Tag Archives: Stupidity

Woodrow Wilson Goes to Europe: One Hundred Years of Delusional American Madness, by Martin Sieff

Martin Sieff discusses “that extraordinary American combination of innocence, arrogance and ignorance.” From Sieff at strategic-culture.org:

We are now in the dubious position of “celebrating” – if that is the word – the 100th anniversary of US President Woodrow Wilson’s departure on December 4, 1918 on the liner SS George Washington for the Versailles Peace Conference where he was confident he would dictate his brilliant solutions that would end war in the world for all time.

Historians and psychiatrists – including Dr. Sigmund Freud himself who co-authored a book on Wilson – have endlessly debated whether Wilson was sane and just deluded or raving mad. Freud clearly inclined to the latter view. And he had ample evidence to support him. What is most alarming is that, as Henry Kissinger – significantly not born an American at all – points out, all US presidents either share Wilson’s ridiculous messianic fantasies or feel they must pretend to.

During the supposed dark age of the Cold War from 1945 to 1989, the recognition that the Soviet Union was at least as militarily powerful as the United States imposed the disciplines of realism and restraint on US policymakers. But since the Berlin Wall came down, the Warsaw Pact was dissolved and the Soviet Union peacefully disassembled, that restraint has vanished.

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Depressing Survey Results Show How Extremely Stupid America Has Become, by Michael Snyder

From Michael Snyder at theeconomiccollapseblog.com:

Ten years ago, a major Hollywood film entitled “Idiocracy” was released, and it was an excellent metaphor for what would happen to America over the course of the next decade. In the movie, an “average American” wakes up 500 years in the future only to discover that he is the most intelligent person by far in the “dumbed down” society that he suddenly finds himself in. Sadly, I truly believe that if people of average intellect from the 1950s and 1960s were transported to 2016, they would likely be considered mental giants compared to the rest of us. We have a country where criminals are being paid $1000 a month not to shoot people, and the highest paid public employee in more than half the states is a football coach. Hardly anyone takes time to read a book anymore, and yet the average American spends 302 minutes a day watching television. 75 percent of our young adults cannot find Israel on a map of the Middle East, but they sure know how to find smut on the Internet. It may be hard to believe, but there are more than 4 million adult websites on the Internet today, and they get more traffic than Netflix, Amazon and Twitter combined.

What in the world has happened to us? How is it possible that we have become so stupid? According to a brand new report that was recently released, almost 10 percent of our college graduates believe that Judge Judy is on the Supreme Court…

The American Council of Trustees and Alumni publishes occasional reports on what college students know.

Nearly 10 percent of the college graduates surveyed thought Judith Sheindlin, TV’s “Judge Judy,” is a member of the U.S. Supreme Court. Less than 20 percent of the college graduates knew the effect of the Emancipation Proclamation. More than a quarter of the college graduates did not know Franklin D. Roosevelt was president during World War II; one-third did not know he was the president who spearheaded the New Deal.

It can be tempting to laugh at numbers like these until you realize that survey after survey has come up with similar results.

Just consider what Newsweek found a few years ago…

When NEWSWEEK recently asked 1,000 U.S. citizens to take America’s official citizenship test, 29 percent couldn’t name the vice president. Seventy-three percent couldn’t correctly say why we fought the Cold War. Forty-four percent were unable to define the Bill of Rights. And 6 percent couldn’t even circle Independence Day on a calendar.

Even worse were the extremely depressing results of a study conducted a few years ago by Common Core…

*Only 43 percent of all U.S. high school students knew that the Civil War was fought some time between 1850 and 1900.

*More than a quarter of all U.S. high school students thought that Christopher Columbus made his famous voyage across the Atlantic Ocean after the year 1750.

*Approximately a third of all U.S. high school students did not know that the Bill of Rights guarantees freedom of speech and freedom of religion.

*Only 60 percent of all U.S. students knew that World War I was fought some time between 1900 and 1950.

Of course survey results can be skewed, and much hinges on how the questions are asked.

To continue reading: Depressing Survey Results Show How Extremely Stupid America Has Become

Profits From Stupidity, by Robert Gore

Most people who encounter economics do so in college. They take microeconomics first, and if they’re not completely turned off, they take macroeconomics. Unfortunately, there’s no such thing as macroeconomics separate from microeconomics. The idea that there’s one economics for individual entities and markets and another for government-directed aggregate behavior has led to an unmitigated stream of statist disasters stretching back over a century. There’s plenty of competition, but it ranks as one of recent history’s more insidious academic frauds.

Macroeconomic policy prescriptions rest on the belief that governments have special properties and powers that allow them to transcend reality. The unique essential of government is that it can legally initiate force against its people. Coercion gives governments no transcendent magic, any more so than it does for criminals (there is substantial overlap between the two groups), it only gives them the ability to force people to do things they would not voluntarily do. Governments legally tax, spend, issue debt, and in conjunction with a central bank, force acceptance of that debt as the medium of exchange.

The analyses of these activities are straightforward exercises in microeconomics. If government takes money from taxpayers and redistributes it to government employees, contractors, or beneficiaries, that’s money the taxpayer can’t spend, save, or invest that will be spent, saved, or invested by the government’s payee. The propensities to spend, save, and invest may differ between taxpayers and government payees, but all three activities are necessary in an economy and governments have no special insight into the optimal mixture. They don’t even know beforehand what those propensities are, although many studies in abstruse economics journals have tried to determine them. The studies amount to high-toned guesswork, a search for an answer to a question that doesn’t need to be asked unless one believes that governments are better at deciding how much people spend, save, and invest than the people themselves.

Debt funds current spending, saving, and investing from the future, and again, nothing changes when a government or central bank does the borrowing. Governments and central banks create fiat debt that can only be redeemed for more debt, and mandate acceptance of such debt as a medium of exchange. Imagine a neighborhood where a gang of hoodlums printed up their own scrip and made everyone accept it as payment for goods and services. Obviously their ability to bully has given the hoodlums an economic advantage, but their scrip is in no way an economic plus for the neighborhood. As the gang prints up an ever increasing amount of scrip, its value declines and only the gang receives any benefit from it. Coercion cannot produce economic value and it doesn’t matter whether it’s a neighborhood gang or a government gang doing the coercing.

The macroeconomic cover for central banks is that they serve as a lender of last resort during financial panics and smooth fluctuations in the business cycle. In reality, central banks have ushered in the transition from precious metals-backed money to fiat scrip. Precious metals cannot be created from thin air. Central bank fiat scrip can, and it can be used to buy a government’s debt. Whatever temporary stimulus such debt-fueled spending produces, it eventually runs head first into two microeconomic facts, often ignored in macroeconomic models that treats government debt as a consequence-free “exogenous” variable. Debt, like most everything else, has diminishing returns, or progressively less bang for the buck. Debt also carries an interest cost and it must be repaid, even if it is only repaid with more debt.

Diminishing returns and the interest and repayment burdens of debt means that the marginal value of an additional unit of debt can become negative, which is where we are now. The lender of last resort function has devolved into the Greenspan, Bernanke, and Yellen “puts”: injections of fiat debt meant to stop financial market perturbations. As with forest fire suppression, the perturbative underbrush builds up until it fuels unstoppable financial conflagration: the crashes of 2001, 2008, and the next one, coming soon. Fiat debt injection has reached record highs and interest rates record lows after the 2008 crash, not just in the US but around the world. However, the subsequent “recovery” has been abysmal, making a mockery of both governments’ and central banks’ claims of smoothing fluctuations in the business cycle—and the brands of macroeconomics on which such claims rest.

The dirty little secret of all those macroeconomic policy prescriptions is debt: governments issue it; central banks monetize it and suppress its cost. However, the microeconomic facts remain. Debt borrows from the future, imposes costs that can outweigh benefits, and has to be repaid. The biggest glut facing the world now is not oil, iron ore, steel, shipping capacity, or even coal, it’s debt.

That makes debt a short. The most heavily leveraged governments and companies relative to their revenues and profits will be the first culled, and SLL has advised conservative investors to stay away from all corporate and municipal debt (see “Neither a Borrower Nor a Lender Be,” SLL, 8/26/15). The more adventuresome may want to consider the speculative implications of the debt reversal and contraction. While credit spreads are widening, that move is in its infancy and there’s plenty more to come. Companies, indeed entire industries, have ridden on the debt wave, what happens when the tide comes in? One obvious example would be the automobile industry, where ever more lenient credit standards and loan terms have enabled robust car sales. Thinking about cars may lead you in the direction of consumer discretionary and finance sectors. Credit is the life’s blood of both. There is no shortage of overly indebted companies whose securities are good short sale candidates for imaginative and intrepid speculators willing to do their financial homework.

Compared to the years, even decades, in which debt builds up, it unravels with lightning speed, and as we’ve seen in 2001 and 2008, the effects on financial markets are calamitous. Volatility is the barometer of upheaval. If you own a broad portfolio of stocks and bonds, you are implicitly short volatility. In other words, you are betting that nothing is going to radically upend the apple cart. Conservative investors should reduce that implicit short bet. A small subset of knowledgeable investors with discretionary speculative funds and access to top-flight financial intermediaries may want to consider going long volatility, which is a bet on generally unanticipated upheaval. There are options strategies and Exchange Traded Funds that are ways to so speculate, but this is for people who can afford speculation and know what they’re doing, and should only be done in consultation with an expert financial advisor.

Unsustainable debt is contracting and the macroeconomic “theories” that blessed it stand exposed, once again, as hogwash. The powers that be will, once again, bluster about “unforeseen” consequences and their own blamelessness. The rest of us must do our best to stay out of harms way, and perhaps avail ourselves of the short-debt, long-volatility opportunities they’ve unwittingly bestowed upon us. Just because you can’t stop stupidity doesn’t mean you can’t profit from it.






Trading Places, 6/27/15

The US and Europe are adopting the model that Russia, China, and India are discarding. The failure of command and control is writ large across the twentieth century—culminating in the collapse of the Soviet Union and upheaval and transition away from the Maoist model in China—and the first fifteen years of the twenty-first. The Western nations are not yet totalitarian nightmares and Russia, China, and India are not libertarian paradises and may never be so. What is important, however, for real-time analysis as history unfolds, is to recognize the direction and magnitude of incremental moves at the margin, which yields the conclusion that the latter are moving away from statism while the former increasingly embrace it. Not only do these trends have important geopolitical implications, they suggest an investment strategy far different, and far more profitable, than the one most Western investors, individuals and institutions, currently employ.

Command, control, and coercion are incompatible with human nature and thus, immoral. They don’t work for animals—ask anyone who trains them—how can they work for presumably more intelligent (perhaps a questionable presumption) humans? Stated plainly, the proposition that some individuals have the right to initiate coercion against other individuals is as indefensible as it sounds. However, centuries of convoluted political philosophy have attempted to justify that proposition without stating it so plainly, usually by ascribing to governments “rights” that their citizens do not have.

Debt, welfare state spending, and foreign military interventions have taken Europe and the US to the edge of a precipice, but they’re doubling down on further state control. The US has a comparative economic advantage in the Internet and online technologies, which will slowly ebb as the FCC, now empowered to treat the Internet like a utility, starts treating the Internet like a utility (see “The Net Neutered,” SLL, 2/17/15, and “Obamanet Shows Its Fangs,” Wall Street Journal, 6/22/15). Obamacare promises to further America’s slide into the slow, no, or negative economic growth mode that has plagued most of Europe for decades. It’s already promoting consolidation and centralization among insurance companies and medical care providers, the antithesis of free market decentralization, innovation, and competition.

As Greece blows up, European officials have decided the problem with the EU is too little command and control. They are calling for less national sovereignty and more power for the supranational European institutions (“Presenting The New Plan For A Eurozone Superstate—Curly, Larry And Moe,” davidstockmanscontracorner.com,). The Organization for Economic Cooperation and Development (OECD) has launched a campaign to ensure that its 34 members—most of the developed nations—don’t lower tax rates to attract businesses. The OECD envisions, and the Obama administration has endorsed, a regime in which multinational companies would have to disclose extensive information about their activities so that they could be taxed based on the location of their economic activity and “value creation” (see “1000s Of American Jobs Could Be Lost If This…,” SLL, 6/23,15), obviously a costly administrative nightmare. Lurking within the thousands of pages of the three trade agreements under consideration is undoubtedly more such “harmonization,” not just of taxes, but regulations and benefits as well (see “Trust Me, Charlie Brown,” SLL, 6/16/15).

Meanwhile, in what Sir Halford Mackinder called in 1904 the “Heartland” of the “World Island”—the Euro-Asian area encompassing Russia, Turkey, the Middle East, and Asia, which he argued was the fulcrum of world power—its nations are exploiting their latent potential and moving away from the unipolar world of US design (see “Washington’s Great Game and Why It’s Failing,” SLL, 6/8/15). With large percentages of the world’s population, land mass, and resources, Euro-Asia, led by the Chinese, is developing linkages, building infrastructure, and propelling itself forward. A new Silk Road initiative will resurrect and modernize the storied trade route traversed by Marco Polo. Petroleum pipelines and high-speed rail lines are being built between Russia and China.

Importantly, Russian-Chinese petroleum transactions will be denominated in yuan and rubles, not dollars. Petrodollar recycling—based on the dollar’s status as the reserve currency—has been an important prop for US global dominance. Across southeast Asia, China is financing and helping construct ports, roads, power plants, dams, and other transportation, trade, and industrial infrastructure. It is also providing seed funding for multilateral lending institutions, notably the Asian Infrastructure and Investment Bank, which will be a counterweight to US and European-dominated institutions like the IMF and World Bank (see “America’s European “Allies” Desert Obama, Join China-led Infrastructure Bank,” SLL, 3/17/15).

It is improbable that the Euro-Asian ascendancy presents a threat to US security, but it certainly does to the tenaciously held dream of US global dominance. China and Russia want to be the dominant powers in Euro-Asia. While that dominance has a military aspect, it will be exercised primarily through political alliances and economic development. The latter, especially, will redound to the benefit of resource-rich Russia and people, ingenuity, and capital-rich China. Their stance towards the Middle East is instructive. They have avoided the military forays that have so disastrously entangled the US. They have supported their allies, primarily Syria and Iran, in international forums and consummated opportunistic investment, energy, and arms deals. If a nuclear agreement is reached with Iran, Russia and China will rapidly expand their ties with what has historically been a dominant power in the Middle East and Iran will become an important partner in the Euro-Asian development effort.

Notwithstanding hyperventilating US politicians, it is hard to believe that either the Chinese or the Russians have offensive military designs beyond securing what they regard as their spheres of influence. They are not that stupid. The military cost curve has shifted dramatically and they know it. The costs in treasure and blood of invasion and subjugation are many orders of magnitude greater than the costs of resisting it, as the US should have learned in Vietnam and the Middle East, and as Russia apparently did in Afghanistan.

The farther away that attempted invasion and subjugation, the greater the cost disparity. Thus, if the US insists on confronting Russia in Ukraine or China in the South China Sea, it will be at a massive disadvantage. The notion that the US, which hasn’t subjugated Afghanistan after fourteen years or Iraq after twelve, could take on Russia or China on their own doorsteps is a howler. If that has been grasped by some in the Washington brain trust, it has not prompted a consensus to avoid such confrontation. Rather there have been moronic murmuring on deploying nuclear weapons. Let’s hope the brain trust is not that stupid, but it’s not a safe bet; all the surprises the last few decades have been to the downside.

While humanity as a whole makes three steps forward and two steps back, it’s never in lockstep. The Euro-Asian nations are stepping forward; the US and Europe are stepping back. To reiterate a theme SLL has sounded repeatedly (most recently, “Buy Asia; Short the US and Europe,” SLL, 2/3/15), the Euro-Asian nations will be the predominate source of long-term investment opportunities. As the last few months in China have demonstrated, there will be volatility both up and down, but longer-term, the Euro-Asia nations will far outperform the US and Europe. They have the land, resources, and people, and most importantly, they are minding their own business, promoting economic development while the US and European nations are encumbered with debt, increasingly powerful and bureaucratic national and supranational governance, and US-led foreign military intervention.

The emergence of Euro-Asia presents multitudinous opportunities from which Western governments and companies could benefit. Sadly, until those governments, especially Washington, abandon antediluvian policies based on projected power and subjugation, those opportunities will not be realized. Fortunately, nothing stops individuals from investing and profiting from the emerging Euro-Asian colossus. If your financial advisor doesn’t have a good handle on investments there, find one who does.


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