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Tuesday, August 31, 2010

The Morning Blah: August 31, 2010

Here in Beaumont-land, we're inagurating a new feature. The Heritage Foundation has its Morning Bell feature; however, my morning behavior is anything but bell-like. Bill the Cat, from the old "Bloom County" comic strip, is my role model for the pre-9AM hours.

So, I hereby announce (with a fanfare of coughs and grunts) the Morning Blah. A concise analysis of the day's trends with no attempt whatever at slippery concepts like "balance" or "fairness".

Seriously, if you aren't convinced that the country is in trouble, them you haven't been paying attention. Pull your head out, abandon your preconceptions, and think things through.

Oil prices continue to drop. CORN prices are dropping; not a trend that most would anticipate, maybe. Folks, when bulk commodity prices drop -- including foodstuffs -- it illustrates a deeper weakness in the economy than generally realized. As we have previously noted, we like lower prices, but the process of deflation would entail a great deal of pain for most people.

Contrast the USA's economic decline with the BRIC economies (Brazil, Russia, India, China), which are growing, some with rates approaching 10%. Are these countries going to be the new world leaders? Well, not necessarily.

Brazil is energy-independent and exports many agricultural products; Russia has oil and natural gas; India has a rapidly growing industrial base. China, however, is much more dependent on exports of finished goods than the others, and has been playing a shell game with its currency for years. The Chinese must maintain an appearance of rapid growth or face devastating unrest.

Consider this scenario: as the capacity (due to economic circumstances) or willingness (due to resurgent patriotism) of the US to import Chinese goods diminishes, China would face a crisis. As a nation built on exports --primarily to the US -- founders, the losses must be made up in some way. The huge stocks of precious and strategic metals that the Chinese government has accumulated will begin to lose value as the world economy weakens further.

In order to provide at least a temporary infusion of cash, and also "save face" ( a concept the West understands little of) the Chinese dump large quantities of metals on world markets. Gold, silver, platinum, germanium, etc. -- prices drop abruptly.

In the past, we have seen that abrupt price drops in one commodity can begin a cascade effect among other commodities. One result is that world currencies can be diluted. When that happens, Brazilian grain, Russian oil, Indian goods are all worth less to buyers, and cost more to produce. Of course, the same factors affect the US, Europe, and Japan. We can see where it goes from there.

Some economists are beginning to toss around the term "depression". That would seem an accurate desription of the effects of such a scenario.

Thursday, August 26, 2010

Unstable? Really?

Uber-leftist MSNBC host Ed Schultz recently learned that he had not been included in a promo for the network. He launched into a tirade, yelling, "I'm gonna burn this f------ place down!"

When management told him that any repetition of such behavior would result in his dismissal, he reportedly broke down and cried on the spot.

Our culture views such people as "unstable" or "stressed". No doubt those descriptions are true within a limited frame of reference. But is there a deeper reality behind such definitions?

I submit that there is. Popular American thought (now there's an oxymoron) likes to avoid the mere suggestion that spirituality issues may be involved with emotional or mental issues.

Obviously, this is not news to people of faith. But we tend to forget it.

Allow me to suggest a refresher for those who have neglected this idea, or a primer for those who have never considered it. Pick up a copy of C.S. Lewis' "That Hideous Strength". I can virtually guarantee that you will recognize people you know in the characters. Possibly, even yourself.

Tuesday, August 24, 2010

Economic education the easy way

Many Americans have little or no understanding of how the U.S. economy works. This is not surprising, since our government schools (not "public" schools) rarely teach anything of the sort, and the material they do offer is geared toward big-government, Keynesian/authoritarian schools of thought. Little or no effort is devoted to teaching the principles of economic freedom that made the USA the world's most successful economy -- not just in its own era, but in the world's history.

I have been asked to offer some suggestions as to how a person with little background in either political thought or economics can educate themselves. It's actually not difficult, and I can offer two sources in particular that will enlighten the seeker in both areas.

The first is Thomas Sowell. An economist of long standing, he has written more books on the free market than anyone else this blogger is aware of. A good starting place would be his articles at www.jewishworldreview.com. After that, one could go to his classic book "Basic Economics", or his current one, "Dismantling America".

The second is Walter Williams. Another economist, he speaks and writes frequently on free-market issues. His columns can be found at www.creators.com/opinion/walter-williams.html. For books, try "Liberty Versus the Tyranny of Socialism".

These men are literally founts of wisdom. Warning: exposure to their writings will change your view of the world.

Down the rabbit hole we go...

... but, unlike Alice, we won't find Wonderland at the other end.

Major stock benchmarks have dropped for a second consecutive week. Existing home sales dropped 27% in July. Oil prices are dropping due to pessimism in economic forecasts. More and more people are aware of threats hanging over our economy, ranging from the incipient crisis in public-employee pensions to the massive tax increase due in 2011.

Is this the beginning of an all-but-inevitable decline in the US (and, by extension, the world) economy? Does pessimism play a role in making the situation a self-fulfilling prophecy? And does that matter?

The answers are 1) very possibly so, 2) yes, and 3) no.

At this point in time, no real hope is evident for avoiding an economic crisis. Boosterism and blind hope are maintaining an image of an economy in recovery -- in other words, nobody wants to believe it's as bad as it really is. The only real question is the timing of that event, and no one can accurately predict it prior to its beginning.

When the hammer does fall, however, look for many talking heads and self-proclaimed experts to say that they knew it all along. Accord them the level of respect they deserve.

As to pessimism, the challenge is to define it. Yesterday's negativity is today's realism. In large part, our economy runs on wishful thinking. The problems we face are legion, and no one is attempting to seriously address them. Eventually, fantasy will be forced aside by reality, and whatever we would like to believe simply won't matter.

Despite all this, we have no reason to abandon hope. Events will run their course, and the innate tendency of economies is to seek equilibrium. We may suffer greatly in the interim, as the failed policies of the last hundred years are exposed and discarded, but if we remain committed to sound principles, we will prosper again.

Those principles are both personal and national. They are identical in both cases. Don't live beyond your means. Insist on value given and received. Live according to a high standard.

As odd as it may sound, the only requirement for freedom and prosperity is a "moral and virtuous people". That's something the Founders were well aware of, and something we have, today, largely lost sight of.

Thursday, August 19, 2010

Two tastes that don't taste great together: Obama and faith

The NY Times, CNN, et al., are very upset at the results of a TIME magazine poll indicating that a growing number of likely voters (89% of the respondents, self-identified) believe that Barack Obama is a Muslim. This poll follows closely upon his endorsement of the Hamasque project, and his hosting of a Ramadan dinner in the White House. Such actions on the part of a sitting President do not sit well with many Americans. Why, then, do the media seem so shocked at the poll results? Could it be that Barry really is Muslim?

It is more likely that Obama is not a person of faith at all, although he is undoubtedly a Muslim sympathizer. Now, why should you credit this idea? Let's examine some incidents from his history:

His father was Muslim, and so under Islamic law, he is considered Muslim.

After abandonment by his father, he was raised by his mother's family, who endorsed socialist and communist ideals. Socialism and its ideological fellows are not sympathetic to religious faith.

When his mother remarried, he attended a Muslim school in Indonesia.

Upon arriving in Chicago, he began attending Jeremiah Wright's church, Trinity United Church of Christ. Now, despite its name, the church teaches black liberation theology. This is not a theology that most Christians would recognize as Christian at all. Among other things, they endorse "collective salvation", the belief that unless all are saved, no one can be saved. The Pope has denounced this idea as demonic, as it is directly opposed to the idea of individual salvation through acceptance of Christ.

Wright's church was regarded as the premier black church in Chicago. As such, it was the perfect place for a young black man with political ambitions.

Obama is known to carry a small statue of a Hindu monkey god in his pocket. After his election, Hindus in India built and dedicated a new statue of the god in a temple, in his honor.

Since his election, despite many protestations of faith and Biblical-sounding references in speeches, he has not attended church.

In summary, then, Barack Obama appears to be nothing more than an opportunist who will don whatever theological garment he believes will serve him best, as long as such devices do not conflict with his inborn prejudices. For evidence of those prejudices, examine his treatment of Israel, of conservative Christians, and of the Dalai Lama.

And ask yourself how much you can trust him.

Wednesday, August 18, 2010

Conversations with the spouse, Part 2

Recently, the Beau-mate and I took a couple of days off to visit a nearby city. On road trips, she usually drives, since she enjoys doing so, and I navigate.

We took a wrong turn and found ourselves in a very scenic, but hilly and unfamiliar maze of streets. In that great tradition of cities everywhere, once you're off the main roads, the signage is no help at all.

I dug out our handy and incredibly un-detailed folding map and attempted to discover our whereabouts while the car's speed steadily increased.

ME: Slow down a little -- these signs are all behind trees and bushes. I can't read them before we pass them.

HER: I'm not going that fast!

ME: Okay, stay in this lane. (She immediately moves into the other lane.)

HER: You didn't say which lane.

ME: The lane you were in when I said, "Stay in this lane".

HER: (Approaching a split in the road) Which way do I turn?

ME: Slow down so I can read the street signs. (Immediately zooms down the right-hand road)

ME: We need to turn around. Don't go any farther.

HER: Okay, okay. You should have said so before now.

You just can't make this stuff up

A Memphis city councilwoman issued an apology to the National Black Caucus of Local Elected Officials for an incident during a riverboat party last week, involving the councilwoman, dancing, and a pole. She claimed that she was not intoxicated at the time.

The councilwoman's name? Janis Fullilove.

Early deflation indicator, part II

I regret an omission in my last post: I did not explicitly link Iceland's decline in inflation with possible deflation.

A rapid drop in the inflation rate may be a harbinger of deflation to come, but, as the ancient Chinese philosophers said, "Here comes the fun part." We'll just have to see.

My stellar typing skills initially rendered deflation as "dedflation". Now that I think about it, that may be a good, concise description of its effect.

Early deflation indicator?

Iceland's central bank has cut a "key" interest rate to 7%, down a full percentage point.

For those who don't typically keep up with financial news, Iceland was an early casualty of the current worldwide economic crisis. The Icelanders discovered that their economy was built upon a house of cards, and chaos followed -- at least, low-key, relatively polite Nordic-style chaos. For some months, the country has been attempting to put the pieces back together.

The bank issued a statement saying that inflation had declined "much faster than forecast".

The question before us is this: Does the current state of the economy in Iceland anticipate conditions in the USA?

Several well-informed persons, whose opinions yours truly listens to closely, have opined that widespread deflation is likely. Now, deflation is a phenomenon that most Americans currently alive have not experienced. Basically, prices decline. Wow! Great!

Not really. Deflation is a mixed blessing, at best. As prices decline, so does the value of many forms of wealth -- including things like your house, your retirement account, and even "solid" wealth like precious metals.

At this point, no one can predict exactly how such a scenario might play out. But the chances are good that you wouldn't like it.

Some thinkers believe that deflation would be followed by massive inflation, and that by a general economic collapse. Others differ, but most of the possible scenarios are unpleasant.

"What can we do prevent it?", you might ask. As a nation, very little. The global economy is actually more unstable than most people realize. We're just waiting for the hammer -- maybe the first of several -- to fall.

You can, and should, do what you can to prepare for bad times personally. Pay off whatever debt you can. Keep extra food on hand. Get to know your neighbors. If you have never been a person of faith, at least be open-minded enough to explore the idea.

Friday, August 13, 2010

Welcome to Freddy Kruger-land (formerly Wall Street)

And a happy Friday the 13th to all, the only such Friday in 2010. Freddy would be so proud -- after all, we're descending into a surreal, dangerous fantasyland very much like the dream sequences in those famous movies.

BUT EVERYTHING IS WONDERFUL! HOW DARE YOU SAY OTHERWISE!

In case you have not read or listened to the old-media outlets (ABC, CNN, etc.) lately, the above pretty much summarizes their view of our world. The reality is somewhat less heavy with kittens and rainbows.

Stock prices have staggered this week. Is this the beginning of a general slide in stocks? Probably not, but the eventual decline is inevitable. Governmental interference and geopolitical stresses are exerting incredible pressure on financial markets. While the majority of us are no experts in the machinations of Wall Street, any reasonably aware person can see that the moving hand has already written "MENE MENE TEKEL" on the wall. Everyone knows the last word is coming; it's merely a question of how quickly or slowly the hand writes.

A variety of techniques are in place to attempt to prevent such drastic stock price declines. For example, Germany recently joined other countries in banning what is known as "naked short selling". The effect of this ban, of course, is to artificially restrain the market from seeking its natural price level. Many other such methodologies have been enacted toward the same end.

But the market cannot be restained indefinitely. Eventually, prices will drop to the level demanded by economic, political, and social pressures. The drop will likely be sudden, thus destroying such remaining confidence in stock-price growth as exists.
This will cause a further decline in prices.

Where does the market bottom out? It's really anyone's guess. Take advice from whoever you believe to be knowledgeable, but keep in mind that you must know your expert's political and social biases, because those biases will always color the advice they give.

My best guess, at this point, is that things may stabilize with the Dow at around 3,000. But by that time, "stabilize" may be a laughable word.

What can you do to mitigate the effects of such a catastrophe on your family and work? Study history. Learn about the Weimar Republic and Argentina's recent history. In those places and times, the last word has been written.