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- In depth Car industry in crisis
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Tourists will soon be able to visit the underground of the Colosseum, where gladiators once prepared for fights and lions and tigers were caged before entertaining the public.
Rome culture officials said that, after several months of work to make the area safe for visits, the public will be allowed to add the underground section to tours of the arena starting in late summer. No exact date has been set.
Architect Barbara Nazzaro said that tourists will be able to see the spaces where lions, tigers and bulls were kept in cages before they were hoisted on elevators to ground level for entertainment in the ancient arena.
The M3 figures - which include broad range of bank accounts and are tracked by British and European monetarists for warning signals about the direction of the US economy a year or so in advance - began shrinking last summer. The pace has since quickened.
The stock of money fell from $14.2 trillion to $13.9 trillion in the three months to April, amounting to an annual rate of contraction of 9.6pc. The assets of insitutional money market funds fell at a 37pc rate, the sharpest drop ever.
"It’s frightening," said Professor Tim Congdon from International Monetary Research. "The plunge in M3 has no precedent since the Great Depression. The dominant reason for this is that regulators across the world are pressing banks to raise capital asset ratios and to shrink their risk assets. This is why the US is not recovering properly," he said.
The US authorities have an entirely different explanation for the failure of stimulus measures to gain full traction. They are opting instead for yet further doses of Keynesian spending, despite warnings from the IMF that the gross public debt of the US will reach 97pc of GDP next year and 110pc by 2015.
Larry Summers, President Barack Obama’s top economic adviser, has asked Congress to "grit its teeth" and approve a fresh fiscal boost of $200bn to keep growth on track. "We are nearly 8m jobs short of normal employment. For millions of Americans the economic emergency grinds on," he said.
David Rosenberg from Gluskin Sheff said the White House appears to have reversed course just weeks after Mr Obama vowed to rein in a budget deficit of $1.5 trillion (9.4pc of GDP) this year and set up a commission to target cuts. "You truly cannot make this stuff up. The US governnment is freaked out about the prospect of a double-dip," he said.
The White House request is a tacit admission that the economy is already losing thrust and may stall later this year as stimulus from the original $800bn package starts to fade.
Recent data have been mixed. Durable goods orders jumped 2.9pc in April but house prices have been falling for several months and mortgage applications have dropped to a 13-year low. The ECRI leading index of US economic activity has been sliding continuously since its peak in October, suffering the steepest one-week drop ever recorded in mid-May.
Mr Summers acknowledged in a speech this week that the eurozone crisis had shone a spotlight on the dangers of spiralling public debt. He said deficit spending delays the day of reckoning and leaves the US at the mercy of foreign creditors. Ultimately, "failure begets failure" in fiscal policy as the logic of compound interest does its worst.
However, Mr Summers said it would be "pennywise and pound foolish" to skimp just as the kindling wood of recovery starts to catch fire. He said fiscal policy comes into its own at at time when the economy "faces a liquidity trap" and the Fed is constrained by zero interest rates.
Mr Congdon said the Obama policy risks repeating the strategic errors of Japan, which pushed debt to dangerously high levels with one fiscal boost after another during its Lost Decade, instead of resorting to full-blown "Friedmanite" monetary stimulus.
"Fiscal policy does not work. The US has just tried the biggest fiscal experiment in history and it has failed. What matters is the quantity of money and in extremis that can be increased easily by quantititave easing. If the Fed doesn’t act, a double-dip recession is a virtual certainty," he said.
Mr Congdon said the dominant voices in US policy-making - Nobel laureates Paul Krugman and Joe Stiglitz, as well as Mr Summers and Fed chair Ben Bernanke - are all Keynesians of different stripes who "despise traditional monetary theory and have a religious aversion to any mention of the quantity of money". The great opus by Milton Friedman and Anna Schwartz - The Monetary History of the United States - has been left to gather dust.
Mr Bernanke no longer pays attention to the M3 data. The bank stopped publishing the data five years ago, deeming it too erratic to be of much use.
This may have been a serious error since double-digit growth of M3 during the US housing bubble gave clear warnings that the boom was out of control. The sudden slowdown in M3 in early to mid-2008 - just as the Fed talked of raising rates - gave a second warning that the economy was about to go into a nosedive.
Mr Bernanke built his academic reputation on the study of the credit mechanism. This model offers a radically different theory for how the financial system works. While so-called "creditism" has become the new orthodoxy in US central banking, it has not yet been tested over time and may yet prove to be a misadventure.
Paul Ashworth at Capital Economics said the decline in M3 is worrying and points to a growing risk of deflation. "Core inflation is already the lowest since 1966, so we don’t have much margin for error here. Deflation becomes a threat if it goes on long enough to become entrenched," he said.
However, Mr Ashworth warned against a mechanical interpretation of money supply figures. "You could argue that M3 has been going down because people have been taking their money out of accounts to buy stocks, property and other assets," he said.
Events may soon tell us whether this is benign or malign. It is certainly remarkable.
** While the Fed does not publish M3, it still publishes the underlying components. The indicator is reconstructed accurately for clients by Dr John Williams. See it here.
Thomas "Tommy" Gold, the brilliant and controversial 20th century Viennese-born science figure and professor emeritus of astronomy at Cornell University, died at the age of 84 years eight months ago on June 22, 2004 at Cayuga Medical Center, Ithaca, N.Y., after a long battle with heart disease. His Cornell obituary states: “Gold's reputation as a Renaissance man was surpassed only by his penchant for unconventional theories -- from the origin of the universe to the source of petroleum. Few scientists ever attempt what Gold made a career of, staking their reputations on ideas that radically challenge the methods and assumptions of an entire discipline.” (1-2) Fortunately, Gold has left many writings for posterity, including ones available on his still-functioning homepage website (3) and his book titled “The Deep Hot Biosphere (2001), which no Barnes and Noble or Borders Booksellers in Chicagoland currently carry in their stores. (4)
Thomas Gold (young).
Thomas Gold (old).
In his later years, Gold challenged the belief, deeply held by American and British geoscientists, that oil is fluid concentrated from huge amounts of vegetation and animal remains that have been buried in the sediments over hundreds of million of years. Instead, he and many other geophysicists, most notably in Russia and China (5), for decades have been providing evidence that oil and natural gas are generated from hydrocarbon substances in the Earth’s crust that were “brought in from space when the Earth was formed.” (6)
When asked what first prompted him to think that oil and natural gas are generated from hydrocarbons present at Earth’s formation, Gold replied, “The astronomers have been able to find that hydrocarbons, as oil, gas and coal are called, occur on many other planetary bodies. They are a common substance in the universe. You find [large quantities of hydrocarbons] in the kind of gas clouds that made systems like our solar system…Is it reasonable to think that our little Earth, one of the planets, contains oil and gas for reasons that are all its own and that these other bodies have it because it was built into them when they were born?” (7)
When the interviewer replied, “That question makes a lot of sense. After all, they didn’t have dinosaurs and ferns on Jupiter to produce oil and gas,” Gold said, “That’s right. Yet, for some reason my theory was not heard. The theory that it was all made from fossils ha[s] become so firmly established that when the astronomers had perfectly definitive evidence on most of the other planets, it was just ignored, especially by the petroleum geologists who had, by then, called these things, ‘fossil fuels.’ So once they had a name, then every body believed it.”(8-9)
What IS the evidence for each of the two theories of the origin of oil? Two main observations have favored the biogenic (ferns and fish) origin of petroleum.
1. “Petroleum contains groups of molecules [e.g., “hopanoids,” a material coming from bacterial cell-walls], which are clearly identified as the breakdown products of complex, but common, organic molecules that occur in plants, and that could not have been built up in a non-biological process.” (6)
2. “Petroleum is mostly found in sedimentary deposits and only rarely in the primary rocks of the crust below; even among the sediments, it favors those that are geologically young. In many cases such sediment appears to be rich in carbonaceous materials that were interpreted as of biological origin, and as source material for the petroleum deposit.” (6)
Wyoming coal mine.
Los Angeles La Brea Tar Pits. LA High School students examining fossils in the first
two decades of the 20 th century.
The following four observations favor the abiogenic or “energy fuels” (present at origin of Earth) origin of petroleum:
1. “Petroleum and methane are found frequently in [surface] geographic patterns of long lines or arcs, which are related more to deep-seated large-scale structural features of the [deep] crust, than to the smaller scale patchwork of the sedimentary deposits.” Gold explains this idea through two examples: the distribution of oil deposits in the Middle East and in Indonesia.
Oil fields of the Middle East, showing continuous region from Turkey to Oman. The dots represent individual fields, and the size of each dot indicates the magnitude of the field.
Source: Thomas Gold: “The Origin of Methane (and Oil) in the Crust of the Earth” at: http://people.cornell.edu/pages/tg21/usgs.html.
a. The Middle East: “Everyone now thinks of Arabia, the Persian Gulf, Iran and Iraq as being the oil region of the world. It is indeed one connected large patch that is oil-rich for 2,700 km from the mountains of Eastern Turkey down through the Tigris Valley of Iraq and through the Zagros Mountains of Iran into the Persian Gulf, into Saudi Arabia and further south into Oman. There is no feature that the geology or the topography of this entire large region has in common, and that would give any hint why it would all be oil and gas rich. The various oil deposits are in different types of rock, in rocks of quite different ages, and they are overlaid by quite different caprocks. They are in a topography of folded mountains in Turkey and the high Zagros mountains of Iran, in the river valley of the Tigris in Iraq, in the Persian Gulf itself, in the flat plains of Arabia and in the mountainous regions of Oman…These hydrocarbon-bearing formations represent times so different from each other that there would have no similarity in the climate or in the types of vegetations that existed there during deposition, just as there is no similarity in the reservoir rocks or in the caprocks of the different regions now. Yet it is a striking fact that the detailed chemistry of these oils is similar over the whole of this large region. Surely this is an example of the need to invoke a larger scale phenomenon for the cause of the oil supply than any scale we can see in the geology of the outer crust.” (6)
b. Indonesia: “The island arc of Indonesia, of which Java and Sumatra are the main components, belongs to a much larger pattern of an arc, that stretches from the western tip of New Guinea through these Indonesian islands in to the Indian Ocean, through the Andaman Islands up into the Irrawaddi valley of Burma, and on into the high mountains of Southern China, over a total length of 6,000 km. That it is one connected arc all the way cannot be doubted because the frequency of earthquakes along the whole of this arc is hundreds of times greater than outside. Along the whole of this arc petroleum is very abundant. But at one end this arc is made up of volcanic islands; at the other end, in Burma and China, it is continental materials with folded mountains. Again, there are great age differences and differences in every aspect of the geology in which the oilfields exists; but here we have a unifying feature, namely the belt of earthquakes and volcanoes which stretches over this entire length, and which points to causes in the deeper crust or in the mantle.” (6)
2. “Hydrocarbon-rich areas tend to be hydrocarbon-rich at many different levels [in the earth], corresponding to quite different geological epochs, and extending down to the crystalline basement that underlies the sediment. An invasion of an area by hydrocarbon fluids from below could better account for this than the chance of successive deposition.” (6) Also, such extrusion of hydrocarbons periodically over time from below could explain the findings of organic debris, such as ferns, saber tooth tigers, and even human fossil skulls, in seams of coal (think La Brea tar pits in Los Angeles, California). Gold writes: “The coal we dig is hard, brittle stuff [but] it was once a liquid, because we find embedded in the middle of a six-foot seam of coal such things as a delicate wing of some animal or a leaf of a plant. They are undestroyed, absolutely preserved, with every cell in that fossil filled with exactly the same coal as all the coal on the outside. A hard, brittle coal is not going to get into each cell of a delicate leaf without destroying it. So obviously that stuff was a thin liquid at one time which gradually hardened…[p]etroleum…gradually becomes stiffer and harder [and] that is the only logical explanation for the origin of coal. The fact that coal contains fossils does not prove that it is a fossil fuel; it proves exactly the opposite. Those fossils you find in coal prove that coal is not made from those fossils. How could you take a forest and mulch it all up so that it is a completely featureless big black substance and then find one leaf in it that is perfectly preserved? That is absolute nonsense.” (6)
3. Hydrocarbons are found in areas where no sediments have ever been deposited. “Methane [a primordial hydrocarbon] is found in many locations where a biogenic origin is improbable or where biological deposits seem inadequate: in great ocean rifts in the absence of any substantial sediments; in fissures in igneous and metamorphic rocks, even at great depth; in active volcanic regions, even where there is a minimum of sediments; and there are massive amounts of methane hydrates (methane-water ice combinations) in permafrost and ocean deposits, where it is doubtful that an adequate quantity and distribution of biological source materials is present.” (6)
4. “The regional association of hydrocarbons with the inert gas helium, and a higher level of natural helium seepage in petroleum-bearing regions, has no explanation in the theories of biological origin of petroleum.” (6)
Where then did hopanoids (material from bacterial cell-walls), and other molecules found in oil deposits come from, if they didn’t come from squashed ferns? Gold rewords the question: “How much of the biological imprint of material in the sediments is due to surface life and how much to life at depth? Life at depth???? What does Gold mean here?
Gold explains in a 1992 article: “We are familiar with two domains of life on the Earth: the surface of the land and the body of the oceans. Both domains share the same energy source: namely sunlight, used in the process of photosynthesis in green plants and microorganisms. In this process the molecules of water and of carbon dioxide are dissociated, and the products of this then provide chemical energy that supports all the other forms of life [you and me]….This was the general concept about life and sources of its energy until approximately twelve years ago , when another domain of life [anaerobic bacteria called ‘thermophiles’] was discovered. This new domain, the ‘ocean vents’, found first in some small regions of the ocean floor, but now found to be widespread (including Monterey Bay and Yellowstone), proved to have an energy supply for its life that was totally independent of sunlight and all surface energy sources. There the energy for life was derived from chemical processes, combining fluids—liquids and gasses—that came up continuously from cracks in the ocean floor [communicating with the mantle beneath the Earth’s crust], with substances available in the local rocks and in the ocean water.” (10)
A thermophile (heat-loving) bacteria.
Chemosynthetic clams. See also “Hydrocarbons Associated with Fluid Venting Processing Monterey Bay, California, by TD Lorenson, et al. available at: http://walrus.wr.usgs.gov/hydrocarbons/index.html.
In other words, bacterial life in this third deep-Earth life domain gets its energy from converting methane and hydrogen into carbon dioxide and water, all in the absence of sunlight. Gold continues: “The pore-spaces in the [Earth’s] rocks are quite sufficient to accommodate bacterial life [too], and the rocks themselves may contain many of the chemicals that can be nutrients together with the ascending [hydrocarbon] fluids. …[A]ctive bacterial life deep in the solid crust could have gone largely unnoticed,” in the same way that bacterial life in the ocean vents went unnoticed until secondary larger life forms that fed on the thermophiles drew scientists’ attention. The answer to the origin of the hopanoids is that they come from the deep-Earth bacteria.
How widespread is life based on internal energy sources of the Earth? “We do not know at present how to make a realistic estimate of the subterranean mass of material now living, but all that can be said is that one must consider it possible that it is comparable to all the living mass at the surface. Together with this consideration would go the consideration of the cumulative amount of chemical activity that could be ascribed to the deep biosphere, and with that the importance it may have had for the chemical evolution of the crust, the oceans and atmosphere, and the development of the surface biology.” (10)
Editor’s Note: Understanding the origin of petroleum is not an arcane subject of interest only among academics. Rather, it has vast political and economic ramifications including refuting the idea that oil is a finite resource found only in relation to sedimentary rock in certain areas of the world such as the Middle East. If Gold is correct, as he has been so many times before, imponderable amounts of oil are constantly being manufactured from hydrocarbon sources constantly upstreaming from the Earth’s upper mantle (beneath the Earth’s crust) by a vast domain of bacterial life. Indeed, we now know that oil and gas fields are not running out at the expected time, but seem to be recharging from below. (11) Probably the most frustrating aspect of this topic is that American geoscientists have shamelessly ignored the boatloads of evidence and seem locked into studying “fossil fuels” instead of “energy fuels.”
(1) “Thomas Gold, Cornell astronomer and brilliant scientific gadfly, dies at 84,” Cornell News, June 22, 2004, available at: http://www.news.cornell.edu/releases/June04/Thomas....
(2) Thomas Gold curriculum vita at: http://www.people.cornell.edu/pages/tg21/vita.html.
(3) Thomas Gold: “The Deep, Hot Biosphere: The Myth of Fossil Fuels,” Springer-Verlag Telos (2001).
(4) “Thomas Gold” homepage at the Cornell University website: http://people.cornell.edu/pages/tg21/.
(5) J.F. Kenney and V.A. Krayushkin, et al: “Gas Resources Corporation” website at: http://www.gasresources.net/.
(6) Thomas Gold: “The Origin of Methane (and Oil) in the Crust of the Earth, USGS Professional Paper 1570, The Future of Energy Gasses, 1993, available at: http://people.cornell.edu/pages/tg21/usgs.html.
(7) “Natural Gas, Oil Occur Naturally & Are Not a Limited Fossil Fuel, Says Prominent Scientist,” American Free Press interview, October 28 ?year, available at: http://www.americanfreepress.net/RFA_Articles/Natu....
(8) Martin J.S. Rudwick: “The Meaning of Fossils: Episodes in the History of Palaeontology,” 2 nd edition, University of Chicago Press, 1976, pp. 1-2.
(9) Indeed, paleontologist Martin Rudwick pointed out years ago that the original meaning of the word “fossil” was “dug up,” NOT objects that today we would recognize as the fossil remains of organisms. (7) Conrad Gesner (1516-1565), “like all his contemporaries and his predecessors back to Aristotle, used ‘fossil’ to describe ‘any distinctive object or material dug up from the earth or found lying on the surface,’” wrote Rudwick in “The Meaning of Fossils.” “Not until the early 19th century was the word ‘fossil,’ without qualification, finally restricted to” what we know as fossils today, even though “today a relic of its former breadth of meaning is still preserved in the use of the term “fossil fuels” for coal and oil.” (7) One increasingly hears the use of a new term, “energy fuels,” instead of “fossil fuels,” which will go a long way in breaking up the locked in thinking about the origin of petroleum.
(10) Thomas Gold: “The Deep, Hot Biosphere” July 1992, available at: http://www.people.cornell.edu/pages/tg21/DHB.html.
(11) Thomas Gold: “Recharging of oil and gas fields.” Available at http://www.people.cornell.edu/pages/tg21/recharging.
* Italy aims to cut deficit to 2.7 pct of GDP by 2012
* Goals now are discipline, debt burden and growth - IMF (Adds details, quotes)
WASHINGTON, May 26 (Reuters) - The International Monetary Fund on Wednesday welcomed Italy's commitment to reduce its fiscal deficit and said containing the public wage bill should be the focus of cost-cutting measures.
As investors and governments fret over the broader effects of Greece's debt crisis, the IMF strongly commended measures adopted by Italy's cabinet late on Tuesday to cut the fiscal deficit to 2.7 percent of gross domestic product by 2012.
Italy's deficit was 5.3 percent of GDP in 2009 -- well below the EU average -- and public debt rose to about 115.8 percent of GDP by the end of 2009, the IMF said. The fiscal deficit is projected at 5.2 percent of GDP in 2010.
"The overarching policy goals now should be to maintain fiscal discipline, reduce the burden of public debt, and raise the economy's long-term growth rate," the IMF said in its annual review of Italy's economy.
The outcome of the IMF review came as Prime Minister Silvio Berlusconi defended his government's 24 billion euro ($29.4 billion) austerity package that targets public workers, saying sacrifices were needed to save the euro EUR=. [ID:nLDE64P1HB]
Italy, along with Portugal and Spain, have introduced deeper budget cuts to try to fend off contagion from the Greek debt crisis. [ID:nLDE64O0R1]
The IMF said Italy's economy was set for a gradual recovery but warned that its banks may face a number of challenges due to weak growth and market turbulence in the euro area.
Italian authorities should encourage banks to strengthen capital, while reforms were needed to boost productivity and reduce the high cost of doing business, the IMF said. (Reporting by Lesley Wroughton; Editing by John O'Callaghan)
WASHINGTON, May 26 (Reuters) - The International Monetary Fund on Wednesday urged New Zealand to step up efforts to limit an increase in public debt, saying it would relieve pressure on monetary policy and the exchange rate.
Staff papers released on Wednesday, which detail IMF annual economic consultations with New Zealand, show the mission advised the government to restrain spending to return the budget to a surplus earlier than planned.
But IMF staff said the government decided its own plan was appropriate. The government has proposed reducing the budget deficits gradually by curbing spending, aiming for a balanced budget by 2016.
Staff recommended returning the budget to surplus by 2014, unless risks to growth rise.
The Fund repeated earlier estimates that the New Zealand dollar NZD= was overvalued by 10 to 25 percent.
"Faster consolidation over the next 3-4 years would take pressure off monetary policy and the exchange rate, thereby helping rebalance the economy toward the tradables sector and contain the current account deficit," according to the papers.
While New Zealand's economy was not as hard hit by the global financial crisis as other advanced countries, the IMF said high household debt and costlier credit could weigh on the growth of private consumption and investment.
The IMF projects that over the medium term, New Zealand's growth is likely to ease to 2.3 percent from about 3 percent in 2010 and 2011.
The biggest downside risks to the growth outlook are if Chinese demand drops sharply, pushing down commodity prices, and if the global economic recovery stalls, the IMF said. (Reporting by Lesley Wroughton; Editing by John O'Callaghan)
The International Monetary Fund (IMF) has raised fresh concerns about Spain's economy, saying "far-reaching" reforms are needed to ensure its recovery.
It said the country faced "severe" challenges, including the need to urgently reform a "dysfunctional" labour market, and its banking sector.
The IMF's comments came after Spanish authorities had to rescue regional lender Cajasur at the weekend.
Last week, Spain's government passed austerity measures to cut its deficit.
Andrew Walker BBC economics correspondent
It is not the first time that the IMF has said Spain needs economic reform, but the language has a much greater sense of urgency
This deficit - the money the administration has to borrow to pay for public services due to insufficient tax returns and other revenues - currently equates to 11% of Spain's economic output.
This is substantially higher than the eurozone ceiling of 3% and another concern that the IMF has highlighted.
It also pointed to Spain's property market slump, heavy indebtedness in the private sector, and weak productivity and competitiveness.'Bluntly'
"It is not the first time that the IMF has said Spain needs economic reform, but the language has a much greater sense of urgency," said BBC economics correspondent Andrew Walker.
"The IMF says bluntly, the Spanish labour market is not working and needs reform of pay bargaining and lower payments for fired workers."
Last week, the Spanish government approved a 15bn euro austerity plan, including a 5% cut to public sector salaries, as it aims to reduce its deficit.
Spain is also having to cope with unemployment of more than 20%.
Concerns about the Spanish economy have to be seen in the light of the recent financial crisis in Greece, which has a deficit amounting to 13.6% of GDP.
Amid fears that Greece could default on its debt payments and that the crisis could spread to Spain, the 27 member states of the European Union and the IMF joined together to agree an emergency package worth 750bn euros ($975bn; £650bn).
This includes access to 440bn euros of loan guarantees for struggling nations, and 60bn euros of emergency European Commission funding.
The remaining 250bn euros comes from the IMF.
The "click" of comprehension triggers a biochemical cascade that rewards the brain with a shot of natural opium-like substances, said Irving Biederman of the University of Southern California. He presents his theory in an invited article in the latest issue of American Scientist.
"While you're trying to understand a difficult theorem, it's not fun," said Biederman, professor of neuroscience in the USC College of Letters, Arts and Sciences.
"But once you get it, you just feel fabulous."
The brain's craving for a fix motivates humans to maximize the rate at which they absorb knowledge, he said.
"I think we're exquisitely tuned to this as if we're junkies, second by second."
Biederman hypothesized that knowledge addiction has strong evolutionary value because mate selection correlates closely with perceived intelligence.
Only more pressing material needs, such as hunger, can suspend the quest for knowledge, he added.
The same mechanism is involved in the aesthetic experience, Biederman said, providing a neurological explanation for the pleasure we derive from art.
"This account may provide a plausible and very simple mechanism for aesthetic and perceptual and cognitive curiosity."
Biederman's theory was inspired by a widely ignored 25-year-old finding that mu-opioid receptors – binding sites for natural opiates – increase in density along the ventral visual pathway, a part of the brain involved in image recognition and processing.
The receptors are tightly packed in the areas of the pathway linked to comprehension and interpretation of images, but sparse in areas where visual stimuli first hit the cortex.
Biederman's theory holds that the greater the neural activity in the areas rich in opioid receptors, the greater the pleasure.
In a series of functional magnetic resonance imaging trials with human volunteers exposed to a wide variety of images, Biederman's research group found that strongly preferred images prompted the greatest fMRI activity in more complex areas of the ventral visual pathway. (The data from the studies are being submitted for publication.)
Biederman also found that repeated viewing of an attractive image lessened both the rating of pleasure and the activity in the opioid-rich areas. In his article, he explains this familiar experience with a neural-network model termed "competitive learning."
In competitive learning (also known as "Neural Darwinism"), the first presentation of an image activates many neurons, some strongly and a greater number only weakly.
With repetition of the image, the connections to the strongly activated neurons grow in strength. But the strongly activated neurons inhibit their weakly activated neighbors, causing a net reduction in activity. This reduction in activity, Biederman's research shows, parallels the decline in the pleasure felt during repeated viewing.
"One advantage of competitive learning is that the inhibited neurons are now free to code for other stimulus patterns," Biederman writes.
This preference for novel concepts also has evolutionary value, he added.
"The system is essentially designed to maximize the rate at which you acquire new but interpretable [understandable] information. Once you have acquired the information, you best spend your time learning something else.
"There's this incredible selectivity that we show in real time. Without thinking about it, we pick out experiences that are richly interpretable but novel."
The theory, while currently tested only in the visual system, likely applies to other senses, Biederman said.
Bill Gross manages the world's largest bond fund (Pimco: managing more than a Trillion Dollars).
As such, he has to be considered one of the world's top bond vigilantes.
But Gross says in his latest investment outlook that austerity may not work to lower sovereign debt:
Granted, sovereign debtor nations are now saying all the right things and in some cases enacting legislation that promises to halt growing debt burdens. Not only Greece and the southern European peripherals, but France, the U.K., Japan, and even the U.S. are sounding alarms that might eventually move them towards less imbalanced budgets and lower deficits as a percentage of GDP.
Still, credit and equity market vigilantes are wondering if in many cases sovereigns haven’t already gone too far and that the only way out might be via default or the more politely used phrase of “restructuring.” At the now restrictive yields of LIBOR+ 300-350 basis points being imposed by the EU and the IMF alike, there is no reasonable scenario which would allow Greece to “grow” its way out of its sixteen tons. Fiscal tightening, while conservative in intent, leads to lower and lower growth in the short run.
Tougher sovereign budgets produce government worker layoffs, pay cuts, reduced pension benefits and a drag on consumption and the ability of the private sector to accept an attempted hand-off from fiscal authorities. Recession becomes the fait accompli, and the deficit/GDP ratio moves ever higher because of skyrocketing risk premiums and a plunging GDP denominator. In many cases therefore, it may not be possible for a country to escape a debt crisis by reducing deficits!
In other words, when a highly-indebted nation implements fiscal austerity and slashes spending, it can increase unemployment and slow spending, deepen the country's recession, and thus cause creditors may look at the country's economy as more risky, thus requiring more of a risk premium, so that the cost of funding it's debt increases.
As Joe Weisenthal notes:
This isn't just a theoretical point. Countries have already experience this (see: Ireland).
And we're back left wondering whether anyone has any understanding of sovereign debt.
Ireland cuts its spending, and its debt problem gets worse.
If austerity isn't the answer, and given that massive new borrowing at high interest rates isn't the answer? what should countries experiencing a sovereign debt crisis do?For starters, the ability to create credit to loan to the beleaguered countries should be taken away from private banks which charge huge fees to their own governments for doing something which every sovereign nation has the inherent power to do itself.
On May 3, 2010, I gave a talk to a class of students studying public health policy at the University of Washington. I began the talk by asking the students how many of them believed that the current healthcare system in America was flawed; everyone in the class raised their hand. I then asked how many of them believed that the recently passed healthcare legislation, supported by President Obama, was a step in the right direction in reforming America's healthcare system. Once again, everyone raised their hand.
While I agreed with the students on the first point, I disagreed that the recently passed legislation was a step in the right direction. My aim in giving the talk was to present the students with a consistent, libertarian, free-market perspective on healthcare reform, covering both the morality and the economics of why it would be desirable to eliminate government interference in the market.
One of the most important factors animating the libertarian rejection of public policy in general is the recognition that any state action must ultimately resort to the use or threat of aggression. As Ludwig von Mises observed,
It is important to remember that government interference always means either violent action or the threat of such action. Government is in the last resort the employment of armed men, of policemen, gendarmes, soldiers, prison guards, and hangmen. The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning.
Libertarians who value justice and recognize that the use of aggression cannot be logically justified must reject all state action in principle — this includes the use of aggression in implementing healthcare policy.
A common argument advanced in support of greater government intervention in the American healthcare market is that a large and growing fraction of the gross domestic product (GDP) is spent on healthcare, while the results, such as average life expectancy, do not compare favorably to the Western nations that have adopted some form of universal healthcare. This argument is spurious for two reasons:
A growing fraction of GDP spent on healthcare is not a problem per se. In the early half of the 20th century, the fraction of GDP spent on healthcare grew significantly as new treatments, medical technology and drugs became available. Growth in spending of this nature is desirable if it satisfies consumer preferences.
Attributing national-health results to the healthcare system adopted by different countries confuses correlation with causation and ignores the many salient variables that are causal factors affecting aggregate statistics (such as average life expectancy). Factors that are likely to be at least as important as the healthcare system include the dietary and exercise preferences of a population.
Another argument commonly used in healthcare-policy debates is that there are almost 46 million people who have no health insurance at all. Again, this is not a problem in and of itself. According to the National Health Interview Survey, 40 percent of those uninsured are less than 35 years old, while approximately 20 percent earn over $75,000 a year. In other words, a large fraction of those who are uninsured can afford insurance but choose not to buy it or are healthy enough that they don't really need it (beyond, perhaps, catastrophic coverage).
The real problem with the American healthcare system is that prices are continually rising, greatly outpacing the rate of inflation, making healthcare unaffordable to an ever-increasing fraction of the population — particularly those without insurance.
If prices in the healthcare market were falling, as they are in other markets such as computers and electronics, the large number of uninsured would be of little concern. Treatments, drugs, and medical technology would become more affordable over time, allowing patients to pay directly for them. Identifying the cause of rising healthcare costs should be the first priority for anyone who seeks solutions to America's broken healthcare system.
As I explained to the students in the public-healthcare-policy class, there are four major causes of rising prices in the healthcare market, and in every case government intervention has either directly caused or greatly exacerbated the problem.
Perhaps the most important cause of rising healthcare prices in America is the employer-provided health-insurance system. The very existence of the system is itself a very strange occurrence and a big hint that government intervention played a key role in its creation. After all, employers do not pay for food or gasoline; why do they pay for healthcare?
Employer-provided health insurance has its origin in a tax policy passed in 1943, which made insurance provided by employers tax free. At the time the United States was engaged in World War II and had enacted wage and price controls, preventing employers from competing for scarce labor using the normal mechanism of offering a higher salary. Instead, businesses used the availability of newly tax-subsidized healthcare as a means of differentiating themselves.
The tax advantages were made even more attractive and fully codified in the 1954 Internal Revenue Code. Over the next few decades, the government's subsidization of employer-provided health insurance lead to the dominance of that model of healthcare delivery, as the following data from the 1965 Sourcebook of Health Insurance Data makes clear.
The most important economic consequence of the existence of the employer-provided health insurance is that consumers are much less likely to discriminate on cost. Beyond the deductible, the employer pays the cost of medical procedures through an insurance company. As anyone who has gone on a business trip knows, if the company is paying, then the employee is likely to purchase a more expensive ticket and accommodation. Where an economy ticket may have sufficed for a personal budget, a business-class ticket becomes far more attractive.
Not only are consumers less likely to discriminate on cost, but providers of healthcare services have greater incentive to provide medical treatments that are only marginally more effective at much higher cost. This is the opposite of how the price mechanism works in a free market, where consumers (who are paying out of their own pocket) search for the cheapest prices and providers work hard to provide services that are equally efficacious but less costly.
While employer-provided health insurance undermined price sensitivity among consumers, it did not completely destroy it. Businesses, being profit-maximizing organizations, have an incentive to push back when costs increase. However, because of privacy concerns, businesses are less able to push back against rising healthcare than they are for plane tickets. An employer is less likely to pry into the cost effectiveness of a particular surgical procedure undertaken by an employee than they would be to pry into the purchase of a substantially more expensive first-class plane ticket.
In 1965, Medicare was passed as part of the Social Security Act, essentially supplying employer-provided health insurance to all citizens above the age of 65. However, the "employer" in this case was the US government, which does not have the same economic incentives as a business, but rather has political incentives. Elected officials have a strong incentive to promise their elderly constituents an expansion in the range of treatments covered by Medicare, as well as to lower the deductible that Medicare consumers pay out of their own pocket. Both these factors further undermine a consumer's desire to discriminate on cost when seeking medical treatments.
In 1960, the government covered 21 percent of total medical expenditures with 55 percent coming out of consumer pockets. In 2000, 43 percent were covered by the government with 17 percent coming out of pocket. Unsurprisingly, the passing of Medicare in 1965 almost immediately lead to a precipitous rise in US healthcare spending as a fraction of GDP.
While price sensitivity has widely been undermined in the American healthcare system, there remain some exceptions to the rule, where the normal market mechanism remains intact. I gave two examples to the students of how price sensitivity is working in healthcare today in order to illustrate how it would work in a free market.
The first example was the LASIK corrective-vision procedure, which has become very popular over the last decade. LASIK is an elective procedure that is not covered by standard insurance, and consumers must pay directly for the service — which means that they are much more likely to discriminate between providers both on cost and reported quality of the surgeon. With these incentives in place, the LASIK procedure has been reported to have fallen in cost by over 30 percent during the last decade.
Even more importantly, the quality of the procedure has improved dramatically in that period as providers competed to deliver the most efficacious treatment. According to Erik Gross, an expert in the field of LASIK technology,
Early procedures were not LASIK at all, but uncomfortable surface ablations with no astigmatism correction. Subsequent generations of the procedure increased the treatable range, added correction for astigmatism, correction for hyperopia, the lasikflap to increase stability and comfort, accuracy and safety features, and finally moved to true custom wavefront analysis and correction.
The second example I gave the students was from a personal experience, when I wanted to have a small epidermoid cyst removed from my back. The first practice I visited was a dermatologist's office, which deals primarily with insured customers and can afford to charge exorbitant rates. I explained to the assistant on my first consulting visit that I didn't have health insurance — I choose not to — and asked how much the procedure would cost if I paid cash. She quoted me $700 for a riskless procedure that takes about 15 to 20 minutes to perform, and would not in this instance be performed by the dermatologist, but by the assistant herself. As I explained to the students in the public-health-policy class, the fact that there are very basic procedures that cost the equivalent of $2,100 an hour is a glaring sign that the market's normal price mechanism has been broken.
On the recommendation of a friend, I decided to visit another medical practice, Country Doctor, which deals mostly with lower-income patients who do not have health insurance. Because its customers pay out of pocket, Country Doctor has a much stronger incentive to charge prices that its customers are willing to pay up front. When I had the procedure to remove the cyst done at Country Doctor, it was performed by an actual doctor, and it cost less than $50.
The moral of the story is that price sensitivity is a crucial factor in driving prices down over time. Government policy has undermined price sensitivity, and this has been a very important cause in the rising costs of the American healthcare system.
Licensure is the practice of restricting entry into a market by forcing practitioners and providers to seek permission before doing so. A common fallacy is that medical licensure protects consumers — yet having a license is no assurance of the ability of a person to practice medicine. Some who have received their license decades ago may no longer be fit to practice, demonstrated either by incompetence or lack of continued education.
From its inception, the practice of licensure has been motivated primarily by the control of supply by organized medicine — in particular, the American Medical Association (AMA) — to allow the increase of wages for members of the licensed group. In the early 20th century, for instance, a physician named J.N. McCormack spent several years traveling the United States on behalf of the American Medical Association in an attempt to convince doctors of "The Danger to the Public from an Unorganized and Underpaid Medical Profession."
The restriction of supply and the attendant rise in prices faced by consumers is not the only detrimental factor that can be attributed to the actions of the AMA. As Milton Friedman pointed out,
It is clear that licensure is the key to the medical profession's ability to restrict the number of physicians who practice medicine. It is also the key to its ability to restrict technological and organizational changes in the way medicine is conducted.
In other words, the AMA has sought not only to limit supply, but also to regulate who can practice various aspects of medicine. For instance, many medical procedures and decisions about prescriptions could be handled by nurses or medical technicians rather than doctors, whose labor is more expensive. Licensure limits the extent to which market forces — that is, forces that lead to the cheapest and most effective results for consumers — may determine the most efficient use of doctors, nurses, and technicians.
A recent example of the AMA's use of licensure was their attempt — ostensibly for "patient safety," — to regulate Walmart's creation of low-cost retail clinics by preventing the clinics from operating using only nurse practioners. The practioners would have only been providing very basic medical services, such as administering needles and prescribing drugs, which Van Ruth et al. conclude carries no extra risk to patients.
It is precisely the sort of clinics operated by Walmart that allow consumers — and especially the poorest in society — access to basic, affordable healthcare. By regulating these clinics and reducing the supply of doctors and providers, the AMA has caused higher prices for American consumers of healthcare.
In terms of its cost, obesity is perhaps the largest medical problem in America. Finklestein et al. estimate that medical expenditures for treatment of patients who are either overweight or obese accounted for almost 10 percent of all medical expenditures in 1998, at a cost of 92 billion dollars (in 2002 inflation-adjusted dollars). They also estimate that almost half of all Americans are either overweight or obese, with the numbers in each category growing by 70 percent and 12 percent, respectively, during the decade prior to 2003. Sturm estimates that obese adults incur annual medical expenditures that are 36 percent higher than those of normal weight incur.
One might conclude from these statistics that obesity in America is a clear example of a failure of the free market — that undirected consumers, without the protection of a benevolent government agency, have taken to consuming increasingly high-calorie and unhealthy foods, leading to America's obesity epidemic. However, this specious (yet popular) narrative is contrary to the facts and disregards the crucial role government policy has played in encouraging the production of unhealthy foods supplied to American consumers.
Recent research has uncovered the baneful influence that corn-based sweeteners have had on America's obesity epidemic. It is estimated that Americans consume 73 pounds of corn-derived sweetener per person per year, and as Michael Pollan points out, the growth of corn-based sweeteners is a direct result of the government's farm policy, which subsidizes corn production. A basic consequence of economic law is that when something is subsidized, more of it will be produced. Pollan writes,
Very simply, we subsidize high-fructose corn syrup in this country, but not carrots. While the surgeon general is raising alarms over the epidemic of obesity, the president is signing farm bills designed to keep the river of cheap corn flowing, guaranteeing that the cheapest calories in the supermarket will continue to be the unhealthiest.
Pollan also correctly notes that the calories from high-fructose corn syrup are unhealthier than those from natural sweeteners such as sugar. Research by Powell et al. concludes that "[r]ats with access to high-fructose corn syrup gained significantly more weight than those with access to table sugar, even when their overall caloric intake was the same." Avena, commenting on their study, said that "[o]ur findings lend support to the theory that the excessive consumption of high-fructose corn syrup found in many beverages may be an important factor in the obesity epidemic."
The obesity epidemic in America has been exacerbated by the abundance and relative cheapness of high-fructose corn syrup. The growth of calories produced, and in particular the abundance of unhealthy calories, is not an outcome of the free market but rather the direct — if perhaps unintended — consequence of government farm policy. As Pollan observes,
Since 1977 an American's average daily intake of calories has jumped by more than 10 percent…. This was, of course, the same decade that America embraced a cheap-food farm policy…. Since the Nixon administration, farmers in the United States have managed to produce 500 additional calories per person every day.
Only by removing the subsidies available to corn producers, and allowing local and organic farmers to compete on an even playing field, will healthier calories become more economically attractive to consumers.
A patent is a government-granted monopoly on production. Holders of pharmaceutical patents are free of the strictures of competition when deciding the price at which to sell the drugs they produce. In practice this means that drug companies are able to charge significantly higher prices than they could in a market free of government intervention. Kesselheim et al. estimate that for three drugs alone (amoxicillin, metformin, and omeprazole), the delayed availability of generic alternatives cost Medicaid 1.5 billion dollars between 2000 and 2004.
The following chart illustrates the effect of generic competition on the price of a cocktail of antiretroviral drugs, used to treat HIV, between 2000 and 2001.
Before the availability of a generic competitor the brand cocktail cost over $10,000. Once generic competition was introduced, the price rapidly dropped to $712. The dramatic difference in cost hardly covers the human cost of government-granted monopolies on drug production — namely, the tens of thousands infected with HIV who died for want of affordable treatment.
One common myth in the economics profession is that intellectual-property rights are necessary to foster innovation in the production of ideas. Recent work by Boldrin and Levine and Stephan Kinsella has exploded the fallacies underpinning this widely believed economic shibboleth.
In particular, Boldrin and Levine devote a chapter of their book, Against Intellectual Monopoly, to the pharmaceutical industry. They argue that the actual cost of bringing drugs to market is substantially lower than the estimates produced by the pharmaceutical industry — a group with a vested interest in lobbying for strong patent protections. They also provide evidence that in many instances the existence of patents hinders research in drug production.
Patents are not a natural outcome of the free market but are government-granted monopolies on production. Contrary to conventional economic wisdom, patents are not an unequivocal benefit in fostering the development of ideas. The existence of patents is, on the contrary, a clear contributor to the high cost of medical treatments available to American consumers.
In giving the talk to the class of public-health students, my aim was to disabuse them of the widely held belief that America's healthcare system is an example of a free-market failure and that a free market in healthcare compares poorly to that of government-provided, universal care. In fact, the US healthcare system has endured substantial government intervention — albeit intervention of a different variety than that of Europe or Canada. And the areas in which the government has intervened in the market have seen substantial increases to costs for consumers.
None of the causes of higher prices identified in this essay are adequately addressed by the recently passed healthcare legislation. Indeed, the problem of high costs will be further exacerbated by extending insurance to cover more people and more procedures while also reducing deductibles.
The only solution to increasing costs is to eliminate government interference in the market and to allow the price mechanism to work as it should. Consumers who pay out of their own pocket will search for the cheapest solutions to suit their needs, while providers of healthcare will compete, through constant innovation, to drive prices down and discover the most efficacious treatments.
As the national debt clock ticked past the ignominious $13 trillion mark overnight, Congress pressed to pass a host of supplemental spending bills to, among other things, fund the continuing wars in Afghanistan and Iraq, ramp up security on the U.S.-Mexico border and prevent teacher layoffs.
Taken together, the Democratic-led U.S. Congress is trying to find a way to pass about $300 billion more in unfunded spending before Memorial Day -- a spending spree that rivals anything drunken sailors have been accused of.
The debt-fueled spending would only add to the $13 trillion national debt, which breaks down to $42,000 for the average American.
The spending spree comes three months after President Obama lifted the cap on the amount of money the U.S. can borrow from $12.4 trillion to $14.3 trillion to keep the nation from going into default.
But another intervention may be needed since the administration has projected a $1.56 trillion deficit for the budget year ending Sept. 30 -- a figure likely to grow in the wake of the current spending spree.
The underlying war funding measure that congressional leaders hope to pass by the end of the week would bring the amount provided by Congress for the Iraq and Afghanistan war efforts to $1 trillion.
But lawmakers in both parties are using Obama's war funding request to advance unrelated pet initiatives like a $500 million administration request for border security and an Education Department request for a $23 billion teacher bailout.
In the House, Obama's original $63 billion request for war funding, disaster relief and aid to nations like earthquake-ravaged Haiti and war-torn Afghanistan has swelled under a draft measure being readied for a key panel vote on Thursday.
Democrats such as House Appropriations Committee Chairman David Obey, D-Wis., are pushing $23 billion to help school districts avoid teacher layoffs, along with $6 billion to make up for a funding shortfall in Pell grants for low-income college students and lesser amounts to hire border patrol agents and help Mexico fight drug cartels.
Meanwhile, Senate Republicans are using a sleaker $58.8 billion version of Obama's war funding bill to try to add billions of dollars to boost security along the U.S.-Mexico border.
Since the war funding measure is the only appropriations bill likely to pass before fall, it's being eyed by lawmakers in both parties seeking to deal now with violence along the southern border, the Gulf oil spill disaster and a variety of domestic programs. But the pressure for more spending is running into resistance from lawmakers worried about out-of-control deficits and Congress' reputation for extravagant spending.
"Ninety-eight percent of this bill doesn't meet the requirements of being an emergency designation," said Sen. Tom Coburn, R-Okla., who along with Sen. John McCain, R-Ariz., are offering amendments to pay for the war funding bill.
Coburn said the bill is being described as an "emergency" to use the federal credit card rather than finding a way to budget for the expenses.
"We are going to borrow it from the children of the people who are in Afghanistan and Iraq who are fighting this war," he said."We can always rationalize away the ability to make hard choices. That is what we are doing."
Senate Majority Leader Harry Reid may not allow any votes on amendments in his quest to get the measure passed before the Memorial Day recess. Coburn says he intends to keep up his filibuster, and calls Reid an "obstructionist" for not allowing votes on amendments -- a label often used by Reid and other Democrats for Republicans.
The Senate measure, currently being debated on the floor, blends about $30 billion for Obama's 30,000-troop surge in Afghanistan with more than $5 billion to replenish disaster aid accounts, as well as funding for Haitian earthquake relief, and a down payment on aid to flood-drenched Tennessee and Rhode Island.
Because of the need to attract GOP votes, Democrats have kept the Senate bill fairly "clean," at least as emergency spending bills go. The measure comes in under Obama's requests and won unanimous support from the Appropriations panel this month.
Sen. John Cornyn of Texas is just one of several Republicans seeking to add money for border security. He's offered a $2 billion amendment to award grants to state and local law enforcement agencies, provide new unmanned surveillance aircraft, and hire hundreds of immigration and border agents, among other steps.
McCain offered an amendment to provide $250 million to send 6,000 National Guard troops to the Mexican border. Democrats will consider countering with a proposal of their own in the wake of a White House announcement that Obama would seek $500 million to send 1,200 guardsmen to the border and take other border security steps.
Lawmakers also have loaded up a separate bill that originally was intended to extend expired tax breaks and provide expanded unemployment benefits through the end of the year. The bill has grown into a nearly $200 billion grab bag of unfinished business that lawmakers hope to complete before Memorial Day.
The bill includes $1 billion for summer jobs programs, $1.5 billion in aid to farmers who had crops damaged by natural disasters and $4.6 billion to settle two long-running lawsuits against the government, one by black farmers claiming discrimination and one by American Indians over the government's management of their land.
In all, the bill would add $134 billion to the federal budget deficit, drawing opposition from Republicans and some Democrats. House leaders said Tuesday they were determined to pass the bill this week to avoid allowing jobless benefits to expire for thousands of people.
But the measure has been delayed while House leaders round up support, which could mean the Senate might have too little time to act before next week's Memorial Day recess.
Fox News' Trish Turner and The Associated Press contributed to this report.
Recent developments in the euro zone that increasingly look like they will lead to the restructuring (if not the collapse) of one of the world’s major currencies and the potential for this “contagion” to move first north to the U.K. and then west to the U.S. have many people wondering what’s gone wrong with the global monetary system.
How could advanced Western economies have run into such trouble?
With trillions of dollars in debt now transferred from
public private sector balance sheets onto those of governments (where very different rules apply), could the problems seen in mainland Europe today spread to the British Isles and then to the U.S. where fiscal and economic conditions are, arguably, even worse?
Despite all the talk about slashing budgets in the former and upward revisions to economic growth forecasts in the latter, it seems clear that these two Anglo Saxon nations are not yet clear of danger and, if that danger comes, we may see something that rhymes not-so-nicely with the events of late-2008 as history is not prone to repeating exactly.
How did it come to this point of staring into the abyss and, perhaps, falling in?
In a word, the problem is “debt”.
Too much of it.
There are those who say that, like many things in life, a little debt is a good thing and this is very true.
Credit markets connect investors and entrepreneurs, both of whom presumably understand the risk that is involved, and when a good idea gets a little money behind it, wonderful things can happen – economic growth, job creation, and rising standards of living to name just a few.
And borrowing by governments is not necessarily a bad thing.
We all like new roads and bridges and, just like when a family buys a house, it’s difficult to make such big outlays with cash. Governments borrow to pay for costly infrastructure work just as households finance the purchase of new homes costing two or three times their annual income (at least that’s the way it used to be).
New Debt Not the Same as the Old Debt
Unfortunately, the borrowing and spending that has gone on over the last few decades in most of the Western world (not coincidentally, since the entire global monetary system lost its last tether to anything resembling a system of sound money) seems far removed from any of these “a little debt goes a long way” examples that, by and large, benefit society.
Over the last 30 years, a rapid expansion of credit and debt has been one of the major reasons why economies have grown at such an impressive pace and why asset prices have risen so high, but all the new debt hasn’t gone to build bridges and buy modest homes.
Up until recently, no one really seemed to notice the difference.
Having gone on for so long, it’s no wonder that most economists, analysts, and investors so quickly extrapolate these prior decade’s results into the future. But, a judgment like that assumes the system as we’ve come to it know since the days of the “Reagan Revolution” is sustainable and, after the events of the last few years, it should be clear that this is now at least a question that should be asked.
Sadly, too few are asking that question.
Now, just a year or so removed from the worst financial crisis since the Great Depression, we seem to be quickly approaching some sort of debt threshold – a “point of no return” that may have already been reached in parts of Europe – where no one believes that the massive amount of debt can still be serviced, let alone paid back.
Of course, unlike companies and individuals, sovereign governments with their own currencies have the option of paying back their debt with a currency that they can depreciate – by printing up more of it.
That certainly seems to be the explanation for why the “wolf pack” – those CDS, FOREX, and bond traders who insist on making ever larger bets against whichever country they deem the weakest – have left the U.K. and the U.S. alone.
At least, so far.
Anyone looking solely at deficits as a percent of GDP or debt-to-GDP ratios would surely have concluded that it’s not the eurozone (as a whole) that has a debt problem, it’s the U.K. and the U.S., both of whom seem happy to continue whistling past the graveyard.
Yes, there’s Japan too, but, as should be clear by now, being able to finance government deficits from domestic savings makes a big difference in when your “point of no return” starts to cause big problems.
Many claim that, under the stewardship of Ben Bernanke, we’ve avoided another Great Depression in the U.S. and that the borrowing and creation of trillions of dollars in order to do so is simply “the cost of doing business”.
Some say, “Hey, financial market panics happen every so often, and this one will just cost a little more to clean up than the previous ones.”
For today’s policymakers, the fact that trillions of dollars in debt have been transferred from the private sector to the public sector seems to be but a footnote to the history that is now being written and, while there is mounting concern about who’s going to bail out the central banks who bailed out the governments who bailed out the private sector, there’s far too little serious consideration of the possibility that all this amounts to simply rearranging the deck chairs on the Titanic.
A World of Debt Addicts
There is far too little admission of the basic problem here.
The entire West has become a group of debt addicts – governments, corporations, and individuals – and, instead of trying to have an intervention, we’re just giving lip service to the idea that we’ve spent too much money that we didn’t have and that we can’t continue to do so.
Like a true addict in desperate need of an intervention, current thinking is that, after being nursed back to health from what was a very nasty hangover – the worst yet – we’ll kick this habit for good, but, doing so now would just be too much to bear.
Unfortunately, we’ve heard that all before when the hangovers were far less extreme and, at this point in the discussion, perhaps the loss of brain cells due to excess consumption of alcohol is a more appropriate metaphor…
The current path is clearly unsustainable.
Why doesn’t someone just stand up and say, “Let’s just have a miserable next five years and clean up this mess rather than relegating the entire developed world to a lost decade … or two?”
Because the path back to a more reasonable lifestyle – where income better matches up with outlays and printing presses need not be run so often – is believed to be too hard.
Politicians have made promises that they can’t keep but they keep getting reelected because a lot of people in the world really believe that there is such a thing as a free lunch.
Now, that may be changing and one need look no further than in the U.S. where a growing percentage of the citizenry seem to like the idea of getting less from their government before the fact.
How they react when the cuts begin to affect them is a discussion for another day.
But, when you think about it, why should wealthy individuals collect social security when they don’t need it and why should public employees be so handsomely compensated when the government must borrow money to do so?
We’ve come to a crossroads where an unsustainable system of expanding credit and debt seems to have reached its upper bound and there are no pain-free ways to make the system sustainable again.
The problem is too much debt and the solution involves pain.
It’s time that we all got used to that idea.
MONTREAL - A respected member of Montreal’s Jewish community and longtime educator at John Abbott College is to undergo a personality evaluation before lawyers discuss his sentence in the fall for child pornography crimes.
Bill Surkis, 70, will be back in court Sept. 27 after pleading guilty Wednesday to one count of possession of child pornography and another of accessing pornography on the Internet. A third count of distribution, which was added Wednesday, was also stayed.
In a brief hearing in Quebec Court at the Montreal courthouse, Crown prosecutor Cynthia Gyenizse read aloud a joint statement of fact, while Surkis, dressed in a suit, showed no emotion.
A woman who answered the phone at B’nai Brith, where Surkis was once regional director of Quebec, curtly distanced the organization from the situtation.
“He was neither employed nor involved with B’nai Brith during the entirety of the period covered by these allegations,” she said, reading from a prepared statement, which was attributed to no one in particular.
When asked when Surkis was regional director, the woman replied “we have no more comment.”
After buying a computer at a Best Buy store in June 2008, Surkis returned it a couple of weeks later, complaining it was running slowly.
While the technician was going through the hard drive, he discovered several videos and photos depicting young boys and girls engaged in sexual acts.
Police were called in and the computer was held until Surkis showed up several months later. Surkis, who was the academic dean of John Abbott College for 22 years, was charged last May, released on bail and ordered to obey several conditions.
He is prohibited from being in the presence of minors or in any park or playground where minors congregate, is forbidden from using his computer or any other equipment to access the Internet except for work purposes, and is barred from Internet cafés.
He was ordered to give up his passport and remain in Quebec unless given written permission by the prosecutor.
At the time of his arrest, his lawyer, Steven Slimovitch, said his client was downloading the videos to educated himself before giving public lectures on the issue of abuse on the Internet.
“In order to study the abuse problem, the root problem, you have to go in deeper and that’s what he was doing,” he said at the time.
Wednesday, Slimovitch refused to comment.
Surkis faces a mandatory minimum sentence of 14 days and a maximum sentence of five years in jail.