Tuesday, September 30, 2014

Instigating Fear

"Machines will stop spitting cash. It will be the end of the world."
--Julie Steinhardt (Wall Street: Money Never Sleeps)

Under conditions of threat, people restrict information flow and centralize decision-making. This plays into the hands of statists. Instigate fear and government becomes more powerful as people turn to the state for protection. Both Teddy and Franklin Roosevelt clearly learned this lesson well.

Some current myths designed to instigate fear and increase state power:

Enemies of the United States will kill us if we don't take pre-emptive military action.

The economy is finished if people cease to borrow and spend.

Man is causing a global warming with dire consequences.

Producers, not consumers, are the controlling force of capitalism.

Without state-run schooling, many children would not be educated.

Failure to bail out big banks in times of crisis would mean the end of the world.

Permitting gay marriage destroys the fabric of society.

A strong military is necessary for peace.

The poor get poorer when markets are free.

Economic growth will not occur unless money is printed out of thin air.

Illegal immigrants are stealing American jobs.

People will not choose to voluntarily help those at the bottom of the economic pyramid.

Terrorism must be stopped 'over there.'

Backing a currency with gold restricts standard of living for the masses.

Without a federal government of present size and scope, there would be no order.

Monday, September 29, 2014

C Word

"Crash and burn, huh Mav?"
--Slider (Top Gun)

Among the mavens that I track, a number of them are starting to use the c-word. John Hussman discusses the crash notion in his weekly letter.

A crash is by nature a low probability event. But I find it interesting that the idea is surfacing among sages on my radar screen.

position in SPX

Sunday, September 28, 2014

We Control Our Response

"Knights, the gift of freedom is your by right. But the home we seek resides not in som foreign land. It's in us, and in our actions on this day! If this be our destiny, then so be it. But let history remember that, as free men, we chose to make it so!"
--Arthur Castus (King Arthur)

Many situations are out of our control. How we respond to those situations is in our control. Another person's words, social pressure, even dangerous situations influence our behavior only to the extent that we let them.

Stress, guilt, anxiety, anger, outrage, et al are self-imposed responses to external stimuli. We can choose differently.

Don't take it personally, and live free.

Saturday, September 27, 2014

Price Increases Lag Money Printing

Sometimes I never leave
But sometimes I would
Sometimes I stay too long
Sometimes I would
--The Motels

Increase in price of goods and services, what is today's semantically challenged world is commonly called 'inflation,' is a lagging indicator. Money is printed and makes its way toward various categories of prices--some before others.

Once price increases materialize, the toothpaste is out of the tube. The process cannot easily or quickly be reversed.

Policymakers and their minions, it seems, falsely believe otherwise.

Friday, September 26, 2014

Formal Education Not The Key

Didn't make sense not to live for fun
Your brain gets smart but your head gets dumb
--Smash Mouth

This cartoon is a reminder that formal education is not the most vital component of standard of living improvement. 


Standard of living improves as productivity improves. The binding constraint in productivity improvement is unlikely to be formal education. Because knowhow can be transferred, it is not the scarcest of resources. Currently, we have more people carrying more diplomas and degrees than at any time in history. Yet prosperity is not growing commensurately.

Instead, the critical resource is likely to be capital. Capital comes from savings. When no savings exist to fund productivity improvement, then standard of living stagnates.

In fact, savings could be squandered thru borrowing binges that fund advanced levels of formal education. This may be occurring now.

Thursday, September 25, 2014

Trapping Longs

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

After yesterday's lift seemed to ease bull psyches about recent price weakness, the hammer came down today. The SPX was off 1.6%, erasing all of yesterday's gains and then some, and easily slicing thru the 50 day moving average.


In addition to the usual suspect list of catalysts, there was some chatter that there was heavy futures selling out of Europe today, perhaps driven by the ECB. In any event, am getting the feeling that there are increasing numbers of 'trapped longs' looking to sell.


Pulling back the time horizon demonstrates just how high this market has gone and how far it has to fall before significant damage is done. The uptrend defined by the Thanksgiving 2012 lows is still in place, and can not seriously be viewed as broken unless/until the SPX falls another 60 or so handles thru 1900ish. This level corresponds to the 200 day moving average.

It does seem like the tone of the tape may be changing. However, until big technical support is breeched, Hoofy's Heros must be given benefit of the doubt.

position in SPX

Quid Pro Quo

Well now something tells me
You're gonna use me again
You think you can lay down
The how, the where, and the when
--Heart

Quid pro quo translates as "something given for something else" or "this for that." Contract law has extended this meaning to include the notion that contracts should be legally binding only if they involve exchanges of comparable value.

However, as Gary Galles observes, exchange value in unhampered markets may not be seen as equivalent by outside onlookers.

Voluntary exchange occurs when two or more parties, all interested in improving their circumstances, judge ex ante that they will be better off if they engage in trade. One party might benefit more. But trade occurs when all parties sense that they will benefit from exchange.

Moreover, judging equality of an exchange is difficult because value is subjective and in the eyes of the beholder. Those engaged in trade may value things differently than the onlooker.

Quid pro quo restrictions therefore impair standard of living, as people who would otherwise engage in voluntary exchange deemed to improve their circumstances are prohibited from fully doing so.

Agency and moral hazard problems also arise, as mediators designated to establish and regulate fair value trade are subject to mischief.

Wednesday, September 24, 2014

Immigration Socialism

Let me be your ruler
You can call me queen bee
And baby I'll rule, I'll rule, I'll rule, I'll rule
Let me live that fantasy
--Lorde

Jacob Hornberger observes the hypocrisy among conservatives. This group frequently claims that it supports free markets, private property, and limited government. Yet, conservatives usually act in favor of market intervention.

The immigration issue demonstrates this. Conservatives favor immigration controls. Immigration controls oppose free market principles.

As JH notes, immigration controls exemplify socialist central planning. Under immigration socialism, bureaucrats plan the number of permissible immigrants into a country, their qualifications, and other criteria.

Hayek labeled the bureaucratic belief that planners possess the knowledge and expertise to forcibly control the lives of others for the better as "the fatal conceit."

Their support of immigration socialism demonstrates that conservatives possess this fatal conceit.

Tuesday, September 23, 2014

Unclear and Distant Danger

"These drug cartels represent a clear and present danger to the national security of the United States."
--President Bennett (Clear and Present Danger)

As US bombs and missles fly in Syria, I am reminded what Syrian officials said prior to the attack--that any military action taken by the United States in Syrian would be viewed as acts of aggression.

They are correct. We are not defending ourselves against aggression. Syria has not attacked us nor has it brandished a clear and present threat that justifies lethal self-defensive force. Instead, we are the attacker, engaging in offensive action against Syria. Syria is now the self-defender.

Playing out how this could escalate is not a pleasant endeavor.

I am also reminded how similar this president's actions are to his predecessor's, despite claims to the contrary. Distinctions with no difference...

Monday, September 22, 2014

Property During Crisis

"No matter how bad it gets, we don't steal."
--Jim Braddock (Cinderella Man)

Recently watched a movie called World War Z. I wouldn't recommend it. However, the chaotic tone did raise a few interesting questions for the survivalist in me.

One came early in the film when the East Coast is being overrun by the zombie plague. The family of Gerry Lane (played by Brad Pitt) was caught in the middle of it and trying to escape. However, Lane's daughter had asthma and was in need of medicine. The family pulled into the parking lot of a Kroger's like grocery store.

The store was being looted. People scurried out of the store with filled shopping baskets. Not batting an eye, Lane told his wife to grab a cart and fill up while he headed to the pharmacy in search of medicine for his daughter. There, he joined several others who were looting the drug drawers.

Watching the scene, I wondered whether I would similar. Would I be willing to take someone else's stuff during times of crisis? When does respect for other's property dissolve into grabbing what you can from whomever?

Seems to me that property rights are particularly important during times of crisis, lest we digress toward the animals wreaking havoc in the movie.

Sunday, September 21, 2014

Rich Man's Gold

Charlie Croker: You've got no imagination. You couldn't even decide what to do with all that money, so you had to buy what everyone else wanted.
Steve: Try this on your imagination, okay. That gold is already gone.
--The Italian Job

The UK Telegraph reports that while the price of paper gold has been marking multi-year lows, demand among the rich for larger gold bars has been robust. This, of course, is what ECON 101 would suggest. As prices fall, demand rises.


Of course, demand for financial assets often works in reverse. The lower prices go, the less people want to buy. It is only when prices head higher that people jump on the bandwagon.

The rich buying physical gold in size right here suggests that many well-off people do not feel altogether right about the world right here. They feel the need to roll paper currencies into hard assets. To diversify.

Gold is essentially a hedge against disorder. It is a means of preserving wealth. Governments know it. The rich know it.

position in gold

Saturday, September 20, 2014

Institution Theory

You're watching movies trying to find the feelers
You only see what we show you
We're the slaves of the phony leaders
Breathe the air we have blown you
--The Who

Institution theory (Dimaggio & Powell, 1983; Meyer & Rowan, 1977) views individuals and organizations as operating inside fields of of socio-economic networks and relationships that shape institutional norms in their environments. Institutional norms are expectations of acceptable behavior within an environment.

Because the ultimate goal is survival, individuals and organizations conform to institutional norms to increase legitimacy and survival capabilities. Pressure to adopt institutional norms should increase as environmental uncertainty grows. Pressures can be normative ("Do this because it's the proper thing to do"), mimetic ("Let's copy the successful people"), and coercive ("Do this or go to jail").

The survival motive and pursuit of norms encourages conditions of isomorphism in institutional fields. Isomorphic tendencies should increase with environmental uncertainty.

Ultimately, of course, isomorphism as an adaptive mechanism conflicts with other theories such as Darwinism, which posits that variation under uncertainty is necessary for long term survival.

As such, institution theory can be seen as a theory of maladaptation.

Nonetheless, like threat-rigidity theory, institution theory helps explain tendencies toward compliant and collectivistic behavior, particularly in uncertain times.

References

Dimaggio, P.J. & Powell, W.W. 1983. The iron cage revisited: Institutional isomorphism and collective reality in organizational fields. American Sociological Review, 48: 147-160.

Meyer, J.W. & Rowan, B. 1977. Institutional organizations: Formal structure as myth and ceremony. American Journal of Sociology, 83: 340-363.

Friday, September 19, 2014

Mavens Aligned

"I wanna tell you a little secret. Being The One is just like being in love. No one needs to tell you that you are in love. You just know it--through and through."
--The Oracle (The Matrix)

Studying financial markets over the past 20 years, I have been attracted to people exhibiting sound thought processes. I learn well this way. Study thought processes for their validity. Adopt/embrace those that ring true in concept and in application. Discard those that don't.

Financial market thought processes are regularly put to the test in markets of all types but, for me, they are particularly useful during multi-year bull markets. This is because it is easy for me to get caught up in the emotion of rising prices, and I have found that it is only the clearest thinkers who can separate investment from speculation during secular uptrends.

The best thinkers can consistently identify long term rallies that are destined to fail and fail big. If your investment horizon is relatively long (like mine), then you don't care if these forecasts pan out right away. The important thing about epic market failures is that they wipe out years of gains. Once you are confident that you are in a window for epic decline, you want to manage your risk profile in a manner that allows you to cope whenever markets ultimately come unglued.

People who in my experience have demonstrated well reasoned capacity for calling looming big declines are, from where I sit, true 'mavens' and worthy of my attention.

In the late 1990s, a small group of mavens that I was observing correctly identified the dot com bubble. Some were years early, but it didn't matter. When the bubble popped, years of gains were lost.

In the mid 2000s, that same group of mavens, plus a couple more that appeared on my radar, correctly identified the mortgage/credit bubble. Some were years early, but it didn't matter. When the bubble popped, years of gained were lost.

So here we are again. Once more, the mavens that I respect are in agreement. All in this group believe that we are headed for an epic market wipeout. Some have been saying this for years and have been labeled 'permabears,' cassandras,' etc. because the decline has yet to occur. Similar labeling, btw, happened in previous cycles as well.

In the two secular bull markets that have defined my past two decades of finanical market education, these mavens have correctly called major turns. They are aligned once more, with reasoning that again seems sound.

position in SPX

Thursday, September 18, 2014

Yellen at the Poor

"You know, it occurs to me that the best way you hurt rich people is by turning them into poor people."
--Billy Ray Valentine (Trading Places)

ZeroHedge observes the irony of Fed chief Janet Yellen extolling the poor to save and build assets. The Fed's inflationary policies hammer the poor while rewarding the rich, thereby unnaturally increasing the distance between top and bottom of the social pyramid.

Moreover, by suppressing interest rates, the Fed discourages the very saving processes that Yellen seems to espouse. Instead, interest rate suppression encourages speculation as investors reach for yield.

Of course, perhaps that is what Yellen is suggesting that the poor to do. Borrow some of our cheap money and use it to speculate in the stock market.

position in SPX

Wednesday, September 17, 2014

Slanting Roosevelt

Making a living the old hard way
Taking and giving my day by day
I dig the snow and the rain and the bright sunshine
I'm draggin' the line
--Tommy James

Have been watching Ken Burns' new series The Roosevelts. I enjoy Burns' work as he shares interesting records and factoids that help me better understand history.

However, piecing together history primarily on Burns' accounts would be a mistake. Burns is not a critical reporter of history who sees various perspectives and thoroughly evaluates their validity. He is a story teller with a viewpoint, and his work reflects his particular slant.

Roosevelt is no exception. While Burns does present some dark sides of Teddy, FDR, and Eleanor, this work is clearly pro-Roosevelt and neglects alternative views that have previously been put forth.

This was obvious in the first 30 minutes that I watched. I missed the first episode when it initially aired, meaning that my first exposure to the series was Episode 2. Episode 2 opens with Teddy taking over the presidential reigns from the assassinated McKinley and immediately setting his sights on busting the 'trusts' that allegedly were squeezing life out of America.

Burns assumes the conventional stance that large firms were 'bad' for America and that they needed to be regulated, and TR was just the man to do it. He never questions how such firms got so large in the first place, although he implies that this was a consequence of capitalism and free market behavior. He never presents alternative views--e.g., that it was government privilege that assisted many 'trusts' in amassing such size, and that, despite these advantages, many of these presumed 'monopolies' were actually losing the battle to smaller entrepreneurial competitors.

In particular, Burns focuses on TR's intervention in the Coal Strike of 1902. Many biases immediately become evident. To build sympathy for the labor side of the story, for example, Burns says that many workers had not seen hourly wage increases in decades. What he does not say is that price levels throughout America had been constant or falling for decades due to increased productivity. It is likely, therefore, that real wages for workers making the same $/hr were increasing over time.

Following the traditional script, Burns also paints coal company owners as the bad guys, refusing to negotiate with unions etc. What he doesn't say, however, is that the owners approached the federal government for help in protecting person and property from the wrath of striking workers, who had purportedly killed at least 20 people. The owners argued that the government should use its power to protect the interests of people who want to work (such as strikebreakers) and that, if those rights were protected, that there would be no coal shortage in the upcoming winter as many forecast. Such an argument, of course, is consistent with the notion of freedom of associationproperty rights, and use of government for defensive rather than offensive purposes.


Like the Progressives of the time, however, Burns hoists TR's intervention as a victory. Teddy overstepped the Constitution and "it worked" according to Burns. But did it really, in the long run? Burns does not consider the downstream consequences of TR's actions here, such as their long term impact on employment in the coal industry or on precedent setting for even larger government interventions in future 'crises.'

While Roosevelt is interesting, it would be even more insightful if Burns carefully considered that which is not typically seen.

Tuesday, September 16, 2014

Divisiveness and the State

Tell me why, tell my why, tell me why
Why can't we live together?
--Sade

Many Americans understand that instrusive foreign policy practiced by the United States invites feelings of resentment and pushback from people in foreign countries. They know that foreign countries are sovereign by right, and that the United States has no business meddling in the affairs of others.

Unfortunately, many of those same Americans fail to grasp that intrusive domestic policy invites similar feelings of diviseness among the citizenry at home. As Jefferson observed, all individuals have been endowed by the Creator with certain inalienable rights, and when the State aggresses on those rights then people will naturally resist.

Want to reduce divisiveness and encourage more peaceful cooperation? Then stop trying to 'force it' via government. Reduce size and scope of the State--both abroad and at home.

Monday, September 15, 2014

Healthcare Slaves

Walking on the streets
It's really all the same
Selling souls, rock-n-roll
Any other day
--Huey Lewis and The News

David Stockman shares an interesting chart that contrasts government vs out-of-pocket healthcare expenditures.


Since 1960, government healthcare spending has increased from about 15% to about 50% of total expenditures, while out-of-pocket spending has fallen from about 48% to 10%.

As Stockman correctly observes, healthcare markets no longer do what they do best--efficiently allocate scarce resources--when buyers no longer have out-of-pocket incentive to seek satisfaction at prices perceived as attractive. Lower quality, less innovation, less capacity, higher prices are predictable and inevitable under these circumstances.

What he doesn't note is the moral decline that accompanies the above trends. More government spending and less out-of-pocket spending on healthcare essentially means that more people are being forced to produce healthcare goods and services for others. The above chart suggests that nearly half of all healthcare output is produced under conditions of force.

More people are being enslaved as healthcare resource providers.

Sunday, September 14, 2014

Dollar Destruction

Now that ain't workin'
That's the way you do it
Lemme tell ya them guys ain't dumb
--Dire Straits

Nice graphic that provides a sense of how much purchasing power has been lost in the dollar over the years.


It should be noted that the USD was not destroyed right out of the gate. From the country's founding thru the early part of the 20th century, the purchasing power of the dollar held steady--with notably exceptions such as the Civil War.

What this means is that if the above graphic were done in 1900, then what the dollar could buy in 1900 was about the same as what the dollar could buy in 1800. There would be little if any difference.

It was not until the Federal Reserve took the reigns in 1913 that the dollar's decline began in earnest.

The gradual, covert nature of this loss in purchasing power is why inflation is often referred to as "the invisible tax."

Saturday, September 13, 2014

Warmonger in Chief

Guy de Lusignan: Give me a war.
Reynald de Chatillon: That is what I do.
--Kingdom of Heaven

David Stockman suggests that Barack Obama, the 'peace candidate of 2008,' is kowtowing to the influence of the warfare state with his recent comments aimed at the latest figment of terroristic fear presented before the American public: ISIS.

Perhaps. But another motive for beating wardrums could be that the president thinks he needs the ultimate distraction to divert attention from other issues, including a sputtering economy. He may even buy into the perverse logic employed by past presidents that war jump starts the domestic economy.

A deadly fallacy, quite literally.

Chance of war continues to increase.

Friday, September 12, 2014

Treasury Selloff

Drawn into the stream
Of undefined illusion
Those diamond dreams
They can't disguise the truth
--Level 42

Long dated Treasuries have been selling off over the past week or so. The action has been getting 'gappy.' Ten year yields are cutting thru the downtrend line defined by the New Years top.


The 200 day moving avg above at ~26.5 (2.65%) seems the next technical level of lore.

The most popular 'reason' for the weakness is fears of a more hawkish Fed in the face of growing economic strength.

Regardless, protracted govie weakness is a radar-worthy item. The policymaker playouse burns down if rates can no longer be suppressed.

no positions

Thursday, September 11, 2014

Mystery

But keep in mind
That love's the clue
And keep in mind
That it's all for you
--Ric Ocasek

The central mystery of God is how life and freedom leap from death and bondage. Once again this day offers opportunity to reflect on this mystery. Solemn and sad for loss.

But grateful as well. Grateful for the awakening. For the open window.

And for the blessings involved with climbing thru it to pursue truth.

Wednesday, September 10, 2014

Buybacks and Market Tops

I don't about yourself or
What you want to be
When we gamble with our time
We choose our destiny
--Molly Hatchet

Interesting analysis on share buybacks in John Hussman's always insightful weekly letter. The analysis stems from his argument that the only folks who will be able to safely exit markets at these prices are those investors whose shares are removed via share buybacks. Remaining shareholders will be subject to the escalating musical chairs Ponzi.

Currently, share buybacks are approaching an annual rate of 4% of stock market capitalization which is near the upper bound of historical buyback data. Those not taken out by buybacks face the Greater Fool.


Hussman notes that heaviest share buyback activity is typically associated with market peaks--just like emotionally-led share buying intensity in general. To fund these corporate buying frenzies, however, managers need to borrow--since corporate cash flows are insufficient to cover other activities such as capital expenditures and dividend payouts in addition to share repurchases.


In other words, corporations are going on margin to buy stocks at their highs. As Dr J observes: "the history of corporate buybacks is a chronicle of corporations buying stock at market tops, and retreating from buybacks at the very points that stocks are most reasonably valued."

Where does current corporate buyback behavior suggest we are in this cycle?

position in SPX

Tuesday, September 9, 2014

Less Savings, Less Entry

So I went to the bank to see what they could do
They said, sir, bad luck's got a hold on you
--Simply Red

This missive proposes that secular decline in new firm entries is due in large part to declining savings. These pages have frequently put forth similar arguments.


As savings decline, less production is set aside to fund productivity improvement projects. Capital is consumed, and there is less available for entrepreneurs seeking to build businesses.

Most monetary and fiscal policies today encourage capital consumption, allowing the big to get bigger and raising barriers to entrepreneurial entry.

Monday, September 8, 2014

QE World

To me
You're like a grown addiction
That I can't deny
--Seal

Here is a graph of major central bank balance sheet assets:


Central bank assets have more than doubled since late 2008, rising from $4 trillion to over $10 trillion. It should be noted that the Fed alone is responsible for nearly $4 trillion of that increase.


As noted previously, the effect on stock markets has been straightforward.

This relationship explains why stock markets rally on bad economic news. They sense additional easy money fix.

position in SPX

Sunday, September 7, 2014

Fall and Football

Roland Steele: Rudy, are you ready for this, champ?
Rudy: I've been ready for this my whole life.
Roland Steele: Then you take us out on the field.
--Rudy

Although the colleges began last Labor Day weekend, fall doesn't seem 'offical' until the this weekend with the arrival of the NFL. Only the barest hint of fall has been revealed--some early leaf turn and diminishing daylight. 


Indeed, during the first couple weeks of the football season, it is hard to imagine that the last few weeks of the season will be played in snow and cold. Because at kick-off, conditions are warm and the view downfield looks wide open.

Saturday, September 6, 2014

Rx Addiction

And though she's not really ill
There's a little yellow pill
She goes running for the shelter
Of a mother's little helper
And it gets her on her way
Gets her through her busy day
--Rolling Stones

Sobering data suggesting that the number of Americans hooked on legally prescribed drugs is larger than the number addicted to illegal drugs. More than 30 million Americans, including about one in four women aged 40 to 60, are on antidepressants. Doctors are writing more than 250 million prescriptions for painkillers annually.

Drug addiction is a form of dependence. When facilitated by government and the medical profession, it creates institutionalized followers.

Moreover, the influence of particular pharmaceuticals, such as SSRI antidepressants, on precipitating illness and violent crime (e.g., mass shootings) are not well understood, although evidence mounts.

Presumably, the purpose of prescription drugs is to help people cope with illness. Plausibly, however, prescription drugs as consumed in the United States foster illness and aggression.

Friday, September 5, 2014

Institutionalized Followers

You and I
Travel to the beat of a different drum
Oh, can't you tell by the way I run
Every time you make eyes at me
--Stone Poneys

Interesting observations here on leaders, followers, and freedom. Particularly insightful were comments related to what might be termed 'institutionalized following.'

He suggests that "most Americans today are followers, whether they know it or not." Whether due to fear of freedom or some other cause, these followers "tend to seek out control over other people, if only to make up for the lack of control they feel in their own lives."

Nice observation, as it does ironically appear that many people who display little control over their own affairs dedicate much time and attention toward watching and influencing what others are doing. In particular, followers seem to obsess over what others think about them and are willing to employ strong armed agents to forcibly revise the actions of others in order to preserve their self-esteem and view of the world.

He further posits that "Americans today at their darker core are desperate for the approval of others." The social media phenomenon helps validate this proposition. We log into social media websites to check on the actions of others. We press "Like" buttons when we approve of others and hope that they "Like" us back. Ditto for "Friend" and "Follower" networks.

We feel better about ourselves when others click our webpages, like our posts, and follow us.

A technology that institutionalizes following...

Thursday, September 4, 2014

Grant and Grace

John Robie: Why don't you own a place like this?
Frances Stevens: Palaces are for royalty. We're just common people with a back account.
--To Catch a Thief

Wonderful shot of Cary Grant and Grace Kelly on the set of To Catch a Thief in 1955.


A famous scene from the film finds Grace speeding around the curves in the surrounding French Riveria hillsides while Grant white knuckles it in the passenger seat.

Ironically, over 25 years later, Princess Grace of Monaco would lose her life when she drove her car off a similar serpentine road not all that far from the Thief set.

Wednesday, September 3, 2014

Days Off Tax Living Standards

Can't seem to get my mind off of you
Back here at home with nothing to do
--Go-Go's

As we leave the Labor Day holiday in the rear view mirror, it seems fitting to ponder the pros and cons of idle time. Most people believe that vacation days, i.e., days off from work, improve their living standards. This belief stems from the axiom that people prefer leisure over work. And to be sure, taking a breather from work can provide welcome rest that recharges the batteries.

At the same time, however, days off necessarily mean days of no production. No production means no economic resources have been generated. Scarcity has not been reduced. In fact, scarcity increases during rest because resources previously produced are consumed.

Stated differently, production is required to boost living standards. In the long run, days of no work, particularly when joined together in large blocks of time, do not improve living standards. Idle time weighs against standard of living.

Tuesday, September 2, 2014

Gone Native

We tried to speak between lines of oration
You could only repeat what we told you
--The Who

Mas Ayoob applauds a reporter for admitting his biases while covering a police shooting story outside of St Louis. Most reporters pretend to be reporting objective news rather than what they are actually doing--i.e., filtering data thru subjective lenses to generate distorted pictures of reality.

In fact, journalists are likely to 'go native' without realizing it. Their biases and narrow ideological networks lead them to believe that they indeed see the world objectively even though they have joined the slant walk.

Possible solutions to the problem, such as expanding personal networks to include people with significantly different views, or disclosing biases such as political affiliations at the beginning of stories proposed to be 'objective news,' seem unlikely.

Responsibility therefore rests with consumers of news to separate fact from fiction.

Monday, September 1, 2014

War: The Ultimate Diversion

Guy de Lusignan: Give me a war.
Reynald de Chatillon: That is what I do.
--Kingdom of Heaven

Politicians understand the value of diversions. The more significant the action that requires cover, the larger the necessary diversion.

Few diversions are larger than war. War diverts attention toward an external 'enemy.' Moreover, war entices a spirit of nationalism, where people come together and rally 'round the flag.

Wars have been famous political tools since civilization began. In the US, there is reason to believe that Lincoln, Wilson, and FDR (among others) facilitated wars to advance their political agendas.

Indeed, a perverse lesson that hardcore policymakers likely derive from studying the Great Depression is that war is a fine way to jump start an economy--provided the war is won, of course. Sadly, even some economists have suggested that economic growth is tied to war.

The more this administration struggles with economic malaise and other problems, chances of war go up.