.

The bank executives who committed fraud should be prosecuted. Any settlement needs to go beyond fixing paperwork, fully addressing ongoing abuse and ending the flood of unnecessary foreclosures.

We demand that any overarching settlement agreement contain mandatory loan modification programs, including principal reduction for owner-occupant families facing foreclosure and remedies for those families who have already lost their homes.

Now is the time for bold leadership from the nation’s Attorney Generals to hold big banks accountable for the damage they have done to families, communities and the nation’s economy.

I have signed this letter and strongly encourage you to do so. Please visit the site, www.crimeshouldntpay.com to support this effort. Thanks!

Gonzalo here (to borrow a phrase from Yves): I fully support her call, which is why I have signed this letter, and am now passing it along to my readers, so that they might do the same.

Bitching and moaning never ever achieved anything—in a democracy, numbers count. So please sign up—at least go on record that you support sticking it to these bankster fraudsters. 

This is important—and time is short. Thank you. 

GL

A Question for My Kind Fans

Shocking as it is—and it’s a shock to me most of all—but I have fans.

Not just casual readers, but fan fans—diehards.

This message is for them.

Recently, you saw how I wrote about two big subjects over the past few weeks: European sovereign debt, and the whole Wikileaks thing—and I won’t lie to you, it was exhausting. 

Having to bear down and and get a firm grip on this material was a lot like, well, work. It was fun, sure—and it was fascinating to find out such interesting stuff—and to once again be underwhelmed by the slipshod practices of the mainstream media. 

But it was work—and hard work at that. 

Read more »

The New McCarthyism, The Real Terrorists—The Case of Wikileaks, Part II

In my previous post, “The Hacker’s Treehouse”, I discussed Wikileaks, its founder and leader Julian Assange, and the latest hubbub they’ve stirred with the State Department cable scandal. 

In this post, I discuss the reaction of the various governments to the Wikileaks revelations, and what these reactions say about our current state of affairs. At the end of the piece, I conclude that we are living in the era of the New McCarthyism. 

The New McCarthyism, The Real Terrorism

Can you identify the terrorist?
Or do they all look the same to you?

What is a terrorist?

Someone who uses violence and intimidation in order to achieve a political goal. 

What is a criminal?

Someone who, whether by action or omission, carries out an offense proscribed by the law, an offense which is therefore punishable by the State. 

It’s important to know what these words mean, because both of them—criminal and terrorist—have been liberally applied to Julian Assange and Wikileaks, since it posted its very first batch of documents.

Now, with the State Department cable leaks, those calls have become a collective roar of condemnation, in America:

“Terrorist!”

“Criminal!”

Of course, Assange is neither a terrorist nor a criminal: He simply published some leaked documents that embarrassed some people. 

He’s not a terrorist, because he did not commit a single act of violence or intimidation, in order to achieve his political goal. 

He’s not a criminal, at least not in the United States, because he has not broken any law in America, and he is not an American citizen, subject to U.S. jurisdiction. 

But you wouldn’t know it, from the uproar over the Wikileaks’ case. 

The examples are too numerous to list—so let’s go to the highlight reel: 

Read more »

The Case of Wikileaks, Part I—The Hacker’s Treehouse

This is the first of a two-part examination of Wikileaks. Part II, “The New McCarthyism” will be posted on Thursday morning. 

GL.

It’s only when you poke the beast that you get a sense of its true nature.

The American government, media, and corporate establishment are all in a tizzy over the latest poke from Wikileaks:

The “whistleblowing” site (it really isn’t, but I’ll get to that in a minute) is releasing excerpts from a cache of some 250,000 diplomatic cables and other documents. These cables were sent from various American embassies back to the State Department between 1966 and 2010. The leaks have been dripping out since November 28, revealing a whole host of tawdry but so far trivial tidbits of American diplomatic behavior.

None of the “secrets” revealed by Wikileaks are really secrets: They’re mostly confidential appraisals of the U.S.’s allies and rivals; much of it is gossip, or merely pedestrian—demonstrably so:

Of the 251,287 documents Wikileaks has obtained, 134,000 are outright unclassified; 102,000 are classified “confidential”; and 15,652 are classified as “secret”. Source is linked here, confirmation is linked here.

None of these documents are classified “top secret” or higher—anyone claiming that they are “top secret” or that they “put lives in danger” is at best exaggerating, and at worst lying.

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Firefox Users Are Having Trouble Seeing My Blog

• Fix below •

√ Problem seems to be fixed, see Update II below.

A housekeeping note: Firefox users are having trouble seeing my blog. 

I do not have control over this—it is apparently a Blogger or Firefox problem. 

I have contacted Blogger. Hopefully it will be repaired shortly. I do not know how to contact Firefox. 

I have also removed left the original cloud background (which is what Firefox users were seeing beneath the text, making blog text well nigh impossible to read), and temporarily replaced it with a smooth cream background. 

To my readers using Firefox, I suggest you use any other browser, as none of the others I have tried (Safari, Explorer, Chrome, Stainless) seem to have this problem.

Please excuse the inconvenience. 

GL

Update I:

The problem seems to be intermittent with Firefox users—some users have trouble, some do not. Considering over a third of my readers use Firefox, this is an issue to me.

To anyone having trouble seeing my blog with Firefox, I would suggest you try out different browsers: You can find downloads for Safari here (I heartily endorse Safari, which I use), Chrome here (which I also recommend), Explorer here, Opera here, and Stainless here (for Mac Snow Leopard only).

GL


Fix for this problem: 

The easiest fix for the Firefox users experiencing this problem is:

Go to the View menu—go to Page Style—select No Style.

Voilà!—a plain white background appears, with the text in black and links in default blue. Not as pretty as the regular format, but functional, and you can read all the text easily—which of course is the whole point.

If you are one of the (few) Firefox users experiencing this problem, I am sorry for the inconvenience. However, it appears to be a Firefox issue, not an issue with my blog (I’ve spent the whole afternoon troubleshooting it, to make sure it's okay).

Hope you enjoy my posts.

GL

Update II — Dec. 20, 2010:

All on its own, the problem seems to have resolved itself. Yeay team!

If the problem recurs, please e-mail me. Thank you.

GL

As The Euro Goes The Way Of The Dodo, Where Does That Leave The Dollar?

The Eurozone is heading for a crash—anyone saying otherwise is either stoned, works in Brussels, or hasn’t checked the European bond market action lately: All hell is breaking loose there.

The Euro:
A famed, flightless bird, now extinct.

And if, as I have argued here, the Irish Parliament decides not to pass the austerity budget next December 7—that is, decides not to take the European Central Bank bailout—then hell is going to break out in Europe just in time for Christmas: Satan and Santa Claus just might be squaring off on the Rue Belliard before year’s end.

Therefore, the smart money starts thinking about what’s going to happen after the euro-crisis-climax happens.

In other words, what’s going to happen to the dollar, once the euro goes the way of the dodo.

First, we have to understand how we got here, in order to figure out what’s going to happen next.

The Banana Republics of Europe

In the 1970’s and ‘80’s, various Latin American republics foolishly pegged their currency to the U.S. dollar.

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If Ireland Doesn’t Take The Bailout . . .

Update I, below. Update II, below.

So a week ago as I write this, the Irish formally asked for a bailout from the European Union, acting in concert with the International Monetary Fund and the British government.

And now, a week after that request, the EU finance ministers just approved the bailout of the Republic of Ireland—

—however . . . However, in those seven days in between, a serious shitstorm broke out in Ireland—it has been one hell of a week, over there in the Emerald Isle.

And though the bailout has been approved by the EU finance drones, we still do not have an approval from the most important player of them all:

The Irish people.

Let’s recap:

On Monday, immediately after the announcement that the Irish government had formally asked for the bailout, the Greens—partners of Prime Minister Brian Cowen’s Fiana Fáil party—left the governing coalition, forcing Cowen to call for an election in January.

The Green’s leader, John Gormley, isn’t stupid: He knows that, in politics, association is the very definition of guilt—and the Greens are guilty of having been in bed with Cowen. So Gormley and the Greens want to put as much daylight between themselves and Fiana Fáil before the election.

Even members of Cowen’s own party are trying to put distance between him and them—they’re openly calling for his resignation. That’s gotta hurt.

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Today I’m Exhausted

Today, I was supposed to post a piece that tied in to Thanksgiving, and alluded to the multiple crises that we are experiencing. 

Me, as I write this.

But this morning, I woke up, re-read all the drafts I had of what would have been today’s post, and realized that—frankly—it was all drivel. 

Some people—a lot of people, actually—think that most of what I write is drivel. (Oddly, the same people who think my stuff is shit read everything that I post—and comment about it, too. But nevermind.) 

Re-reading the crap I had written for today’s post was terribly dispiriting—for a second there, I thought that the haters were right: My stuff is shitty drivel that hardly makes any sense!

It took me a while to recall what I was trying to do—not just in the piece, but in my blog, generally speaking:

What I’m trying to do is write stuff that’s informative, entertaining, and insightful. 

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For Europe’s Future, Spain Is All That Matters

Last Spring it was Greece that was in crisis mode—then last week, it was Ireland—and coming up next is Portugal—

—but all those pale in comparison to Spain.

That’s gotta hurt.

If I had to bet on which country will bring about the end of the Euro—and perhaps even the end of the European Union—I’d have to say it’s Spain.

Right now, no one is talking about Spain—Spanish spreads are as quiet as a guilty man in a police line-up—everyone’s too concerned over Ireland, and the upcoming Portuguese Situation.

But Spain is the key—Spain is what you should be paying attention to, if you want to find out what will happen to the European Monetary Union (EMU), and the European Union (EU) itself.

First, a recap of last week’s exciting episode of I’m an Insolvent Nation—Get Me Out Of Here!:

Ireland got into trouble with the Euro bond markets after German Chancellor Angela Merkel made some not-very-clever remarks about Irish bond-holders needing to take some haircuts. The bond markets started to panic—yields on Irish debt started to widen—and then once again, it’s Sovereign Debt PanicTime™ (patent pending).

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A Full Body Scan of American Corruption

In the United States, if a policeman stops you for a traffic violation, and you offer him a $20 bill to forget about the whole thing, you’ll likely end up in jail.

But if you leave your Federal government job and go work as a consultant to the very industry you used to regulate, you won’t go to jail—you’ll grow rich. Very rich. 

Michael Chertoff

Michael Chertoff is the poster boy for this institutionalized corruption going on in America today. He is not unique. He is not an outlier of any bell curve. If anything, Chertoff’s form of corruption is average—it’s ordinary. It’s what everyone is doing: Everything within the law, everything that the law says he ought to be doing—yet the net effect is a blatant corruption that is personally despicable, and socially disastrous.

Michael Chertoff was the head of the Homeland Security Agency from February of 2005, to January of 2009. But after he left, he formed an outfit called The Chertoff Group—and was promptly hired by an obscure company called Rapiscan Systems.

The Chertoff Group, according to their website, “provides strategic security advice and assistance, risk management strategy and business development solutions for commercial and government clients on a broad array of homeland and national security issues.” 

That sounds . . . impressively vague. Slippery as a greased stripper’s pole, actually. So let’s approach this a different way: 

What does Michael Chertoff do?

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Because of My Web Seminar on Hyperinflation . . .

. . . I won’t be posting Friday—all the prep work is leaving me no time to write. 

Though it’s a lot of work, I’m very much looking forward to my web seminar. It’s not so much that I’ll enjoy talking for 90 minutes about hyperinflation and what it will look like when it hits the United States—I’m actually looking forward to the questions from the audience. 

Prepping for the web seminar (I hate the term “webinar”—it sounds like a disease ducks get), I’ve been really concentrating on questions: What questions will my audience ask, how will I answer them. What questions I need to answer. What questions need to be asked. 

So that’s why I won’t be posting on Friday—prep work. 

If you’re interested in joining me on my web seminar, click here and check it out. It’s on this Thursday, 9:30pm EST—if you think it’s something you’d be interested in, sign up: I’d very much enjoy your participation. 

I’ll be back on Sunday with a new post. So until then, all the best,

GL

Is Europe Coming Apart Faster Than Anticipated?

The sky is black with PIIGS coming home to roost: I was going to write my customary long and boring think piece—but the simmering crisis in the Eurozone just got the heat turned up: Things are boiling over there!

“Euro Dead” by Ryca.

So let’s take a break from our regularly scheduled programming, and give you a run-down of this late-breaking news:

The bond markets have no faith in Ireland—Greece has been shown up as having lied again about its atrocious fiscal situation—and now Portugal is teetering—

—in other words, the PIIGS are screwed. I would venture to guess that we are about to see this slow-boiling European crisis bubble over into a full blown meltdown over the next few days—and it’s going to get messy.

So to keep everything straight, let’s recap:

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Selecting for Cynicism in the Ivy League

I did high-school in Chile, graduating in 1985—but I only got around to applying to U.S. colleges in 1990. When I finally did apply, I was a flat broke 22 year-old—naturally, I applied only to need-blind schools: There was no point in getting into a college I couldn’t afford. So I pinned my college hopes almost exclusively on Ivy League schools, because all of them had need-blind admissions. 

Baker Library Tower
Dartmouth College

This wasn’t as fool-hardy as it sounds. I had the grades and the test scores—99 percentiles. But what I later realized made me so attractive to admissions committees was that I’d done stuff: Travelled through the Peruvian jungle, complete with a run-in with Shining Path guerrillas. Protested the Pinochet dictatorship, and gotten sprayed by a guanaco (water cannon) for my troubles. Lived through a 7.7 earthquake. Taught English as a second language. Written a first novel.

(I’d also done a few things which I realized wouldn’t go down so very well with the various admissions committees—like arranging my first FMF threeway at 19, brokering a sizable pot sale at 20, and other such adventures. These achievements I kept to myself.)

So when the envelopes from the various admissions committees finally got to my mailbox, they were all fat—I was lucky enough to have my pick of schools.

For fairly ridiculous reasons mostly having to do with the nearby Skiway and the shiny computers every freshman was supposed to get on arrival, I chose Dartmouth as my school. When I got to Hanover as a proud member of the Class of ‘95, I was surrounded by kids who were completely different from me.

Not in their brains or even their backgrounds. Most of them were—like me—private school kids of well-to-do parents. Most of them were—like me—incredibly smart, yet fairly arrogant about those smarts. Most of them—like me—had read pretty much everything, and could talk—knowledgeably—about just about anything.

But there was one big difference between me and my peers:

Community service, and volunteer work.

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The Tidal Forces Ripping Europe Apart

In July of 1994, a comet named Shoemaker-Levy 9 crashed into Jupiter—it was quite a sight. 

According to astronomers, Shoemaker-Levy was a comet that was captured by Jupiter’s gravity twenty or thirty years before it was discovered. As the comet circled Jupiter, at one point it passed the Roche limit—the line around a large mass where its gravity will rip apart a smaller mass by way of tidal forces. 

Comet Shoemaker-Levy,
after Jupiter’s tidal forces
ripped it apart. 

By the time Shoemaker-Levy crashed into Jupiter, tidal forces had had their way with the comet. As the picture shows, it was no longer a single comet—it was a string of small lumps of rock and ice

Tidal forces are pulling the European Union apart. 

On one end, European governments have taken on debt and liabilities—both public and private—which they cannot possibly meet. These debts and liabilities are near-term enough that there is only one way to characterize many of the smaller European states: They are insolvent. 

On the other end, Europe is unwilling to carry out sovereign default of any one of its member nations. Indeed, there is a sense that—constant drumbeat of the Germans aside—Brussels is unwilling to even contemplate the very notion of sovereign default and debt restructuring. Brussels and the European Central Bank believes in bailouts, not default, because they believe that the entire European project rests on the non-default status of all the EU members. They believe that all EU debt is backed by the entire EU, no matter how irresponsible the EU country that issued the EU debt. 

As we watch Europe get closer and closer to the Global Depression, we are seeing as these two opposing forces—insurmountable debt vs. unwillingness to default and restructure—pull the continent apart as surely and relentlessly as tidal forces. 

Let’s first look at the debts and responsibilities the Europeans have taken on, which they cannot fulfill. 

Read more »

New Posting Schedule

To My New Readers and Kind Fans, 

Due to personal circumstances, from now on I will be posting about macro-economics, business and finance every Tuesday and Friday at noon EST. 


My everything-else post will come out on Sunday at 6pm EST. 

GL

The Boiling Frog: Effects of QE2 On The Bottom 80% of the U.S. Population

An old metaphor: If you take a frog and drop it into a roiling pot of boiling water, it’ll jump right out, unscathed. But if you put that same frog in a pot of cold water, and then slowly raise the heat, that frog won’t move. It’ll stay in that pot of water, calm as can be, right up until it is boiled to death. 

  

Would you boil this little guy?

I’ve been arguing that the unpayable Federal government debt, coupled with irresponsible Federal Reserve policies, will inevitably lead to a hyperinflationary event and currency collapse. In order to prepare for a web seminar on hyperinflation in America, I’ve been looking at the issue of how to safeguard assets before a currency collapse, and how to identify opportunities in the midst of a hyperinflationary crisis. 

  

But along the way—inevitably—it’s led me to consider the issue of the effects of hyperinflation on the American people. Not even hyperinflation—just regular old rising consumer prices: How will they affect the average household.
 
It’s disturbing.
 
Even if you don’t buy my hyperinflation call in the least—and a lot of very smart people don’t—the recently announced Quantitative Easing 2 policy of the Federal Reserve has had and will have a profound effect on the dollar.
 
And a profound effect on the American people—especially the bottom 80%. 

Bernanke’s stated purpose in QE2 is to spark consumer spending, and thereby reignite the economy. To do this, Bernanke and the Fed will pump $600 billion into the Treasury bond market, in monthly $75 billion increments—at minimum. According to the Fed’s statement, if more “liquidity” is needed, then by golly, more liquidity will be pumped into the economy.

  

QE2 is really the official start of a race-to-the-bottom debasement of the U.S. dollar. 

No one doubts this—and no one would dispute that such a currency debasement will bring about upward pressures on consumer prices across the board. Indeed, this is the explicit purpose of QE2: The Fed is trying to induce inflation, as it believes that inflation will bring about a reignition of the stagnant American economy.

A lot of commentators have been discussing what QE2 will mean for equities and the various bond markets. People are talking about the Treauries’ yield curve—but not much about what QE2 will mean for the rest of the American population: The middle class, the working poor, the poor, and even the upper-middle class.
 
So let’s give it a go:

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The Acid-Laced Satire of Pixar’s Movies

Since the release of its first movie, Toy Story, in 1995, Pixar animation studios has had one of the most remarkable winning streaks in motion picture history. 

  

As of this year, they have released eleven movies—all of them international blockbusters. Combined, these pictures have grossed $6.63 billion (unadjusted) worldwide—just at the box office. God Alone knows how much Pixar has grossed through video and DVD sales; an additional $10 billion is a reasonable guess. 

  

But if Pixar’s movies had been merely successful, they wouldn’t be noteworthy. There are lots of film studios that have released extraordinarily successful pictures that no one remembers—or which no one wants to remember. 

  

What sets Pixar apart is the quality of its movies: They’ve all been good. 

  

Some were merely very good, like A Bug’s Life (1998) and Cars (2006). Several have been excellent, like Monsters, Inc. (2001), the three Toy Storys (1995, 1999, 2010), Finding Nemo (2003), Ratatouille (2007)

  

A few have transcended the medium of film altogether, and become art. I would argue (very good-naturedly) that The Incredibles (2004), Wall-E (2008), and Up (2009) all fit into the category of art. (As an aside—again, very subjectively—I would say that the most beautiful of all the Pixar movies was probably The Incredibles; it was certainly the best lit, with a painterly eye for composition and color that would have pleased Néstor Almendros or Gordon Willis.) 

  

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Two More Nails In The Dollar’s Coffin—the Republican “Victory”, and the Fed’s QE2

So on Wednesday, not only did the Republicans win control of the House of Representatives, but the Federal Reserve finally took the plunge with Quantitative Easing 2—

—in other words, on the very same day, the U.S. dollar got the ol’ one-two punch—right to the groin: 

  

First the spend-and-cut-taxes Republicans won the Congress—and then, the Fed opened the money spigot with QE2. 

  

Light at the end of the tunnel?

Talk about a bad hair day! The issue is no longer if the dollar will be killed—it’s now a matter of when.

  

Full disclosure: Though I am a fiscal and social conservative, I have always sneered at the Republican Party’s fiscal policies. 

The Republicans have always espoused “smaller government” and “fiscal prudence”—but in the last 40 years, it was the Democrat’s president, Bill Clinton, who actually made government smaller. Shrub, Bush, Ford, Nixon, even the dubiously sainted Ronald Reagan all made government bigger: Bigger in absolute terms, bigger as a percentage of GDP—bigger government has been the real mantra of the Republican Party. 

As for “fiscal prudence”—nominally, the Republican Party is in favor of balanced budgets. But ever since Richard Nixon said, “I am a Keynesian”, there hasn’t been a single Republican president who has managed to balance the budget. Cutting taxes without cutting spending is not a viable definition of “fiscal prudence”—but that’s what Republicans have been selling as viable macro-economic policy for close to 40 years. 

  

The reason is simple. Long ago, the Republicans and the Democrats came to a tacit understanding: The Republicans let the Democrats spend all they want on various Big Government programs, while the Democrats let the Republicans cut all the taxes they want and spend all the money they want on defense. That way, both parties look good with their voters. 

The cost of this Faustian bargain? The Deficit. 

  

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The Contradictions In The Life of A Fluffer

A “fluffer” is the person on a pornographic film shoot who makes sure that the male lead has an erection, and can thus “perform” at the appropriate moments. Remember Boogie Nights? Remember the fat little tub-o’-lard brilliantly played by Phillip Seymour Hoffman? The one who had a secret homosexual crush on Mark Wahlberg’s porn-star character? That’s a fluffer. 

  

Brad DeLong is Paul Krugman’s fluffer. 

  

Brad DeLong

DeLong is an economist at UC Berkeley, a Neo-Keynesian like his charge. (I’m sure I’ll get an earful for that characterization). Basically, Krugman and DeLong and their followers think that fiscal spending via deficits is the only way to turn around the economy. Fiscal spending, according to this macro-economic worldview, is the determining factor in the growth of a modern economy.

  

DeLong has worked with Krugman on quite a few different projects—but DeLong’s real job is making sure Krugman stays hard, and stays aimed at the appropriate hole, as it were. I mean, after all, he’s Krugman’s fluffer—that’s his job: To keep the talent erect and ready to perform, while dispatching any and all distractions. 

  

Full disclosure: I was one of those distractions that got Krugman all soft. I wrote a piece where I pointed out that Krugman was clearly opening the inference for readers to think that a war might be the only solution for America’s fiscal problems. 

  

DeLong called me “batshit insane”—which I sort of liked, actually. Sort of like the name of the super-villain in a cheesy James Bond rip-off: “My name is Insane—Batshit Insane.” I was thinking of having business cards made up. 

  

Anyway: Recently, DeLong called for either the resignation of David Broder of the Washington Post, or the resignation in protest of the Washington Post staff, or a combination thereof. Why? Because according to DeLong, Broder’s most recent editorial was calling for a war with Iran, in order to save the U.S. economy. 

  

Hmmm . . . 

  

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Has Facebook Peaked?

If Hollywood has gone and made a movie about Facebook, then Facebook has probably peaked. 

  

“One of us, one of us, one of us . . .”

Looking at the numbers, it would seem that FB has definitely peaked: On July 22 of 2010, it got its 500 millionth user—but now three months later, it’s at 543 million. 

  

The inference is easy to make: From the halcyon days of consistently charting 25 million new users per month, Facebook is now going up by about 14 million new users per month. 

  

Still: 14 million users a month? The implications are staggering. 

  

FB doesn’t release numbers of users who’ve quit—rather cagily, they say that, on any given day, half of all users log on to Facebook. 

  

But none of that really matters: Who has registered, and now is inactive, who registered and is on every day, who registered and is sporadic, who registered and now wants their Facebook account shut down and disappeared—all of that is trivial and unimportant, compared to the central and obvious fact that they all registered on Facebook.  

  

This means? It means that one corporation has managed to get the basic personal information of roughly ten percent of the world. 

  

That’s epochal. No wonder the fuckers in Hollywood made a movie about the people behind the Facebook program. So let’s not get too cavalier and condescending, when discussing this remarkable achievement. 

  

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I’m Down

GL, Self-Portrait

  

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Signs Hyperinflation Is Arriving

This post is gonna be short and sweet—and scary: 
  
Back in late August, I argued that hyperinflation would be triggered by a run on Treasury bonds. I described how such a run might happen, and argued that if Treasuries were no longer considered safe, then commodities would become the store of value. 

  

See, how come I don’t look as cool
when I make my predictions?

Such a run on commodities, I further argued, would inevitably lead to price increases and a rise in the Consumer Price Index, which would initially be interpreted by the Federal Reserve, the Federal government, as well as the commentariat, as a good thing: A sign that “the economy is recovering”, a sign that “normalcy” was returning. 

  

I argued that—far from being “a sign of recovery”—rising CPI would be the sign that things were about to get ugly. 

  

I concluded that, like the stagflation of ‘79, inflation would rise to the double digits relatively quickly. However, unlike in 1980, when Paul Volcker raised interest rates severely in order to halt inflation, in today’s weakened macro-economic environment, that remedy is simply not available to Ben Bernanke. 
  
Therefore, I predicted that inflation would spiral out of control, and turn into hyperinflation of the U.S. dollar. 
  
A lot of people claimed I was on drugs when I wrote this. 
  
Now? Not so much. 

  

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Links To Look At

This is an experiment I’ll be trying out over the next few days: Daily links to interesting/unusual/informative stories or bits of information on the web. I’ll link to between a half-dozen and a dozen. I’ll try to post this by 7 am EST. 

  

To my new readers and kind fans, please comment as to whether you like them or not—both the idea, and the specific links. Thank you. GL

  

• British Airways chairman says, “We must stop kowtowing to American security overkill”. Surprised it took this long. 

  

• Slate.com on Treasury bonds yields going negative, and investors betting on inflation. If Slate is talking about this, then the U.S. mainstream is (slowly) realizing inflation is on its way. 

  

• The Hobbit film production stays in New Zealand—after the Kiwis gave Warner Bros. a sweetener in the form of incentives. The foolish Australian actors’ union—which is the parent of the NZ actors’ union—was behind the brouhaha; scuttlebutt is so as to get part of “The Hobbit” filmed in Australia. The production will spend US $530 million in NZ. 

  

• Lenders take over Stuyvesant town in Manhattan. The four-year, $5.4 billion agony is over—for now. 

  

• Michael Lewis gives an excellent explanation of the TBTF banks’ shell game regarding their prop-trading desks. The banks—contrary to statements—aren’t selling their prop desks: They’re disguising them. 

  

• Fascinating and in-depth cultural précis on China’s Communist Party today, and what they are aiming for. From the always illuminating London Review of Books. 

  

• Glenn Greenwald on NY Times and mainstream American media’s efforts to discredit WikiLeaks new document release by smearing their spokesman, Julian Assange. Greenwald has been all over this—and he’s absolutely right: The messenger is not the message. 

  

• Calculated Risk confirming that Ben Bernanke will use an incrementalist approach to QE2. It’ll be “a couple of hundred billion at a time”. 

“Our God Is Money”: Economics Isn’t a Dismal Science—It’s an Ersatz Religion

“Are you an Austrian?” I was asked recently, in the polite tones reserved for asking if I were, say, Jewish or Muslim or Christian. 
  

An object of veneration.

I’d been asked the question while discussing macro-economic policy in the United States— 
  
—actually, “discussing” doesn’t quite capture what I’d been doing:
  
I’d been lambasting the Neo-Keynesian drivel of spend!-spend!-spend!, which I deplore—“They’re like drunk sailors with the national credit-card—trawling for good blow and cheap whores in a Tijuana back alley!”—
  
—while at the same time ridiculing the Monetarists’ obsession with money supply—“Money-supply fetishists are just like foot fetishists—only twice as creepy, and only half as reasonable!”—
  
—all the while insisting that in this Global Depression, savings had to be the priority—austerity the only policy prescription that made any kind of sense. 
  
“Are you an Austrian?” came the question. 
  
“I'm an agnostic,” I answered flippantly—but then instantly realized that my answer went to the heart of the problem with economics. 
  

It’s no great insight to say that economics—the so-called “dismal science”—has had a dismal track-record in terms of predicting macro-economic events over the last forty-odd years. 
  
And as for the last couple of years? Sheesh—a monkey throwing darts would have done a better job of predicting how the macro-economic picture would play out. 

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I’m Late—Sorry!

Dear Readers, 

Please forgive me: A personal emergency kept me from posting today, Monday 10/25. 

  

I'll post tomorrow, Tuesday 10/26, at noon EST—promise. 
  
The name of the post will be: 

  

“Our God Is Money”: Economics Isn’t A Dismal Science—It’s An Ersatz Religion
  
Until then, all the best, 


GL

Chile’s Triumph, America’s Exhaustion

In Chile, the collective mood is one of hard-earned triumph, after the successful rescue of the 33 miners.

  

The leader of the trapped Chilean miners, Luis Urzúa,
seconds after emerging from their two-month ordeal.

There was of course joy and jubilation when the miners were pulled out after their two-month ordeal underground. I wasn’t watching the news at the time, but I knew the precise moment when the first miner was pulled out alive: Passing cars started loudly honking their horns—Tat–tat–ta-ta-tat!! Tat–tat–ta-ta-tat!! Tat–tat–ta-ta-tat!! 

  

But in the nearly two weeks since the rescue, there has been a collective afterglow in Chile: Everyone feels happy. Everyone feels confident. Everyone feels as if any and every problem—no matter how big—can be taken in hand, and solved successfully. 

  

There is none of that feeling in the United States.

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