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Oh, Baby!!!

Washington quarterback Jake Locker, appearing on the network’s “College Football Live” show as part of a three-day conference media blitz on the East and West coasts, called Oregon State the favorite to win the Pacific-10 Conference in the upcoming college football season.

Oregon Due For Major Quake?

The other day I wrote about the Mogi Doughnut Hypothesis and it occurred to me looking at the map of Oregon and Washington that while we are both earthquake prone states, Oregon has been quirt a long time. Are we living in a Mogi Doughnut?

My Father is an Exotic Dancer

One day a fourth-grade teacher asked the children what their fathers did for a living.. All the typical answers came up — fireman, mechanic, businessman, salesman, doctor, lawyer, and so forth.

However, little Justin was being uncharacteristically quiet, so when the teacher prodded him about his father, he finally replied,

‘Okay…my father’s an exotic dancer in a Gay cabaret and takes off all his clothes in front of other men and they put money in his underwear.   Sometimes, if the offer is really good, he will go home with some guy and stay with him all night for money.’

The teacher, obviously shaken by this statement, hurriedly set the other children to work on some exercises and then took little Justin aside to ask him, “Is that really true about your father?”

‘No’, the boy said, ‘He actually works for the Democratic National  Committee and helped get Barack Obama elected President last year, but I  was too embarrassed to say that in front of the class.”

Oregonians On The Hook For PERS!

The other day in PERS Rates To Go Up!, I posted that governments at all levels in Oregon would see their the payroll rates to cover their employees’ pension and health care benefits more than double in 2011, from their current level 5.2 percent of payroll to 10.8 percent of payroll.

There’s a lengthy article, The Muni-Bond Debt Bomb, at City Journal by Steven Malanga that features Oregon. Now we know why the payroll rates are going up and why you and I are on the hook:

Seven years ago, (Oregon) officials there began to push for a change in the state’s constitution to let its pension funds issue bonds, saying that it would save millions of dollars. The Statesman Journal in Salem called the idea “a no-brainer,” while the Oregonian claimed that it constituted “state government acting prudently, like a business.” The measure passed, and Oregon municipalities loaded up with billions in pension debt, which they invested in the market—often using risky investment strategies in an attempt to beat what the bonds paid out in interest. That approach proved ruinous during the financial crisis. In 2008, Oregon pension funds lost 27 percent of their value, the largest decline in the state’s history. Oregon taxpayers are now staring at a $1.2 billion hike in the state’s contributions to the pension system. “That could force school districts, cities and counties to lay off workers or cut services as they struggle to pay higher pension contributions,” the Oregonian noted, conveniently omitting its earlier support for the bonds.

Malanga shares some ideas for fixing the problems brought on by too much debt, but owners of munis beware. Governments may not like the medicine and decide that default is easier.

The Cardinal Climax!

George Ure who writes Urban Survival has some interesting info on the next couple of days astrologically:

Guys like Arch Crawford, Robert Hitt, and Jeff Harman see it plain as day in the astro charts.  Arch summarizes what’s going on ‘upstairs” this way…

“The most exacting and powerful alignment of planets in ALL of Human History takes place from July 26- Aug. 3

Astrologers are calling it the Cardinal Climax being ALL near Zero degrees of ‘Cardinal’ signs.

Of course, that means it’s as important as anything that has ever happened – WWI, WWII, Great Depression, Black Plague, Fall of Rome (and everyone else).

More specifically July 30-Aug 1. Represents a Maximum of a Strange Attractor in all kinds of phenomena.

Here’s what it looks like courtesy of SpaceWeather.com:


Kaletsky Worries About Inflation In 2008!

Now that I’ve written my review of Anatole Kaletsky’s Capitalism 4.0, I have time to see what others have said about him in the past.  I searched Forbes for “Kaletsky”and found a blog quoting an article written by Kaletsky in May of 2008: “Could oil mania be coming to an end?” Don’t you just love this opening second paragraph:

While the slowdown in Britain and Europe has only just started, the US economy now seems likely to avoid an outright recession as Washington’s huge tax cuts, interest rate reductions and bank and mortgage bailouts appear in the nick of time over the economic horizon, just like the US cavalry riding to the rescue in a classic cowboy film.

This was before Obama was elected and before Kaletsky knew the U.S. would spend trillions and before he knew it would have little effect on recovery or employment. It was also before he knew that Obama wanted to rescind those tax cuts while still in the recession.

As these measures start gaining traction we should see fewer of the panicky headlines about a return to the Great Depression…

When he writes about commodities, he suggests trend followers are just speculators and will get hurt, but doesn’t acknowledge the trend following speculators in housing. Kaletsky is worried about commodity prices:

…there is now only one key uncertainty marring the signs of improvement: the huge increase in energy, food and other commodity prices since the start of this year. This now poses a far greater danger to the world economy and financial system than the correction in US and British housing markets and the related credit losses suffered by leading banks.

Don’t you just want to laugh at such nonsense! He doesn’t see the risk in housing, but sure is worried about inflation just before prices fall off the table. When he wrote the article West Texas crude (WTIC) was about $125 per barrel and soon peaked at $147.90 in July, 2008. Six months later the price had fallen to $35 per barrel. Corn peaked with WTIC at $7.50 a bushel and by December was below $3.00. Copper peaked at $4.00+ and fell to $1.25. Gold was testing $1,000 about the time of this article then pulled back to below $700.

It seems obvious that Kaletsky regards Gold as just another one of the commodities and I suspect if he’d known the depth of the coming recession and how we did start to invoke the Great Depression, he would have trouble justifings Gold rise from $700, through $1,000 and peak over a year later at $1,200.

He writes that “Commodity inflation is worse than housing and bank deflation for three main reasons.”

  • First, rising prices of food and energy hit poor people hardest and stir to action those who are politically apathetic. If I may, I think the premise is correct, Tea Party members for example, but they are really upset about housing and bank deflation brought about by government meddling.
  • Secondly, inflation is inherently harder for governments and central banks to deal with than deflation. No it’s not! The FED is trying like crazy to inflate asset prices, but the deflationary tide is nullifying their efforts.
  • Thirdly, the countries most exposed to the risks of commodity inflation – China, India and other large consumers of energy and food – are precisely the ones that the world economy now depends on for most of its growth. I suspect that China is most scared of deflation, a collapse of housing and a collapse of demand for their products. Unemployment is probably their biggest concern.
  • To make matters worse, the political pressures caused by energy and food inflation in developing countries is provoking panic reactions such as trade restrictions, price controls and credit rationing schemes that now seriously threaten the progress towards global market liberalisation and will almost certainly make commodity shortages even worse in the long term. This I just don’t believe. I think a collapse in currencies and deflation might cause more panic.

The problem with elitists, economists and even pundits like me, is that we try to tell you what is bad and good and warn about events, but most of don’t know anything beyond our little existence. It is arrogant to try to manage an economy as large and as complicated as ours were at home. It’s hubris to try to manage the global market.


Now There’s Wallet Blog

Back in January I wrote in a post “Here’s an idea I like a lot: CardHub.”


Now I see that Card Hub has a blog called Wallet Blog. Part of the reason I liked Card Hub was our ability to search for the best credit card for us including the best interest rates. Wallet blog seems devoted to make us smarter with credit. Take this post 2010 Starts with an Alarming Debt Trend.

CardHub.com released the Q1 2010 Credit Card Debt Study this week, which revealed that consumers are on track to end up with more debt at the end of 2010 than 2009, despite positive signals in the economy

One of the reasons for the depth of this recession was that consumers had more debt than could be justified by their income.  Because of the recession, debt is down from “$973.2 billion at the end of 2007 to $829.4 in April of this year,” but most of the reduction has come from the write off of bad debt. Now consumers, it’s feared, are reverting to pre-recession behavior.

Wallet blog has this important piece of advice:

With the unemployment rate at 9.7 percent (seasonally adjusted) – almost twice what it was three years ago – our economy simply cannot sustain pre-recession debt levels. Other fundamental weaknesses in the economy, such as a huge federal deficit, make it even more important that consumers remain fiscally responsible and are diligent in paying down their credit card debt in order to avoid future hardships.

Indeed!

Book Review: “Capitalism 4.0” By Antole Kaletsky

I started to read “Capitalism 4.0” by Anatole Kaletsky and I’m done with it and I’ve only begun.

In the Introduction Kaletsky looks back at the financial crisis of 2007-2009 and writes that Capitalism didn’t die, but pre-crisis faith in the wisdom of financial markets and efficiency of free enterprise will never again be what it was.  He shares with us that the left-wing anti-capitalist ideologues and the right wing free-market zealots, need to have their hubris challenged for the government intervention was “clearly necessary to save the system.”  Imagine, he uses the word hubris as in “arrogance, exaggerated pride, or self-confidence that often results in retribution.”  In old Greece, to say one was filled with hubis was the worst form of disapproval.

I argue right off the bat that spending $1 trillion dollars to save Chrysler and GM, AIG and Goldman Sachs, and all the big banks was not necessary.  Those auto companies, for example, were saved for the unions which had done so much to make them uncompetitive and puts Ford in a precarious position. Kaletsky disagrees writing:

After the worldwide bank bailouts and the U.S. government’s takeover of General Motors, the dogma that government intervention is always inimical to private enterprise can no longer be sustained.

Kaletsky argues that we are in the fourth iteration of Capitalism.  The first laissez-faire Capitalism 1.0 lasting from the early19th century to 1930.  Capitalism 2.0, FDR to Lyndon Johnson, lasted from 1930 to the Margaret Thatcher-Ronald Reagan Capitalism 3.0 of the 1970s to 2007-2009. I would argue that small government and Capitalism 1.0 ended when Congress established the Federal Reserve System in 1913.  Prior to that governments played a small role and had to sell bonds to conduct wars.  Capitalism 3.0 began when Nixon took us off the Gold Standard.  I expect Capitalism 4.0, when ever it arrives, will be a complete repudiation of government intervention after 1913 and a return to what the Constitution says about money.

Then there is this howler from Kaletsky:

…if the rising generation of American and European politicians and business leaders play their cards well, the new economic model can be more prosperous than the last one.  Perhaps it will one day be described as Obamanomics. (my emphasis)

Then Kaletsky trots out Greernspan.  We all know now that all the reverence Wall Street and Congress showed this man was misplaced.  Touted as an Ayn Rand believer, he was incompetent as an economist and had no spine for her economics.  Asked whether he found his free-market beliefs were dangerously flawed, he replied, “Yes, I have found a flaw.”   He failed to tell us that he was the flaw.  He didn’t walk the talk!  The flaw to Kaletsky is lassez-faire Capitalism.  Ayn Rand said “The ideal political-economic system is lassez-fair capitalism…In a system of full Capitalism, there should be (but, historically has not yet been) a complete separation of state and economics…”  Greenspan believed he not the market could discover what interest rates are appropriate, how low or high to keep them and how much money should be in the system, even though he wrote a paper about the role of Gold in an economy.

Kaletsky believes on the other hand that the only good examples of Lassez-faire are Somalia, Congo and Afghanistan!  The new kind of capitalism now emerging will essentially reverse Ayn Rand’s objectivist ideal.  Instead of separating the state and private economy, Capitalism 4.0 will bring them into a closer relationship.”

Ayn Rand wrote Atlas Shrugged in the late1940s and  50s and laid out exactly what our economy would look like if we continued down the path we were on.  She was exactly right and the state involvement in the economy has not worked and more state will not make it work better.

Kaletsky continues, “Experimentation and pragmatism must therefore become the watchwords in public policy, economics, and business strategy even if this means a loss of consistency and coherence.” Pragmatism is spineless, fascist and morally ambiguous.

Kaletsky, while advocating more Keynes will help us, suggests we look to China for guidance.

China’s tremendous economic growth and the gain in international prestige for its state-controlled economic model after the 2007-0 crisis have cast doubt on the theory that capitalism and democracy will always be mutually supportive.  The optimistic slogan of the Thatcher-Reagan period that “free markets create free people” can no longer be taken for granted.

We’ll see if that continues to hold as China is rife with mal-investment and the correction has been held off by the politicians in charge.

I’m not alone in my view of Kaltesky’s economics:  Peter Foster: Statism 4.0 – Author Anatole Kaletsky’s ‘new’ capitalism is just a regurgitation of the tried and failed fantasy of a ‘mixed economy’

Finally, who is Kaletsky?  Mish Shedlock shares one Kaletsky idea:

Three Ideas That Should Scare The Hell Out Of You

I quoted Kaletsky back in 2006 when he said

DEFEAT IS NEVER pleasant, but often it is better to lose than to win.

The elites and statists will slobber all over this book, however Kaletsky is wrong on the dividing line between his various forms of Capitalism and he’s wrong about a coming marriage between business and government.  We already have it.  It’s called corpocracy and all it means is more debt, more government and less freedom.

Happy 18th Anniversary!

My bride and I celebrate our 18th wedding anniversary today with nine holes of golf at Glendoveer, dinner at Il Piato and the premiere of the fourth season of “Mad Men” at 10:00.

Beverly is as lovely today as the day we married and I’m re-upping for another 18! I am a lucky man to have found a woman who loves me despite my flaws.

PERS Rates To Go Up!

Did you read Ted Sickinger’s article about Oregon’s Public Employee Retirement System (PERS) in OregonLive friday?

…the PERS board (was told) Friday that systemwide, the payroll rates paid by cities, counties, school districts and state agencies to cover their employees’ pension and health care benefits will more than double in 2011, from their current level 5.2 percent of payroll to 10.8 percent of payroll.

When “cities, counties, school districts and state agencies” have to pay more, you know whoelse has to pay more?  That’s right the Oregon taxpayer!

Mish Shedlock has a comment at:

Oregon’s Public Employee Retirement System (PERS) in Deep Trouble, Taxpayers on the Hook

Question: Which of the two running for Governor of Oregon is more beholden to the public employee unions?

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