When the Riots Begin

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The rate of fire for the AK-47 is controlled by a panel on the side (at least for military variants) of the firearm, panel down and facing the same direction as the gis = safety, panel up at 45 degrees = semi-automatic fire one pull of the trigger shoots several rounds, panel facing up = fully automatic (never use that setting)

http://www.nytimes.com/interactive/2010 ... udget.html

I like this graphic of the 2011 budget. You can see clearly that the only truly discretionary portion of the budget is income security. Notice how the rest of the vital organs of government barely exceed the allocated budget of the temporary but really permanent assistance given to the country's deadbeats? There is a huge cut in unemployment insurance forecast for 2011 and that is not going to come about because people find jobs but because people simply run out of benefits. The expectation then is to move people into SSI programs or food stamps which are both slated for double digit increases. Imagine how these people are going to feel when those $400 weekly unemployment insurance checks stop coming and they get meager food stamps instead.

Assume, as most people do, that cutting the entitlement programs of Medicare, Medicaid and Social Security would mean political death, and that the Federal Government is not so bloated that significant cuts elsewhere are possible, then only the National Defense budget remains. But even if a full withdrawal from Iraq and Afghanistan is initiated, it still will not be enough to pull America into an even fiscal keel. You should note that interest payments will continue to grow at a double digit rate as a result of Obama’s economic heroism and the fact that the financial system – in particular the mortgage industry – is essentially the way it was prior to Lehman’s collapse. Fannie Mae and Freddie Mac are both still in operation and issuing guarantees for mortgages. They are already on the hook for hundreds of billions of dollars of sour mortgages but Barrack Obama wants them (and thus the Federal Government) to guarantee more mortgages because he wants to manipulate the system to in effect produce another asset bubble. But as I have made the point before, defer the pain today, and it is the children of America who will suffer.

It is worth your time to look at this chart and to ask yourself what you would do. There really are not that many options available.

It is true that present US fiscal policy is ruinous, and that without major reforms the US will eventually go the way of Argentina. However to present such a future as fact ignores that the US has, in some areas, shown a remarkable capacity to reform itself in recent decades, and some countries formerly thought basket cases have been able to reform themselves (Brazil's transformation into an increasingly industrial creditor nation, and for that matter China's transformation from a starving Maoist dystopia to an industrial powerhouse and the world's leading creditor nation). The US as a nation is, I think, at a crossroads; it can choose the ruinous path of debt and decline (pioneered by California), as Greece, Italy and Japan seem to have chosen, or it can choose the path of reform. It won't really depend on the politicians, it will depend on the voters; polls have shown that so far at least they are against any spending cuts that could actually make a difference, against tax increases, and also claim to be concerned about the deficit. The behaviour of politicians is not irrational, but is a natural consequence of these attitudes - but it's a start that at least voters recognise that the country is going in the wrong direction.

http://www.nytimes.com/2010/02/06/world ... pe.html?hp

Keep a close eye on events in Europe. The United Kingdom is really a Portugal, Italy, Greece and Spain (PIGS) times 5 and the United States is a United Kingdom times 5. The good news for the UK is that it has far better relations with China than the US, but that will do nothing for the Brits when the Chinese decide that it is time to hike up the value of the Yuan to improve the terms of trade.

Protests by public sector workers in the PIGS states have already started. Cuts now by the PIGS will mean fiscal health and economic stability in the future whereas America’s attempts to hold on to lifestyle that is clearly beyond its means can only lead catastrophic failure. In the near term, it will seem like the PIGS have made the wrong decision to comply with EU treaties, but time will prove that it is far better to live the life one can afford than to be subject to a creditor such as China. There will be riots and protests in the PIGS states that will carry uncomfortable racial undertones as welfare payments are cut drastically or else eliminated. What happens here is a precursor for what happens in the United States. So keep watch!

http://www.nytimes.com/2010/02/06/busin ... o.html?hpw
http://www.nytimes.com/2010/02/06/us/06return.html?hp

Where was Joe during the Asian Financial Crisis? Some Asian countries are still reeling from the cuts they were forced to make more than 10 years ago.

The American media is quick to pounce on good economic news in the United States and even nimbler when it comes to pointing out the problems of others. I wonder how many people actually believe that the rate of unemployment in America is below 10%. The Bureau of Labor Statistics (BLS) has a funny way of counting the rate of unemployment. After about a year, even if you do not have a job and want one, they decide that you are discouraged and no longer in the workforce. According to the BLS, all the people who were retrenched in the months following Lehman’s implosion are now no longer unemployed even if they do not have a job. Is it not neat that no matter what happens, the numbers will always trend towards optimum?

The unions in Greece have called for strikes. Take note. There is more to come.

Although information about what goes on in this world is all well and good, there is something about the way you tell it that makes me feel uneasy. =.=

The news maybe good, but it is not real. People need to hear that things are improving and so that is what the Obama administration has decided to say. If you are interested in this issue, you can spend your time going through the numbers from BLS’s own website: www.bls.gov

That was excerpted from BLS’s homepage. Nonfarm payrolls fell by 20,000 and the rate of unemployment declines from 10.0% to 9.7%? You do not need advanced degrees in mathematics to see that the numbers warrant deeper investigation.

With Scott Brown’s victory in Massachusetts, there is now full scale panic amongst the Democrats. The Republicans have made clear they will vigorously oppose any further extension of unemployment benefits – and this is a decision that has widespread grassroots support – meaning that there are millions of families who will suddenly going to find themselves literally left out in the cold. We will not have to wait until November for people to express how angry they are. If the BLS is simply lying through their teeth and grossly understating how bad the employment picture is, which oddly enough actually gives further ballast to the Republicans who are demanding an end to the incredibly generous giveaways, reality could make itself known in a far more violent and traumatic way.

Except that, objectively, the debt situation isn't nearly as dire in the US or Britain as in Greece. In terms of figures, rather than resorting to hysterics, Greek public debt is well above GDP, while those of Britain and the US, though growing, are still well below GDP. As a percentage of GDP, Italy, Japan and Zimbabwe are just about the only countries more in debt than Greece - and Italy's deficits are at least substantially smaller than Greek ones as a percentage of GDP, and Japan at least also has substantial savings, both private and public. So Zimbabwe is just about the only country facing a significantly worse debt situation than Greece.

What's the margin of error for these figures? A disagreement within the margin of error would not imply cooking the books.



Except that that would hurt the competitiveness of China's exports, as well as diminish the value of China's reserves (held in dollars) in terms of yuans. Not a wise thing to do at a time of weak worldwide demand, when the emphasis is on cutting costs and other low-wage producers have substantial spare capacity. China has kept an artificially low exchange rate for a reason.



Protests, particularly during recessions, are normal in democracies. Only in places like North Korea are there no protests.

http://www.spiegel.de/international/bus ... 07,00.html

A good analysis of the Grecian drama currently playing out. The difference between Greece and America is that the Greeks can lean on the Germans to bail them out. Obama tried leaning on the Chinese but was told a flat out NO. Unlike Greece though, a devaluation of the dollar will not restore America's export competitiveness as America is already selling everything that it can sell. A weaker dollar will only mean poorer terms of trade. I get the sense that the ECB is playing on the market's fears to drive down the Euro. It will take a few years, but Europe will eventually recover from this.

Germany has essentially the same incentive to intervene on Greece's behalf as China does on the US': keeping its own currency's value from plummeting. After all the yuan is pegged to the US dollar; China benefits from a moderately weak dollar (artifically making exports to Europe, etc more competitive), but too weak a dollar (and therefore too weak a yuan) would mean soaring costs of oil, minerals and other vital imports for China. Of course, an obvious difference is that Greece has a small economy, much more easily bailed out by any of the world's major ones; on the other hand, US public debt is still modest compared to that of Greece, in terms of GDP. So while the US will be a lot more difficult to bailout if it comes to that, it's still possible to avoid that fate.

If the Germans and others have any sense, they'll bail out Greece - but on terms that would make the IMF look like a softie. A bailout should be so painful that the recipient should make sure it will never happen again. Otherwise, it is a certainty that it will happen again and again and again. If the Germans, Dutch, etc had had more backbone and more foresight, Greece would have been expelled from the EU, probably Italy as well, and Spain, Portugal and Ireland would have been given notice. One thing that does surprise me is that nobody is talking about Italy's debt - which as a percentage of the economy is actually bigger than that of Greece.

If nothing changes, by the end of this decade, America will owe 5-10 times as much to the Chinese as it does today. The Chinese do not find such an outcome acceptable. It is extremely naïve to believe that just because the Chinese hold so much American debt at present that they will do everything they can to protect American interests. Such thinking was the critical failure in the Obama administration’s recent foreign policy efforts that led to such humiliating outcomes. It is not present holdings but future build up of worthless American promises that worry the Chinese. If $2 trillion of American debt is a bad thing, then you can be certain that $10 trillion will be even worse.

Will the Chinese succeed in escaping from America’s wobbly orbit? It will all depend on Chinese government’s ability to raise rural incomes where the bulk of China’s population still resides. The Chinese farmer is typically a small holder who relies on his own cheap labor. Simple mechanization with handheld power tools or the application of fertilizers will have quite an impact on yields. As incomes rise, a consumer boom will result and the world will be transformed along with it. If the Chinese fail to raise rural incomes, then the inequality between the poor farmers and their rich city brethrens will probably spell the end of the Chinese Communist Party as we know it.

No matter how you look at it, we are in for a very rough and turbulent period in the history of the world.

http://www.bloomberg.com/apps/news?pid= ... _gAo&pos=6

Will Barrack Obama finally get what he has been hollering for? Margins for many Chinese contract manufacturers have shrunk to such an extent as a result of yuan appreciation that any further increases in the Chinese currency will have to be passed on to American consumers. This decade will herald the return of high inflation in the United States.

http://projects.latimes.com/mexico-drug-war/#/its-a-war

I have been following this series for some time and it is probably the best coverage on the topic. The reports just seem to get more violent and gruesome month by month. They used to just kill people. Then the ante was upped as bodies were dumped in public spaces. But in further one-upmanship the corpses were beheaded and the severed heads hung over bridges while the bodies were placed separately. Recently the cartels started to strip the faces off their victims and sew them onto footballs. Look back ten years and you will see just how far the Mexican cartels have come. In the year 2000, the word cartel was still associated with Columbia. Today, Mexico is the undisputed leader in drug distribution in the United States. We already have syndicates that have annual revenues in the billions of dollars and as the War on Drugs whittle down the competitors it will not be long before the largest cartels rival the world’s biggest corporations. They will have no problems capturing political power in dysfunctional/vulnerable states in America.

It is actually amazing to see parallels in America’s decline this century with China’s own devastating decline in the 19th century. The role of opium in China’s prolonged misery is well known, but the financial crises that shook the feudal Chinese economy which plunged the country into a vicious cycle of social collapse followed by more crises is often entirely ignored.

http://www.theatlantic.com/doc/201003/j ... ica-future

All that annoying upbeat positive thinking is finally giving way to some realism. Even so, the article does not quite dare to touch on how bad things really are. The reliance on summarizing expert opinion and citing research studies in an effort to be credible also makes the piece somewhat unreadable. But this article is something of a marker in the evolution of American public thought on the malaise afflicting America in that it dares to speak of the pain to come.

Above is the final synthesis which the writer wants the reader to arrive at. Despite bravely going where others fear to tread, he still concludes without reason that things will eventually get better. Why else would more reckless spending be justified? If you have been following what I have been saying, you will know my view is that America’s line of credit will soon be cut by the Chinese. America is really just Greece but many times bigger and with public and private sector fraud that reaches even further. It is imperative to protect now whatever little faith the world still has in America’s promises. To borrow even more in a futile attempt to soften the blow of unemployment or underemployment puts at risk wider national interests. Unfortunately for Americans, they and their leaders do not understand that the pain is a necessary part of urgent adjustments which must be put in place if the supertanker is not to run ashore.

The debates continue while the riots fester.

Last edited by Zeno on 17 Feb 2010, 7:58 pm, edited 1 time in total.

If Usama bin Laden were to arrange for a plane to crash through the headquarters of Goldman Sachs, would Americans not celebrate him as a hero?