Monday, 24 September 2012

Trouble across the pond

Jeff Randall has a good article in today's Telegraph on the debt situation in the US:

The White House website boldly claims: “President Obama has led the way on structuring the government to live within its means.” This is not even remotely true. By any measure, the US continues to spend way above its income and, as a result, its debt position is deteriorating apace.

These are the facts. George W Bush left behind a set of books that were not so much unbalanced as vertiginous. At the end of 2008, US debt was $9.9 trillion, or 69.7 per cent of GDP, and the ballooning deficit was $683 billion. Since then, all the key indicators have worsened markedly. By the end of this year, gross debt is forecast to reach $16.3 trillion ... more than 100 per cent of GDP, or a rise of two thirds under Obama. The annual deficit is close to $1.5 trillion, 10 per cent of GDP. Worse still, according to official forecasts, US debt is on course to hit $20 trillion by 2016. If this is a country living within its means, one dreads to think what would happen if Washington decided to throw a party.

Of course, $16.3 trillion is just the official figure. As here in the UK, and in every other developed nation, far greater liabilities hide 'off balance sheet'.

In an article for, Gary North explains:

The expert here is Professor Lawrence Kotlikoff of Boston University. His most recent report says that total unfunded liabilities went from $211 trillion a year ago to $222 trillion this year.

The biggest source of future red ink will be Medicare. In second place is Social Security.

How can the government pay off these obligations? It can't. The possibility does not exist. The government needs a spare $222 trillion to invest in private companies. This investment must make a return of at least 5 percent to provide the money needed to pay meet the government's obligations. There is no $222 trillion available, and no capital markets large enough to absorb $222 trillion.

Conclusion: the US government will default.

In this context, 'default' doesn't just mean that 'investors' in government debt lose their money. It means that the government will renege on a wide range of welfare IOUs.

These IOUs were unsustainable long before Obamacare. As with our own National Insurance scheme, they made the mistake of paying out immediately - out of current contributions rather than past savings. There's a term for this sort of scheme:

The welfare state's Ponzi scheme economics will catch up with the politicians. It will catch up with everyone who is dependent on the welfare state. All over the Western world, this is statistically inevitable.

We wonder why people begin Ponzi schemes. The schemes always blow up. They cannot survive. The numbers tell us that. Why don't the initiators see what must inevitably hit them?

The financial world was amazed at Bernie Madoff. How did he fool smart rich people for so long, and for so much money?

Simple. He copied Congress.

Friday, 7 September 2012

Should people be forced to take long lunch breaks?

Another classic BBC article:

Nothing excites the BBC more than the 'mandatory'.

Except Obama rallies, perhaps. And melting sea ice.

Am I drinking too much in old age?

Just as I finished reading Christopher Snowdon's latest article, BBC Breakfast began promoting Panorama's upcoming prohibitionist propaganda.

Spurred on by a viewer's email about a grandfather who (shock!) enjoys whisky, Louise Minchin felt obliged to ask: "perhaps we should leave the elderly alone".

Of course, this was just an excuse for her interlocutor, Joan Bakewell ("the government's former voice of older people") to explain why we shouldn't. A small amount of social drinking is ok, you see, but we mustn't drink every day, and never alone and never in excess of the government's unit limits. She herself was guilty of everyday drinking.

Snowdon's article is well worth reading. As well as the Panorama programme, he considers a BBC 'news' piece from yesterday Drink firms 'target young online', Alcohol Concern Cymru claims.

You might assume ... that some sort of research has been published to support allegations of wrong-doing (for it is forbidden to target the 'young' with alcohol advertisements). Alas, there is no mention of it. Instead we get a bunch of quotes from Alcohol Concern which spread unsubstantiated claims designed to advance their campaign for a total ban on alcohol sponsorship. As is typical of the nation's broadcaster when the temperance movement is involved, there are no balancing quotes from drinkers, the drinks industry, freedom-lovers or anyone else who might object to neo-prohibitionism.

Marx the sponger

Volume 2, chapter 10 of Rothbard's An Austrian Perspective on the History of Economic Thought (1995) contains this little gem, featured in yesterday's Mises Daily article, Marx's Path to Communism:

An insatiable spender of other people's money, Marx continually complained about a shortage of financial means. While sponging on Engels, Marx perpetually complained to his friend that his largess was never enough. Thus, in 1868, Marx insisted that he could not make do on an annual income of less than £400-£500, a phenomenal sum considering that the upper tenth of Englishmen in that period were earning an average income of only £72 a year. Indeed, so profligate was Marx that he quickly ran through an inheritance from a German follower of £824 in 1864, as well as a gift of £350 from Engels in the same year.
As in the case of many other spongers and cadgers throughout history, Karl Marx affected a hatred and contempt for the very material resource he was so anxious to cadge and use so recklessly. The difference is that Marx created an entire philosophy around his own corrupt attitudes toward money. Man, he thundered, was in the grip of the "fetishism" of money. The problem was the existence of this evil thing, not the voluntarily adopted attitudes of some people toward it. Money Marx reviled as "the pander between … human life and the means of sustenance," the "universal whore." The Utopia of communism was a society where this scourge, money, would be abolished.