Barrel Strength

While we are on the topic of socialism in Canada, imagine a society without public transport.

You think, like a good Canadian, that such a thing is a disaster, right? Wrong, wrong ,wrong.

Go to the Dominican Republic. You cannot walk along a country road for a hundred yards without a jeep, jitney, motorized tricycle, motorbike, or taxi offering you transport. Wait half an hour and a country bus will take you to town. No public transport. No unionized workers. Few if any fixed routes, except for inter-city travel. Everything is coordinated by cell phones. The poor get around quite well, as there is transport for every budget. Air-conditioned taxi for the rich. A plywood bench in a Toyota pick-up truck for the poor. The rear seat of a motorcycle for anyone.

Imagine what “public” transport would be like in Ottawa if there were no public sector providing it.   The first effect would be a vast reduction in large buses, driving around at all hours of day and night, mostly empty. Have you ever thought how soviet that is, that tons of moving vehicle are used to transport two, three, or six people, all the while chewing up diesel fuel, by a unionized worker approaching a meltdown of rage? I invite you to look at large near-empty buses at any hour of day as a symptom of socialist planning, not market failure.

In a capitalist transport system, vehicles would be appropriately sized to the human traffic. Very few buses would be the full-sized monsters of main traffic routes.     Jitneys, car-pools, taxis, and mini-buses would pick people up from suburban homes and take them to assembly points, where large air-conditioned coaches would take them to downtown offices.

The system would be coordinated by cell-phones between drivers, by some measure of common ownership of vehicles, and by computers.     Vertical integration between the smallest providers and the largest, and horizontal integration across the cities of Ottawa and Gatineau, would probably be impossible. Only government licensing would create the shortages that would result in higher fares. So don’t restrict the number of licences in the transport businesses, just licence the drivers in the same way that all people are.

Such a system would be near impossible to monopolize. Free entry and exit.

Instead, what do we have? Legal monopolies on transport, held by city councils. Large labour unions. The public held hostage to sullen unionized drivers. Overcrowded buses. Poor service.

Why should you not be able to phone a jitney cruising your section of suburbia for a lift to the nearest mall or shopping strip, where you would transfer to a smaller bus, and then to a larger coach if you were going more than ten miles. This would be the normal pattern of public transport if it were privatized. It is time to unleash the Lebanese, the Sikhs and like entrepreneurial clans and nations and let them solve the problem of coordination.  OC Transpo is just a socialist planner. Abolish it.

Don’t hold your breath.

From today’s Ottawa Citizen:

Men, argues McGill University professor Paul Nathanson and his colleague Katherine Young, suffer from the myth that they are the gender with the power and therefore cannot be damaged by criticism and ridicule. The physical, political and economic power that a small percentage of men do wield renders women, they believe, “either unwilling or unable to see men as fully human beings, people who can indeed be hurt, both individually and collectively.”

Nathanson and Young have written five books chronicling the rise of misandry, the hatred of men, which they view as a culture war being fought because of the feminist activism that led to the changed role of men.

It’s official. The Roman Church just confirmed every dark thought that every ranting protestant has ever had about the dark schemes of the Vatican.

The Pontifical Office for Justice and Peace has issued a memorandum calling for world goverment.

The proposals are to:
1. Strengthen the United Nations on the way to world government, and make its decisions mandatory.
2. Set up a world bank capable of global monetary management.

The report says:

“A supranational Authority of this kind should have a realistic structure and be set up gradually. It should be favourable to the existence of efficient and effective monetary and financial systems; that is, free and stable markets overseen by a suitable legal framework, well-functioning in support of sustainable development and social progress of all, and inspired by the values of charity and truth. It is a matter of an Authority with a global reach that cannot be imposed by force, coercion or violence, but should be the outcome of a free and shared agreement and a reflection of the permanent and historic needs of the world common good.”

“However, a long road still needs to be travelled before arriving at the creation of a public Authority with universal jurisdiction. It would seem logical for the reform process to proceed with the United Nations as its reference because of the worldwide scope of its responsibilities, its ability to bring together the nations of the world, and the diversity of its tasks and those of its specialized Agencies.The fruit of such reforms ought to be a greater ability to adopt policies and choices that are binding because they are aimed at achieving the common good on the local, regional and world levels.”

The report calls for the progressive surrender of state sovereignty to regional and global authorities.

“So conditions exist for definitively going beyond a ‘Westphalian’ international order in which the States feel the need for cooperation but do not seize the opportunity to integrate their respective sovereignties for the common good of peoples.It is the task of today’s generation to recognize and consciously to accept these new world dynamics for the achievement of a universal common good. Of course, this transformation will be made at the cost of a gradual, balanced transfer of a part of each nation’s powers to a world Authority and to regional Authorities, but this is necessary at a time when the dynamism of human society and the economy and the progress of technology are transcending borders, which are in fact already very eroded in a globalized world.”

On the new world banking authority:

“Specific attention should be paid to the reform of the international monetary system and, in particular, the commitment to create some form of global monetary management, something that is already implicit in the Statutes of the International Monetary Fund. It is obvious that to some extent this is equivalent to putting the existing exchange systems up for discussion in order to find effective means of coordination and supervision. This process must also involve the emerging and developing countries in defining the stages of a gradual adaptation of the existing instruments.In fact, one can see an emerging requirement for a body that will carry out the functions of a kind of “central world bank” that regulates the flow and system of monetary exchanges similar to the national central banks.”

And will a central world army enforce the decisions?

It is clear that no one has been reading a newspaper in the Vatican lately. Have they noticed the European debt crisis cannot be fixed while retaining a common currency, but rather that the solution lies in having currencies that reflect the productivity of many different peoples?

But the proposals for world government imply a world of saints, and depend on virtues nowhwere evident in the common run of humanity.

It is interesting to observe the relatively complete silence with which these proposals have sunk from sight. A decent impulse may be at work here to spare the Vatican from the kind of croticism that would befall a more worldly body. David Warren would be appalled at these proposals, and I would welcome his intervention.

Beyond the misestimation of the virtues of the human species involved in these proposals, a deeper error is being made. Concentrating decision-making at one central agency, rather than at the lowest possible level – which is the usual Catholic position on political decision-making – ensures that when the world government is in error, it will larger and more difficult to recover from. Imagine what such a body would already have done with anthropegenic global warming.

Someone in the Vatican needs to read Naseem Nicholas Taleb’s “The Black Swan“. Since error is inevitable, institutions have to be made more robust against the effects of the unforeseeable.

So it is time to hear from David Warren, Canada’s arch-Catholic. What do you think of this nonsense, David?

Do you think a man as clever as Benedict XVI actually believes this stuff? Did he want to get in ahead of the occupy Wall Street crowd? Does he want to promote the African cardinal who heads the office which produced this claptrap?

Ambrose Evans-Pritchard offers this analysis of why the Euro – the common currency – is the source of rather than the solution to Europe’s tensions.

“Chancellor Angela Merkel warned last week that euro failure threatens a thousand plagues. “No one should think that another half-century of peace and prosperity is assured”

“She has the matter backwards. The euro itself is has become an engine of destruction and bitter cross-border rancour.

“Europe will not be whole and happy again until the currency is broken into workable parts, and this misguided experiment is shut down for ever.”

And in the same paper, Ian Cowie reports that there are more Porsches in Greece than there are Greeks declaring 50,000 Euro incomes. In fact it is worse.

“Something can’t be right when the modest city of Larisa, capital of the agricultural region of Thessaly with 250,000 inhabitants, has more Porsches per head of the population than New York or London.”

Perhaps the penny – or the euro – is already dropping, because Professor Polemarchakis writes that Larissa “is the talk of the town in Stuttgart, the cradle of the German automobile industry, and, particularly, in the Porsche headquarters there”, since it “tops the list, world-wide, for the per-capita ownership of Porsche Cayennes”.

“The proliferation of Cayennes is a curiosity, given that farming is not a flourishing sector in Greece, where agricultural output generates a mere 3.2pc of Gross National Product (GNP) in 2009 – down from 6.65pc in 2000 – and transfers and subsidies from the European Commission provide roughly half of the nation’s agricultural income.

“A couple of years ago, there were more Cayennes circulating in Greece than individuals who declared and paid taxes on an annual income of more than 50,000 euros.”

Polling of protesters at New York’s Zuccotti Park provides real data supporting the stunningly obvious:

Our research shows clearly that the movement doesn’t represent unemployed America and is not ideologically diverse. Rather, it comprises an unrepresentative segment of the electorate that believes in radical redistribution of wealth, civil disobedience and, in some instances, violence. Half (52%) have participated in a political movement before, virtually all (98%) say they would support civil disobedience to achieve their goals, and nearly one-third (31%) would support violence to advance their agenda….

The author is responding to critics of the Wall Street Journal’s coverage of OWS, and he finds that the Journal’s reporting does jibe with the ground situation.

There is plenty of justification for anger at how capitalism has become divorced from the rational allocation of resources to deserving projects, and you can read all about it in any number of Michael Lewis books. For those who want to understand how the mortgage crisis led to the meltdown, you can read Gretchen Morgenson’s Reckless Endangerment.

But that will not change my attitude towards all the weedy and possibly well-intentioned protestors one iota.

Remember the Arab Spring? In Egypt it has become an occasion to murder Christians. In Libya, an inter-tribal fight. All the hype – and nothing. Same goes for Syria. As the Syrian marchers say in their signs: “Alawites to the grave, Christians to Beirut.” The Arab Spring is just another pretext for Muslims to massacre, humiliate, and deport their non-Islamic or heteodox minorities.

What really forms my views about the Occupy movement was the death of Princess Di. It is worth a story. We were gathered at a Canadian lakeside with a bunch of Liberals and like-minded bien-pensants for a friendly weekend of discussion of worthy issues. The day was progressing in its usual bland fashion when a woman Toronto journalist began a rant the likes of which I had never heard before or since. “Men don’t get it” she said. Here we were discussing reform of the politics of Canada, when the most important issue in recent human history was occurring – the outpouring of grief for Princess Diana – and all we were doing was showing our insensitivity. Like most canadian men, the gang at the lakeside did not think much of Proncess Di’s death, and we thought even less of the hysterical and largely bogus outpouring of emotion on her by the now deranged British. Regardless of political affiliation, the people at the conference were psychologically normal. They knew a bogus event when they saw one.

Clearly our sang-froid was not merely insensitive, it was offensive. The reporter went on at length with mounting outrage until, this being a liberal gathering, all the usual apologes were offered for our masculine insensitivity.

Yet we were right and she was wrong, and her outrage was a cover for the shallowness of her judgment. Ten years after, it has become clear that Princess Di was a trivial and passing phenomenon.

The economic crisis we are in is neither trivial nor will it be quickly passing. We have been accumulating problems since deficit budgeting became normal. Greece is a harbinger of larger policy failure. But this climb-aboard unfocused Occupy movement is the froth on the coffee. The crisis is real, the protesters are the standard assortment of leftist wankers.

I think Steve Jobs was an evil prick. He made the walled garden cool. He tried to return technology to the era of the old centrally directed AT&T monopoly, where all innovation from inside or outside was resisted, because it did not conform to the plan.

Most of what makes the Internet a desirable form of social organization is the ability to innovate without permission. This has been the central characteristic of the Internet, with its collaborative decision procedures, open protocols, and lack of centralized direction. But the Internet (in the sense in which I am talking here) exists at the logical layer only. There are two more layers than that, one below and one above.

The layer below is the transport layer, and it is characterized by atoms, not electrons. This is the pipe, backhoe, overhead wire level of the network. It has the cost characteristics of physical things. No matter how cheap they make the purchase of it, if you buy an anvil from China, you will pay the transport costs of moving pounds through space. The physical transport layer offers limited possibilities for competition, such as cable versus telco.

The network layer is above the logical layer, and it too can run to monopolies or near- monopolies: Google (the least harmful), Amazon, eBay, Facebook, and so forth. But the long tail of the Internet means that, with search engines, the consumer is always supplied with his choice of whatever he wants, no matter how obscure.

The particular harm that Jobs sought to achieve was to make the walled-garden, the limitation of choice and innovation, socially normal, hence “cool”. Back to the past, with a vengeance.

I recommend this appreciation of Steve Jobs which I have found at Armed and Dangerous.

In the same vein, Ambrose Evans-Pritchard (gotta love the name) today decries the financial policies of our elites.

“Did anybody think about this when they unleashed globalisation with its elemental deformity, free trade without free currencies?

“The self-correction mechanism is jammed. China holds down the yuan against the dollar through a dirty peg. Germany and its satellites hold down the D-mark against Club Med covertly through the mechanism of EMU.

“This outcome in Europe is not deliberate (I hope); it is not a German plot; it is the unintended effect of a currency union created by ideologues against Bundesbank advice, and which has calamitous implications for German foreign policy and for Latin social stability.

“My sympathies go to the hard-working citizens of Germany, Spain, Italy, Portugal, and Ireland for being led into this impasse by foolish elites.

“A global system biased towards export dumping has had unhappy effects on the US, UK, and Club Med. These countries have faced a Morton’s Folk over recent years: an implicit choice between job losses at home, or accepting credit bubbles to mask the pain.

“They chose bubbles. That was a mistake. This strategy of buying time cannot safely be repeated because fiscal woes are already near “boiling point”, in the words of the BIS. “Drastic improvements will be necessary to prevent debt ratios from exploding,” it said.”

“Bank of England Governor Mervyn King called recently for a “grand bargain” of the world’s major powers to break the vicious circle and ensure that the burden of adjustment does not fall on debtors alone.

“The need to act in the collective interest has yet to be recognised. Unless it is, it will be only a matter of time before one or more countries resort to protectionism. That could, as in the 1930s, lead to a disastrous collapse in activity around the world,” he said.

—————–

My interpretation of this sort of language – and financial blather is very high in euphemism – is that the lenders are going to have to recognize that the money they have lent will not be collected in full. In the words of the financial markets, they are going to have to take a haircut.

Alex Jurshevski is a Toronto crisis manager for failing economies, and more particularly, countries whose governments have mishandled their public finances to such an extent that they need outside assistance . He writes an occasional blog about the economic situation.

Alex handled New Zealand’s external debt crisis back in the 80s, and has advised governments in central Asia and elsewhere how to clean up their act.

His outlook is bleak.

Now it has occurred to me that the ongoing crisis of debt is an opportunity for western societies to get themselves off the heroin of consistent overspending and mounting debt. But the prognosis is that this is going to be a long period of unemployment, social turmoil, and failing regimes.

Here’s Alex writing in Augist 2011:

“So, for the period following the meeting of super-bankers, our short term prognosis is as follows: Government and Central Bank balance sheets will bloat further, unemployment will stay stubbornly high, economic growth will continue to crawl along at or below stall speed, the EU will continue to try and bail out failing Euro-sovereigns, the ECB and EFSF will continue to gorge on Euro-area debt that nobody wants to own; the Super Committee will serve up a dog’s breakfast; and the Fed will goose things further.

“Similar to the fading days of the old Soviet Empire, the pressures for a financial collapse are building. Expect the outcome of the Jackson Hole meetings this weekend to add to, and not to subtract from, those pressures.”

Feeling better now?

From The Globe and Mail:

With crashing stock markets, a plummeting currency and furious talk of military interventions in the Greek economy, this may be remembered as the Monday when the European crisis turned into an utter cataclysm.

And from The Daily Telegraph:

Unicredit, the Italian lender, saw its shares suspended after falling 7.5pc, while in France Societe Generale slid 12pc to its lowest level in more than 19 years.

The falls come as traders slash holdings in lenders with exposure to Greek debt with some bankers in London forecasting a default within weeks.

The euro dropped to a 10-year low versus the yen and a seven month low versus the dollar as currency traders shifted their holdings to safe havens. The shift to the yen keeps alive the risk that Japanese authorities will follow their Swiss counterparts in a wholesale intervention to weaken the yen.

If you recall the Viet Nam war, you will recall the traditional view of the war as a “mistake”. You will recall the dreadful effects on American self-confidence in the aftermath. The truth is that Viet Nam was not a mistake, it was a defeat. Defeat, plain and simple: that is the way to correctly assess the meaning of the Vietnamese War. The communists won, the Americans lost. Seen in that light, Viet Nam is made comprehensible. The US military learned from Viet Nam not to allow it to get sucked into wars that the political leadership was not serious about winning. Something vital was learned from defeat.

In the same way I hope that we learn something vital from the economic crisis. Here is my offering.

Regulation as the Friend of Markets

First, regulation is fundamental to the successful operation of markets.

You have been told endlessly by any number of conservative spokesmen that the market must decide, that the market is self-correcting, that prices reflect information, and that consequently less government regulation is a good thing. The ongoing economic doldrums which erupted over the US mortgage blow-out have demonstrated the falsity of these propositions.

Government regulation of the market is essential to the successful operation of markets. They are not self-correcting, any more than hurricanes are. Both are chaotic phenomena.

As Gretchen Morgenson demonstrated in her comprehensive account of how the blowout came to pass, Reckless Endangerment, the US launched itself on a plan to put more minorities into housing. For “minorities” read blacks and Hispanics. In the course of ten or so years, the US banking system systematically was told to ignore risks, and was insulated against bankruptcy by making the taxpayer ultimately responsible for the bad debt so accumulated. When your bonuses depend on producing more crappy loans, you produce more crappy loans.

It was a classic case of what Jane Jacobs argued, in her brilliant little book, Systems of Survival, constituted corruption. Jacobs said that there are two systems of morality at work in society: the guardian and the market. Guardian morality prevails in non-market institutions: churches, regiments, policework, and public office. Corruption occurs when the market seeks to use market-style incentives to influence the guardian system. The classic case is a suitcase of cash to a judge. But Jacobs also argued, just as effectively, that corruption occurs when market institutions are infected with guardian ideas. Making housing more affordable for minorities was the guardian idea. “Let’s get black home ownership figures up” said the politicians. In this case the market was asked and incented to engage in guardian activities. So systematically all the normal rules of prudence in lending were thrown overboard. As Morgenson shows, every regulation that stood in the way of banking disaster was removed. It was as if the ship was dismantled from the inside as it sailed the seas. No wonder it sank.

The US mortgage crisis triggered banking failures, and these stressed the overloaded debt system of European governments.

Public Finances

The second lesson we may take away from the crisis is to clean up our public finances.

Public finance is more a moral than an economic issue.

A welfare state suffers inevitable pressures to spend more than it takes in. A weird dynamic permeates society when we are getting way more government than we are paying for. Excessive public spending skews everything to the Left, because more distributionist and regulatory personnel can be hired at every level of government and society than the productive parts of the economy are paying for. The electoral pressure generated by the government interventionist policies augments the tendency for ever more public expenditure. Thus a spiral of overspending is generated. Ever more public spending is seen as the solution to the growing list of problems the spending itself is creating. The productive and law-abiding parts of society are denigrated. The job-generating productive classes leave.

It does not seem to matter whether it is aircraft carrier groups, welfare payments or arts grants, the moral effect of too much government and too little paying for it seems have a pervasive corrupting effect. People know that the gravy-train cannot go on forever, but have no incentive to stop demanding government programs because there is a first-mover disadvantage.

The sovereign debt crises of Europe are in part the result of a relentless hollowing out of the productive impulses of the few in favour of the comforts of non-competition and the easy life for the many. Democracy is great until the masses learn they can loot the Treasury. In Europe the boomer generation has learned it can loot the Treasury and make the younger generation pay for it in lost jobs, smaller families, uncontrolled Islamic immigration, and future debt.

The United States is in a far better state to handle its crisis in public finance, since its population is expanding and its citizens could afford to pay more taxes. It has been remarked that a 10 cent per gallon tax on gasoline would wipe out the federal deficit.

Here we find ourselves in 2011 awash in public debt. The usual way to finance this is through inflation, which is the printing of money, called “quantitative easing” in Bernanke-speak. Spain, Portugal and Italy may follow Greece into the financial garbage can. Debt holders, including the banks, are going to take a bath. Europe may find itself in the same position as Japan has been since its great property bubble of the 1980s: in decades of underperformance.

Is there any bright side to this gloom?

I think so. It is entirely possible that the debt crisis will cause the break-up of the European currency union and the downfall of the European superstate. It will reward those societies that work hard and save, and it will put societies that do neither through the wringer. The situation of a Greece or Portugal is dreadful, but it is made worse by their having a Euro valued at 100 cents when a national currency might be worth 15 or 25 cents, at which level their economies could be competitive.

In our country, where the public debate has been won for the conservative side, and in the United States, where we are still in the early stage of debate, public finances are the core moral concern of government. The United States cannot continue financing its government expenditure out of foreign borrowing. The failure of the Obama administration to address this issue successfully is evident. The Republicans fare no better; they show little sign of grasping that lower taxes and less government regulation are not the effective paths to dealing with overspending.

I have learned not to pay too much attention to the political debate in the United States: they will shout and scream at each other until the moment they come up with a deal. It is my devout wish that the Democrats will accept that their core constituencies will have to endure the shutting off of public spending spigot, and the Republicans that higher taxes and more vigilant banking regulation are required, as well as a smaller military.

Indeed, as one element of the solution, they might even take a look at the enormous social wreckage and state expenditure entailed by the war on drugs.

One way or another, sound public finances are the moral cornerstone of society, and by that measure, Canada is doing well, and feels itself doing well.

The “Big Three” debt rating agencies in the world (S&P, Moody’s and Fitch) are learning the political ropes the hard way. Did they really think that the governments would simply let them impede the business of spending money unmolested? A few news items of note.

From Italy.

As stock and bond markets across the world tumbled on fears about Italy and Spain, it emerged that police acting on orders from prosecutors had raided the Milan offices of rating agencies Moody’s and Standard & Poor’s as part of continuing investigations into their role in the recent financial turmoil.

From US

The Justice Department is investigating whether the Standard & Poor’s credit ratings agency improperly rated dozens of mortgage securities in the years leading up to the financial crisis, The New York Times reported Wednesday.

From US

Deven Sharma is stepping down as president of Standard & Poor’s only weeks after the rating agency issued an unprecedented downgrade of the credit of the US, the company said.

Of course there are places where the rating agencies can downgrade sovereign debt without threats, but they are outside the reach of politicians from debt incurring nations.

China’s Dagong Global has cut the credit rating on U.S. sovereign debt to A from A+, Chen Jialin, general manager of the international department at the firm told CNBC on Wednesday. The agency has also put the U.S. on negative outlook.

White House Press Secretary on the reason for inadequate economic growth in US:

And there’s no question that we have — this economy has faced headwinds this year, a variety of them, including the earthquake and tsunami in Japan, the increase in oil prices, energy prices that resulted from the unrest in the Arab world, and the situation in Europe also.

Obama’s top reelection strategist Axelrod on the reason for adequate economic growth in Texas:

“There’s a specific reason that Texas has done so well, and that’s because the oil industry has done so well in the last few years, and the military has grown because of the challenges that we have had overseas,” said David Axelrod.

“And so he’s been the beneficiary of things that he had very little to do with,”

Well if lack of economic growth at the national level is out of President’s hands, and economic growth at the state level is out Governor’s hand, then whey not can them all and save some money? Economy will do what it is suppose to do based on his reasoning.

Have you got a better explanation?

(Note for the archives: Nycole Turmel was the temporary leader of the New Democratic Party, a socialist-separatist alliance in Canada, in the period of global financial instability called the Great Contraction of 2011-14, after which socialism and fiat-based currencies were suppressed in the Great Troubles of 2015-2045, where the Oligarchy assumed control and the franchise returned to adult male property-owners in those countries still allowing popular suffrage).

“But the real problem is that the global economy is badly overleveraged, and there’s no quick escape without a scheme to transfer wealth from creditors to debtors, either through defaults, financial repression or inflation.”

-Kenneth Rogoff, Globe and Mail, wednesday August 3, 2011

• Hence, borrow money at low fixed interest rates and laugh all the way to your new home.
• Have you noticed the inflation lately? Have you noticed that an entree at a good restaurant is now $38 instead of $27. Is the price of arugula shocking you?

“Anybody gone into Whole Foods lately and see what they charge for arugula?” the senator said. “I mean, they’re charging a lot of money for this stuff.” – then Senator Obama on tour in Illinois in 2007 (Whole Foods is a luxury food shop. I still do not know what arugula is, but I am sure it is poncey)

• Have you noticed governments still pumping out money?
• Did you hear of the US Justice department going after banks to cause them to lend to blacks and others who otherwise would not be creditworthy? No? How about here? Was that not the cause of the most recent meltdown of credit? Or is the US Justice department defending the rights of the poor against banks foisting bad loans on them?

Bankers and lenders will have to  take a haircut. And they will do everything in their power to prevent this from happening. After all, what are governments for but to protect bankers?