Dog of the Year

And it’s only January 4th:

It was already dark on Saturday evening and Austin had little time to react when he discovered the reason for Angel’s strange behaviour. The boy spotted what he first thought was a strange dog emerge from the shadows. Just two metres away, the cat charged at him.

“He was like: Aw, crap, it’s a cougar.”

But Angel was ready – the young dog leapt at the hungry cougar and “took the whack,” Mr. Forman said. The boy escaped inside his home while the two animals battled for several minutes. “The cougar was latched onto her head, you could hear both the dog and the cougar screaming. Then it went silent.”

This is why we have the Dainty Flower. I have the utmost admiration for the courage of the brave golden retriever, but if a similarly smallish cougar were ever to make the fatal mistake of running into Spacebunny’s Ridgeback, I’d fully expect to discover her outside happily crunching away on the dead cat’s skull.

Mailvox: "You are my Dawkins"

Samuel J. Scott reviews RGD:

The aver­age reader could prob­a­bly be for­given for pass­ing Vox Day’s “The Return of the Great Depres­sion” with­out giv­ing it a sec­ond thought. After all, the author is a weekly colum­nist for World­Net­Daily, a far-right, news web­site that is as biased as it is sen­sa­tion­al­is­tic.

But the reader would be miss­ing one of the poten­tially most-important eco­nomic reviews in recent times.

Con­trary to what some might have pre­dicted from a writer for WND, Day’s sec­ond non-fiction book — the first was his cri­tique of the so-called “New Athe­ism” of Richard Dawkins, Sam Har­ris, and Christo­pher Hitchens in “The Irra­tional Athe­ist” — is not a polemic in favor of end­ing the Fed­eral Reserve, return­ing to the gold stan­dard, or other such issues that dom­i­nate among fringe con­ser­v­a­tives and lib­er­tar­i­ans. Rather, it is largely a cold, ratio­nal, even-handed assess­ment of the eco­nomic his­tory of the past twenty years from the rise of Japan in the late 1980s to the finan­cial tur­moil of today.

Beware of spoilers! Chris Bechtloff posts reviews Summa Elvetica:

Could not put it down. This is one of the best fantasy books I have read in a while.

And finally, Mr. B.A.D. takes me to task for sticking to the literary formats:

To be blunt, you and your buddies are intellectual snobs. Which is fine if all you ever want to do with your great think tank is circle jerk each other about how much smarter you are than the dummies who are running the world.

However if you aspire to make the world a better place with your great minds, which is the only choice of use in a great mind that does not result in total waste, you ought to learn the value of the idiot. The key element of my favorite movie of all time, Conan the Barbarian, is that Will alone is the true power behind anything. Once you have the will of the mob, who are all idiots, you have the means to change the world. This is why Hitler’s number 2 guy was in charge of propaganda, this is why transformers 2 was a box office hit, this is why those red handed atheists found it easier to just kill people than change their minds, this is why Liberals pander to the poor and welfare crowd, and this is why you ought to format your great thoughts and books into something the idiot can enjoy/ comprehend: Documentaries with pretty colors, animations, zingy noises, and humor.

Now I’m no idiot on an all inclusive scale, but I am a far cry from you and your friends in mental capacity. I’ve never had an actual IQ test but…..I scored 136 on one of those Internet tests 8 years ago. I drank a lot back then, and have since enrolled in college. I bet I can squeak in the last few points on a real IQ test and qualify as a genius. I’ll wait till you stop laughing….

Now, my only point was that I am more intelligent than the average human, and I feel I was able to comprehend your books, but they certainly gave my brain a stretch. I am certainly not as sharp as you, and lack the ability to see through the multiple layers of BS spoon fed us by the media each day. In a way you can say that I am the Christian version of the atheists who take science and the unholy trinity as gospel truth, except you are my Dawkins. I do not have the capacity to see the big picture the way you do, nor the reasoning ability to weigh what is bullshit and what is not. On the grand scale I’d actually be on the same level as Dawkins intellectually, I can remember facts, and reason fairly well, but not as well as I think I can, and probably have huge gaps in my logic. Watch Dog of the big picture being your gift, you should use it in a manner that will benefit all, not just the intellectual elites that your blog caters to. If your books were at the far end of my ability, than the people I run across on a daily basis who are barely literate have no hope of grasping the vital truths that you are shining a light upon. So please, draft up some cartoon characters, saddle up with your power point, and put something together for a limited theatrical release with a broad DVD release. If the Lord was able to pass down his higher thoughts to us, than I’m sure you can figure a way to do something similar.

I am his what? Anyhow, I suppose the criticism is not entirely invalid. I have been looking into putting together some sort of bi-monthly YouTube deal with the intention of permitting those who prefer video to follow some of the economic matters I’m writing about. However, it’s important to keep in mind that some subjects can only be dumbed down so far. I mean, if someone genuinely cannot understand that 8.3% annual credit growth over the same time period as 3% annual GDP growth means that the increase in GDP is wholly dependent upon increasing credit, or grasp the significance of what it means when that 8.3% credit growth is replaced by a 6% contraction even when I point it out to him, then there’s really not a whole lot I can do even if I spell everything out with pretty pictures and monosyllabic words.

Of course, Mr. B.A.D. also has to keep in mind that I simply don’t care all that much about the rest of the world except for my desire to stay away from it. I tend to follow my intellectual interests as they happen to evolve; I’m certainly not attempting to save Man from himself.

And returning the subject to RGD, those who have read it should be amused by this inadvertant, but telling confession by Paul Krugman in today’s NYT column:

As you read the economic news, it will be important to remember, first of all, that blips — occasional good numbers, signifying nothing — are common even when the economy is, in fact, mired in a prolonged slump…. Such blips are often, in part, statistical illusions.

You don’t say…. In case you don’t understand the significance of what Krugman is saying here, it is a straightforward admission by a Neo-Keynesian Samuelsonite that macroeconomic statistics are insufficiently reliable for macroeconomic policy making. Which, of course, is the very point I was making in the chapter entitled “No One Knows Anything”.

Bernanke and the housing bubble

In which Ben Bernanke throws Barney Frank under the bus. Even if you’re not an economist, Ben Bernanke’s attempt to excuse the Federal Reserve for any responsibility in creating the housing bubble really has to be read to be believed. Here’s the one of the more damning paragraphs in the 36-page PDF:

First, the cumulative increase in housing prices shown in Slide 5 is quite large. Can accommodative monetary policies during this period reasonably account for the magnitude of the increase in house prices that we observed? If not, what does account for it? Second, house prices rose significantly during this period in many industrialized countries, not just in the United States. If monetary policy was an important source of house price appreciation in the United States, it seems reasonable to expect that, in an international comparison, countries with easier monetary policies should have been more likely to have significant rises in house prices as well. Is that the case?

With respect to the magnitude of house-price increases: Economists who have investigated the issue have generally found that, based on historical relationships, only a small portion of the increase in house prices earlier this decade can be attributed to the stance of U.S. monetary policy. This conclusion has been reached using both econometric models and purely statistical analyses that make no use of economic theory.

This is extraordinarily deceptive on several levels. Bernanke is first leaving out the fact that regulation of the banks is the specific responsibility of the Federal Reserve and is an inherent part of monetary policy given the fact that most of the money in the system is created by bank loans under the fractional-reserve system. He is, of course, limiting his implicit definition of “monetary policy” to interest rate targets, which is acceptable in general economic discussions but not in a specific one of this sort.

Second, it should be no surprise that Bernanke feels justified by the use of econometric models based on the Taylor Rule because the Taylor Rule is the very rule that was used to justify the Fed’s actions in the first place. As Mike Shedlock shows using Case-Shiller housing prices in the place of Owner-Equivalent Rent to calculate CPI-U, the Taylor Rule is fundamentally flawed because it is based on CPI-U. In RGD, I demonstrate a few of the many ways CPI-U considerably underestimates the real rate of price changes; the fact that it doesn’t even take real housing prices into account renders it entirely useless as a basis for defending the Federal Reserve’s actions or comparing the U.S. housing market with international housing markets.

No doubt there will be a lot of detailed critiques of this paper in the coming month. I may even write one myself. But in summary, “Monetary Policy and the Housing Bubble” is a shameless and deceptive attempt by a failed economist to justify his spectacular failure by using the very models that failed him in the first place.

I recognized the housing bubble in 2002; that is a matter of public record. Bernanke, on the other hand, was still denying it existed in October 2005, less than a year prior to its 2006 peak! “House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals, including robust growth in jobs and incomes, low mortgage rates, steady rates of household formation, and factors that limit the expansion of housing supply in some areas.”

Calculated Risk points out two more things that Bernanke conveniently avoided mentioning:

“Bernanke used data from other countries to suggest monetary policy was not a huge contributor to the bubble … however, Bernanke didn’t discuss if non-traditional mortgage products contributed to housing bubbles in other countries. This would seem like a key missing part of the speech.

Bernanke didn’t discuss how the current regulatory structure missed this “protracted deterioration in mortgage underwriting standards” (even though many people were pointing it out in real time). And Bernanke didn’t discuss specifically how the new regulatory structure would catch this deterioration in standards.”

The truth is that the Fed knew about the “protracted deterioration in mortgage underwriting standards” prior to the start: “Even before economic prophets of doom such as Marc Faber, Nouriel Roubini, and Peter Schiff became famous for their correct warnings of imminent crisis, Edward Gramlich, a governor at the Federal Reserve, told Fed Chairman Alan Greenspan that making home mortgages available to low income borrowers would lead to widespread loan defaults having extremely negative effects on the national economy. This extraordinarily specific warning was given in 2000, amidst the wreckage of the dot-com bomb and before the housing bubble even began. Those possessed of a mordant sense of humor may appreciate how Greenspan rejected Gramlich’s recommendation to audit consumer finance companies on the basis of his fear that it might undermine the availability of subprime credit.”
– Vox Day, The Return of the Great Depression, x.

WND column

Trust Not in Republicans

They abstain from interference, because they fear that, if it fail of good effect, their own safety or reputation may be damaged or destroyed; not because they see that their preservation and good name are needful, that they may be able to influence those who need their instruction, but rather because they weakly relish the flattery and respect of men, and fear the judgments of the people, and the pain or death of the body; that is to say, their non-intervention is the result of selfishness, and not of love.
– St. Augustine, City of God, Chapter 9

In the chapter of his magnum opus entitled “Of the Reasons for Administering Correction to Bad and Good Together,” St. Augustine explains that those who have neither sinned themselves nor opposed the evil deeds of the wicked merit the consequences that invariably arise from those evil deeds on the basis of their refusal to interfere with the rampant sin surrounding them. St. Augustine was referring to Christian morality and the sack of Rome by Alaric in 410 A.D., but the principle applies equally well to economics and the ongoing financial devastation of the United States.

Karl Denninger makes a tangentially related point at the Market Ticker:

It is a fact, whether we like it or not, that we cannot have and sustain the sort of “economic growth” we have been sold over the last 30 years on an indefinite forward basis, as you cannot continually take on debt at a rate that exceeds productive output – eventually you will default. Instead of facing the truth – a long-term growth rate roughly approximating the growth in population, or about half of what we have allegedly “enjoyed”, we have used debt pyramiding – that is, serial Ponzi schemes, to produce the illusion of dramatically higher economic growth.

There is no evidence that [Ben Bernanke], or anyone in Congress, has yet had their “Come to Jesus” moment with the blunt mathematical facts. Attempting to blow another bubble – which is the inherent path you are attempting to take – risks destruction of our nation’s political system and economic future. There are hard choices to make and economic adjustment to the realities of our debt load and what this portends for economic growth on a forward basis will not be easy. It is, however, both inevitable and necessary. The longer we continue to try to deny the math the worse the ultimate outcome.

Given that both Alan Greenspan and Ben Bernanke were Republican appointees and that a Republican White House, Senate, and House of Representatives presided over the most inflated period of “the so-called ‘modern era’ of Central Banking”, it defies both reason and history to assume that economic sanity will be provided by Republicans.