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Are Americans on the Road to Serfdom?

inoculatedinvestor's picture




 

Appreciation for Hayek continues to spread: As the freshwater and saltwater economists continue their never-ending fight to see who could be more reluctant to consider ideas that fit outside their narrow frameworks, many people are starting to embrace the idea of the Austrian school of economics. After reading some great material on the Austrian school, I wrote an article on Hyman Minsky and now Amity Shlaes has penned on op-ed piece on the Austrian- influenced economist Friedrich von Hayek. According to Shlaes, one of Hayek’s ideas that is most pertinent to today has to do with the loss of personal freedoms at times of national stress. Hayek believed that wars and crises led to national planning, creation of influential special interest groups and an erosion of individual liberties. Hmmm, does that sound familiar? National planning? Well, the government now decides what companies survive and fail and is looking into nationalized health care. Powerful special interest groups? We can’t forget the banking oligarchy that has captured Washington and now imposes its will on Main Street with no repercussions. Loss of liberties? Remember all that wire tapping and other invasive activity that came with the renewed focus on Homeland Security? Sounds to me like the government has used 9/11, the Iraq and Afghan wars, and the financial crisis to become a much bigger influence in our day to day lives.

 

The problem with this dynamic, according to Hayek, is that the economy suffers due to too much government involvement. Even worse, in the long run he believed that we would all become serfs. I have to admit that in some of my darkest moments I worry that the in recent years the government and the banks colluded and conspired to create a nation of indebted people who would be no more than passive participants in their own lives. Zombie consumers. It’s hard to rise up and question the status quo that includes huge bankster bonuses, crony capitalism, and reduced freedoms when the bank is standing on your doorstep ready to take your house. I hope Hayek was wrong and that Americans will not stand for being trivialized and marginalized indefinitely. One of the few things I have faith in these days is that we are capable of forcing our government to change. I just pray it does not take some kind of point of no return tragedy to wake people up:

 

As the war came to end, Hayek penned an apocalyptic tract, “The Road to Serfdom.” His thesis was that war gets people used to national planning. So the planners continue to plan, even in peacetime. These incremental expansions of the social- welfare state aren’t benign. They foster the creation of ever- more-powerful interest groups. The economy becomes less productive. Political corruption in turn gives rise to dictators. Foreign-policy tension or economic crisis accelerates the trend.

 

“‘Emergencies,’” Hayek wrote, “have always been the pretext on which the safeguards of individual liberty have eroded.”

 

For a number of decades the main thing about Hayek seemed to be that he was wrong. Britain did head to the left, far to the left. After the war, the U.S. also institutionalized government planning in new areas. Yet neither Britain nor the U.S. went socialist or trampled personal freedoms. On the contrary, they eventually turned toward Margaret Thatcher and Ronald Reagan

 

But this low estimation of Hayek fails to appreciate his central thought: the economic damage is subtle and is evident only over time…

 

Hayek understood that a good decade where government expansion seems to stall -- the 1990s -- doesn’t mean government won’t expand when the next crisis comes.

 

The recent pattern of following a war and a financial collapse with the creation of a new entitlement is a perfect example of the Hayekian dynamic in action…

 

The U.S. is on the road if not to serfdom then to less growth, less innovation, more rationing and more political corruption…

 

Brad Delong defends the stimulus: The debate over the efficacy and impact of the $787B stimulus package continues to rage on. Many conservatives have called it a failure because it has not arrested unprecedented job losses. Others, such as Paul Krugman worry that the US will need another round of stimuli because the first allotment was insufficient to repel deflation. Some think it did not focus enough on rebuilding the deteriorating infrastructure in this country. Others wish that it had put more money in the hands of consumers through tax cuts. Curiously, within this cacophony of criticism, the Obama administration has come out with a claim that the stimulus package has saved or created 640K jobs. I am clearly skeptical of government statistics in general. But, in reality, I have no way of assessing the validity of such data. However, this is the same government that continues to claim that small business start ups are adding around 80K jobs a month. To that I say, with what credit and to cater to what demand?

Still, if we give Helicopter Ben credit for bringing the financial system back from the ledge (despite the fact that he was one of the men who allowed it to get so close to the precipice), then maybe we can give Congress and the Obama administration the benefit of the doubt and assume that the stimulus did help prevent a more dramatic initial economic decline. (I say initial because I am deeply concerned that we are setting ourselves up for an even nastier round two) Within this context, I found some interesting commentary from Berkeley economist Brad DeLong. His thesis is that we cannot in retrospect just dismiss the need for stimulus because we automatically assume that “this time is different” and the 54% decline in industrial output that occurred during the 1930s could not have happened again in this crisis:

It is worth stepping back and asking: What would the world economy look like today if policymakers had acceded to the populist demand of no support to the bankers? What would the world economy look like today if Congressional Republican opposition to the Troubled Asset Relief Program (TARP) program and additional deficit spending to stimulate recovery had won the day?

The only natural historical analogy is the Great Depression itself. That is the only time when (a) a financial crisis caused a widespread, lengthy, and prolonged reinforcing chain of bank failures, and (b) the government neither intervened nor passed the baton to a consortium of private banks to support the system as a whole.

 

It is now 19 months after Bear Stearns failed and was taken over by JP MorganChase with the assistance of up to $30 billion of Federal Reserve money on March 16, 2008, and industrial production stands 14% below its peak in 2007. By contrast, 19 months after the Bank of the United States, with 450,000 depositors, failed on December 11, 1930 – the first major bank collapse in New York since the Knickerbocker Trust failure during the panic and depression of 1907 – industrial production, according to the Federal Reserve index, was 54% below its 1929 peak.

 

Opponents of recent economic policy rebel against the hypothesis that an absence of government intervention and support could produce an economic decline of that magnitude today. After all, modern economies are stable and stubborn things. Market systems are resilient webs that offer the best possible incentives to people to make deals and use resources productively. A 54% fall in industrial production between its 2007 peak and today is inconceivable – isn’t it?

 

If so, then the unavoidable conclusion must be that things would not have been so bad if the government had refused to implement an expansionary fiscal policy, recapitalize banks, nationalize troubled institutions, and buy financial assets in non-standard ways. The problem, though, is that all the theoretical reasons to think that depressions as deep as the Great Depression simply do not happen to market economies applied just as well to the 1930’s as they do to today.

 

But it did happen. And it could have happened again.

DeLong’s point is that doing nothing could have been disastrous and just because it is not 1930 anymore, does not mean the US is immune to that type of a downturn. People reading the newspaper in 1930 did not know that they were about to enter a Great Depression and they probably believed some of the same hype that is being spouted today by the government, banks and media cheerleaders. Obviously, the idea that the stimulus had a part in staving off Armageddon is even harder to prove than how many jobs it has saved. But, despite my skepticism surrounding the Keynesian response that includes unabashed money printing, I grudgingly admit that DeLong may have a point.

 

A preliminary post mortem on the crisis by Howard Marks: For anyone who is not in the habit of checking Oaktree Capital Management’s website periodically just in case there is a new piece from Howard Marks, I suggest you bookmark the site and set a monthly reminder on Google Calendars. Marks is in the same league as Buffett and Klarman in terms of being able to deliver prescient, articulate and poignant commentary on the financial markets. For value investors especially, his words are pure gold. The latest piece from Marks includes an analysis of what how the US economy, banks and consumers all got into such a terrible mess. It has the feel of an 18,000 foot view of the crisis taken long after the situation had stabilized. Unfortunately, his analysis may turn out to be nothing more than a halftime assessment of what went wrong in the first half. Based on the complete lack of reform and behavioral changes, it appears that we have learned nothing from the bubble years and the subsequent implosion of the global economy. As such, there is little reason to believe that the second half will play out any differently from the first half. Accordingly, I think it is now even more important than ever to understand the biases, greed, incompetence, and blindness that produced such an extraordinarily negative outcome on so many levels. In that case there is no one better than Marks to illustrate where changes need to be made if we are to return to sustainable prosperity:

 

The recent crisis came about primarily because investors partook of novel, complex and dangerous things, in greater amounts than ever before. They took on too much leverage and committed too much capital to illiquid investments. Why did they do these things? It all happened because investors believed too much, worried too little, and thus took too much risk. In short, they believed they were living in a low-risk world…

 

Belief that risk has been banished is a key element in allowing people to engage in practices they would otherwise view as risky, and in permitting assets to be bid up to prices that would clearly be too high in a world perceived to involve risk.

 

Worry and its relatives, distrust, skepticism and risk aversion, are essential ingredients in a safe financial system. To paraphrase a saying about the usefulness of bankruptcy, fear of loss is to capitalism as fear of hell is to Catholicism. Worry keeps risky loans from being made, companies from taking on more debt than they can service, portfolios from becoming overly concentrated, and unproven schemes from turning into popular manias. When worry and risk aversion are present as they should be, investors will question, investigate and act prudently. Risky investments either won’t be undertaken or will be required to provide adequate compensation in terms of anticipated return.

 

But only when investors are sufficiently risk averse will markets offer adequate risk premiums. When worry is in short supply, risky borrowers and questionable schemes will have easy access to capital, and the financial system will become precarious. Too much money will chase the risky and the new, driving up asset prices and driving down prospective returns and safety…

 

One of the errors committed in 2003-07 – forming a cornerstone of the crisis – consisted of believing too much in the ability to predict the future. Investors, risk managers, financial institution executives, rating agencies and regulators trusted forecasts, extrapolations and computer models. This made them comfortable with risk, always a dangerous arrangement. The “I know” school of investing has received frequent mention in my memos (e.g., “Us and Them,” May 7, 2004). Its members – money managers, Wall Street strategists and media pundits – believe that there’s a single future, it is knowable in advance, and they’re among the people who know it. They’re eager to tell you what the future holds, and equally willing to overlook the inaccuracy of their past predictions. What they repeatedly ignore is the fact that

 

(a) the future possibilities cover a broad range, (b) some of them – the “black swans” –can’t even be imagined in advance, and (c) even if it’s possible to know which one outcome is the most likely, the others have a substantial combined probability of occurring instead.

 

Thus one key question each investor has to answer is whether he views the future as knowable or unknowable. An investor who feels he knows what the future holds will act assertively: making directional bets, concentrating positions, levering holdings and counting on future growth – in other words, doing things that in the absence of foreknowledge would increase risk. On the other hand, someone who feels he doesn’t know what the future holds will act quite differently: diversifying, hedging, levering less (or not at all), emphasizing value today over growth tomorrow, staying high in the capital structure, and generally girding for a variety of possible outcomes.

 

The unemployment problem in a nutshell: I know Tyler Durden included a portion of this piece from David Rosenberg of Gluskin Sheff regarding the unemployment situation in the US. However, I wanted to make sure that everyone had a chance to read it. In just a few paragraphs Rosenberg explains why employment is not going to just turn around on a dime like the bulls will have you believe. I heard financial blogger Mish call it a “job-loss recovery” as opposed to a “jobless recovery.” I happen to think he is spot on because there are structural problems facing this country that are going to preclude companies from hiring and new businesses from forming immediately. Having said that, there are a lot of people much smarter than I am who believe that the jobs will eventually come. Just like we could not have predicted the internet boom, the claim is that some new sector will take the lead and create millions of jobs. It could be from health care. It could be from education. It could be from a green energy or some other form of infrastructure-based revolution. If you ask me I hope it is all of the above. We sure need to rebuild the education system, health care system, energy grid and physical infrastructure of this country if we want to maintain the standard of living we have become so accustomed to. The problem is that it could take years for one or all of these to start creating meaningful jobs. In the meantime, we have to deal with unemployment (both U3 and U6) that will continue to rise until the imbalances that have been created by over-retailing, over-building, over-banking, and over-consumption are eradicated.  We should all be thankful that Rosy is here to keep things in perspective and make sure that our expectations for a sustainable job and stock market recovery are realistic:

 

There are serious structural issues undermining the U.S. labour market as companies continue to adjust their order books, production schedules and staffing requirements to a semi-permanently impaired credit backdrop. The bottom line is that the level of credit per unit of GDP is going to be much, much lower in the future than has been the case in the last two decades. While we may be getting close to a bottom in terms of employment, the jobless rate is very likely going to be climbing much further in the future due to the secular dynamics within the labour market.

But in a nutshell, to be calling for a 12.0-13.0% unemployment rate is meaningless except that it is very likely going to be a headline grabber. The most inclusive definition of them all, the U6 measure of the unemployment rate, which includes all forms of unemployed and underemployed, is already at 17.5%. The posted U3 jobless rate that everyone focuses on is at 10.2% (though if it weren’t for the drop in the labour force participation rate, to 65.1% from 66.0% a year ago, the unemployment rate would be testing the post-WWII high of 10.8% right now). The gap between the U6 and the official U3 rate is at a record 7.3 percentage points. Normally this spread is between 3-4 percentage points and ultimately we will see a reversion to the mean, to some unhappy middle where the U6 may be closer to 15.0-16.0% and the posted jobless rate closer to 12%. This will undoubtedly be a major political issue, especially in the context of a mid-term elections and the GOP starting to gain some electoral ground.

Think about it. We haven’t yet hit bottom on employment but that will happen at some point. Employment is not going to zero, of that we can assure you. But when we do start to see the economic clouds part in a more decisive fashion, what are employers likely to do first? Well, naturally they will begin to boost the workweek and just getting back to pre-recession levels would be the same as hiring more than two million people. Then there are the record number of people who got furloughed into part-time work and again, they total over nine million, and these folks are not counted as unemployed even if they are working considerably fewer days than they were before the credit crunch began.

So the business sector has a vast pool of resources to draw from before they start tapping into the ranks of the unemployed or the typical 100,000-125,000 new entrants into the labour force when the economy turns the corner. Hence the unemployment rate is going to very likely be making new highs long after the recession is over — perhaps even years.

 

 

Good luck generating alpha in the herd: Hat tip to Yaser Anwar for providing access to this piece from Dylan Grice of SocGen. Between the work of Grice and Albert Edwards, I think SocGen may produce the only sell-side research worth reading (Just kidding sell-side guys—you know I love you). Having spent my time on the buy-side I think I take a little too much pleasure in seeing data that suggests that for the most part the sell-side analyst community struggles to add a lot of value. I happen to know a number of sell-side analysts who are amazing and have a depth of knowledge regarding their coverage space that I could only dream of. But as whole, they unfortunately comprise a somewhat biased herd and any good contrarian investor knows there is money to be made by betting against the herd. To illustrate this point further, Grice decided to see if there was any relationship between the number of analysts that covered a stock and the relative performance of that stock. I won’t give the secret away as you can peruse his findings below, but let’s just say that the data does not disprove the value investing mantra that it is better to fish where others are not:

 

 

It was with all of this in mind that I read Charles De Boissezon, one of our Financial Engineering team’s excellent analysis of sell-side coverage of stocks in Europe. He calculated the extent to which a stock was overbroked by dividing the number of analysts covering a stock to its market cap, and uncovered such gems as Nokia being the most covered stock with 63 analysts “and still it can come up with ‘shocking’ numbers” and Q-Cells (1bn free float) being covered by 44 analysts. Hours of fun.

 

But it got me wondering whether or not this might be a good proxy for measuring herding within the sell-side research management community. The obvious motivation for hiring a sector team is that there is plenty of commission to be won…

 

So I took Charles analysis a little further. Let’s call his ratio of coverage to market cap the Banks Aggregate Analyst Herding Index, or the BAAH Index for short (as in the noise bleating sheep make). I used Factset sector classifications with the FTSE World Index and got the results given on the front page. That chart shows herding is most pronounced in the clothing and construction sectors and least pronounced in energy and tobacco. Then, I backtested the strategy on Factset by ranking each sector according to its BAAH index (beginning in 1987) and calculating the subsequent years returns. I rebalanced the portfolio annually. It turns out that a long-short strategy of buying the sectors where herding is less dominant and shorting those where coverage is deepest would have generated around 7% p.a. since 1987For a given market cap, it seems, the more analysts you see swarming around a sector the more wary you should be of being able to extract alpha from it. (Emphasis added) Leave the herd to its dopamine fix and have another think about the less-crowded sectors.

 

 

 

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Fri, 11/13/2009 - 16:12 | 130064 Prophet of Wise
Prophet of Wise's picture

Are Americans on the Road to Serfdom?

No we're all livin' in a van down by the river!

http://www.hulu.com/watch/4183/saturday-night-live-down-by-the-river

 

Fri, 11/13/2009 - 23:44 | 130428 CD
CD's picture

As I'm sure you know, this gets to be a little less funny when it gets real (there are better documentaries out there, but the best I could find immediately):

http://www.youtube.com/results?search_query=tent+city+homeless&search_type=

There is a critical mass for these things -- but I fear that true mass movement for change (in a physical way) requires conditions to worsen in an absolute, not just relative fashion. And if we have to wait until things get to the level of, say 1917 Russia (or worse, the gov't has a much, much larger buffer to placate avg. Joes and Janes with) for people to recognize the need for fundamental change... Ech, and I used to be an optimist. I am starting to inwardly agree with others that something 'real', something physical (or at least non-virtual) must be done by those of us here at ZH and of critical minds in general. Yet I question my willingness and courage to stand up to, say, a line of masked policemen in riot gear. Or interrogation and indefinite detention (while my family wonders where I am). Perhaps if they close the borders, it will help put steel my resolve. Hey, at least I closed my BofA account today... We are serfs as it currently stands, the question is, is there anyplace on the planet where this is not (or at least less) so?

Fri, 11/13/2009 - 16:01 | 130053 i.knoknot
i.knoknot's picture

hot potato.

It comes down to our voluntary (albeit practical) agreement in the represented "stored value" of a (your currency here) dollar. What would an alien do if you gave it $100 bill? What about your buddy on a deserted island...? What about a policeman getting paid to 'enforce the (tax) laws'?

Should the currency collapse, obviously nobody would have the continued power to use their "store of value" to "buy you lunch" for "trimming their trees". Money sure is convenient.

But remember, 'they' have *centuries* of such 'agreed upon' wealth stored up (or printed on demand) in various forms, ready to pay to have us do their bidding, *all* because we (and our armies/local police) continue to accept the premise of their wealth. Most likely because it is also the form of our wealth... right?

It's no accident or ineptitude that's causing our political administrations to actively and effectively socialize the world by encouraging the debasement of the world's central ($) currency. The irritating social policy changes going on right now (at least in the US) are *nothing* compared to the current neutering of those with enough financial power (the new rich) to threaten those at the helm (the old rich). It's the most radical and violent shakeout in history. The semi-elite have gotten too close to power and are being robbed more effectively than the homeless (10% of nothing is...?). If trillions become worth pennies (Zimbabwe), we're all equal again. Except for those that are more equal... So long as the armies take 'their' currency, so must the rest of us, right?

Just *try* to keep your home if you don't pay your property taxes. Unless you walk, their guns will *eventually* come out in virtually any scenario.  *Your* home - what a joke. Even if you don't use their roads, water, phones, or electricity, you still have to pay/play their game. It works until it doesn't.

wherever possible: a good safe. barter. hard goods. transparent un-leveraged loans with trustworth peers - and real *accountability* (mafia style).

Meanwhile we're relegated to continue to empower their abstract digital $$$ and the very real armies that control us. And so long as those dollars control the armies/police, it matters very little what the average sheeple thinks or wants.

Every time you take a dollar from anybody, they win (you sucker). Every time you dump one for something real, you win.

hot potato.

Fri, 11/13/2009 - 15:35 | 130035 Hammer59
Hammer59's picture

....that enables them to buy $50MM paintings while we dance over our "cash-4-clunkers" deal---LOL!   Excellent comments-all too true!  And yes, good people dont rebel against the wealthy/elites. Bad ones do. When this system of things collapses, it may get really ugly for them.

Fri, 11/13/2009 - 15:24 | 130021 Hammer59
Hammer59's picture

I dont disagree that Government at all levels is primarily responsible for our economic woes. But the citizens are to blame as well. How many of you actually contact your reps? Do you even attempt to buy American products? Does your ego determine your amount of debt? Are you physically fit? Healthy? Do you vote? Work hard? Any "family man" who claims that the meager sum paid to recipients collecting unemployment insurance nearly matched his income is too impoverished to procreate, and too lazy to survive. You cant blame government for their existence. The 'hive' mindset was that the party would never end. The American of today bears no resemblence to the Americans of the past. They had character, honor, thrift. For a civilization to be destroyed from without, it must first have been destroyed from within.

Fri, 11/13/2009 - 15:32 | 130031 tomdub_1024
tomdub_1024's picture

+100

Fri, 11/13/2009 - 15:24 | 130008 Pat Shuff
Pat Shuff's picture

`At any rate I'll never go there again!' said Alice as she picked her way through the wood. `It's the stupidest tea-party I ever was at in all my life!'

Resistance is feudal.

Fri, 11/13/2009 - 14:44 | 129952 Anonymous
Anonymous's picture

James Madison expressed similar concerns. War, he said, was "the true nurse of executive aggrandizement."

Fri, 11/13/2009 - 14:02 | 129897 Anonymous
Anonymous's picture

Perhaps to those on this board this does not apply - but many, many Americans for the past century or so have gladly accepted the government as nanny in lieu of personal responsibility.

Witness the shrill cries from both those on the left and right that the government "Hasn't done enough" to "create jobs." I've found myself explaining again and again, even to intelligent right-leaning peers that it's not the governments' job to create jobs - government is if anything a hindrance to job creation and that by way of limited regulation, tax policies and effective education (the one thing government SHOULD do right, but mostly fails in the U.S.) jobs are created, not the government lever.

First, this is an anecdote but I know someone. Good fellow. Family man. He's been out of work for a long, long time. I feel horrible for him. I feel less horrible because when he first lost his job before a lot of the meltdown happened his response was, "Yeah, I'm not worried. Plus, I almost make as much on unemployment so what's the hurry?"

His viewpoint is not in the minority in the U.S. He likes having a nanny. He expects to have a nanny. It's part of being American for him.

Fri, 11/13/2009 - 16:05 | 130058 i.knoknot
i.knoknot's picture

+100

Fri, 11/13/2009 - 14:48 | 129958 tomdub_1024
tomdub_1024's picture

"Yeah, I'm not worried. Plus, I almost make as much on unemployment so what's the hurry?"

Your anecdote is unfortunately too common...the spirit that made America what it was has been bred and ednacated out of most US citizens.

"His viewpoint is not in the minority in the U.S. He likes having a nanny. He expects to have a nanny. It's part of being American for him."

This is hitting me the wrong way, I am sliding from acceptance of reality and not giving a sh*t anymore back towards depression/anger...Is it beer:30 yet?

maybe I should have my kids watch the old show Sanford and Son and say---"there ya go, thats what to expect for your life...sorry 'bout that...the people who did it to you? You will be paying for their golf course McMansion retirement lifestyle..."

*sigh* Is it beer:30 yet?

 

 

Fri, 11/13/2009 - 12:35 | 129801 Anonymous
Anonymous's picture

“‘Emergencies,’” Hayek wrote, “have always been the pretext on which the safeguards of individual liberty have eroded.” <<<<<<

The sons of bitches give us 911, then they say we need homeland security and etc. We fight for the rights of others, so we are told, and yet we lose our own. God I hate this country now. I hate our government. I hate those who are stealing from me and my grandchildren. I hate them for taking my freedoms. I will hate them for all of my life now.

Fri, 11/13/2009 - 12:19 | 129779 Anonymous
Anonymous's picture

The current American predatory capitalist system = serfdom.

Fri, 11/13/2009 - 12:01 | 129741 Anonymous
Anonymous's picture

Goldman OWNS government.

First, get goldman out of the government. Then maybe government would start to get smaller. AND free moving markets and CAPITALISM would RETURN TO THE U.S.

I am sick of these government-loving Goldman guys changing rules in their favor, wiping out their competitors, printing their own trading money, using government announcements to prop their positions, AND last but not least, GETTING TAXPAYER MONEY TO COVER

THEIR
BAD
DEAL

With AIG.

If Goldman guys are so smart (as defenders like to claim) well then why did they make a STUPID ASS deal with AIG?

And if they are just good capitalists, why don't they suffer like a REAL TRADER OUT HERE (like me) and try to make it on their own WITHOUT WELFARE HANDOUTS?

Fri, 11/13/2009 - 11:51 | 129722 Anonymous
Anonymous's picture

Government Sachs must be shut down

Fri, 11/13/2009 - 12:03 | 129746 Anonymous
Anonymous's picture

Yep,
step 1: break up Goldman into several smaller firms.
step 2: remove ALL goldman execs and former execs and affiliates from government positions.

There needs to be a PERMANENT firewall to get these Goldman folks away from their LOVE AND LUST for government power.

Try competing in a free market Goldman. Take steps 1 and 2 and we can get a free market back and then see how Goldman does then.

Fri, 11/13/2009 - 11:46 | 129712 THE DORK OF CORK
THE DORK OF CORK's picture

Surely a element of strategic planning is necessary in this new world of changing energy dynamics.Most of us agree that oil is or has reached its peak and in such a scenario decentralised commerce and other activities become less diffuse and more concentrated(e.x.-19th century industry). I would contend that nuclear fission is the only substantial solution to a coming energy diet(famine). Critics of nuclear power state that the capital costs are too great but I would think that is a advantage since capital would be static for the lifetime of the power plant and less open to speculation. As readers here understand it was no coincidence that the last nuke plant in America was built in 71, the year the speculators had a free hand to run down the capital of nations,companys and indivduals. indeed the new accounting did not really recognize true capital.

readers should take note that the only western state to put up a fight against monetarist policeys was France, a country which invested heavily in the above.However I would agree that It has now been taken over by the Priesthood of Brussels and has suffered accordingly , but still it is in a far better postion then the U.K. which ran down its vast wealth in the North Sea without reinvesting at least some of this into its future energy infrastructure. To sum up France has remained a relatively free country up to now(brief interlude in 68) for a country with a high degree of central planning

 

Fri, 11/13/2009 - 11:20 | 129673 Anonymous
Anonymous's picture

short answer: yep.

There are some huge misconceptions about synthetic debt and derivatives growth. These were not "mistakes," they were the ONLY way to grow the credit money animal once the REAL eocnomy peaked.

What looks like insane risktaking was only a byproduct of creatively trying to figure out how to feed the beast.

Fri, 11/13/2009 - 11:16 | 129668 RagnarDanneskjold
RagnarDanneskjold's picture

A democracy will never be able to recognize failed policies that take generations to collapse. Medicare and Social Security are policies that should have never been implemented, certainly as designed, but also at all due to the way they change the relationship between the citizen and the government. Don't try explaining it to people, however, if you want to keep your friends. There's a reason why Tytler's cycle goes from liberty to bondage and then to liberty. Only when the people are in chains will they take the time to find the origins.

Fri, 11/13/2009 - 11:57 | 129732 Anonymous
Anonymous's picture

Right, without Medicare and Social Security the masses wouldn't have a piece of the pie they bought through taxes they paid and the ruling class would have that money too. Dont be an idiot.

Fri, 11/13/2009 - 15:33 | 130033 RagnarDanneskjold
RagnarDanneskjold's picture

The government takes your pie, eats some, and then sends you back what's left. I'm pretty sure that's how slavery works.

Fri, 11/13/2009 - 11:10 | 129659 bugs_
bugs_'s picture

Somewhere in the last two years the pavement
gave way to a dirt road.  People are confused
now because they remember the ride being much
smoother.  Its a bit bumpy now.

Fri, 11/13/2009 - 11:03 | 129650 Anonymous
Anonymous's picture

That George Carlin video puts it about as clear as you're ever going to get it. Every sentence in it is right on. Go back watch it and believe every word. Its never been about politics or politicians, its about what they the ruling class get the politicians to think through the lobbyists and what legislation they get passed that bilks the public but lets them buy $50 million paintings while the rest of us dance over the cash for clunkers bargains we got. The view is good from the castle walls and you aren't in it! But its OK for them to screw up the world and go to church on sunday because its the soma of the masses. Good people don't rebel against the ruling class. They throw tantrums on blogs and go about their way.
Im not so sure that these blogs arent more of a corral for like thinkers than an outlet."OK let off some steam there folks and on your way" nothing changing.

Fri, 11/13/2009 - 10:42 | 129635 hidingfromhelis
hidingfromhelis's picture

Road to serfdom implies traveling toward a destination.  I feel treadmill or hamster wheel is more applicable.

Fri, 11/13/2009 - 10:35 | 129631 Anonymous
Anonymous's picture

'Government' is a tool, not an entity. It's not the 'government' taking everything, but an oligarchy of wealthy elites, using government to take everything.

It's foolish and naive to think that without 'big government' this wouldn't still happen.

Fri, 11/13/2009 - 14:08 | 129910 SWRichmond
SWRichmond's picture

They'd want to do it, but their actions wouldn't be backed by men with guns and the legal monopoly on the use of force.  That is the difference.

Fri, 11/13/2009 - 10:29 | 129623 Cheeky Bastard
Cheeky Bastard's picture


Are Americans on the Road to Serfdom?

is that a rhetorical question?

Fri, 11/13/2009 - 10:24 | 129617 Osprey
Osprey's picture

Leo, thanks for posting the Carlin video.  Reminds of an essay, The Real Matrix by Steven Yates:

http://sovereignty.net/p/gov/stevenyates-1.html

Welcome to the Machine...

Fri, 11/13/2009 - 10:20 | 129611 Zippyin Annapolis
Zippyin Annapolis's picture

Andre Malraux, "Man's Fate". And then you die.

Fri, 11/13/2009 - 10:19 | 129609 SWRichmond
SWRichmond's picture

The recent crisis came about primarily because investors partook of novel, complex and dangerous things, in greater amounts than ever before. They took on too much leverage and committed too much capital to illiquid investments. Why did they do these things? It all happened because investors believed too much, worried too little, and thus took too much risk. In short, they believed they were living in a low-risk world…

I'm sorry, but this is just grade-school blather.  An entire generation of 30- and 40-something "investors" believed the Fed had their backs.  The novel, complex and dangerous things were credit and interest rate derivatives, and they were used to enhance leverage by enabling the assignment of falsely strong ratings to debt instruments and fiat currencies.  This was condoned by banksters, regulators and Congress in order to pay for the continuation of the welfare/warfare state for another decade.  That is over with now, and unless some new, even higher-leverage scheme is found, the collapse is upon us.  The collapse will play out as a currency crisis leading to a general repudiation of paper assets.

Fri, 11/13/2009 - 10:55 | 129644 lookma
lookma's picture

+1

Fri, 11/13/2009 - 19:11 | 130258 DaveyJones
DaveyJones's picture

what he said

Fri, 11/13/2009 - 10:10 | 129603 Doc
Doc's picture

A glimpse at the "modern American's" life:

So I work my butt off, save my money, get a decent job, now I have the "privilege" of paying 39% of my income to the federal government. But the federal government is very good to me, it "allows" me to keep 61% of my income. God Bless them. I mean after all they do permit me to keep some of the money I work hard for, because after all we do know that if they need it they can tax me as much as they want.

If I live in NY, CA, NJ, MA I also have to pay an additional 10% state income tax, but a 49% to 51% split is still fair right? I mean, my country is so free that it lets me be a majority share holder of my own income! God Bless my freedom.

So now I buy a house with that 51% of my money, but god-forbid I just live in the house I bought with my own money. Since I have the "privilege" of living in a "free" state, I have to pay the state rent, in the form of property taxes. So there goes 2% of my property's value a year just to have a place of my own to call "home".

Anytime I decide to go out and buy something, I have to pay "protection" money to the state, circa 8%, but commerce needs to be protected right?

Finally, after working hard for 45 years of my life, and I croak, anything I've had the "privilege" of earning is taxed at 45% for my kids. Ok you say, I should have given it to my mistress, but any gift over $13,000 to my mistress (or the disabled kid down the street), gets taxed 50%...

Whoever said Freedom Wasn't Free certainly had the right idea.

Anyone in the world would say that the old-system of sharecropping after the Civil War was immoral. What is the difference between that and what we have now? It's just sharecropping in a "service" economy...

The road to serfdom is where we are at, not where we are going. In addition to all the income the government expropriates from any citizen, it also has the right to hold us indefinitely, torture us, search our houses without a warrant, audit us without any evidence, take away any of our constitutional rights at will, rewrite property laws, steal from us through inflation etc. etc. etc.

Brave new world here we come!

Fri, 11/13/2009 - 14:34 | 129944 Apocalypse Now
Apocalypse Now's picture

Sorry to break it to you, but the COGD this year was August 12th - you have to add in state income taxes, medicare, social security, sales taxes, fees, and registration.  After August 12th you can keep it all.

Happy Friday!

Fri, 11/13/2009 - 11:50 | 129720 Anonymous
Anonymous's picture

I would not mind all that if there was a quid pro quo. Sadly, I cannot think of much that I get in exchange. I am rather pissed when my hard earned wealth is re-distributed to folks that already have plenty. And please, do not tell me that with all the money we spend on taxes, we cannot figure out how to get free healthcare to every American. Also, it is not the serfdom that scares me that much. It is the apathetic, delusional, inane serfdom that is prevalent around these parts of the world. People are too complacent to see farther than their own nose. As long as they have McDonalds, PS3, a pick up truck and a warm bed, they seem to be content with whatever iron dildo the government sticks up their butts.

Fri, 11/13/2009 - 12:05 | 129749 Doc
Doc's picture

"And please, do not tell me that with all the money we spend on taxes, we cannot figure out how to get free healthcare to every American".

No offense... but I'll "please" tell you it isn't FREE. This is part of the delusional social conditioning you're discussing. If someone is paying for it, it isn't free. Period. Now you are correct about whether it is to society's benefit to tax a certain amount in order to receive said benefit, being healthcare. That is a subjective matter for each voter to make for himself.

However, time and time again government has proven that it cannot run any program in the long-term. Anything it has been involved in has gone to shit. Ever since it got involved in education standards have been dropping, yet the Department of Education keeps getting more funding. Ever since the Department of Energy was created in order to wean us off of foreign oil, we've been importing more. Ever since we started the War on Drugs, our society has been consuming more of them. Ever since we started expanding our military spending we've been going to war more often... the list goes on and on and on...

 

Fri, 11/13/2009 - 13:55 | 129890 Anonymous
Anonymous's picture

it could be free in that I do not have to pay more for it than what I am already paying in taxes. In other words, proper budgeting and setting up proper priorities makes a difference. After all, that's one of the functions of government and as everything else, they could either do a good job or a lousy job. Good day to you..

Fri, 11/13/2009 - 16:38 | 130089 Doc
Doc's picture
free

 - 8 dictionary results

 

8. provided without, or not subject to, a charge or payment: free parking; a free sample.

 

It cannot be "free" in any sense of the word. Using the word "free" to discuss public healthcare is an oxymoron and a bad use of the English language.

Secondly, name one government program that has been properly budgeted?

Fri, 11/13/2009 - 09:34 | 129573 Anonymous
Anonymous's picture

"...everybody's gone serfin', serfin' USA.."

Fri, 11/13/2009 - 09:39 | 129571 Leo Kolivakis
Leo Kolivakis's picture

Umm, they've been serfs for decades. "It's a big club and you and I ain't in it":

 

 

Fri, 11/13/2009 - 10:40 | 129634 Anonymous
Anonymous's picture

Can't get enough of Carlin. The guy never gave up his principles. It's not comedy at all - it's the truth.

Fri, 11/13/2009 - 08:44 | 129543 HayeksConscience
HayeksConscience's picture

Welcome to Serfdom - Worker Drones. 

No system works which is run by totalitarian criminals - communist or capitalistic.  

Forget the labels and look at the behavior.  Then label the behavior for what it is. 

We are serfs is a criminal oligarchy.  Serfs Unite. 

Fri, 11/13/2009 - 08:23 | 129525 Anonymous
Anonymous's picture

I wouldnt mind a few American serfs to come and do some hard labour on my propety, i will feed you of course. yeehaa, freemarket capitalism rules!

Fri, 11/13/2009 - 18:03 | 130192 snorkeler
snorkeler's picture

Where are you located A129525? I would be happy to do some work on for you.

Fri, 11/13/2009 - 13:00 | 129822 lukahnli
lukahnli's picture

Freemarket Capitalism?  Never seen that before.....

Fri, 11/13/2009 - 04:22 | 129478 Gordon_Gekko
Gordon_Gekko's picture

"Are Americans on the Road to Serfdom?"

HAHAHAAAAHAHAHAHAHHHAAAAHAHAHA!!! They already ARE serfs. Just take a look around. Where have you been?

Fri, 11/13/2009 - 13:53 | 129888 ghostfaceinvestah
ghostfaceinvestah's picture

Yeah, no kidding.  It will only get worse, though, you can be sure of that.

Fri, 11/13/2009 - 03:49 | 129469 Anonymous
Anonymous's picture

As regards the first of these p[ieces, honestly, what a crock. The source of our current woes lies in those rosy 1990's and in the crony capitalism instituted by Reagan and Thatcher and institutionalised by Clinton a decade later. Or was crony capitalism invented by the left???

And Britain's problem was never in heading "far to the left", which it did in 1945 for about 18 months. It was about decline of empire and hocking themselves to America to pay for two wars. Hardly an archetype for demonstrating the Austrian school of economic thinking (though it may be a precursor for what, in a more limited fashion, is awaiting the US).

The political thesis is subtle and attractive, the extrapolation to economic welfare is tentative. It's nothing to do with left and right, certainly as those terms are defined in America. It's about efficiency of resource management, on which the economic jury can be said to be well and truly still out.

Fri, 11/13/2009 - 08:09 | 129520 Anonymous
Anonymous's picture

if Britain had gone any further left after WW2 they would have become communist. Now im not denying your version of events, however i have been led to believe that Britains keynesian economic socialism, big government, and welfare created excessive inflation that led to the crisis in capitalism in the 70's.

Enter Thatcher, Reagan, and Von Hayek Neo Liberalism in the 80s and there was an about face to the far, far right, almost corporate Fascism.

And where are we now? in some kind of socialist fascism where the tax payers bail out corporations cos the government either;
1) does not seem to want to take control
2) knows that public ownership and central planning is a thing of the past
3) or is simply too weak to take control and central plan the economy.

one thing is certain, things will only get worse from here until we eventually have blown Corporate Fascism. There can be no other way.

godammit whats with these ridiculously hard math questions? next you will be putting up trigonometry!

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