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Archive for May, 2012

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(link to an excellent – Charles Hugh Smith article)

Presented without any need for commentary.

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The Argument Industry: Hyping Controversy and Avoiding Solutions

May 25, 2012

The mainstream media has always loved controversy and wars, military and cultural alike.  Now we have an “Argument Industry” that thrives on keeping problems insoluble. 

That much of the “news” is artifice and propaganda, is a given.

How can a society make good decisions about its future when the “facts” (such as the unemployment rate) are massaged and manipulated, and so many of the “reforms” are simulacra…? Answer:  it can’t…      more.

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(A= truth and transparency.  ~R )

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** UPDATE **

And – a second related article by Hugh.

Is This What We’ve Become?

If you incentivize victimhood, fraudulent accounting, and gaming the system – guess what you get?    A nation of liars and thieves.

Is this what we’ve become; brittle simulacra “grown-ups”, who are incapable of acknowledging the truth of our situation?

If we cannot dare acknowledge reality, then how can we solve our problems? If we cannot bear an awareness of our systemic rot and unsustainability, then how can we move past denial and expediency?  If we have lost the ability to live within our means and to acknowledge difficult facts, then we have lost everything:

Our national integrity, our ability to problem-solve, our vigor and our future.

More…

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Same here as there….

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Statism

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Statism is at it core, a state of mind.

You either believe that the answer to any problem is more State control/intervention, or you don’t.

Assuming that our current global financial crisis is a direct consequence of runaway State intervention, control, expansion and capture – then any solution to our problems must involve re-imagining, restructuring and deconstructing the State.  Ipso facto.

The problem here is huge numbers still believe in the idea and ideals of the State.  Ohh.. and by the way, conflate State and Government in that description.

The government will save us, the government will sort it, the government should do something… (sic)

The only thing the Government/State can be guaranteed to do is expand it’s control and infrastructure.  Any benefits it bestows will be largely incidental, or even accidental. Inherently, anything government does it must do in a degraded fashion – in that it takes a cut from the taxes it receives, before with varying levels of (in)efficiency, it distributes what remains.

And yet the call is always for more: more benefits, more services, more regulations and sanctions.  I hear the calls daily, watch the news for some-one, or group, calling for the government to “do something”.  Please nanny State, save us...

The State/Government will always be only too happy to heed your call for it to have ever more control and involvement in your life.

Where does this fantasy come from, that: More government = More satisfaction or security?  Is this not an obvious Non Sequitur?   …Apparently not.

But until it begins to dawn on enough people that the ultimate genesis of their problems IS the State, then they cannot comprehend that the answer to too-much-government cannot be more-government.

Realistically though, in order to displace the mind space and share of an established idea, you need to have created and widely disseminated a credible alternative.  People wont let go of the devil they know, for an unknown quantity.

True – there definitely are social functions that need to be addressed collectively.  But that is not at all the same thing as continuing with the administration of our affairs and governance as we currently practice it.  Necessary functions are entirely possible outside of the current paradigm.  (Albeit a debate about what constitutes necessary functions also needs to happen)

So a concomitant of a disillusionment with Statism, is a believable alternative; if there is to be any effective change.

How big a job is it to create and spread such a disruptive meme?

Pretty much the tallest order in the world.

But hey, what sort of radical/philosopher/writer/revolutionary/dreamer would I be if I wasn’t prepared and happy to have a crack at it.

So there you go – my job is to formulate and write a credible/actionable prescription for reforming the world.  How hard could it be…?

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For the Bible-Bashers amongst you, here is an idea to equate:

Statism / Satanism.   the Big Lie.   Really truly, only just here for YOUR benefit…

Yeah, right…

It will lead you to your self destruction on a pathway of your own choosing.

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Contracting

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That which can’t be sustained, won’t be.

Just like the problem of debt cannot be solved by more debt – the problem of government cannot be solved by having more government.

Our “Government” is the problem.

~R

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Acknowledging the Arrival of Peak Government

~ Charles Hugh Smith   (heavily edited for my own biased ends ~R)

Most informed people are familiar with the concept of Peak Oil, but fewer are aware that we’re also entering the era of Peak Government.

Central government – the Central State – has been in the expansion mode for so long, that the process of contracting government is completely alien to the nation, to those who work for the State, and to those who are dependent on the State.

Thus we have little recent historical experience or any conceptual guideposts to help us understand its contraction.

Peak Government is a reflection of four key systemic forces that drove State expansion – that are now either declining or reversing.

The Four Key Drivers of State Expansion

The twin peaks of oil and government are causally linked: central government’s great era of expansion has been fueled by abundant, cheap liquid fuels. As economies powered by abundant cheap energy expanded, so did tax revenues.

Demographics also aided Central States’ expansion: as the population of working-age citizens grew, so did the work force and the taxes paid by workers and enterprises.

The third support of Central State expansion was debt, and more broadly, financialization, which includes debt, leverage, and institutionalized incentives for speculation and misallocation of capital. Not only have Central States benefited from the higher tax revenues generated by speculative bubbles, they now depend on debt to finance their annual spending.

The fourth dynamic of Central State expansion is the State’s ontological imperative to expand. The State has only one mode of being, expansion. It has no concept of, or mechanisms for, contraction.  This ontological imperative in terms of the States control of the entire economy is to cut the causal connection between risk and gain so that the State can retain the gain and transfer the risk to others.  People who are exposed to risk and consequence act very differently than those who are not exposed to risk and consequence.

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All four of the causal factors itemized above are turning against continued expansion:

*  The key energy source of global transportation, liquid fuel, is no longer cheap and easy to access.

*  The demographics have reversed as the population of State dependents is soaring.

*  Debt has expanded to the point that servicing that debt now threatens the financial stability of the State and its currency.

*  The State’s separation of risk and consequence is generating systemic instability.

The Failure of the State

The citizens grant the State extraordinary power to protect their freedom of faith, movement, expression, enterprise and association and to insure that no subgroup can dominate the nation for their private gain.

Granting this power to the State creates a risk that the State itself may become predatory.  Rather than protect the citizens from exploitation, the State’s primary role becomes protecting the private gains of elites who have taken effective control of the State’s vast powers.

To enhance their own power, these elites increase the State’s reach until it dominates the entire political, social, and economic system.

The more the State expropriates, the less surplus is left for productive investment, and creates a feedback loop – a death spiral.

There are plenty of models of State expansion – and none for State contraction.   This suggests that the down slope of Peak Government will be disorderly and rife with unintended consequences.

Ends.

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This suggests that the down slope of Peak Government will be disorderly and rife with unintended consequences.

Moving away from Statism – ‘the State will(would,should) look after that‘ – will NOT be easy, painless or quick.

It will just be necessary.

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In a somewhat long and rambling dissertation on Economics/Democracies/Debt and Defaults, my favourite local commentator/economist, Bernhard Hickey touched on a couple of interesting points.

How and why democracies might default on their debts.

Here are the comments I was interested in.

This only intensifies the death spiral because it causes deflation, which is poisonous for any economy. Deflation encourages consumers to stop spending because saving makes their money more powerful in future.

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Most countries with control of their own monetary policies and currencies can attempt to devalue their way out [of debt] and to cut interest rates.  Ultimately, the least disruptive way out (?) of the massive debt burdens now stunting economic growth in Western economies is to force interest rates down and to allow inflation rates to run higher than interest rates. This is known as financial-repression and was the tactic used by the United States during the 1940s and [is being used again now today].  This is a decision to force a default on savers by stealth.

Ultimately, money printing to increase inflation and financial repression to reduce interest rates is how democracies default.

Things that make you go Hmmm….

So I was interested to read these replies in the Comments section.

by benwave | 08 May 12, 11:41am

“Deflation encourages consumers to stop spending because saving makes their money more powerful in future”

I understand the reasoning behind this, rational economic actors etc etc, but I have two questions about it – First, Is there a lot of empirical evidence that this occurs? I could imagine that it doesn’t make a lot of difference to the behaviour of someone on low income.  Second, if people save rather than spend then does that have an effect to lower the debt levels?

by PeterPen | 08 May 12, 11:54am

How very true. BH is just parroting the mantra of “deflation is poison” in a very unreflected way. There a plenty of historic examples of inflation bringing down societies – but deflation, who knows one?
I will not wait to buy a car or house for my family just because it might be 2% cheaper next year, I will buy it because it is needed.
I suspect it is much more the aspect of so-called governments in debt up to their necks that is the issue here. They need to stoke inflation to keep their heads above water. Deflation would  expose them for what they are, utter incompetents who cannot balance their books like any simple housewife can.  (highlights mine ~R)

by Ralph | 08 May 12, 12:09pm

I think if you look at the numerous depressions of the 1800’s you’ll see that’s what did happen and that’s where the observation came from.
In addition to savings everyone’s purchasing power increases as well – meaning our standard of living goes up.
God forbid.
Although – I do seem to remember those deflationary cycles brought an unemployment problem as industry reorganized in the downturn so a warning there.

by PeterPen | 08 May 12, 12:19pm

Ya, God forbid, rising living standards for people outside the banking and real estate industries? That would be a scandal.

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As Peter Pan suggests:  the thing Deflation is poisonous to is Governments running inflationary/debt-defaulting strategies.

Unfortunately the Western Political-Economies have been running debt and inflation policies for nearly a Century now. It is so baked into the system that changing it would essentially blow up the financial system. Although, as the whole financial system is in the process of blowing up anyway – we now have the choice of a rock and a hard place.

Changing our system and reversing course to a deflationary system is the choice you make when you no longer have other lazy choices.  It wouldn’t be the end of the world, but there would be winners and losers.  The losers would be currency manipulators(Governments) and those who profit from debt (Banks).  

BooHoo – cry me a river…

Like the whole debate about a Gold-Standard, what it really comes down to is governments actually having to submit to fiscal discipline – i.e. not run deficit-spending policies.  The virtue of a Gold-Standard isn’t about “Gold”, it is about the “standard”.  Governments can spend what they receive in tax’s, but no more than that.  Gold isn’t intrinsically necessary for that to happen.  All that is necessary is for the government to stop trying to cook the books.  Discipline [or intelligence].

In a deflationary system, debt spending becomes too expensive to pursue because your debt gets bigger with time, let alone any interest rate considerations. (and without being able to print money at will, governments can’t dictate interest rates either – like ZIRP)

So… which is the true poison:  Inflation or Deflation?

Depends who you are asking I guess doesn’t it. If you are winning under Inflation, then deflation is indeed an absolute poison – right up until the point your Inflation explodes the whole global economy.  Then it is a toss up.

As for the rest of us…  I’ll leave the last word to Peter Pan:

by PeterPen | 08 May 12, 12:19pm

Ya, God forbid, rising living standards – for people outside the banking and real estate industries? That would be a scandal.

/sarc.

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There has been a nice little scandal brewing here recently.

I noted it, but hadn’t thought too deeply on it – but perhaps we should, there is more going on than appears on the surface.

………  Kim Dotcom  ………………..  John Banks ……………….  PM John Key  ……

The way the story broke was like this:  Kim Dotcom is front page of a national newspaper saying he gave a large political donation to John Banks.  Allegedly, Banks wanted it broken into smaller payments, so he didn’t have to declare where the money came from.  Which is against the law.

So, on the face of it, Banks is now criminally liable for an offence that is punishable by up to two years imprisonment.  Naturally he is ducking and diving for all he is worth.  I am reminded of the comment that: it is not the crime which gets you, it is the cover-up…  and there is a lot more for this story to run.  Banks is looking Smarmy(and deceitful) in the extreme.

But the real problem here is that if he ends up being charged and convicted of breaking the law, then he could take a lot of other people with him.

Due to the possible sentance for this type of offense, there is a very real danger that he would be ejected from paliament. If that happens the government is almost certain to fall.  They only have a slim majority – and a coalition one at that.  The opposition parties are going to be ALL over this.

So the real dagger is pointed at John Key, the Prime minister.

It will be fascinating to see what sort of hoops Key jumps through to try and save his government.  Or even, what sort of influence and manipulations he is prepared to use.  There is huge potential for this to get really, really nasty.

I am just fascinated by the back story here though.

Kim Dotcom was welcomed into our country and was buddy-buddy with a number of politicians in the process – John Banks for example. Dotcom spreads around a lot of money, making friends and influencing people.  In theory he has bought his way into the club.  But then he gets shafted by the FBI led takedown of his business (Megaupload) – with the active connivance of the NZ government.

He spends something like a month in a cell before he can get bail.  His assets are seized, and his business ruined.  All before he is convicted of anything by the way – and for a white collar crime (if it is ever proved, which is looking more and more unlikely).  This is normally the sort of police tactic usually reserved for drug dealing gangsters.  (How come we haven’t seen them doing raids like this on any Bankers?)

I am guessing Kim is feeling a bit pissed-off about now.  The people who should have been looking out for him – they have been bought and paid for afterall – have proved to be fair weather friends.  Well, two can play at that game.

Looks like Kim was a bit smarter than a lot of people thought.  He had a noose around John Banks’ balls, and now he has cinched it tight.  At this point I don’t see Banks getting out of this without getting castrated.  But taking down Banks, also has the added bonus of having a very good chance of taking down the government.  That is a better than average revenge on perfidious “friends“.

The whole takedown of Kim was distasteful from the start. Now it is looking like all those involved  are going to reap what they sowed – tenfold.  I won’t mourn for any of them.

Hopefully there is a lesson there for others about cuddling up to the US authorities as well.  Lie down with dogs and you will get flea’s.  Although that I suspect they already had more than enough of their own to begin with.

The demise of this government won’t be mourned by me, and I am hoping it happens sooner rather than later.  In any event, I doubt this government will run its full term.

Nice knife job Kim.  Bravo.

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This is a bit of a this-and-that article – with several points that sort of tie together.

I was recently up in Auckland visiting friends and family. (Auckland is the largest metropolitan centre in NZ)  And while this is all anecdotal, I was intrigued by the conversations I was having and the shift in attitude.  People(most) were asking my opinion of the economy.  Not specifically because I write a blog about such things, but because they are enquiring in a general way. Enquiring to everyone they know, I suspect.  Looking for confirmation and validation of their concerns.

They are all getting uneasy. Things aren’t looking so rosy. It is getting harder and harder to make a living and pretend things are normal.  The recession is over three years old already, things should have started to turn around by now – but the prospects are looking gloomier, not better.

Gosh, what a surprise…!!!

Actually, perhaps that shouldn’t be a surprise. Not that things aren’t looking so good – but that people just had this blind optimism for so long, that it would all come right sooner or later – that the government would sort it out, or it would sort itself.  People expected things would be no different this time, than they were for all of the previous recessionary cycles, over the last 3-4 decades.

I have been going “Hello… hello… is anybody awake out there” for several years now.  And wondering why everyone seemed to be sleepwalking into the future.  Wasn’t it painfully obvious that this was not your average blip to the downside… no?  I saw armageddon in the making – and they saw… what exactly?

I still don’t think they see things as super-serious, but they sure as hell don’t like what they do see, and are getting uncomfortable.  Apparently they can feel the water starting to get hot after-all.  And it appears they seem to be losing some faith in the ability of the government to make it all better.

Well of course the government isn’t going to make it all better – the government is the problem.  But that conclusion is a still a step (or more) too far for most people yet.

The pain is going to have to be ratcheted up a few more notches yet, before they start seriously squealing and taking note of what is happening around them – and enquiring into why we are where we are.

The second interesting event was a recent interview we did at work. It was with a woman who had been working in the social services sector with elder-care. Her position has just recently been disestablished, so she didn’t feel the need to bite her tongue as she may have in the past.  She had a number of frustrations and wanted to vent a little.

She started off by saying the government needed to get serious and engaged with the issues she had been dealing with.  She said that the various government bodies said all the right things, but nothing ever actually happened.  Be it the police, the local-body councils, central government, or the various government welfare agencies – they all talked a good fight, and produced lovely discussion papers and reports, but never actually did anything, or achieved concrete results.  She was upset that there was so much that could be done, but it needed government to get actively engaged. Government needed to DO something.

I sat there trying hard not to laugh.

She had got a lot of it right, and had recognised a lot of home truths – but hadn’t yet managed to close the loop and draw the whole thing together.  

Governments don’t DO for you.

Governments DO for themselves.

They are self-referencing institutions that serve themselves.

If you have swallowed the Koolaid, then more fool you.  If you still believe that government is there to govern “by the people, for the people” you are living in a fantasy.

When times get tough (you know, like now…) government won’t be there for you to lean on.  It Will Be Too Busy Leaning On You.

It’s first and last priority will be self-preservation.  And no price will be too high for that.  Your sacrifice will be its’ salvation and satisfaction.

And so the discomfort grows, on many levels and across the country.  The bitching and moaning has started.  And yet… and yet… – most are still blind to the direction the real threat is coming from.

Without question government and politicians will attempt to direct that feeling so that various sectors of society will fight amongst themselves, blaming those other good-for-nothings for damaging “our” country, blah blah blah…

There will be just enough of a germ of truth in that sort of thing to excite our prejudices.  Classic FUD (Fear, Uncertainty and Doubt), as a deliberate, premeditated strategy.  Divide and conquer.

How many people will be able to put Two and Two together and get Four?  People are starting to ask questions, that’s good I guess.  But it is late in the day, and we have arguably already passed the point of no return.  I am afraid I don’t have much confidence that people will suddenly (or even gradually) see the light.  Giving up on old ideas and beliefs, and adopting new ones isn’t in our nature.  We would much rather ignorantly fight amongst ourselves.

But there are two inescapables in all this.

We won’t get away from our current dilemmas unscathed, we ARE going to get burned.

And – until we perceive that it is our systems(rules) and Rulers that have done for us, we will remain in the boiling pot getting cooked.

Another thought I had this last week on my trip North:

I have few doubts: the government will not manage to run its full term.  [opps, wrong on that one]

Things are getting tougher and going wrong at an accelerating pace.  A One-Seat coalition majority isn’t going to cut it.

The really smart politicians retired at the end of the last term. It was just the dumb ones that came back (into a developing storm) for more.

And these are the leaders to save us…???

I think not.

Run Forest, run…

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