Inflation and other matters.

Mail 750 Tuesday, November 13, 2012

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Inflation

There is a great deal of mail on inflation, most of it very good, but far too much to post all of it. Here is a selection with comments.

Paul Krugman has discussed inflation on a number of occasions in the past few months. His view is quite different from your view, if I’m understanding you both correctly. Worth a quick google (there are a fair number of articles.)

Here is a short video and a very superficial overview which touches on hyperinflation fears.

http://finance.yahoo.com/blogs/daily-ticker/krugman-fed-tolerate-higher-inflation-reduce-unemployment-130644416.html

The problem here is that I don’t really care to listen to the comments of a commentator even if he does have prizes in economics. I’d like to see his theories with data. To the best I can determine, Krugman’s critique of TARP and the Stimulus is that we didn’t put enough money into it. We should have borrowed/printed more, and spent more, and stimulated more, to get us out of this depression. The debt doesn’t actually matter.

That will result in inflation, but inflating our way out of the crisis is the right way to go.

Mark

Perhaps so; spending one’s way out of debt would certainly work if the spending resulted in great waves of new production. Once production ramps up you don’t have a paucity of goods, and having lots of money chasing those goods doesn’t rack prices up. So far this hasn’t worked, in part because the money tends to be invested in companies rather than technologies, and the companies picked by the government have not been successful. Stimulus resources tend to be allocated to political allies, not for economic reasons.  This time for sure, of course; we will almost certainly see more of that.

Given the popularity of Dr. Krugman with liberals and the left, it is likely that we will see more attempts to implement his plan. We can only wait and see what that does.

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Hyperinflation

Your fairy-tale themed corrector seems to be wrong, from a bit of poking around online; hyperinflation just means inflation that’s so big it needs to be distinguished from vanilla inflation.

Example: http://www.investopedia.com/terms/h/hyperinflation.asp#axzz2C8MKG0Ap

*quote*

One of the most famous examples of hyperinflation occurred in Germany between January 1922 and November 1923. By some estimates, the average price level increased by a factor of 20 billion, doubling every 28 hours.

*end quote*

I would guess that he’s using a specific definition from a specific theory.

Amanda S.

I did not see the German inflation but I did see the Brazilian model. Incidentally, “what I tell you three times is true” is from The Hunting of the Snark (An Agony in Eight Fits) by Lewis Carroll, not precisely a fairy tale, and of course I have used the phrase many times myself.

I did like the tone of the Hyperinflation mail either, but I have been intrigued by this subject as it relates to computing for some time now. With our current computing power we should be able to represent every person and business and study any economic theory, before we implement it! Why have we not modeled our economy? I used sabermetrics back in the 90’s in little league and it does not give you a huge advance, but it does give you something. I read Paul Krugman book and thought it was the biggest pile of junk I ever read. Lots of statements, but no documentation backing it up. I’m an engineer and a programmer not an economist. I would like to some modeling and documentation as it relates to the economy. Not another WAG.

Regards,

Curtis

Economic Full Stop

Jerry,

Our congress critters have been very effective at changing how inflation is measured. As a result must of what impacts fixed incomes is not measured.

http://www.shadowstats.com/alternate_data/inflation-charts

"Economic Full Stop" when googled results in Chaos Manor’s post from yesterday third from the top. The two above are referenced to Paul Krugman, the only economist the liberals like, and both reference this post from Krugman:

http://krugman.blogs.nytimes.com/2012/10/22/things-that-arent-bubbles/

In my experience with liberals, if Krugman says something it is as good as a law of nature, and is not to be doubted or questions. To doubt or question just shows that you are a "regressive".

Philip

Alas. I confess to some doubt about the efficacy of the spend your way to success theory. Of course no one doubts the truth of “Invest your way to success.” Many politicians have asserted that as well. Invest in infrastructure seems to be one of the recommended investments. Generally the execution is a bit less than the intention, and the usual result is that the money simply vanishes. There are exceptions. One can make the case that TVA was a great success, and I certainly believe that if the US had spent the projected $300 billion cost of the Iraq War on domestic energy development the result would have been better than what we obtained, even if those investments had simply vanished without effect. When government chooses what to invest in, the results are not always predictable. The Manhattan Project certainly changed history, and Oak Ridge was not a likely private investment scheme. Generally, though, what government invests in does not directly make profits, and simply passing money out does not end depressions.

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hyperinflation

Your nasty commenter does have a point.

How does the money get into the hands of the people? With high unemployment, open borders, weak unions, workers don’t have much leverage to get higher wages. There is also a credit squeeze as banks sit on the money they are getting from the feds.

It seems likely that the actions of the Federal Reserve are merely staving off deflation.

bob sykes

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Re:Inflation and hyperinflation

The flaw in your belligerent correspondent’s argument is that he assumes wages and salary to be the only source of income. Many if not most Americans receive some sort of Federal payment, the amount of which is set by Congress. When prices go up high enough the People will demand Congress Do Something. The Price-Payment spiral will be driven by an Act requiring monthly COLA adjustments, and possibly direct Economic Stimulus payments.

John Stephens

Dr Pournelle

Regarding https://www.jerrypournelle.com/chaosmanor/?p=10601, Inflation and hyperinflation.

"Hyperinflation requires a wage-price spiral." — your unnamed correspondent

I am not persuaded by your correspondent’s repeated assertions that the above statement is true. It appears to be a thesis; that is, a hypothetical proposition put forth without proof. It needs support.

My guess is that your unnamed correspondent is young, studied economics in some college or university, and deludes himself that the answers to his exams map one-to-one with reality. In my experience, nothing credible has ever come from the sogenannte science of economics.

I note that in the Nobel Prize in Economics in 1974 was awarded to Friedrich Hayek for "pioneering work in the theory of money and economic fluctuations and . . . penetrating analysis of the interdependence of economic, social and institutional phenomena." In 1975 the Prize was awarded to Soviet economist Leonid Kantorovich for <http://en.wikipedia.org/wiki/Leonid_Kantorovich> his "contributions to the theory of optimum allocation of resources." Hayek was a classical liberal; he championed life, liberty, and property and a free economy. Kantorovich was a Communist; he championed a demand economy. The fact that these two won the Nobel Prize a year apart tells me that Economics is not a science. It is a political platform.

I recall the Carter years when inflation reached twenty percent a year. I did not and do not regard that as hyperinflation, but it was not a pleasant time.

I traveled through Brazil twenty years ago when the country was in the throes of ‘government managed’ hyperinflation. Every second Sunday, at the end of the evening news, the newsreader gave the inflationary rate to be applied beginning the following business day. During my stay, the rate varied from eleven to fourteen percent. Every other week. Set that up in a spreadsheet and see what you get as a yearly result. To say it was unpleasant fails to describe the experience.

What I saw in both cases was a decrease in the amount of capital available to lend for acquisitions, capital investments, and so forth. Small businesses suffered. That resulted in the generation of fewer new jobs. That meant unemployment rose.

I do not have any faith in college-educated economists. My father manned 8-inch rifles in France and Germany during the Second World War. After the war, he learned a trade while still in the Army. Over the years, he built a company that manufactured custom homes. By the early ’70s, he employed three four-man crews and subcontracted to numerous plumbers, masons, painters, roofers, electricians, sheetrockers, heating and air conditioning installers, and finishers.

I have never had a course in Economics. The hardest courses I ever took were Complex Analyses, Nuclear Physics, and Secured Credit Law. Maybe I am not smart enough to understand Economics. But on economic advice, based solely on the rate of return from the initial investment, given a choice between my father and the combined talents of Secretary of the Treasury Timothy Geithner and Chairman of the Board of Governors of the Federal Reserve Ben Bernanke, I shall choose my father.

Live long and prosper

h lynn keith

I was in Brazil in that period; it was fine for the rich who seemed to have ways to get new money as the indices rose. Not so good for those who had to stand in lines. And one learned not to convert many dollars since the local currency lost its value by the hour.

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inflation, wages, gold, etc…

the value of money, any currency, be it fiat money or commodity-based, is what people expect to be able to buy with it later. tomorrow, in ten years, today’s value is an aggregate of immediate and expected value. how this is resolved depends on too many – fluctuating – factors for anybody short of Harry Seldon to determine.

In the case of fiat money it’s actually simpler: it’s what people expect the country who prints the money will produce in the future. Will this country make things people will want to buy?

Next there’s the problem of money supply vs the requirements of the economy. Is there enough money to go around? this is where fiat money is superior to commodity-based systems like gold. In a growing economy, you need more money every year. If your currency is commodity based, you may or not produce more money. In an ideal world of fiat money the central bank will print more money to fit the need of the economy. this is why inflation is unavoidable: you’ll have the central bank print a little more just in case so there’s no shortage. A little inflation is not a problem, a lot less a problem than money shortage. As long as inflation stays within reasonable bounds, say less than 5% a year.

A little inflation is also a good thing because it’s more productive to have people invest their savings in inflation-proof vessels like private companies shares than rent.

The catch, of course, is the Iron Rule: if government can print money to increase its power, it will.

Up to a point it’s not a problem. History shows that up to, say, 7% inflation, people have time to adjust.

Wages: the key point is that most people live from a salary, and on average economy works if and only if people on a salary can buy the things they make. So if wages are disconnected from inflation people will be able to buy less and less.

(making a big jump because it’s late)

the real problem is we now have the technology to supply most people’s basic needs with very little work. with robots and nuclear power 10% of the world’s population are enough to feed, house, water, etc… the rest of the people. The 50% below average are irrelevant. How do we manage this?

Depends on the people who are adjusting. Losing 7% of your income per year, which is what happens to those living off savings and annuities, soon leads to ruin. Cost of Living Adjustments to Social Security and other government payments never keeps up with the actual inflation rate. The squeeze can be excruciating. My mother lived with us during the big inflationary periods, and we could see what it did to her incomes; and my father was a prudent man who had left her savings.

As to the 50% below average, surely the best thing to do would be to design a system in which they are valuable and can know that they are? Being entitlement consumers is not a bracing occupation. But perhaps we can teach people that they also serve who only spend and consume?

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hyperinflation?

given the tone, i really don’t want to respond either, but will note that we have an additional factor in (relatively) easily available consumer credit to meet the increasing prices. If eggs and milk for my family costs $50 and i do not have it…but do have $50 left on my mastercard, …Crying hungry children are so annoying. Of course,…bein’ as how consumers don’t typically have a printing press, paying off the credit creates yet another problem. The credit card people will certainly be helpful, they would prefer for everyone to be in hock to them up to the eyeballs and making minimum payments—The only thing that is really clear is that things are not as simple as the writer wishes them to be.

stacy stanley

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Inflation and deflation

I think your very rude correspondent has a kernel of truth going for him. It’s important to distinguish between a general inflation, like the stagflationary 70’s, and a deflationary hyperinflation. If you’ll forgive my layman’s understanding of the difference, I’ll give it a go.

Sorry for the length, but it’s a complicated subject.

A general inflation (such as the 1970’s) may be a monetary phenomenon, but it also features a decrease in the aggregate productivity of inputs–the ability of a man-hour or a quantity of iron ore to produce a dollar of economic output. If an industry wants to make a buck, they’ve got to shell out more bucks to get it. Thus, a positive wage-price spiral. This can be exacerbated by monetary policy (as it was in the 1970’s), but monetary policy is not the sole cause. The 1960’s were a period of general price inflation even before the mistakes of the 70’s.

For several reasons we are in a general period of deflation, characterized by increasing productivity of inputs. Industry does not need to shell out more dollars just to maintain profitability. They can actually spend less over time for a given output. All things being equal, that leads to a negative wage-price spiral. Note that productivity does not equal increased GDP–the Great Depression was deflationary.

So far so good. Inflation is one thing and deflation is another.

However, even in a deflationary environment it’s possible due to bad fiscal and monetary policy to break the relationship between a currency and its future value. The currency loses its value catastrophically, as people catch on to what is happening. My understanding is that this is what happened in Argentina, for example, when they broke the peso-dollar link. I’m not exactly sure which category Weimar fits under, although it has many hallmarks of a deflationary environment.

Note that Weimar and Argentina have a common feature–a parallel currency. Weimar had gold marks and Argentina had the dollar, and both were in general circulation as legal tender right alongside the paper mark and the peso. That’s something that is most emphatically NOT a feature of the U.S. economy, and if you try to run a business denominated in anything other than dollars then heaven help you; the IRS certainly won’t. The federal government has gone to great lengths in the tax code to make it difficult to maintain the value of one’s savings against a rapid increase in money supply.

My best guess at the moment is that the Fed will indeed simply print enough money to keep the government in clover. There will be some odd distortions to the economy, but not a general price increase at least for the next several years. Anything imported will likely start to get expensive, although other countries will be concurrently expanding their money supply to "defend" their export markets so that too is not easily predictable. The most predictable outcome is that the first recipients of the newly-minted money will do fairly well in this economy. Everyone else will see their buying power erode. Unless there is a drastic shift in fiscal policy, that I suspect that means government retirees, government employees, Social Security and Medicare beneficiaries, and government-subsidized corporations. "Nice work, if you can get it."

Now hopefully someone more knowledgeable can point out the flaws in my understanding.

Neil

If the problem is that productivity is too high, it is soluble. It is much easier to divide a large pie than a small one. The problem is that the entitlement economy leads to attitudes widely seen in Moscow toward the end of the USSR: “We pretend to work, and they pretend to pay us.” On my morning walk in Moscow I saw seven men filling a hole in a blacktop street. Two hours later I returned from my walk to the Russian Parliament building. The hole was still there and they were still ‘working’ on it. I asked the foreman why it took so long to fill a pot hole. “Ah, well, but there is always another hole…”

No one seemed particularly unhappy with the situation. They would spend the evening in a tavern. And my visit to the Writer’s Union lounge was instructive. The main complaint was the price of American cigarettes. I had thoughtfully brought a carton of Marlboro’s; the result was that many joined at my table, and I was told, with some laughter, that this was the first time the Jewish and Gentile Members had sat at the same table in weeks.

It is surprising how well one can adjust to situations. If productivity had been higher, the USSR would exist today.

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on the end of entrepreneurship

Being a founder of a startup here in silicon valley, I can comment on Spengler’s essay. In the EDA business (Electronic Design Automation) everyone expects to get bought by one of the large EDA companies. No one expects to go IPO. Why? All of those wonderful laws the democrats passed after the fake energy crisis. Once you pass the small business threshold and enter big business, the cost of doing business goes up prohibitively. Further, the extra burdens placed on IPO’s in the last 10 years, make it much harder to go public. The net result is we all (if we are lucky) join the collective. We get paid for our stock or get new company stock, stay the minimum required time and leave. Those of us with the energy, do it all over again. The unintended consequence is we build bigger and fewer large companies. Just what the democrats like. As Amity Shales pointed out in "The Forgotten Man", bigger companies act more like the government and are easier to manipulate. Resistance is futile.

That of course appears to be desirable to the liberals, who do not care for all that independence which spoils the big plan. The obvious way out of a depression is a booming economy with great production of goods, so that the problem is distribution of goods, not unemployment. It is easier to divide a big pie than a small one. And of course to most of the world, the impoverished in the United States are enormously wealthy, and the temptation to divide THAT pie is great. If one we can get there and be part of it…

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Wage-Price spiral

Dear Dr. Pournelle,

I have read your recent mail discussion with your somewhat impolite correspondent. His thesis seems to be that the result of inflation will not be hyperinflation but instead an economic full stop. He seems to believe this will be the case because wages will not rise as prices do, resulting in the economy grinding to a halt.

While this is possible, I do not believe it likely.

As prices rise, skilled workers such as lawyers will be able to negotiate for better wage packages, because they are needed and not easy to replace. They can hold a gun to their company’s heads and will do so.

Unskilled workers who are unionized will use the union club and their allies in government to push through wage increases as well.

That leaves the unskilled minimum-wage workers and the "shadow economy" of illegal immigrants. Given who’s in office, I assume it won’t be very long before Congress raises the minimum wage again. Shadow workers will still take money because even at inflated rates it’s still far better than they could earn at home.

So I don’t see the nightmare scenario your correspondent envisions. I think an increase in prices will result in an increase in wages as well. Wages are, after all, themselves a form of "price" — a price set on labor.

I do believe that inflation is a within-one-sigma possibility. I believe hyperinflation is an outside-two-sigma case but not impossible. But the most likely case, I think, is dramatically increasing debt with no attempt to pay it off either through inflation or through taxes. The can will be kicked down the road. Eventually, of course, the bill will become due but I’ll wager the government will do everything it can to prevent the bill coming due before 2016.

Those of us who have a life expectancy past that point would be well advised to inflation-proof our investments against when, not if , the bill comes due. For myself, I will also keep an eye out for opportunities in Singapore or HK or Australia or Switzerland et al. I don’t know what will happen when the hammer finally falls but I don’t want my family to be here when it does.

Beyond that, of course, I still have hope because the God who delivered Israel from famine in the time of Joseph is still alive and looking after his followers today. Still, God has a tendency to use natural phenomena like, say, a neighboring Egypt than dumping manna on people from the clouds. So I’ll keep my eyes peeled and watch for my chance.

Respectfully,

Brian P.

I have not given up on recovering the nation, but I don’t expect to live to see it. I had a picture of the future in A Step Farther Out that I thought might happen in my lifetime.

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Disturbing News

Well, the left managed to disturb me once again:

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Mr. President, please sign an executive order such that each American citizen who signed a petition from any state to secede from the USA shall have their citizenship stripped and be peacefully deported.

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https://petitions.whitehouse.gov/petition/strip-citizenship-everyone-who-signed-petition-secede-and-exile-them/ZbMjcwPf

The disturbing part is not the request; one expect immature people to make idiotic statements.  The disturbing part is the cognitive bias vis-a-vis executive orders, which seems to suggest the petitioners think that executive orders have the power of law or act as imperial decrees.  Of course, Youngstown Sheet Company vs. Sawyer (343 U.S. 579) set the precedent that executive orders — as an attempt to make law — are illegal.  Justice Black took the position that Presidents have no power to act except in those cases expressly or implicitly authorized by the Constitution or an act of Congress.  This case presented a stinging rebuff to Harry Truman — another president that enjoys unfair popularity with the ignorant — and to the imagined authority of executive orders.

I came across this case when researching executive orders for my political science course.  I wanted to know why presidents seemed to think they could write some of the strangest crap I’ve ever read on paper, call it an executive order, and put the wind up so many people’s butts.  I learned that presidents really have no power with these executive orders, but the bureaucrats and most citizens do not seem to know that, which poses a problem.  Still, we have the precedent of Youngstown Sheet Company vs. Sawyer and other interesting precedents.  As an aside, martial law cannot — legally — occur while civilian courts are functioning — see Ex parte Milligan (71 US 2).  The ignorant often remind me that Lincoln declared martial law, but they do not seem to know of Ex parte Milligan, which declared Lincoln’s action unconstitutional. 

The left seems to have little understanding of how our government works.  The left do not seem realize  that our government is a polyarchy, as the left constantly refers to governance as a "democracy", which it is not and was never intended to be.  The left do not seem to understand that our president is not a despot who rules by decree, that Congress makes laws and is the main branch of governance, and the left does not seem to understand the role of the courts.  Unfortunately, the rest of the government seems to bend to the will of the ignorant as the Obamacare ruling underscored.  Like Franklin said, "A republic, if you can keep it".  The left is making that most difficult in 2012; perhaps we should put a petition that if you voted left that you should be exiled to a communist country?  Or are we already in one?

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Most Respectfully,

Joshua Jordan, KSC

Percussa Resurgo

See the Virginia and Kentucky Resolutions. That period of American history was taught in 5th grade in Tennessee when I was growing up. Now it is hard to find anyone who knows what they were. I do hear about secession petitions.

Your point about executive orders is well made.

The original theory of these United States was that only the States had inherent sovereignty; the federal government was a government of specific and limited powers. It was supreme within its jurisdiction and all state and local judges had sworn allegiance to it as the supreme law of the land; but only within its limits. Sovereignty rested with the states. This guaranteed considerable competition among the states, and allowed all kinds of political experiments. That notion no longer seems to be taught in our schools.

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FBI in the Sex Scandal!

This FBI agent seems to live in a porno movie.   I say that because I saw a porno movie from my father’s collection when I was 13; two people were copulating in a bush and some other person came along and joined it.  There was no surprise or objection from any of the original participants.  This FBI agent seems to think that he can just join in on the extra-marital fun:

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A federal agent who sent topless pictures of himself to the woman at the center of the Petraeus and General Allen scandals was told to ‘stay the hell away’ from the investigation but took it upon himself to ‘nose around’, it was revealed today.

After receiving a half dozen harassing emails from an anonymous account – but later linked to Petraeus’ mistress Paula Broadwell, Jill Kelley, the Florida woman who served as a volunteer social liaison officer at the Tampa military base, contacted a male FBI agent that she knew and had previously worked with.

During a prior exchange, when the agent was trying to establish a friendly relationship with the married mother-of-three, he sent her shirtless photos of himself adding to questions over his true intention behind going above-and-beyond his work duties to help her with the threats.

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http://www.dailymail.co.uk/news/article-2232130/FBI-agent-sent-topless-pictures-David-Petraeus-whistleblower-Jill-Kelley.html

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Most Respectfully,

Joshua Jordan, KSC

Percussa Resurgo

I confess to both amazement and amusement as the melodrama unfolds. But there is the serious question of what happened in Benghazi and the timing of the release of this sex scandal. I don’t expect much to come of that. A spymaster brought down by the jealousy of a mistress: the stuff of novels. I am tempted to write one…

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Subject: Inflation and business

Jerry,

"I have said that the prudent will prepare for inflation; that inflation is taking place now and will continue. I have also said that sometimes inflation has resulted in drastic hyperinflation "

Some of the things my family did in the ’70s suddenly seem to make a lot of sense. My mom and her preserves, my uncle and his huge pantry full of groceries. My dad buying a lifetime supply of stakes for his new stockade fence, to replace broken bits over the years.

Something you could touch on in the next few weeks might be how business will fare. My employer has a fair bit socked away in the bank, and we have as little in inventory as possible. And a lot of effort has gone into Just In Time systems and practices. We’re ‘product realization’: we make other people’s electronics.

Not seeking specific advice, but a general sense of ‘what to expect’ for business in an inflation/hyper-inflation environment.

Brian Dunbar

We will address specifics over time. And I invite suggestions. My income is reasonably inflation proof since the price of books is easily raised, and the market for entertainment is generally good in bad economic times. I am digging out some of my old survival essays. I am not sure how much expertise I have on predicting the future of small business.

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I admit to having been a big fan of Petraeus…What he did in Iraq to get them back on track was amazing, as was his career in general. I find it difficult to forgive him for taking a mistress, and I’m sorry that he has fallen from the lofty level I had placed him at.

However, this issue seems to be all consuming in much of the press, much more so than the deaths of the four men in Benghazi. Could it be that it’s a distraction from some issues at hand, such as the big push in new regulations the President is pushing through, the tax raises, sequestration or another issue? Media is reporting that the government was aware of it some time ago….why did this and the Iraqi attack on our drone get suppressed until after the election?

There are just too many issues for there not to be some cover-up, and I cannot believe that the FBI would not have made the President aware of the issues about the Director of the CIA as soon as they came to light; it’s just too critical a position.

Tracy

We now know that the Attorney General knew some time ago. He says he did not tell the President, who is said to be his best friend. You can believe as much of this as you want to.

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Jerry,

I infer that the excitable correspondent maintains that hyperinflation is not possible without having wages indexed to inflation, creating a painfully obvious positive feedback loop. The correspondent then maintains that in the absence of automatic wage indexing, hyperinflation of prices results in an "economic full stop" at some point in the process before postage reaches three millard marks.

I will admit that I am not enough of a student of history to know if the Weimar republic had such an index, but I had certainly never heard of one. However, if employers want to keep employees in a hyperinflation scenario they have to index the salaries accordingly, which is the mechanism I had always assumed. In other words, indexing does not have to be codified to be effectively in place. Also, real property assets (real estate with improvements, precious metals, and other tangible commodities) sustain some level of value above the previous baseline and are available for sale or barter.

In any event, hyperinflation does NOT refer just to cases where price increases are measured in decibels or tens of decibels per annum (which seems to be another implicit assumption of the excitable correspondent). I would construe inflation rates of above about 30% per annum (sufficient to necessitate a more frequent than annual assessment of prices and wages) to fall into the category of hyperinflation, and I believe that’s close to the definition you were assuming. We are going to exceed that level, at least on a quarterly basis, in the first quarter of Calendar 2013 when the new taxes and Obamacare taxes kick in, and again in the first quarter after "cap and trade" become the regulatory basis under EPA rules. (Note: that does not necessarily mean that the official inflation rate will be recorded at those levels, since the federal government is fully capable of adjusting the formula basis for reporting — inflation has been understated for much of the past four years because increases in food prices have been offset in the numbers by the continued weak housing market.) Those changes are strictly due to the underlying changes in the fundamentals. The expansion in the money supply over the past four years probably represents the opportunity for another 30% correction but not necessarily on the same schedule. So in the absence of significant wage corrections, a near doubling of prices over the next two years seems likely; a wage correction will drive it higher and trigger the inflationary spiral.

I could probably add more but that’s about the limits of my erudition for this morning.

Related note: http://www.cnbc.com/id/49792979 Wealthy Dump Assets Amid Worries About Going Over ‘Cliff’

TJM

The financial cliff is quite real. Be prepared.

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Hyperinflation on Russ Robert’s "Econtalk" and Ricochet.com

Dear Dr. Pournelle,

I do not know if you are familiar with Russ Robert’s "Econtalk," but it is a great source of information about everything economic. He is a professor at George Mason, and I believe now a Hoover fellow or some such. He does weekly, approximately 1.5-hour interviews with a wide range of economists, "ordinary" people, academics, authors, etc. A recent podcast on an economist who studied hyperinflations is here: http://www.econtalk.org/archives/2012/10/hanke_on_hyperi.html

I really appreciate your work here, you are a treasure. You do seem to turn up in many parts of my internet reading and podcast listening – TWiT, Instapundit, John C. Dvorak (although not on No Agenda…that is a fun, informative show, if wacky at times).

Do you know of Ricochet.com? It is a project of Rob Long and Peter Robinson and others with National Review ties – Mark Steyn and Jonah Goldberg turn up from time to time…along with conservatives celebrities such as Pat Sajak. They were aiming for something like a civil HuffPo of the Right. Membership is required for commenting, which, along with a code of conduct, keeps things civil even while arguing politics/culture. They are now generating a number of podcasts. "Law Talk" with John Yoo and Richard Epstein is one of my favorites. I just threw your surname into their site search and found 19 hits for you; people do like to quote the Iron Law. 😀

Thank you for all you do.

Sincerely yours,

Scott Littler

Nashville, TN

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Inflation concerns

I think inflation is going to be less of a worry than you think. I suspect that the various crazies out there, maybe starting with North Korea, are going to start testing. And going by the issue with the embassies in the middle east, I think those tests will be met with apologies from the US. Which will encourage more testing. As the only real losers in the Arab Spring were those dictators who had learned the hard way not to harass Israel, I can see things hotting up over there, plus Germany has got to be getting fed up with being guilt-tripped into paying for the welfare habits of Greece, Spain and Italy, a frustration which could increase hugely if Russia decides to start taking chunks out other countries, not just Georgia. And then the Brits could try buying better quality food at lower prices from countries in the Commonwealth rather than propping up a failing EU. And so on, and so on.

With the lid that’s been kept on the crazies since WWII, I think we’re heading into interesting times at a great rate of knots.

Mark Love

Interesting times. They can be made a bit less interesting if one has a large stock of non-perishable food acquired quietly and without drawing attention. You do not want your neighbors to believe you are hoarding. Hoarding is evil. Being prepared means protecting yourself from having the reputation of being a hoarder.

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Inflation

It’s been my experience that people who use copy & paste, then declare what they tell you three times is true, are generally belligerent assholes who ravings can be readily dismissed.

As several analysts have noted, the situation we’re in is unprecedented. Even during the worst of FDR’s excesses there was some semblance of adult supervision. There is something worse than hyperinflation, where there is at least a value attached to the currency. The worst scenario is, for lack of a better phrase, though economists might have one, is complete dehydration of the currency. This is the opposite of liquidity, where the money is utterly worthless. You can make a bill three feet wide to have room for all of the zeros and it won’t matter. If enough people stop believing it is just pieces of paper.

Part of the crisis in 2007 was that financial institution holding massive piles of Mortgage Backed Securities said they couldn’t act because they couldn’t find any functional mechanism to place a value on the MBS paper. This was nonsense, of course. A thing is worth what someone will pay you for it. They refused to ask the market what it thought of their product because they already knew what the answer would be. So instead they threw a tantrum and threatened to hold their breath until…, well, until the government became the worse kind of weak parent and gave the brats what they wanted. A smarter parent would know the kid would immediately start breathing again after losing consciousness. And if autonomic nervous action didn’t kick in there were plenty of other kids looking for a good home in Manhattan.

Breaking the money is the CTRL-ALT-DEL of global finance. It’s the only way you can really start over. How you do this without WWIII is the question.

It’s late and I’m not sure much of the above makes sense. But anyone who thinks bizarre scenarios are impossible when we’re already in a bizarre scenario is whistling in the dark. We can either back away from the cliff and absorb some hurt to get back to a rational policy or we can make history of the ‘interesting times’ variety. Rational policy isn’t a strong suit of our species, so I expect history it is.

E

And you might look into other nightmares. Indeed.

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PLEASE RECONSIDER WRITING…

…a survival book. The election and your recent musings on preparing for inflation make me think you could do it with your eyes closed.

Surely some of your old research and columns are still relevant? I realize that nuclear war is much less likely (although I think an isolated event much MORE likely now) but you have plenty of material to pore over, edit, compile…

I know you have enough on your plate already, but I think people would pay attention now. Tuesday really was a game changer.

Jason Merrell

We will at least have discussions here.

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Conservatives, don’t despair

http://www.cnn.com/2012/11/12/opinion/frum-conservatives-despair/index.html?hpt=hp_c1

While I don’t agree with a few things in there, especially the snarky remarks at the end, the article does contain some good information and a bit of realism on what just happened. We’ve seen worse time – depression and WWII come to mind – and we’ve seen better times – roaring 20s and Reagan years come to mind. We’ll see worse and better times again, hopefully tinier bits of the former and grander bits of the latter. It isn’t the end of history and conservatism is a more sound philosophy than liberalism, but we need both. In my opinion we got a little too much of the latter in the last election, but hope is not lost. When Obama first came into office his party controlled all branches of government and still barely managed to pass Pelosicare. We are not done yet by a longshot.

Braxton Cook

And we can end on that note. And despair is a sin.

We have sown the wind, and we will reap the whirlwind, but that has all happened before. And Moore’s Law works inexorably.

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Phonics, Geographics ‘Mankind’, and survival

View 750 Tuesday, November 13, 2012

I had finished the editorials and news and was thumbing through the entertainment section of the LA Times when my attention was drawn by a photograph of Spartan soldiers, which attracted me to read a review of a new TV series by National Geographic: Mankind: The Story of All of Us. The series begins tonight at 9PM. Oliver Stone will do his liberal view of about 75 years iof US History in 10 hours. The Geographic will manage to tell the story of mankind from the Big Bang To present. We weren’t around for a long time after the Big Bang, so the story starts with hunters in the grasslands of East Africa.

I haven’t seen the series, but the reviewer says “As with ‘the Story of Us’, ‘Mankind’ with its emphasis on battles, weapons and gadgetry, is clearly aimed at engaging the easily distracted preteen male.” It will be interesting to see which battles National Geographic considers decisive in the history of mankind. As long time readers will recall, I recommend Fletcher Pratt’s Battles that Changed History as one of the best overview summaries of the history of Western Civilization, in part because of his essays on why obscure battles like the Nike Sedition in Constantinople, and Las Navas de Tolosa in southern Spain were selected over the better known battles of Creasy’s Fifteen Decisive Battles of the World which I also recommend. (I also recommend that you read Pratt first, but that’s not terribly important – I read Creasy before I ever heard of Pratt. But Creasy concentrates more on the battles; Pratt embeds the battle into its times, and that can be important.) I suspect the Geographic series will draw heavily on Creasy. Most lecture series of this kind do so.

That, however, isn’t what intrigued me about this upcoming history series. The review continues “There is no way to tell the history of mankind in a dozen hours of television without resorting to absurdities, which here include having “experts” explain how terrible cold and hunger can be, how difficult it was to build the pyramids, how dangerous bandits were and how the invention of the alphabet made it easier to learn how to read.”

Given the state of historical knowledge – abysmal – stretching from the White House and Cabinet through many level of University scholars and down into the public school system, even I am not at all convinced that it is absurd to explain to young American people how terrible cold and hunger can be. We have immigrant children who know these truths in their bones, but the middle class American teen agers who watch the National Geographic Channel are not likely to have experienced such things at first hand. More, concentration on battles and military history cannot be a bad thing. I suspect that “Mankind” will not show the crucial scene in the education of Alexander of Macedon (not yet The Great) who as a teenager was sent with one of Phillip’s marshals with a small force to deal with insurgents and raids on the frontier. On the way they encountered a stream of refugees, young people, women well raped, carrying everything they had as the fled toward the order represented by King Phillip. The old marshal pointed to the stream of misery and said “That is defeat. Avoid it.” Alexander remembered that all his life. It is a lesson every free person should learn.

But that was not the phrase that attracted my attention to this review.

Reviewer Mary McNamara, the Times Television Critic, may think it absurd to have to explain to viewers that the invention of the alphabet made it easier to learn how to read, but I can guarantee you that a very great number of professors of education – and tens of thousands of their students who have become teachers – have never given that idea much thought. Until not very long ago California public schools, like those in many other states, discouraged the teaching of phonics in first grade. They taught “whole word” reading, which is essentially reading as if there were no alphabet. Words are presented as if they were icons. The notion is that one learns to read by word recognition. This bypasses the ‘decoding’ of words by ‘sounding them out’ and thus makes for faster and smoother reading. This is, after all, the way good readers read. There is a lot of research data proving that. So why teach the painful process of word attack, phonics, syllables and sounding out? Better to teach children to read well. Alphabets are all very well, but the important thing is to learn to read words and understand them.

The results were disastrous and California has never recovered from this. School readers had to be revised for ‘grade level’, meaning that stories like Ruskin’s King of the Golden River, poems like Longfellow’s Skeleton in Armor and Macaulay’s Horatius at the Bridge, short stories like The Celebrated Jumping Frog of Calaveras County, many stories by Steven Vincent and Rosemary Benet, all of which were taught by 7th grade in Capleville Consolidated in the 1930’s to farm children, vanished in favor of Dick and Jane and the whole parade of vocabulary controlled junk written specifically for grade schools. The first words of the McGuffy Reader which served America for generations were “No man can put off the Law of God.” The first words of the Soviet first grade readers were “For the joys of childhood we thank our native land.” The first words of a most widely used first grade reader in the United States during the height of the look-say period were “’See Spot run.’ said Jane. ‘Run Spot run.’”

Worse than the sacrifice of literature to banality was the plunging literacy rate. And worst of all was the loss of continuity: with no professor of education teaching phonics, no new teachers learned to teach that English is a phonetic language, and the whole notion of teaching reading through phonetics and teaching children to ‘sound out’ words was pretty well lost. Since professors of education have tenure, replacing those who believed in look say (and clearly didn’t understand phonics) takes a long time – and in many cases is being resisted because those tenured professors don’t want to bring in new professors who know the old goons to be culpable ignorami.

Incidentally, for those who don’t know: of course a study of people who are good readers will not reveal many who ‘sound out’ words. Almost no one reading this exposition will read that way, until he encounters polyethyldimethyltoluene, and depending on reading habits more common words that may be unfamiliar. One may or may not be able to read quaggas at a glance, although if the book in question is a history of large South African mammals it will be encountered often enough to become part of the recognition vocabulary, just as Hannibal and Punic will become familiar to those reading Roman history. On the other hand, those who know phonics will be able to read both those words. They will also be able to read many others they may have heard in conversation but have never seen in print. And of course they will encounter words they have never heard before, and must infer their meaning from context or by looking them up or asking a teacher. It’s a lot easier to ask the meaning of a word one can say. **

I don’t suppose that the National Geographic explanation of how the alphabet allowed more people to learn to read will much change the world, but there is a potential there. The problem here is that smart children often figure phonics out for themselves, but since they have never been taught the principles they don’t learn them all. My wife’s reading program requires seventy half hour lessons to go through English phonics in a systematic fashion. When the student is done with it the student can read, and it works with pretty well every intelligence level. (My mother taught first grade in rural Florida in the 1920’s; when I asked her if any of those farm children left first grade without learning to read, she said, some years there might be one or two, but they didn’t learn anything else either.) Bright kids will learn to read, sort of, without knowing about phonics, but some will have problems; far better to learn systematically. Less bright kids – and some bright ones – just don’t catch on to phonics until the subject matter has by-passed them. If you can’t read by fourth grade you won’t be likely to get much from the rest of your education.

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You may take the above as relevant to the question of survival for the next four years. One thing you can and must do is educate your children. The public schools are not likely to do that, and I see no incentive for them to get dramatically better anytime soon. The most important part of early education is to be able to read. It is your duty, — not the school’s – to see that your children can read before they leave first grade. It would be better that they know before they enter first grade. Since the British education system for centuries was to have nannies teach middle and upper class pupils to read at age four, and it is not likely that those children were better protoplasm than yours, you may safely embark on doing this. If you want to know how, start with Mrs. Pournelle’s reading program The Literacy Connection. It’s old and it’s hokey, but seventy half hour lessons will do the job. Some may have to be repeated, but that’s no difficulty. While you are at it, see that your kids learn the Addition table to 15 + 15 by then end of first grade, and the Multiplication table to 20 by 20 by the end of second grade. None of that requires home schooling, which may not be possible. More on this another time: but one thing you may be sure of is that with the current election results, dramatic improvement in the schools is unlikely. You may add bad education and increased illiteracy to the inflation and unemployment of the next few years. Inflation, unemployment, and increased illiteracy may not be inevitable, but that’s the way to bet it given the past.

Smart people should be in survival mode. That doesn’t mean trekking out into the woods and hiding. What you need to do is find ways to make it more probable that you will survive in place in the coming stagflation. We will from time to time look into observations on this, and of course I welcome discussion.

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I would say that National Geographic is correct in designating the invention of the phonetic alphabet as a key event. Of course those of us brought up on V. M. Hillyer’s A Child’s History of the World have known that from an early age (I read it at about age five; my father bought it and left it lying about the house…) Alas, I don’t know of a reliable low cost source, but I can recommend the book as an early work for American kids. I suspect my father’s method of getting me to read it was optimum in my case, but I also understand that others have had success with bribes…

For that matter, leaving Pratt’s Battles that Changed History lying around for teen agers is worth a try. It too is worth a bribe…

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I had thought the Benghazi / Petraeus story could not get more bizarre. Clearly I was wrong. Speculation without facts is a waste of time. We have not heard the last of this.

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And once again let me remind you that inflation is almost certainly coming. Make some preparations. At least learn something about it.

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** For grins, did you note the relationship of Punic to phonetic?

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Note that the election was extremely close. Well under a million votes in six key states would have changed the outcome. The imbecility of the Republican consultants who built a strange and utterly faulty ground game should be enough to let us get rid of those suckers, although I wonder if the leadership has enough good sense to do that.

Close isn’t winning. But despair is not justified.

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Inflation and hyperinflation

View 750 Monday, November 12, 2012

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I have said that the prudent will prepare for inflation; that inflation is taking place now and will continue. I have also said that sometimes inflation has resulted in drastic hyperinflation – Weimar Germany and Brazil in the last quarter of the Twentieth Century are examples — and this is not impossible for the United States.

Not everyone agrees with me. I have this mail:

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Hyperinflation requires a wage-price spiral.

Hyperinflation requires a wage-price spiral.

Hyperinflation requires a wage-price spiral.

What I tell you three times is true.

What mechanism in the United States economy translates inflation directly into wage increases?

What evidence is there that wages in the United States are inflating at a rate anywhere close to price inflation?

For full points, discuss the specifics of how Weimar Germany holding debt denominated in foreign currencies had the inflationary effect, and explain how the same effect arises in the United States in spite of the fact that United States debt is nearly all denominated in dollars.

If you are unable to frame a proper answer, post a note admitting that you are a fraud and a liar and should not be talking about things you don’t understand.

PRICE INFLATION IN THE ABSENCE OF WAGE INFLATION IS NOT INFLATION, IT IS AN ECONOMIC FULL STOP.

Either the Fed will figure this out, in which case we get deflation, or it will not, in which case we get Mad Max. Either way, you have no idea what you are talking about and should stop deliberately misleading your readers.

I post this in hopes that someone more articulate will explain it to me. Given its tone I have no real desire to correspond with the writer. Is there some truth in there that I have not seen?

I would think that printing fiat money is the very definition of inflation. When there is a great deal of money chasing finite good – including labor – then prices for the goods will rise, and if there is any shortage of labor, then wages will rise. Indeed, on Sixty Minutes last Sunday (November 11, 2012) there was a segment on the shortage of skilled labor for manufacturing jobs in these times of unemployment, and one suggestion was that wages should rise. Of course that would not instantly create more skilled labor; what it might do is induce more of those retired, or satisfied with an entitlement life, to reenter the labor force; employers are of course competing with entitlements, and after January first when the Affordable Health Care Act takes effect there will be other effects.

Hyperinflation is fairly rare, and lest I have not been clear on the matter, is not inevitable. Not inevitable does not mean zero probability. But ever increasing supplies of money will always have an effect, and increasing supplies of money widely distributed will cause prices to rise. If wages do not rise you can get various forms of stagflation; those old enough will recall Gerry Ford’s Whip Inflation Now efforts, and the increased money supply resulting in the return of stagflation during the Carter era. Under Keynesian theory you can’t have stagflation; but in fact that did happen.

Keynes famously quipped that burying jars of money would create non-government work (digging up the money) and through the release of the money into the economy solve the problems of depression. There was also the Townsend Plan, which in essence advocated large pensions to be paid to nearly everyone over 65. Those interested in the theory of the plan can find Townsend’s original proposals on line; they are quite appealing, and were persuasive to many.

If all this works – if goods are produced and more and more people go to work, then you get a booming economy, and all is well. That was the theory of Stimulus, and the shovel ready jobs as investments in infrastructure. Readers may observe the results of that experiment.

But if there is an increase in money but not in goods, prices will rise, and critical prices – energy being one critical – can rise quite rapidly. This will have an effect on the economy and on investment strategies. There are I suppose a number of outcomes including “an economic full stop” whatever that is, but in the latter half of the Twentieth Century the result was almost always stagflation: rising prices, stagnant wages, and high unemployment. This leads to demands for more ‘safety net’ entitlements. We do not know the final outcome of creating a situation in which fairly large numbers of people live under those circumstances, and many become adjusted to living on the dole as ‘normal’, but we may find out from direct experience.

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So. It may be that I simply don’t know what I am talking about, and I am misleading my readers, but I do not do so deliberately. I think I have made a rational analysis of the probable effects of increased entitlements financed by increases in the money supply – pretty well the present US policy – and it seems very reasonable to me that the result will be stagflation: rising prices coupled with high unemployment. The rises in the consumer price index will officially be called “Inflation”, as in Whip Inflation Now, and I believe that prudence demands that we prepare for it.

Inflation always reduces the value of fixed income and cash savings. Those living on savings or fixed annuities should understand that.

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The Petraeus affair continues, and becomes stranger; indeed it becomes so strange that it is becoming credible. There may be less to the story than we thought. There remains the story of Benghazi: who knew what, and when? The key decision was to leave the consulate inadequately protected coupled with not having a ready rescue force standing by in case the gamble failed. But I doubt we will learn much from General Petraeus on that.

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Way back in the Eisenhower Administration there was a saying, “Deficit financing doesn’t cause inflation, deficit financing IS inflation.” While that is not strictly true – it is possible to have deficits created in non-inflationary ways – it isn’t likely. In general, governments running big deficits are engineering inflation. When more money chases the same goods, prices rise.

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Election hangovers, global warming, death panels, and other matters

Mail 750 Sunday, November 11, 2012

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our plan

Dear Dr. Pournelle:

Despair is a sin. When does the constant beating of one’s head against a brick wall become a sin?

Our plan for the foreseeable future is not much of a plan and may even be despicable, but it has the virtue of stopping the pain. For years my wife and I have met the requirements to draw a "disability" check. Instead we have worked longer, harder and more diligently to maintain the lifestyle we established with relative ease in the 1980s. No more.

We are both retiring and applying for disability now. We will put our house on the market, such as it is. It probably doesn’t surprise you that our mortgage is considerably less than the market value of the property. As soon as we close on the house, we will start to travel this still-beautiful land, going where we choose, when we choose.

Our only child has special needs and will never have children of his own. There is absolutely no reason for us to continue working as we have. We have accomplished most that we set out to do and have no reason to wish to leave anything behind to be looted. If this be sin, count us among the damned.

Please do not use my name or email address, but you may sign me,

Blowin’ in the Wind

Be careful of inflation.

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Four More Years

Dr. Pournelle:

The economy is already tanking.

I had a decent job in 2008. A month after Obama was inaugurated I lost that job and didn’t see another for two years.

Now I’m in the worst job I’ve had in thirty years. I just found out that we are going to have a six days of unpaid "vacation" between Thanksgiving and New Years, twice what we had last year. I would not at all be surprised if they made us part-time in order to avoid Obamacare.

Obama seems to suffer from the same sort of obsession with gigantism that afflicted Stalin. Apparently the only jobs of which he’s aware are with G.E., G.M., or government. Everyone else is utterly invisible to him, and in fact don’t matter at all. As far as he’s concerned, we could, in the words of a once famous low grade moron, "Die quickly".

During the run-up to the Obamacare vote, I told my mother, a former AFSCME member, "We’ve long since passed the ‘It’s a bad idea’ stage. We’re now at ‘It’s mathematically impossible." Her reply? "They’ll just print more money." To this I responded, "You’re old enough to remember what happened when the Germans tried that." What’s going to be worse, Obama or what comes along to "fix" Obama? President for Life Buchanan? Obama’s setting himself up to be Salvador Allende. Who’s in the wings waiting to play the role of Augusto Pinochet?

Chris Morton

Beware of inflation.

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Inflation

Please do not publish my name.

> That is the first lesson: prepare for inflation.

And how does one do that in 2012? Traditionally, defense against inflation consists of cost-of-living raises, investment in precious metals (gold, silver), investment in manufacturing commodities (e.g. copper), buying land, and purchasing hard consumer goods (e.g., toilet paper) as far ahead as possible and storing them.

Cost-of-living raises are likely to be minimal in the private sector given the weak economy. Purchasing gold and silver is very easy through ETF’s, but I strongly suspect that at some point the federal government will put a steep tax on capital gains earned through sales of precious metals. They will sell it to voters as a form of the "rich" hoarding capital that is needed by the masses; after all, if you can afford to buy gold ETFs, you are clearly affluent.

Buying land may make sense, but if you live in an expensive region of the country, it may not be viable even for the middle class.

Storing consumer goods has limits, and makes more sense in a period of serious hyperinflation. It’s particularly difficult if you live in an apartment or condo rather than a house.

Many Americans have been frugal savers for decades and have a great deal to protect, and they do not have time to go back and replace their savings with new earnings if they are lost due to inflation. And a significant proportion of that savings is in 401k and IRA accounts with legal limits on the types of investments that can be made in them.

I would welcome your thoughts.

Please do not publish my name.

C

We will be discussing this in the next few weeks. It is a very serious question.

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"Fallen Angels": Science or Fiction

Throw another log on the fire…

http://www.theregister.co.uk/2012/11/09/peat_ice_age_coming_only_co2_can_save_us/

Robert Forrest

Yours is one of many pointing to that article. We don’t know what halts Ice Ages; we do know that there was a great deal of ice and much lower seas during much of pre-history of mankind, and that the ice sheets have come and gone more than once.

We also know that it was warmer in the Viking age than it is now. We know that the seas have been rising at about a foot a century for at least 300 years, and we are fairly certain that this rate goes back a very long time (you can see the ruins of coastal cities in the Mediterranean, for example).

The problem with the cult of Global Warming is that we aren’t studying what is really happening.

Swedish boffins: An ICE AGE is coming, only CO2 can save us! FALLEN ANGELS

Jerry

What a lovely headline. Swedish boffins: An ICE AGE is coming, only CO2 can save us. Have a look:

http://www.theregister.co.uk/2012/11/09/peat_ice_age_coming_only_co2_can_save_us/print.html

“A group of Swedish scientists at the University of Gothenburg have published a paper in which they argue that spreading peatlands are inexorably driving planet Earth into its next ice age, and the only thing holding back catastrophe is humanity’s hotly debated atmospheric carbon emissions. "We are probably entering a new ice age right now. However, we’re not noticing it due to the effects of carbon dioxide," says Professor of Physical Geography Lars Franzén, from the Department of Earth Sciences at Gothenburg uni.”

Fallen Angels seem to be coming home to roost. I guess it’s time for me to dust off my old copy.

Ed

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End-of-life medical care

Mr. Pournelle;

Your musings regarding "death panels" reminded me of a set of questions Senator Paul Wellstone used to recommend:

Who profits?

Who pays?

Who decides?

I thought they were good questions then, and they’re good questions in your comments. I agree that end-of-life medical care needs to be brought under control, and also that this is going to be emotionally, ethically, and politically hard to do. But it needs to happen; seems to me our medical technology is good enough to keep people "alive" for a very long time, while not being good enough to do any real healing at that point.

Allan E. Johnson

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Death Panels

Dear Dr Pournelle,

Your comments on the last two years of (expensive) life, and voting on treatment with Death Panels, reminded me of the controversies over here in England over the Liverpool Care Pathway. In essence a panel of doctors decide that a patient is dying and stop almost all treatment (I think pain medication is still continued). This is certainly cheaper, and arguably retains some dignity for the patient. The controversy arises from the lack of consent, in some cases, and apparently some patients dying of thirst after artificial hydration being stopped.

I think that this type of regime is almost inevitable when health care is universally available, but resources are limited. I expect that Obamacare will bring a variant of LCP to the US.

Regards,

Dave Checkley

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Sobering

Jerry

I happened upon a teacher’s blog. She was going to vote Obama. When talking with people who were going to vote Republican, she thought (but did not say out loud) “You want to repeal the programs we fought to get enacted.” That, and the infamous 47% voting their pocketbooks, probably explains the results.

Your comments on end of life care remind me of a couple of events that hang in my memory. The first was when I was talking with an old man who described his Parkinson’s disease as “Death on the Installment Plan” (these days I have to explain to many what an installment plan was). This old man, whose quality of life (QOL in current medical jargon) was pretty low, said this about just letting go: “I don’t want to die.”

The other event came when I was asked to determine the competency of a man with a mouthful of tubes and respirator hoses. Should they turn off his breathing machine? His wife was convinced that he was suffering and would welcome death. The doctors agreed. The man had never had a mental illness, but they needed a shrink to pronounce on his competence. So, remembering the first event, I gathered up all my fancy expertise, leaned over and asked the man, “Do you want to die?” He shook his head NO, a look like terror on his face. The wife changed her mind instantly and rushed to his side.

I think that end-of-life issues are complicated. I know some men who would welcome death to get away from their wives. I knew a woman who died happy because her death had shown up some doctors who believed she had psychosomatic paralysis.

The answer is 42.

Ed

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Astroboffins spot smiley face on Mercury

Jerry

Have you seen the smiley face on Mercury?

http://www.theregister.co.uk/2012/11/09/smiley_face_on_mercury/print.html

Ah, those lads and lasses at NASA . . .

Ed

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Financial cliff

Dr. Pournelle –

It appears to me that the electorate has, by re-electing the President, told us that they want government spending to continue. At the same time, by leaving control of the House with Republicans, they have told us that they want the spending to be covered by revenues, not by borrowing. And finally, by leaving the Senate in Democrat hands, they have told us that they believe that letting the Bush tax cuts expire is the way to pay, not cutting rates in anticipation that it would increase revenue.

So I say, make a deal. The Bush tax rates expire, the automatic spending cuts do NOT go into effect, and we’ll see what happens.

Meanwhile, we need to start calling the new tax rates "the Obama Tax Rates" and the increasing deficit "the Obama Gap."

I understand that the more acceptable deal, for some, might be to trade the Bush rates for the cuts, i.e., just go over the cliff. That would be my second choice.

Harmon Dow

Chicago, but my house is red.

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Spengler > If You Believe in Staples, Clap Your Hands

Jerry

Spengler has some comments on the current business scene:

http://pjmedia.com/spengler/2012/11/07/if-you-believe-in-staples-clap-your-hands/?singlepage=true

“The last wave of entrepreneurship is long since gone, and there is nothing in the pipeline to replace it. The startup sector of the U.S. economy is dead in the water. In past recoveries, firms with 500 to 1,000 employees were the biggest job creators, as the successful few became big companies. This time around, firms of this size lost the most jobs. Venture capital is doing terribly. Three-quarters of venture capital firms lost money during the past decade, and the sector performed well below publicly traded indices. Once the poster-child for edgy entrepreneurship, Apple has transmogrified into a would-be monopoly that relies on its legal team more than its engineers to suppress prospective competitors. That’s distasteful, considering that Steve Jobs started out by stealing the idea for GUI from Xerox.”

We need a German Miracle. Won’t get one with this President.

Ed

And by the time his term is over, much will be irreversible. Depend on that. Recovery is possible, but it will not be quick. We had the ‘quick’ choice until this election. It’s gone now. And entitlements will continue, and the bunny inspectors will get raises. It is time for the clever to be clever.

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"Free Stuff" and the Election

Mr. Pournelle:

Hal makes interesting points regarding "Free Stuff." As a liberal, I think as a country we need to start paying the bills; and I expect that would mean my taxes would rise. I accept that. I would also support spending cuts, if they offend Democrats and Republicans equally; I don’t think either party can play "let’s cut your priorities, but ours are all sacrosanct." For one specific, I am now receiving Social Security, but would support bringing expenditures on that program down; although I would *not* support "reforms" which appear to be intended to eliminate Social Security by attrition. As a liberal, I have written, and will write, to my congresscritters in such terms.

I am glad that Mr. Boehner has been ready to distance himself from Grover Norquist’s theories far enough to accept the notion that increased revenues could be useful. However, I don’t have any confidence that tax cuts can achieve this, and, regarding tax reform, I’d have to see the details. The difference between reform and pandering isn’t always obvious.

Regarding taxes: while I concede that, at some point on the Bell Curve, increased taxes bring decreased revenue, I think it’s equally obvious that at some point decreased taxes no longer stimulate growth. The question would be: where are we on the curve? I tend not to trust economic theories or predictions much, but it seems to me that our tax structures under Presidents Reagan and Clinton worked pretty well. For that matter, Eisenhower-era tax rates didn’t eviscerate growth, though both Republicans and Democrats would probably have cat-fits if anyone proposed such rates now. Before continuing the Bush-era tax cuts, I’d like to see some evidence they gave us a stronger economy. I have no useful comment on the stimulus approach to recession — it doesn’t seem to me that anyone really *knows* how to head off a depression, so I don’t see the point in second-guessing.

If neither party can muster enough integrity to negotiate a "grand bargain" on taxes and spending, then maybe the so-called "fiscal cliff" (even with its attendant shocks) will be the best we can do. It’s something like using a machete to prune the tea roses, but at least it would be something of a reset button.

Allan E. Johnson

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Hal’ observations re: "Free stuff" and the election

"Even if one disagrees with him on policy, Mr. Obama has always recognized that optimism sells. Just as Mr. Reagan did. The substance may be different, but the more Reaganesque candidate in presentation won last night. And that too is ironic."

Mr. Reagan did not personally demonize his opponent, and did not run a nasty, divisive campaign. While I agree in general with many of the points that Hal made, I find it appalling to characterize President Obama as in any way “Reaganesque”.

Don Hallenbeck

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Re: Hal’s comments

With respect, Hal’s comments are way off base. In the midst of a poor economy, Hal wants to blame Republicans on the one hand for spreading "fear" and on the other for not having "real world concerns" and then claim they’re also responsible for the "free stuff" idea. But those ideas are internally inconsistent. In truth, Republicans ARE talking about real world concerns in terms of our debt and the unemployment crisis, and a proper understanding of that does generate fear about our current trajectory with the implication that there can be no more free stuff. To wave that away as Obama did was not being "positive", it was indulging in fantasy, the fantasy that Medicare is Strengthened even while paying for Obamacare and that somehow he’ll cut the deficit by taxing the rich while "investing" more on education and green energy and that there will be no tax increases on the middle class, yada yada yada. Romney was positive in that he thought he could confront and succeed at these challenges; Obama pretended they were never there. (As for the allusion to Mr. Norquist, I have no idea what Hal’s point is supposed to be. The whole point of the government interference is that it is driven by political incentives, not market supply and demand. And nothing I’ve seen about tax cuts seem even remotely connected with making the cost of government services "low low low". Baffled by this statement.)

Jason Fletcher

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Niven & Benford at Google.

<http://www.youtube.com/watch?v=1-PF32jdqkw>

Roland Dobbins

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The stupidity, corruption, and freak of Pasok, the most infamous socialistic mafia on Earth, are out of this world! Pasok mafiosi are the freaks that initiated the impunity and immunity of Graecokleptocrats, the Siemens scandal, the military bribes, myriad kickbacks, and the fiasco of October 18, 2010, which destroyed my life. Pasok freaks stole my life. Pasok declared a war against me, but the whole world is watching this Armageddon. Many Pasok politicians, such as Akis Tsochatzopoulos, Yannos Papantoniou, Tasos Mantelis, Christos Verelis, and Mariliza Xenoyiannakopoulou, are now investigated by the Financial Crimes Squad (SDOE).

The Greek government is the #1 enemy of the Greek people, a den of thieves, a source of myriad stupid things, a grand sink of bribes and kickbacks, the mother of all bureaucracies, a sender of Trojan Horses, a master of hoodwinks and smokescreens, a gang of freaks, a madhouse, a rot of rabble-rousers, a clan of kleptocrats. http://venitism.blogspot.com

The government of Greece in 2010 was so stupid that it hoodwinked all media that I conspired to trigger a war between Greece and Turkey and blame Mariliza Xenogiannakopoulou, Alternate Minister of Foreign Affairs of Greece, for it! Accusing dissident bloggers of treason, the Greek government manufactured a blood libel in cyberspace, which in turn incites hatred. The government of Greece gave my head on plate to Erdogan. Brutal Graecokleptocrats have destroyed my life. My life is stolen. Now I demand my life back!

In October of 2010, an unknown American, member of Crystal Clear Forum, an American Yahoo Group, used as pseudonym the name of Mariliza Xenogiannakopoulou, Alternate Minister of Foreign Affairs of Greece, to post a single message about Turkey. The unknown American did not violate any law because, according to the Supreme Court of USA, anybody can use any pseudonym or pen name. For example, thousands of people use Obama’s name as a pseudonym. It’s considered an honor, not a forgery. http://venitism.blogspot.com

Only spoofing is forgery. The unknown American would have used spoofing if she used Xenogiannakopoulou’s email which is marilxen@gmail.com. Instead she used mariliza.xenogiannakopoulou@yahoo.com which is not Xenogiannakopoulou’s email. The unknown American posted on http://groups.yahoo.com/group/crystalclearforum with her pseudonym using a kind of literature called Lyric Essay, which uses emotion and color to enlighten a message.

A malevolent blogbuster misinformed Xenogiannakopoulou that the culprit was I, Basil Venitis, just because my name was mentioned in the post! As a result of this misinformation, on October 18, 2010, a gang of six brutal cybercops of the violent Greek Cyber Crime Unit (CCU) broke into my home in Athens and into my college office, and stole my computers, software, files, documents, and personal data. http://venitism.blogspot.com

The cybercops locked me in jail for a night, they humiliated me with handcuffs, fingerprints, mug shots, and lies, leaked false information to the media parrots, and the Greek government initiated sham court proceedings for a stack of stupid freakish charges, including forgery and treason! There was neither pillow nor toilet facility in my jail cell. I had to urinate in a bottle! I, a 67 year old with high blood pressure, was not allowed to keep my hypertension pills with me. There was neither toilet paper nor soap in the whole CCU jail facility.

As a result of the huge bad publicity in all media, I resigned from my job without any kind of compensation. I had to protect my employer from any spillovers of government stupidity. The government of Greece misinformed all TV stations, radio stations, newspapers, and blogs with stupid freakish stories about me, presenting me as a traitor and warmonger!

But that’s not the end of the story. Xenogiannakopoulou never shows up in court. My nerves are broken by infinite deferments of my court trial! The judge always postpones the trial ad infinitum. Meanwhile, I always have to show up and waste the whole day waiting as there is no definite timing for the hearing, but only a day. I and my lawyer have to be in the courtroom the whole day until the judge calls my name. Then the judge postpones the trial for another day of harassment, and so it goes. This has happened six times so far! This is a real Greek tragedy! Justice delayed is no justice, justice perpetuated is hell. This amounts to routine summary punishment of the presumed innocent.

Greece, the most corrupt country in Occident, has become a kangaroo valley, violating basic human rights and Article 2 of the Lisbon Treaty, but nobody gives a damn. I cannot understand why the European Commission tolerates political persecution and freakish Kangaroo Justice within the borders of the European Union and cannot refer the Greek government to the Court of Justice of the European Union. I cannot understand why the European Commission cannot protect Greeks from appalling violations of Article 2 of the Lisbon Treaty by the Greek government. If the European Union cannot protect Greeks from the repressive Greek government, who will?

The government of Greece uses charge stacking to persecute dissident bloggers. Charge stacking is the ability to charge a large number of overlapping crimes for a single course of conduct. Combining crimes enables prosecutors to get convictions in cases where there is no misconduct at all. By stacking enough charges, including treason, prosecutors jack up the threat value of a trial against a dissident blogger, even if the government’s case is very weak. Charge stacking is terror. Disgusting governments cannot terrorize their people.

Persecuting dissident bloggers, the government of Greece violates Article 2 of the Lisbon Treaty, which states the European Union is founded on the values of respect for human dignity, freedom, democracy, equality, the rule of law, and respect for human rights. These values are common to the Member States in a society in which pluralism, nondiscrimination, tolerance, and justice prevail.

Greece violates Article 10 of the European Convention on Human Rights, which states that everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers.

Greece violates Article 19 of the Universal Declaration of Human Rights (UDHR), which states that everyone has the right to freedom of opinion and expression; this right includes freedom to hold opinions without interference and to seek, receive and impart information and ideas through any media and regardless of frontiers. http://venitism.blogspot.com

Greece violates Article 11 of the Charter of Fundamental Rights of the European Union, which states that every citizen has the right to freedom of expression. This right includes freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers. The freedom and pluralism of the media shall be respected. http://venitism.blogspot.com

JAILBIRD FOR A NIGHT

By Basil Venitis

Big brother checks the internet

For things you criticize

To shut your mouth on the net

To shut your mind on the sky.

Cops busted my home

And stole my computer

Hard disk on their comb

blogger on their mooter.

They threw me in jail

For speaking my mind

My words are out of jail

Revolting in a kind.

This jail is awful

Without pillow alone

Urinating in a bottle

And the girl next cell begins to moan.

Screaming in the dark of jail

Guards pretending they are deaf

She is a girl, she is frail

She is missing her Jeff.

I can smile at the old days,

I was a handsome professor then.

Those were real happy days

Happy memory lives again.

Lesmiserables in jail

Kleptocrats out of jail

This is hell on Earth

It’s shame and pain.

Time for a real revolt

To bring a real change

To bring the looting to a halt

Kleptocrats should not escape.

Kleptocrats must be laughing

Premier must be happy,

This is stupid and disgusting,

Government has a party.

Harmglads sleeping before dawn

Silence cut with a cry

Jailbird could be reborn

Coming back to a happy life.

My memory leads me

Finding strength within

People really love me

A new life should begin.

Waiting for the sunrise

Thinking of a new life

I mustn’t give in

A new day will begin.

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