Thursday, March 31, 2016

Dumbing Down Higher Ed

"Mr Hoover, president of Delta house. 1.6...four C's and an F. A fine example you set. Daniel Day Simpson...has no grade point average. All courses incomplete. Mr"
--Dean Vernon Wormer (Animal House)

Interesting insider view on higher ed written by a humanities prof at a Canadian institution. Several points ring true (e.g., trending disengagement of students, caveats of on-line instruction, gradeflation, rising influence of 'student services' staff). Similar points have been discussed on these pages.

Other points ring less true (e.g., inadvisability of contract or adjunct faculty with less than PhD degrees).

He also fails to discuss the role of cheap credit (i.e., low cost student loans) facilitated by government in creating and/or exacerbating the problem.

However, his article does raise a question worthy of self-reflection: How much am I bowing to institutional pressures when formulating and executing my instructional approach?

Wednesday, March 30, 2016

Speech as Aggression

"His brain has not only been washed, as they say. It has been dry cleaned."
--Dr Yen Lo (The Manchurian Candidate)

We seem to have reached a state where speech that someone doesn't like can be termed a 'micro aggression' that requires a 'trigger warning.' As laughably sad as that condition is, it does bid the question: When can speech be considered an act of aggression?

The short answer is rarely. Unlike physical acts of aggression where threat of bodily harm is at hand, people can avoid speech that they don't like by walking away or by tuning it out. Generally, because people have a choice to not take it personally, speech cannot be considered aggression.

However, there are few exceptions where speech might be considered an act of aggression. One is grounded in the well known saying that "you can't yell 'fire' in a crowded theater." The idea often attached to this claim is that an individual can't say something that incites a riot or panic that threatens people with bodily harm (such as sparking a stampede toward the exits in order to escape a fire). And it is true, in some circumstances such speech could be seen as an aggressive act.

But the fire/theater claim is often erroneous for various reasons. If people have the ability to process the speech, as in the case of incendiary remarks at a political meeting, then the speech cannot be considered an act of aggression. If the event is held on private property where the owners permit types of incendiary or disruptive speech, then the speech cannot be considered an act of aggression.

The fire/theater claim often gets the rationale wrong as well. Not only can a person not stand up and yell 'fire' in a crowded theater, a person cannot stand up and yell anything in a theater that might disrupt the ability of patrons to watch the show. The patrons have entered into contracts with the theater house and anyone that speaks loudly enough to disrupt the delivery of the service is aggressing against the property rights of the patrons and the theater owner.

This is the idea behind 'disturbing the peace' charges. It is also why people who attend political rallies to disrupt discourse between speaker and attendees are on dangerous grounds legally.

One other situation where speech might be considered aggression is where capacity to deflect offensive speech is minimal. Prison camps where propaganda is constantly blasted thru speakers at inmates is one example that comes to mind. Another is the case of children on the receiving end of ridicule by others (e.g., peers on the playground, parents). Because juveniles have yet to develop mechanisms for not taking harsh words personally, it can be argued that they are defenseless against such behavior, and that those directing harsh words toward them are committing acts of aggression.

Adults, on the other hand, generally have no right not to feel offended by speech because mature human beings are capable of controlling their feelings.

Tuesday, March 29, 2016

Outsourcing Violence

"I hate this, Johnny. I really do. I hate violence. That is why I had Rosie do this. I could never do that man. I could never hold a knife to Tyler's throat. She was my woman. We shared time together. But Rosie, he's like a machine. He's got this gift of blankness. Once you set him in motion, he will not stop. So, when three o'clock comes, he will gut her like a pig and try not to get any on his shoes. And there is nothing I can do."
--Bohdi (Point Break)

Nice depiction of the chain of violence that flows thru the State.

Would be more accurate if the principals of that violence were added--those being the people who contract with strong armed government agents to do their bidding.

Many people who call themselves peaceful merely outsource violence to others. Government can be seen as a euphemism for aggression.

Monday, March 28, 2016


To the heart and mind
Ignorance is kind
There's no comfort in the truth
Pain is all you'll find

As demonstrated by this presidential election cycle, the number of people willing to engage in spreading and consuming hearsay is mind numbing. "Where there's smoke, there's fire" drives both producers and consumers of gossip.

As Goebbels understood, spreading false rumors is valuable because it works.

But it works only to the extent that people are willing to engage in the process. If they walk away, then the value of the rumor mill goes to zero.

Sunday, March 27, 2016

Saturday, March 26, 2016

Free Will, Government, and Easter

"You can break a man's skull. You can arrest him. You can throw him into a dungeon. But how do you control what's up here? How do you fight an idea?"
--Sextus (Ben-Hur)

As he has done in the past, Judge Nap reminds us of the link between freedom and Easter. This time around, he emphasizes government's tendency to compromise freedom and, by extension, free will.

"Freedom is the ability of every person to exercise free will without a government permission slip. Free will is a characteristic we share in common with God. He created us in His image and likeness. As He is perfectly free, so are we."

Government intrusion on freedom constitutes intrusion on free will. As such, government is stealing a gift from God. "It violates natural law; it prevents us from having and utilizing the means to seek the truth."

As God has told us, He has endowed each individual differently with respect to those means. For example, some individuals are endowed with huge reservoirs of economic resources while others have next to none. Why this is so is perhaps beyond our comprehension.

What we do know is that God does not prescribe the use of government force to even the distribution of means that he has endowed among people in the name of 'the common good.' Instead, He has told us thru His Son that it is up to us via our free will to decide whether to act peacefully to help others--perhaps thru voluntary cooperation and trade or thru charitable acts.

Easter demonstrates the role government often plays as agents of aggression who tread on individual free will.

It also demonstrates thru Jesus's acts that, even under the worst aggression imaginable, we need not surrender of free will in order to pursue the truth.

Friday, March 25, 2016

Young Minds and Statism

"You're here because you know something. What you know you can't explain, but you feel it. You've felt it your entire life, that there's something wrong with the world. You don't know what is it, but it's there, like a splinter in your mind, driving you mad."
--Morpheus (The Matrix)

Emily Ekins considers the attraction of socialism to young voters (i.e., millennials). Exit polls, for example, find that supermajorities of Democratic voters under the age of 30 prefer Bernie Sanders over Hillary Clinton. While both candidates are progressives who promote socialist policies, few would argue that Sanders conveys a more extreme statist position than Clinton.

She notes that instead of associating socialism with command-and-control states like the former Soviet Union, millennials are more prone to relate the socialism concept to Scandinavian state models--although their precise understanding of socialism and how it applies to countries like Sweden or Denmark is questionable. Nonetheless, young people do constitute the cohort by age expressing the highest preference for "bigger government providing more services" to provide for people's needs.

Does this phenomenon merely reflect the idealism of youth? As Ekins shows, previous generations have also expressed preferences for big government when they were young only to see that preference wane as the cohort aged. As they find jobs, raise families, and, of course, pay taxes, then maturing adults become less enamored with the idea of big government because they learn that the State must be funded from their own productive effort. The repeating generational pattern can be seen as reflecting a transitionary process from youthful idealism toward informed realism.

Perhaps, but I would also suggest that youthful preference for big government is not just an endogenous trait that people may be born with. In fact, they might not be born with it at all. It seems just as, if not more, plausible that preference for big government among the young is a product of environmental conditioning. For example, many young people spend 12-16 years of their impressionable lives in educational facilities that deliver instruction with a statist slant. That slant is highly likely to influence (or indoctrinate) political viewpoint in developing minds.

Age-based flip-flopping on statist preference likely involves, at least in part, unlearning falsehoods subtly placed in young heads when they were innocent and impressionable.

Thursday, March 24, 2016

Anti-Social Insecurity

You go back, Jack
And do it again
Wheels turnin' round and round
--Steely Dan

The author's purpose here is twofold. First he criticizes progressivism, claiming that it "is not a rational system of thought but a means to make progressives feel better about themselves and provide a (false) sense of control over a big, complex and often hostile world."

Such a mindset must ignore the possibility that progressive programs might fail or be cost prohibitive. Progressives must also ignore fundamental axioms such as the presence of resource scarcity in order to constantly propose spending more for programs that continue to escalate in cost.

Progressives cannot question their assumptions because, if they did, they would realize that their approach is not a viable one. So they just plow ahead. "Forward..."

The psychology is one of denial and escalation.

The author also demonstrates the flawed progressive mindset in the context of Social Security. He observes that the institution of Social Security in the 1930s was a response to previously failed government programs and actions, including US participation in WWI, the Federal Reserve, government schools, the Smoot Hawley Tariff., and, of course, the New Deal. Flawed programs never die in the minds of progressives; they get institutionalized.

Social Security lengthened the Depression and continues to cost jobs. Social Security payroll taxes increase employment costs. ECON 101 tells us that when labor prices go up, buyers of labor will purchase less of it.

The author makes an additional point that I hope to expand upon in future posts. He observes that Social Security has made older Americans dependents of the State, and molds them into supporters of the ponzi scheme of generational theft necessary to keep welfare programs afloat. "At a time when the elderly should be relying on their families," he notes, "they are forced to spend their golden years voting like automatons for the same wretched state that is destroying the future of their own children, grandchildren and great-grandchildren."

As such, Social Security and the welfare state has weakened age old bonds between parent and child. Formerly, elderly parents would live with their children and help raise the grandchildren. Now, adult children think nothing of moving thousands of miles away from their parents and outsource their elderly care problems to government-funded institutions and the tax slaves that toil for them.

Social Security can be seen as a monumental oxymoron of progressive ideals. It is not secure at all because it lacks a sustainable economic foundation. It is also anti-social in that destroys the basis for voluntary cooperation between individuals in society.

Wednesday, March 23, 2016

Growing Complacency

I have become comfortably numb
--Pink Floyd

Stock market rallies invite complacency. Higher prices make money manager less prone to purchase downside protection. The price of that protection therefore falls.

Moreover, lower volatility can nudge managers into taking more risk thru use of leverage, creating a state of 'compression' w.r.t. volatility.

Currently vols suggest complacency is reaching noteworthy levels. Knowing full well that volatility indexes are not effective timing mechanisms, I bought some INTC puts this morning given the price discount.

position in INTC

Tuesday, March 22, 2016

Hillary's Stonewall

Some people didn't like what the voice did say
So I took the voice and I locked it away
--Russ Ballard

Chatter increasing that the Obama administration and DOJ are stonewalling FBI investigations into Hillary Clinton's email improprieties. This is to be expected as this administration, and any contemporary administration for that matter, is likely to do what it takes to remain above the law.

The interesting element in this case is the FBI. Some believe that there is a good chance that the agency is less susceptible to political expedience than others. If rule of law is suppressed by the federal government, is it plausible that the FBI goes rogue--perhaps to the point of taking its case directly to the American people?

The argument against the likelihood of taking a principled stand, of course, is that the FBI depends on the federal government for its resources and could be cut off if it publicly challenges the administration.

Monday, March 21, 2016

NIRP and Safety

We can go where we want to
To a place they will never find
--Men Without Hats

NIRP in Japan and Europe is indeed inspiring more spending. Problem is that the market boom is pretty narrow: safes and safe deposit boxes.

If people can't keep funds in bank deposits risk-free then they'll consider parking money in a personal safe.

Basic ECON 101 stuff, really. Of course, ECON 101 seems to flummox central bankers to no end.

Sunday, March 20, 2016

State Size and Getting Along

We'll be fighting in the streets
With our children at our feet
And the morals that they worship will be gone
--The Who

Increasingly it seems, claims grow that people are becoming more divided. Progressives in particular bemoan lack of collaboration and concern for what they call 'the common good.'

What progressives and all statists fail (or pretend not to) realize is that it is their policies that invite division in society.

Left to their own devices, people naturally cooperate in order to further their own self-interests. This means peaceful production and exchange of not only material goods but of social and psychological goods as well.

State action, which is predicated on the use of force, interferes with peaceful cooperation. Special interest groups grow with the State to use aggression to get what they want. It is a matter of time until special interest group is pitted against special interest group to wrestle the strong arm of the State in their favor.

Voluntary cooperation collapses as a result.

The 'common good' and similar constructs are euphemisms for anti-cooperation. They encourage the use of force to further the interests of some at the expense of others. Society becomes more polarized as a result. Political processes are consequently anti-social.

The central proposition is this: The greater the size and scope of the State, the less people cooperate and get along.

Because State size and scope have grown epically, tearing of social fabric should be expected.

Saturday, March 19, 2016

Coordinated Easing

They say you'll fall in no time at all
But you know they're wrong
But known it all along
--Jackson Browne

What saved the tape from breakdown a month ago? Hard not to explain the march higher in terms of coordinated easing among central banks.

Japan, China, Europe. Now Fed cuts rate raise outlook.

Central banks need asset prices higher if they are to keep the wheels on the economic wagon.

position in SPX

Friday, March 18, 2016

Political Speech

"Now, shut up! Shut up, all of you! Listen to me, you hicks. Yeah, you're hicks too, and they fooled you a thousand times like they fooled me. But this time, I'm going to fool somebody. I'm going to stay in this race. I'm on my own and I'm out for blood.
--Willlie Stark (All the King's Men)

Judge Nap discusses the law surrounding political speech in light of recent disruptions and violence at campaign events of Donald Trump. In 1946 a Catholic priest named Arthur Terminiello gave an incendiary speech against communism and what he thought was President Truman's comfort with it. The speech was given in a Chicago hall that his supporters had rented.

Although the hall capacity was about 800 people, about 3x that many showed up for the event, with most of the overflow being opposed to the speech. The priest's speech enraged his detractors to the point where Chicago police asked him to stop speaking and leave the building.

The priest refused. Ultimately push came to shove and protesters rushed the stage and attempted to attack the speaker. The police escorted Terminiello out of the building and then arrested him for inciting a riot. None of the rioters who destroyed property and attacked the priest were arrested.

The priest was tried and convicted, but the case was ultimately overturned by the U.S. Supreme Court which essentially saved the First Amendment from authoritarian impulses to suppress speech that some might find uncomfortable. The court warned that police cannot sit idly by and permit protesters to silence speakers using what legally is known as a 'heckler's veto'. The police have an affirmative obligation to protect the speaker's right to speak and the audience's right to hear.

When a speech takes place in a public place, then the protester's right to peacefully protest must also be upheld. When meetings take place on private grounds, as Jacob Hornberger observes, then protesters do not maintain most of those rights. Under the principles of private property, owners of the property and event can run political rallies how they want and have the right to physically remove those who disrupt the event.

What about allegations that Donald Trump himself is responsible for the violence that has erupted at his rallies? According to the Judge, if Trump publicly calls for violence and there is no time or ability for any speech to neutralize his demand and the demanded violence takes place, then Trump's speech is unprotected and he can be prosecuted for inciting a riot. If there is time for more speech to counsel against violence--even if no neutralizing speech is actually uttered, then Trump cannot be prosecuted. Before any prosecution for political speech commences, the court must eliminate any possible lawful interpretation of the speaker's words.

Stated differently, the rule is that all innocuous speech is protected, and all speech is innocuous when there is time for more speech to rebut or neutralize it.

I would also think that if it can be shown that protestors attended a campaign rally with intentions of disrupting the event, then they are liable.

The purpose of the First Amendment is to recognize and protect the natural human right to form and express thought, regardless of whom it might offend. It encourages wide open challenging speech about government that requires no permission slip.

Thursday, March 17, 2016

Yellen's Psychobabble

You're reading my mind
You won't look in my eyes
You say I do things
That I don't realize
--Alan Parsons Project

After the FOMC decided to keep rates unchanged yesterday, none other than Fed apologist Steve Leisman asked Janet Yellen in the post FOMC presser whether "the Fed have a credibility problem" for not raising rates in the face of various data suggesting that extreme monetary policy measures are no longer required.

Not sure whether I laughed more at Yellen's response or at ZeroHedge's description of it. Take it away ZH:

"[Yellen's] answer [to Leisman's question] was a 261 word jumbled nightmare of James Joyceian stream of consciousness interspersed with high-end econobabble that we, for one, were completely unable to follow."

Amusement aside, the frightening part is that Yellen's psychobabble aptly reflects the level of intellect backing decisions that have the capacity to destroy socioeconomic systems worldwide.

Wednesday, March 16, 2016

What Kids Do

Ellsworth Toohey: Mr Roark, we're alone here. Why don't you tell me what you think of me in any words you wish.
Howard Roark: But I don't think of you.
--The Fountainhead

What kids do: Senders call other kids names. Receivers of name calling take it personally. They have their feelings hurts, engage in protests and retaliation, or otherwise act 'offended.'

What adults do: Senders don't call other people names. Receivers of name calling don't take it personally. They walk away and go about their business.

Election season always reminds me that we have many 'grown ups' who have never moved off the playground psychologically.

Ad hominem ad nauseam.

Tuesday, March 15, 2016

Socialism and Resource Distribution

It's my own design
It's my own remorse
Help me to decide
--Tears for Fears

Amusing sign that demonstrates a common perception of socialism--that of equal distribution of economic resources. However, that perception is imprecise.

Socialism is a form of economic organizing in which property and associated decisions rights are in the hands of the State. Many associate equitable distribution of economic resources with socialism, but that is not necessarily the case. Instead, various political processes can be employed for (quite literally) dictating how resources are distributed under socialism.

Fascism, for example, concentrates resource control and distribution in various verticals that are controlled by the state. It is unlikely that resources will be equitably distributed under this political process.

Communism, on the other hand, does espouse equitable distribution of economic resources, often in the name of 'the common good.' Theory and evidence, of course, casts doubt on whether this goal can be achieved.

I've heard it said several times over the past few weeks that this year's presidential election is shaping up as a choice between communists and fascists. There seems truth in that.

Monday, March 14, 2016

Problematic Principal

So I went to the bank
To see what they could do
They said son looks like bad luck
Got a hold on you
--Simply Red

Borrowing at 0% interest seems like 'free money.' No interest to pay. You only have to pay back the principal.

But paying back the principal itself could become difficult if cash flow withers. In fact, you may have bigger payments to make because you borrowed so much at 0%.

Leverage is likely to go up when rates go down. Even with no coupon to pay, paying back principal can be problematic at high levels of leverage.

Sunday, March 13, 2016

Voting to Destroy the Establishment

Think the time is right
For palace revolution
--The Rolling Stones

Nassim Taleb of 'black swan' fame reinforces yesterday's point:

"The establishment composed of journos, BS-vending talking heads with well-formulated verbs, bureaucrato-cronies, lobbyists-in training, New Yorker-reading semi-intellectuals, image-conscious empty suits, Washington rent-seekers and other 'well thinking' members of the vocal elites are not getting the point about what is happening and the sterility of their arguments. People are not voting for Trump (or Sanders). People are voting, finally, to destroy the establishment."

Saturday, March 12, 2016

Insurgency Candidates

"A building is a symbol, as is the act of destroying it. Symbols are given power by people. Alone, a symbol is meaningless. But with enough people, blowing up a building can change the world."
--V (V for Vendetta)

On his radio show yesterday Sean Hannity argued, as these pages have, that the two GOP presidential candidates rising to the top of primary ballot boxes reflect an overwhelmingly anti-establishment voice coming from Republican voters. He called Ted Cruz and Donald Trump the 'insurgency candidates.'

Cruz, he said, is an insurgent because he would make changes to better align political action with constitutional principles. Significant movement toward the Constitution threatens today's Right (and Left) establishment to no end.

Trump, he said, is an insurgent because of his 'outsider' status and his demonstrated disdain for political correctness. After several conversations with Trump, Hannity is convinced that he will keep his promises about making major changes and has little doubt that Trump would do his best (paraphrasing here) to 'blow up the government' if need be.

Whether either Cruz or Trump would actually be insurgents if elected as president is certainly debatable. But I do think Hannity has captured the essence of these two candidates' appeal with many voters.

These voters are saying that they believe that the country is headed in a very wrong direction and that incremental attempts to alter the course, which these voters backed in the past, have not worked. Thus, many citizens are now thinking outside the box that defines Washington orthodoxy. Outsiders, they believe, are the best bet for turning this thing around.

But who's to say that the replacement apparatus crafted by insurgents will be an improvement, you say? Well, to many people, perhaps that's tomorrow's question. Today's question is how do you shut down the existing machine before we're over the cliff's edge?

Friday, March 11, 2016

Unseen Costs

Well I do my best to understand dear
But you still mystify
And I want to know why
--Nick Lowe

Prof Williams applies Bastiat's seen and unseen rule to the Bush administration's 2002 steel tariffs. What is seen are the beneficiaries, including steel industry workers and shareholders who benefit directly from the protectionist practice.

What is unseen are the costs. Williams cites studies estimating that each steel industry job 'saved' by the tariffs cost American consumers $800,000, and that tariffs caused the loss of about 50,000 jobs across 16 states in supply chains that had to cope with higher steel prices.

As Williams observes, taxing ourselves and giving each steel worker a $100,000 check would have been far cheaper than the ultimate cost of the tariffs.

When the federal government creates a special privilege for some Americans, it must necessarily come at the expense of other Americans.

To hone your skills, apply Bastiat's rule to various policies and programs. Consider, for example, some issues favored by the Obama administration, including:

Higher minimum wages
Zero interest rate policy/quantitative easing
Stricter gun control

Identifying who benefits is relatively easy. This is what the administration wants you to see.

Identifying who bears the cost is harder. The administration hopes that you remain blind to the costs.

Thursday, March 10, 2016

EU Desperation

"Remember this day, boys. Remember this day."
--Sam Rogers (Margin Call)

This morning the ECB announced an eyebrow raising array of moves aimed at stimulating the economy. The moves include further movement toward negative interest rates, a 33% increase in asset purchases (a.k.a. 'quantitative easing'), a series of four new long term refinancing programs (LTROs), and the eligibility of investment grade euro-denominated corporate bonds issued for QE purchase.

This is what desperation looks like in central banking land.

Wednesday, March 9, 2016

Force Versus Freedom

Into the blue again
After the money's gone
Once in a lifetime
Water flowing underground
--Talking Heads

Nick Gillespie believes that the two GOP presidential frontrunners deemed as 'anti-establishment' are, in reality, similar to the establishment candidates that they are beating. Essentially, he thinks that they both follow the tradition of authoritarianism that defines both the Democratic and Republican parties.

Despite his sense that, with the exit of Rand Paul, no one with libertarian ideology remains in the GOP race (to be fair, there is reason to believe that Ted Cruz appeals to some libertarians), Gillespie posits that the battle of ideas underway in the Republican Party pits authoritarianism versus libertarianism.

He cites the growing visibility of Rand Paul in the Senate and Thomas Massie in the House as examples of libertarian ideology on the ground in Washington. He also notes that polls continue to suggest ideas of freedom and non-aggression as gaining traction among the electorate.

The faces and times may be new but the clash is a familiar one: force versus freedom. Same as it ever was.

Tuesday, March 8, 2016

Anti-Establishment Pushback

Hey hung up Mr Normal
Don't try to gain my trust
--The Who

In 2010 the Republican Party won a big midterm election, largely on the back of Tea Party voters fed up with the GOP establishment. We noted that the establishment would try to co-opt or otherwise purge many of the incomers in order to maintain the status quo--that being of ever bigger federal government whether it be powered by Democrats or Republicans in Washington.

Fast forward to today and the status quo remains in place. With some noteworthy exceptions, the mandate for change conveyed by the 2010 vote has largely gone unanswered. The federal government is larger and wields more control over people's lives.

Dissatisfaction with the GOP's non-responsiveness is clearly evident this primary season. Voter preference for a few anti-establishment candidates has swamped votes for a dozen plus Main Line hacks.

Of course, the extent to which the anti-establishment candidates actually are 'anti-establishment' in action largely remains to be seen. But there can be little doubt that the Republican Party as we have known it is coming apart at the seams.

A battle of ideas has commenced. This battle was inevitable and is long overdue.

Monday, March 7, 2016

Playing the Heavy

It's time to go home now, and I've got an aching head
So I give her the car keys, and she helps me to be
And then I tell her, as I turn out the light
I say, my darling, you were wonderful tonight
--Eric Clapton

Nancy Reagan passed away this weekend at the age of 94. I thought this story captured the essence of her life as First Lady and as Ronald Reagan's wife.

She would often do things that made herself appear hard and unattractive in order to help her husband. She played the heavy.

And she did so with marvelous devotion.

Sunday, March 6, 2016

Real Productivity Decline

Crossing that bridge with lessons I've learned
Playing with fire without getting burned

This essay argues against the premise that downward trends in US productivity metrics are primarily artifacts of the measurement system itself (e.g., failure to capture info tech gains from innovations such as search engines and social networking).

The author cites recent research that challenges the mismeasurement hypothesis. Findings suggest that the proposed positive info tech spillovers fail to realistically account for the magnitude of lost productivity. Moreover, downward trending productivity is not just a US phenomenon but one that is occurring in dozens of developed countries at approximately the same time.

I would argue more directly that if info tech or other developments are truly 'innovative,' then their influence in improving general output per hour as any productivity enhancing tool should be readily apparent in the data.

As these pages have noted, the more likely explanation is that the loss in productivity is real and related to declining worldwide savings which reduces capital in the system available for productivity improvement projects.

Saturday, March 5, 2016

Cast of Chaos

There's a place where the lights won't find you
Holding hands while the walls come tumbling down
When they do, I'll be right behind you
--Tears for Fears

Not a bad list of the principal players in Socialism--the tragic drama that ends in chaos.

To the central bankers' part, I would add the role of inflating away the value of currency which expropriates wealth from individuals by nefarious means.

I would also add another institutional player to the cast: special interest groups. These are factions that seek to influence other actors, commonly thru use of democratic process to get control of state force.

From a glass half full perspective, special interest groups can be seen as a means for individuals to cope with aggression leveled by the other actors. The glass half empty perspective sees the opposite--that special interest groups are the principals who contract with strong armed agents to do their bidding in a manner that escalates the socialistic machine to the chaos endpoint.

Friday, March 4, 2016

Immunized Clinton Staffer

"The question is whether you were lying then or are you lying now...or whether in fact you are a chronic and habitual liar!"
--Sir Wilfrid Roberts (Witness for the Prosecution)

Judge Nap explains the significance of the DOJ's grant of immunity to an ex Hillary Clinton staffer. It means that a grand jury has already been convened as a result of the FBI's investigation into the Clinton email scandal and that the staffer knows who led efforts to violate federal laws requiring those who receive state secrets to keep them secure.

The judge continues to believe that the evidence will lead to a Hillary indictment and, if it does, "it will shake the Democratic Party and the American political establishment to the core."

Meanwhile, the mainstream media continues to grossly under-report this story...for obvious reasons.

Thursday, March 3, 2016

Less Productivity Per Capita

Some days won't end ever
And some days pass on by
I'll be working here forever
At least until I die
--Huey Lewis and the News

Study of productivity using GDP per capita data rather than the standard BLS productivity series in part to review levels and trends over a longer period of time (BLS productivity tracking began in the late 1940s).

The most common measure of productivity is a ratio of output to labor resources that produce output (a.k.a. partial factor productivity with respect to labor). In the numerator is a measure of output (such as GDP). In the denominator is a measure of labor.

In the BLS series, an estimate of hours worked is used. This comes with obvious estimation challenges as many if not most American workers do not report their hours worked. An advantage of a per capita productivity measure is that focuses on straight head count of the citizenry--presumed to be less subject to error.

However, head count measures of productivity have their own limitations. Viewing output relative to the entire population ignores the fact that only a fraction of all citizens are working to produce that output, and that fraction might change over time. Indeed, the workforce participation rate has been declining for decades. Moreover, headcount measures fail to account for the possibility that workers may work more or less time to produce a given amount of output.

Nonetheless, output per capita provides a useful lens for evaluating productivity over time. It reflects an 'effective productivity' of sorts because it reflects output per all consumers given extant social constraints on production.

The key finding of the study is that productivity measured in terms of GDP per capita has been increasing at declining rates for decades.

This is wholly consistent with capital theory. Saving has been declining. Fewer and fewer resources have been set aside for productivity improvement projects.

Stated differently, as capital is consumed, productivity will decline.

Wednesday, March 2, 2016

Privacy, Property, and Gold

I'm falling down a spiral, destination unknown
Double crossed messenger, all alone
Can't get no connection, can't get through
Where are you?
--Golden Earring

Extending yesterday's post, holding large currency preserves capacity for private transactions but does not prevent devaluation due to inflation. The problem with paper currency is that it always gets debased by government in order to obtain resources from its citizenry.

Preserving purchasing power requires a money that resists debasement. Over the years, that money has been come from precious metals--gold and silver. Money backed by gold and silver cannot easily be debased because concerns about inflationary practices of government will cause precious metal to move from government to private hands--thereby affording citizens protection against having their property confiscated by an 'invisible tax.'

1850 $20 Liberty PCGS XF40 CAC

Take, for example, the US 'double eagle,' a coin containing nearly one ounce of gold with a face value of $20 that circulated from 1850 until 1933. During that period, anyone could walk into a bank and exchange $20 worth of paper money for a gold double eagle. When concerns grew that the federal government was printing too many paper dollars, then more people would accumulate double eagles, thereby draining gold from government vaults until bureaucrats slowed down the printing presses.

Once gold backing was lifted from the dollar by FDR in 1933, then people could no longer sanction the federal government for inflationary practices. This gave the feds license to print $trillions at their discretion with predictable consequences.

1926 $20 Saint Gaudens PCGS MS65 CAC

Today, a $20 bill from the 1920s buys less than what a dime could from the same era. On the other hand, a double eagle from the same era, such the 1926 Saint above, has more than $1200 of purchasing power today based on its gold content alone.

Larger denomination currency, plus its backing by gold, rightly protects privacy and property.

position in gold, silver

Tuesday, March 1, 2016

Cash and Freedom

"Keep the change."
--Latrell Walker (Exit Wounds)

Relating to a previous post about eliminating large denomination currency, a University of Tennessee law professor observes that because inflation has eroded the value of money, a $100 bill today is worth only a fraction of what it could buy just a few decades ago.

Stated differently, large denomination money is not all that large when its current purchasing power is considered. As inflation continues to erode value, then larger bills will be required because small bills, such as the dollar, will be next to worthless (the current value of the penny is a good analogy).

More importantly, the author notes that banning denominations of cash gives bureaucrats more control over people's lives:

"Cash has a lot of virtues. One of them is that it allows people to engage in voluntary transactions without the knowledge or permission of anyone else. Governments call this suspicious, but the rest of us call it something else: Freedom."