Launch code for the US strategic nuclear arsenal was all zeroes until 1977

USA versus China: Wage Convergence, Wealth Divergence and Global Hegemony

No US Currency, Please

Yesterday, I outlined a scenario whereby US wages might converge with those in China and other developing nations within ten years. The underlying assumptions were:

(1) That China's economy continues to grow by 10% a year and that, in line with the growth of the economy, Chinese wages rise by a factor of two to three over the next ten years.

(2) That inflation in America continues at around 10% a year, but that nominal wages remain flat, resulting in a cut in real wages of about two-thirds in ten years.

Not considered was America's roaring underground economy, where wages are already little better than those in the developing world.

Fueled by mass illegal immigration, with every indication of encouragement by the US Federal Government, the underground economy, which already accounts for 7% of US GDP, will increasingly impact wages and employment opportunities in the legal economy. One consequence will likely be elimination of minimum wage laws that deny the least skilled American workers access to the labor market. This, in turn, will help drive average wages lower.

If US incomes fall, so also will consumption, whereas, with rising incomes, Chinese consumption will grow.

If, when wages converge, consumption converges also, the rate in both countries would likely settle about midway between America's current rate of 60 to 70% of GDP and and China's 36% of GDP, or about 50% if GDP.

A fall in US consumption equal to 15% of GDP would, all other things being equal, imply a similar reduction in US GDP. However, as US wages converge with those of the developing world, a recovery in US manufacturing and the tradable services sector of the economy should be apparent.

By 2020, therefore, the American economy could be on track for renewed growth, with American firms competing with the newly developed nations on a level playing field so far as wages are concerned.

But by then, China's economy will be several times the size of America's, which calls in question the long-term feasibility of America's drive for global hegemony.

That question will be resolved by the ability of the United States to maintain a UN-led Western coalition.

A Western coalition for World governance was the goal of the British Rhodes-Milner group, who, in the aftermath of WW1, spearheaded the movement for the creation of the League of Nations.

The League, which lacked American participation, utterly failed in its mission.

Whether NATO, under US leadership, will do any better remains to be seen.

US Economy: Expecting the Unexpected

Not the 72 Virgins we were expecting. Source

Last Thursday, the Wall Street Journal reported "an unexpected increase in first-time filings for unemployment compensation."

It was not stated why this was unexpected, but according to a CNN poll conducted earlier this month, 48 per cent of Americans expect another Great Depression within a year. And it is likely that, of the other 52%, most fail to see the immediate future as absolutely rosy.

In assessing the outlook for the US economy, should one not, then, be expecting the unexpected?

This year China's economy overtook America's.

China's economy is growing at around 10% per year, America's real economy is stagnant or shrinking.

Corporate profits plus workers' wages are inversely related. Capital and technology thus flow from where wages are high to where wages are low.

Average wages are about $4000 per year in China, about $40,000 in America.

America and other developed nations will thus continue bleeding jobs, technology and capital to the developing world until wages equalize. So the big question is how long will that take? How long will Americans have to expect the unexpected, in terms of declining wages and job opportunities?

If China's economy is growing by 10% a year, real wages can grow at a similar pace, which means that they might double every seven years. At that rate it would take 21 years for wages in China to reach 80% of current American wages.

But if, while nominal wages in America are stagnant, real inflation in America is actually 10% annually, then American wages will decline by half in 7 years.

Shadow Government Statistics estimates real US inflation has been in the vicinity of 10% since 2008, and that the current trend as upward.

It is possible, therefore, that American and Chinese wages will be near convergence within ten years, from which we conclude that Americans had better expect the unexpected until about 2020. During the interim, they can expect continued near depression unemployment rates -- which will keep the lid on the demand for even nominal wage increases -- and a cut of something like 50% in real wages.

See also: USA Boom or Bust: The Next Decade

Motion Aftereffect Explained!

In an earlier post (Turtles All The Way Down: Deep Fractal Zoom), I noted that when I stopped the animated zoom on a Mandelbrot Set fractal, the stationary image appeared to shrink, and I asked if anyone knew why. Apparently, no one did, but now they do.

The motion aftereffect illusion, was known, apparently, to the ancient Greeks, but only now has anyone claimed to know its cause. In this week's Proceedings of the US National Academy of Sciences, Davis Glasser, Duje Tadin, James Tsui and Christopher Pack of the Montreal Neurological Institute, report that:

...25 ms of motion adaptation is sufficient to generate a motion aftereffect, an illusory sensation of movement experienced when a moving stimulus is replaced by a stationary pattern. This rapid adaptation occurs regardless of whether the adapting motion is perceived. In neurophysiological recordings from the middle temporal area of primate visual cortex, we find that brief motion adaptation evokes direction-selective responses to subsequently presented stationary stimuli. A simple model shows that these neural responses can explain the consequences of rapid perceptual adaptation. Overall, we show that the motion aftereffect is not merely an intriguing perceptual illusion, but rather a reflection of rapid neural and perceptual processes that can occur essentially every time we experience motion.

Although any motion, even motion so brief as to be imperceptible, can create an aftereffect, the magnitude of the aftereffect varies greatly with the stimulus. In the following video, the magnitude and persistence of the motion aftereffect seems to vary according to where the sequence is halted. One sees striking aftereffects on halting the motion between about 4 min 00 sec and 4 min 30 sec, and at many other places too.

USA Boom or Bust: The Next Decade

Hooverville of the 21st Century

Will the U.S. economy ever recover?

"I'm a huge bull on America" declared Warren Buffett in September 2010, while ruling out the possibility of a double dip recession.

But 48% of Americans think America is already entering the next great depression.

And they, according to Bill Bonner, are optimists who have failed to notice that America has been in a recession for the last ten years, with no sign of a letup for many years to come.

Who to believe?

Perhaps everyone's right.

Bonner appears to be correct in saying the US GDP has gained flip all in the last ten years.

Self-employment: USA 2011

Meantime, unemployment, homelessness, and outright poverty have become widespread features of the American economic landscape.

And as millions of the unemployed run out of unemployment benefits, while losing hope of reemployment, and as millions more illegal immigrants flood in, the outlook for tens of millions of Americans becomes increasingly grim.

But on the bright side, corporate profits have never been higher. Since the low of 2002, IBM's share price is up 300%, Apple's is up 3000% (yes that's right, three thousand percent), and even the Dow and Buffett's stodgy Berkshire Hathaway are up 50%.

So what is going on, and why?

Two words that I've never heard Warren Buffett use explain it: "outsourcing" and "off-shoring".

What these words mean for the American economy I have already discussed in Why China Booms While America Slumps. But the chief point is made in two sentences:

In 1993 Chinese wages were about 3% of those in America.

and since 1993,

Chinese manufacturing wages have been driven up only marginally, reaching US$134 per month in 2004 or just 4.9% of the US rate of US$2732 per month.

Here lies the answer to the dichotomy of view between Buffett and the common man.

As David Ricardo explained:

As the wages of labour fall, the profits of stock rise, and they be together always of the same value...

Cheap labor in China and throughout the developing world means mega profits for American business and poverty for a tens of millions of Americans, and the hardship for millions of Americans is made worse by minimum wage laws that prevent those with skills of limited value from competing on price with Asian, African or Middle-Eastern labor.

Corporate profits hit a record high in 2011

How will this end?

Two possibilities:

(1) Revolution.

(2) Wage equilibration in the tradable goods and services sectors of the economy between America and other Western economies, on the one hand, and the developing world on the other hand, which would mean a fully globalized economy with American living standards more or less matching those in Shanghai, Mumbai, Istambul and Cape Town.

The second alternative is clearly the objective of the ruling elite. So how will the transition be accomplished?

Wages, as Lord Maynard Keynes observed, are sticky on the downward side. Inflation is therefore almost certainly necessary to achieve the transition. This cuts real wages without lowering the dollar amounts paid in wages. It is achieved by printing dollars.

The printing press provides a technology that Ben Bernanke's Fed is proud to possess. We have seen QE 1, aka Money Printing 1, and QE 2. In due course expect to see QE 3, 4, 5 ...

As dollars spew out, the exchange value of the US dollar will fall. It has been falling for years, but now it should fall faster. The result should be a fall in the price of American exports in terms of other currencies and a rise in the cost of America imports in terms of dollars. The net effect should be a gradual restoration of American manufacturing with increasing exports and declining imports.

Trouble is, China, now the workshop of the World, is inflating as fast as Ben Bernanke can crank the press at the Federal Reserve. Net result? Chinese imports remain just as competitive in the American market as before.

What to do? Print even more US dollars.

This will be bad for China, since it will depreciate the hoard of dollars they have accumulated to prevent the Renmimbi from rising against the dollar. It'll serve them right.

Chart source: Shadow Government Statistics

But it will be good for many US equities, though not necessarily for those in the consumption sector, since American consumption is about to undergo a permanent decline.

And it will be very bad for those with cash.

Is gold an alternative?

Maybe.

But remember, gold is not money. No one is promising to pay the bearer any particular number of dollars for an ounce of gold.

The price of gold is the creation of market psychology. At six times the price of only a decade ago, the price of gold could crater anytime.

See also:
Why China booms while America slumps
America's inflationary depresssion

Sherlock Holmes And The Alderney Street Mystery

Gareth Williams

Winter Patriot has an extraordinary and extraordinarily readable fictionalized account of the extraordinary, unexplained 2010 murder of Welsh math wizz and cryptanalyst Gareth Williams. To quote from the preface to this book-length work:

On August 23, 2010, Metro Police entered a well-appointed flat at 36 Alderney Street, in the heart of London. In the flat they found an ensuite bathroom, in the bathtub they found a padlocked bag, and in the bag they found the body of Gareth Wyn Williams.

Williams, a brilliant mathematician from Anglesey, Wales, worked in Cheltenham for GQHC, Britain's domestic eavesdropping agency. He was living in London on a one-year secondment to MI6, Britain's Secret Intelligence Service, and the block of flats in which his body was discovered was an MI6 "safe house".

Apparently uninterested in potential national-security angles, the police immediately announced they were looking for clues to Williams' mysterious death in the details of his private life. But they didn't make much headway. A month after his body was found, they still hadn't determined the cause of death, although they had admitted the case was "complex" and "unexplained."

It seemed like a job for Sherlock Holmes and Dr. Watson.

Fortunately, they happened to be available.

The story begins here with: A letter from Anglesey.

As with any good detective story, most readers will remained puzzled until almost the last page as to how the author will manage to draw together the threads to achieve a convincing denouement. But in this case, the tension is heighten by the realization that this is a true story, but that the identify of the murderer(s) has never been established.

Despite the apparent difficulty, the trick is very neatly accomplished and without, apparently, laying the author open to a charge of libel.

It should be remembered, however, that although artistically well conceived, the identification of the murderers is based not on conclusive evidence but on the the author's imaginative reconstruction of events. Its validity must, therefore, be regarded as far from certain.

According to Winter Patriot's story, which is based on the accurate presentation of publicly available information, Gareth Williams was a remarkable straight-forward, if somewhat naive individual, with a strong sense of right and wrong. It is postulated that as an analyst dealing with intercepted communications of terrorist suspects, he realized that the police account of the liquid bomb plot was fraudulent.

Indignant at the unjust conviction of eight men for their alleged role in this phony plot, Williams in some unspecified way betrayed the British security apparatus. As a consequence, he also became a victim of the fake liquid bomb plot, being liquidated -- literally -- by his own employers.

This, however, is only one of many alternative scenarios, and not the most flattering to the memory of the victim.

An entirely different picture could have been painted on the assumption that Williams, who was seconded to the US to participate in secret work with the NSA, fell afoul of his US hosts who liquidated him and, sending a strong warning to his bosses, returned the body by diplomatic pouch to be dumped with contempt in the bath tub of an MI6 safe house.

Embarrassed, the Brits would have had no option but to execute a cover up, and did so with a story that was neither believable, nor perhaps, intended to be believed.

But that is one of a virtually unlimited number of alternative hypotheses. WikiSpooks offers half a dozen other more or less plausible accounts involving Russians, Israelis and sundry others.

The truth, however, is unlikely ever to be revealed. Williams was a spook and spooks, as Aangirfan reports, have a way of dying under strange circumstances.

Ha! But the game is still afoot.

As Winter Patriot points out (see comment), the story continues. Perhaps, by dint of Holmsean logic, the truth will yet emerge.

Oligarchs for Global Government

By Andrew Gavin Marshall

To say we were striving for a one-world government is exaggerated, but not wholly unfair. Those of us in Bilderberg felt we couldn't go on forever fighting one another for nothing and killing people and rendering millions homeless. So we felt that a single community throughout the world would be a good thing.

Denis Healey, 30-year member of the Steering Committee of the Bilderberg Group

The ‘Foundations’ of the Bilderberg Group

The Bilderberg Group, formed in 1954, was founded in the Netherlands as a secretive meeting held once a year, drawing roughly 130 of the political-financial-military-academic-media elites from North America and Western Europe as “an informal network of influential people who could consult each other privately and confidentially.” Regular participants include the CEOs or Chairman of some of the largest corporations in the world, oil companies such as Royal Dutch Shell, British Petroleum, and Total SA, as well as various European monarchs, international bankers such as David Rockefeller, major politicians, presidents, prime ministers, and central bankers of the world. The Bilderberg Group acts as a “secretive global think-tank,” with an original intent to “to link governments and economies in Europe and North America amid the Cold War.”

In the early 1950s, top European elites worked with selected American elites to form the Bilderberg Group in an effort to bring together the most influential people from both sides of the Atlantic to advance the cause of ‘Atlanticism’ and ‘globalism.’ The list of attendees were the usual suspects: top politicians, international businessmen, bankers, leaders of think tanks and foundations, top academics and university leaders, diplomats, media moguls, military officials, and Bilderberg also included several heads of state, monarchs, as well as senior intelligence officials, including top officials of the CIA, which was the main financier for the first meeting in 1954. ...

Read more

Barmy Blog Posts, No. 43: Cucumber Economics Predict Russia's Demise

US Astronaut, Tracy Caldwell, returned to Earth from the
International Space Station, courtesy of Russia's Space Agency.
Image source.

By a brilliant deductive process involving consideration of Russia's consumption of cucumbers, Craig Murray, former UK Ambassador to Uzbekistan, reaches the amazing conclusion that Russia is an economic basket case, which is in both relative and absolute decline, and more closely comparable with Nigeria than with a modern industrial economy.

His argument is this:

Russia has banned the import of Spanish cucumbers due to the E. coli contamination scare, thereby revealing that "Russia, which has a greater area of unforested potential arable land per head of population than any other major state, is highly dependent on vegetable imports."

This "astonishing" fact, says Murray, "is indicative of a huge malaise." Russia, he concludes, "is not a great power in decline. It is a third world country in decline."

Wow, the power of the diplomatic mind.

See how it ignores the trivial, the nukes, the ICBM's, the tens of thousands of miles of Russian-built pipelines upon which Western Europe depends for around one third of its oil and gas.

Observe its contempt for mundane practicality, the fact, for instance, that in spring, vegetable crops in Southern Europe are somewhat more advanced than in Asiatic Russia.

No, merely from Russia's refusal to consume toxic cucumbers, the future of world events inevitably flows.

But for those whose processes of thought follow a more prosaic path, here are comparative stats for Russia and the UK, which must be telling us something.

2010 ECONOMIC STATS (Source: CIA World Fact Book) Russian numbers followed by UK numbers in parenthesis.
************************************************************
GDP (PPP): $2.23 trillion ($2.173 trillion)
Labour force in industrial occupations: 31% (18.2%)
Investment rate as % GDP: 18.9% (14.4%)
GDP Growth 2010: 4% (1.3%)
Population below the poverty line 13% (14%)
External debt: $0.5 trillion ($8.9 trillion)
************************************************************

Related: 

CanSpeccy: Annoying Bureaucrats No. 23: British Library Security Officials

Mainstream Media Inversion of Reality: the Mumbai Massacre, Zionists and Nazis, Fukushima

An amazing report by James Corbett on the links between US intelligence and the man who plotted the Mumbai massacre (as posted by Aangirfan).

Also from Aangirfan, via Mr. Friend's blog, Kevin Barrett's interview with Lenni Brenner about the virtually unknown Nazi-Zionist collaboration during WW2, as evidenced by the book 51 Documents: Zionist Collaboration with the Nazis, which Brenner assembled and edited.

Lenni Brenner's 1983 book Zionism in the Age of the Dictators is available in PDF format here, and in HTML format here.

Here is Lenni Brenner's CounterPunch article, on the importance for the anti-war movement of understanding the nature of Zionism.

And Exerpts from the Play Perdition, based on Brenner's book Zionism in the Age of the Dictators, and a debate between Lenni Brenner, and the Zionist Martin Gilbert -- Winston Churchill's official biographer and a historian of the Holocaust -- and others.

In the debate, Brenner's Zionist critics accuse him of dancing on the graves of the dead and of being a self-hating Jew.

They say it is all lies that Zionist leaders collaborated with the Nazis in the extermination of one million Hungarian Jews in order to save themselves and a few thousand Jews allowed to emigrate illegally, and that in any case the Zionists had no other choice.

They also say that the Zionist leadership were face with the necessity of making intolerable decisions without time for reflection.

In other words, the Zionists were routed.

See also, Ezra Levant's article on George Soros, the Nazi Jew, who collaborated with the Nazis in dispossessing Jews before they were sent for extermination.

And one more link derived from the tireless research of Aangirfan:

Fukushima: It's much worse than you think, which -- if it's not a contradiction in terms -- is what we thought, since the media are careful to avoid the subject of Fukushima almost entirely, and governments are releasing little if any information on the radioactivity we are now eating and breathing.

Much of the info. about Fukushima that does leak out is aggregated at ENENEWS.COM

Economic Growth, Asset Markets and the Credit Accelerator

From Steve Keen's DebtWatch

By Steve Keen

Neoclassical economists ignore the level of private debt, on the basis of the a priori argument that “one man’s liability is another man’s asset”, so that the aggregate level of debt has no macroeconomic impact. They reason that the increase in the debtor’s spending power is offset by the fall in the lender’s spending power, and there is therefore no change to aggregate demand.
Lest it be said that I’m parodying neoclassical economics, or relying on what lesser lights believe when the leaders of the profession know better, here are two apposite quotes from Ben Bernanke and Paul Krugman.
Bernanke in his Essays on the Great Depression, explaining why neoclassical economists didn’t take Fisher’s Debt Deflation Theory of Great Depressions (Irving Fisher, 1933) seriously:

Fisher’s idea was less influential in academic circles, though, because of the counterargument that debt-deflation represented no more than a redistribution from one group (debtors) to another (creditors). Absent implausibly large differences in marginal spending propensities among the groups, it was suggested, pure redistributions should have no significant macro-economic effects… (Ben S. Bernanke, 2000, p. 24)

Krugman in his most recent draft academic paper on the crisis:

Given both the prominence of debt in popular discussion of our current economic difficulties and the long tradition of invoking debt as a key factor in major economic contractions, one might have expected debt to be at the heart of most mainstream macroeconomic models—especially the analysis of monetary and fiscal policy. Perhaps somewhat surprisingly, however, it is quite common to abstract altogether from this feature of the economy. Even economists trying to analyze the problems of monetary and fiscal policy at the zero lower bound—and yes, that includes the authors—have often adopted representative-agent models in which everyone is alike, and in which the shock that pushes the economy into a situation in which even a zero interest rate isn’t low enough takes the form of a shift in everyone’s preferences…

Ignoring the foreign component, or looking at the world as a whole, the overall level of debt makes no difference to aggregate net worth — one person’s liability is another person’s asset. (Paul Krugman and Gauti B. Eggertsson, 2010, pp. 2-3; emphasis added)

They are profoundly wrong on this point because neoclassical economists do not understand how money is created by the private banking system—despite decades of empirical research to the contrary, they continue to cling to the textbook vision of banks as mere intermediaries between savers and borrowers.
This is bizarre, since as long as 4 decades ago, the actual situation was put very simply by the then Senior Vice President, Federal Reserve Bank of New York, Alan Holmes. Holmes explained why the then faddish Monetarist policy of controlling inflation by controlling the growth of Base Money had failed, saying that it suffered from “a naive assumption” that:

the banking system only expands loans after the [Federal Reserve] System (or market factors) have put reserves in the banking system. In the real world, banks extend credit, creating deposits in the process, and look for the reserves later. The question then becomes one of whether and how the Federal Reserve will accommodate the demand for reserves. In the very short run, the Federal Reserve has little or no choice about accommodating that demand; over time, its influence can obviously be felt. (Alan R. Holmes, 1969, p. 73; emphasis added)

The empirical fact that “loans create deposits” means that the change in the level of private debt is matched by a change in the level of money, which boosts aggregate demand. The level of private debt therefore cannot be ignored—and the fact that neoclassical economists did ignore it (and, with the likes of Greenspan running the Fed, actively promoted its growth) is why this is no “garden variety” downturn.
In all the post-WWII recessions on which Lazear’s regression was based, the downturn ended when the growth of private debt turned positive again and boosted aggregate demand. This of itself is not a bad thing: as Schumpeter argued decades ago, in a well-functioning capitalist system, the main recipients of credit are entrepreneurs who have an idea, but not the money needed to put it into action:

“[I]n so far as credit cannot be given out of the results of past enterprise … it can only consist of credit means of payment created ad hoc, which can be backed neither by money in the strict sense nor by products already in existence…

It provides us with the connection between lending and credit means of payment, and leads us to what I regard as the nature of the credit phenomenon… credit is essentially the creation of purchasing power for the purpose of transferring it to the entrepreneur, but not simply the transfer of existing purchasing power.” (Joseph Alois Schumpeter, 1934, pp. 106-107)

It becomes a bad thing when this additional credit goes, not to entrepreneurs, but to Ponzi merchants in the finance sector, who use it not to innovate or add to productive capacity, but to gamble on asset prices. This adds to debt levels without adding to the economy’s capacity to service them, leading to a blowout in the ratio of private debt to GDP. Ultimately, this process leads to a crisis like the one we are now in, where so much debt has been taken on that the growth of debt comes to an end. The economy then enters not a recession, but a Depression.
For a while though, it looked like a recovery was afoot: growth did rebound from the depths of the Great Recession, and very quickly compared to the Great Depression (though slowly when compared to Post-WWII recessions).
Clearly the scale of government spending, and the enormous increase in Base Money by Bernanke, had some impact—but nowhere near as much as they were hoping for. However the main factor that caused the brief recovery—and will also cause the dreaded “double dip”—is the Credit Accelerator.
I’ve previously called this the “Credit Impulse” (using the name bestowed by Michael Biggs et al., 2010), but I think “Credit Accelerator” is both move evocative and more accurate. The Credit Accelerator at any point in time is the change in the change in debt over previous year, divided by the GDP figure for that point in time. From first principles, here is why it matters.
Firstly, and contrary to the neoclassical model, a capitalist economy is characterized by excess supply at virtually all times: there is normally excess labor and excess productive capacity, even during booms. This is not per se a bad thing but merely an inherent characteristic of capitalism—and it is one of the reasons that capitalist economies generate a much higher rate of innovation than did socialist economies (Janos Kornai, 1980). The main constraint facing capitalist economies is therefore not supply, but demand.
Secondly, all demand is monetary, and there are two sources of money: incomes, and the change in debt. The second factor is ignored by neoclassical economics, but is vital to understanding a capitalist economy. Aggregate demand is therefore equal to Aggregate Supply plus the change in debt.
Thirdly, this Aggregate Demand is expended not merely on new goods and services, but also on net sales of existing assets. Walras’ Law, that mainstay of neoclassical economics, is thus false in a credit-based economy—which happens to be the type of economy in which we live. Its replacement is the following expression, where the left hand is monetary demand and the right hand is the monetary value of production and asset sales:

Income + Change in Debt = Output + Net Asset Sales;

In symbols (where I’m using an arrow to indicate the direction of causation rather than an equals sign), this is:

This means that it is impossible to separate the study of “Finance”—largely, the behaviour of asset markets—from the study of macroeconomics. Income and new credit are expended on both newly produced goods and services, and the two are as entwined as a scrambled egg.
Net Asset Sales can be broken down into three components:

• The asset price Level; times
• The fraction of assets sold; times
• The quantity of assets

Putting this in symbols:

That covers the levels of aggregate demand, aggregate supply and net asset sales. To consider economic growth—and asset price change—we have to look at the rate of change. That leads to the expression:

Therefore the rate of change of asset prices is related to the acceleration of debt. It’s not the only factor obviously—change in incomes is also a factor, and as Schumpeter argued, there will be a link between accelerating debt and rising income if that debt is used to finance entrepreneurial activity. Our great misfortune is that accelerating debt hasn’t been primarily used for that purpose, but has instead financed asset price bubbles.
There isn’t a one-to-one link between accelerating debt and asset price rises: some of the borrowed money drives up production (think SUVs during the boom), consumer prices, the fraction of existing assets sold, and the production of new assets (think McMansions during the boom). But the more the economy becomes a disguised Ponzi Scheme, the more the acceleration of debt turns up in rising asset prices.
As Schumpeter’s analysis shows, accelerating debt should lead change in output in a well-functioning economy; we unfortunately live in a Ponzi economy where accelerating debt leads to asset price bubbles.
In a well-functioning economy, periods of acceleration of debt would be followed by periods of deceleration, so that the ratio of debt to GDP cycled but did not rise over time. In a Ponzi economy, the acceleration of debt remains positive most of the time, leading not merely to cycles in the debt to GDP ratio, but a secular trend towards rising debt. When that trend exhausts itself, a Depression ensues—which is where we are now. Deleveraging replaces rising debt, the debt to GDP ratio falls, and debt starts to reduce aggregate demand rather than increase it as happens during a boom.
Even in that situation, however, the acceleration of debt can still give the economy a temporary boost—as Biggs, Meyer and Pick pointed out. A slowdown in the rate of decline of debt means that debt is accelerating: therefore even when aggregate private debt is falling—as it has since 2009—a slowdown in that rate of decline can give the economy a boost.
That’s the major factor that generated the apparent recovery from the Great Recession: a slowdown in the rate of decline of private debt gave the economy a temporary boost. The same force caused the apparent boom of the Great Moderation: it wasn’t “improved monetary policy” that caused the Great Moderation, as Bernanke once argued (Ben S. Bernanke, 2004), but bad monetary policy that wrongly ignored the impact of rising private debt upon the economy.
Figure 5


The factor that makes the recent recovery phase different to all previous ones—save the Great Depression itself—is that this strong boost from the Credit Accelerator has occurred while the change in private debt is still massively negative. I return to this point later when considering why the recovery is now petering out.
The last 20 years of economic data shows the impact that the Credit Accelerator has on the economy. The recent recovery in unemployment was largely caused by the dramatic reversal of the Credit Accelerator—from strongly negative to strongly positive—since late 2009:
Figure 6


The Credit Accelerator also caused the temporary recovery in house prices:
Figure 7


And it was the primary factor driving the Bear Market rally in the stock market:
Figure 8



Read Steve Keen's complete blog post entitled "Dude, Where's My Recovery"

Controlling the Global Economy: Bilderberg, the Trilateral Commission and the Federal Reserve

Image: Infoguerilla

From global Research

By Andrew Gavin Marshall

This essay is Part 3 of "Global Power and Global Government," published by Global Research.

Part 1: Evolution and Revolution of the Central Banking System
Part 2: Origins of the American Empire: Revolution, World Wars and World Order

---

The Bilderberg Group and the European Union Project
 

In 1954, the Bilderberg Group was founded in the Netherlands, which was a secretive meeting held once a year, drawing roughly 130 of the political-financial-military-academic-media elites from North America and Western Europe as “an informal network of influential people who could consult each other privately and confidentially.”[1] Regular participants include the CEOs or Chairman of some of the largest corporations in the world, oil companies such as Royal Dutch Shell, British Petroleum, and Total SA, as well as various European monarchs, international bankers such as David Rockefeller, major politicians, presidents, prime ministers, and central bankers of the world.[2]

            Joseph Retinger, the founder of the Bilderberg Group, was also one of the original architects of the European Common Market and a leading intellectual champion of European integration. In 1946, he told the Royal Institute of International Affairs (the British counterpart and sister organization of the Council on Foreign Relations), that Europe needed to create a federal union and for European countries to “relinquish part of their sovereignty.” Retinger was a founder of the European Movement (EM), a lobbying organization dedicated to creating a federal Europe. Retinger secured financial support for the European Movement from powerful US financial interests such as the Council on Foreign Relations and the Rockefellers.[3] However, it is hard to distinguish between the CFR and the Rockefellers, as, especially following World War II, the CFR’s main finances came from the Carnegie Corporation, Ford Foundation and most especially, the Rockefeller Foundation.[4]

            The Bilderberg Group acts as a “secretive global think-tank,” with an original intent to “to link governments and economies in Europe and North America amid the Cold War.”[5] One of the Bilderberg Group’s main goals was unifying Europe into a European Union. Apart from Retinger, the founder of the Bilderberg Group and the European Movement, another ideological founder of European integration was Jean Monnet, who founded the Action Committee for a United States of Europe, an organization dedicated to promoting European integration, and he was also the major promoter and first president of the European Coal and Steel Community (ECSC), the precursor to the European Common Market.[6]

            Declassified documents (released in 2001) showed that “the US intelligence community ran a campaign in the Fifties and Sixties to build momentum for a united Europe. It funded and directed the European federalist movement.”[7] The documents revealed that, “America was working aggressively behind the scenes to push Britain into a European state. One memorandum, dated July 26, 1950, gives instructions for a campaign to promote a fully-fledged European parliament. It is signed by Gen William J Donovan, head of the American wartime Office of Strategic Services, precursor of the CIA.” Further, “Washington's main tool for shaping the European agenda was the American Committee for a United Europe, created in 1948. The chairman was Donovan, ostensibly a private lawyer by then,” and “The vice-chairman was Allen Dulles, the CIA director in the Fifties. The board included Walter Bedell Smith, the CIA's first director, and a roster of ex-OSS figures and officials who moved in and out of the CIA. The documents show that ACUE financed the European Movement, the most important federalist organisation in the post-war years.” Interestingly, “The leaders of the European Movement - Retinger, the visionary Robert Schuman and the former Belgian prime minister Paul-Henri Spaak - were all treated as hired hands by their American sponsors. The US role was handled as a covert operation. ACUE's funding came from the Ford and Rockefeller foundations as well as business groups with close ties to the US government.”[8]

            The European Coal and Steel Community was formed in 1951, and signed by France, West Germany, Italy, Belgium, Luxembourg and the Netherlands. Newly released documents from the 1955 Bilderberg meeting show that a main topic of discussion was “European Unity,” and that “The discussion affirmed complete support for the idea of integration and unification from the representatives of all the six nations of the Coal and Steel Community present at the conference.” Further, “A European speaker expressed concern about the need to achieve a common currency, and indicated that in his view this necessarily implied the creation of a central political authority.” Interestingly, “A United States participant confirmed that the United States had not weakened in its enthusiastic support for the idea of integration, although there was considerable diffidence in America as to how this enthusiasm should be manifested. Another United States participant urged his European friends to go ahead with the unification of Europe with less emphasis upon ideological considerations and, above all, to be practical and work fast.”[9] Thus, at the 1955 Bilderberg Group meeting, they set as a primary agenda, the creation of a European common market.[10]

            In 1957, two years later, the Treaty of Rome was signed, which created the European Economic Community (EEC), also known as the European Community. Over the decades, various other treaties were signed, and more countries joined the European Community. In 1992, the Maastricht Treaty was signed, which created the European Union and led to the creation of the Euro. The European Monetary Institute was created in 1994, the European Central Bank was founded in 1998, and the Euro was launched in 1999. Etienne Davignon, Chairman of the Bilderberg Group and former EU Commissioner, revealed in March of 2009 that the Euro was debated and planned at Bilderberg conferences.[11] This was an example of regionalism, of integrating an entire region of the world, a whole continent, into a large supranational structure. This was one of the primary functions of the Bilderberg Group, which would also come to play a major part in other international issues.

Interdependence Theory

 The theoretical justifications for integration and regionalism arrived in the 1960s with what is known as “interdependence theory.” One of its primary proponents was a man named Richard N. Cooper. Two other major proponents of interdependence theory are Robert Keohane and Joseph Nye. Interdependence theory and theorists largely expand upon the notions raised by Keynes....

Read more

China To Establish US Colony?

The End of the American Dream reports that China intends to establish a 50-square-mile "special economic zones" just south of Boise, Idaho, complete with:

... manufacturing facilities, warehouses, retail centers and large numbers of homes for Chinese workers. Basically it would be a slice of communist China dropped right into the middle of the United States.

The State of Idaho is, apparently, keen to accommodate the proposed Chinese colony, which would be located in the heart of the state, just south of Boise, the state capital.

But no one should be surprised by this development. The logic of a One World Order, which is the objective of America's plutocratic elite, is the destruction of every nation on Earth, America being no exception.

America is no more for Americans than it is for illegal immigrants or for well-heeled Communist Chinese corporations.

So if you have the cash to buy 50 square miles in Idaho, then you're welcome to it. And if you buy 50 square miles in nearly every state of the Union, destroy most of America's industry in the process, drive the US unemployment rate ever upward, while wages sink to those of the third-world, feel free to go right ahead.

Oddly so it might seem, the Brits and French, with US backing and six fighter bombers from Canada, went to war with Libya to oust China's colony there, which means that keeping control of Libya's oil is more important to the imperial elite than keeping control of America's economy.

Which makes sense. How could anyone but the Chinese make money in Idaho? But Libya, obviously, is quite different. Stick a pipe in the ground and out comes one-hundred-dollar-a-barrel oil at virtually no cost at all.

The Rationality of Christian Faith

Paleo-Christian Art: The Feeding of the Five Thousand

Writing in 2009, A.N. Wilson, author of Against Religion: Why we should live without it (1991), gave an account of his Damascus Road conversion from Christianity to atheism, followed many years later by his recovery of faith.

To Wilson, it became apparent that the capacity for religious faith is a natural faculty no less than the capacity to appreciate music or the feeling for language.

To say, he argues, that because the work of Bach or Beethoven makes no logical sense, does not mean we would be better off without a musical sense, any more than to say that because love makes no logical sense we would be better off without a capacity for love.

It is true that a feeling for language, the love of music or the love for some at least of our fellow creatures makes no sense if one confines one's search for meaning to the logical deconstruction of the phenomena themselves.

Yet these human faculties make obvious sense in the context of human life. Humanity has survived on this planet for the million years or so since we diverged from our anthropoid ape ancestors because we have these innate gifts and proclivities.

It is only a blithering fool like David Hume or Freddie Ayer, or Richard Dawkins, or Christopher Hitchens who fails to grasp that the universal human susceptibility to religious faith is necessary to the human condition.

It is what makes humans social creatures bound by the transcendent rules that are necessary to social life.

And when religion is denied, people do not, as Malcolm Muggeridge realized, believe in nothing:

One of the peculiar sins of the twentieth century which we`ve developed to a very high level is the sin of credulity. It has been said that when human beings stop believing in God they believe in nothing. The truth is much worse: they believe in anything.

"Anything" being sex,communism, belief in the superiority of a culture that recognizes no culture as superior, the campaigns against racism, nationalism, the family and  religion, and all the other life-destroying principles of the revolutionary liberal, fascist, and socialist creeds of the modern age.

For the "anything" is no less an "irrational" religious faith that what it replaces.

Existence itself makes no sense so far as humans can understand the world. Yet human life continues because humans, as a whole, have an irrational love of life.

For a community to prosper, however, it must have a motivating creed. Moreover, it must have a creed that serves the survival and welfare of society, not one that destroys society.

Human evolution has been driven for a million years by competition between groups. The cohesion and competitive success of those groups has depended almost entirely on their culture, and at the core of every culture is a set of logically irreducible beliefs that have the function, whatever their name, of a religious creed.

For almost 2000 years, Christendom grew and prospered. But with the enlightenment, the Western drive for knowledge began to eat away at the religious faith that underlay the culture. Only science and logic, it came to be thought, provided the basis for valid belief. As a result, today, the religious faith that underlay the success of Christendom has been largely destroyed.

And with the destruction of faith, the West itself is in disintegration. The religion of recreational sex has destroyed the capacity of the Western nations to reproduce themselves. Populations are aging, birthrates are plunging far below the replacement rate.

The Western nations will not disappear, just the people of the West. They will be replaced by adherents of religious faiths that make more biological "sense:" Judaism, Islam, Hinduism and Confucianism.

If Christianity remains in the West, it will most likely be a fundamentalist variety, probably brought to the West by African migrants who have obeyed the biblical injunction to go forth and multiply..

Pedophilia, the Last Great Western Taboo

Aangirfan has a post on Germaine Greer's views about sex and her books about boys.

She believes that pedophilia is the last great Western taboo.

She seems intent on undermining it.

No doubt the the liberal establishment is already getting up a wrecking crew.

Soon they'll be teaching it in school.

They'll teach your five-year-old how to flaunt his butt.

Palestinian Islam Supports Pedophilia

See also: To Rid Islam of Pedophilia, Muslims Must Discard Both the Quran and Hadith

And Paedophiles, An oppressed Minority?

Libya: The Futility of Bombing

Image Source

The futility, not to say obscenity, of NATO's newly extended Libyan campaign of bombing and helicopter assault is clearly established in this Globe and Mail article by retired Canadian Major-General, Lewis MacKenzie:

We are now in the 84th day of the bombing campaign that the United Nations Security Council authorized to enforce a no-fly zone over Libya in a bid to protect civilians from Moammar Gadhafi’s forces. In a bizarre development, the North Atlantic Treaty Organization has said it will extend the campaign for 90 days, surely a first in the history of war when one side “extends the contract” for a set period.

NATO’s obsession with its strategy of hope was tried once before in 1999, with the bombing of Serbia and the breakaway province of Kosovo. A myth that the 78-day bombing campaign persuaded Serbian leader Slobodan Milosevic to withdraw his forces from Kosovo continues to grow despite overwhelming facts to the contrary. ...

Read more

Meanwhile:

Tony Blair Raves: Bomb Everyone Who Won't Submit

... In a new introduction to the paperback version of his memoirs published today, Mr Blair says: “We need to have an active policy, be players and not spectators sitting in the sands, applauding or condemning as we watch. Like it or not, we have to participate.” 

He argues that a Libya-style operation should take place only when regimes have “excluded a path to evolutionary change”. But he does raise the prospect of intervention in some circumstances in Bahrain, Saudi Arabia, Syria, Iran and Jordan. ...

In the extracts released last night, Mr Blair makes no comment on his 2004 “deal in the desert” with Colonel Muammar Gaddafi, which helped turn the Libyan leader from an international pariah who exported terrorism to an ally of the West.... 

Read more

Why China Booms While America Slumps

Image Source

As the wages of labour fall, the profits of stock rise, and they be together always of the same value... David Ricardo

In 1993 Chinese wages were about 3% of those in America.

Thus the adoption of the revised General Agreement on Tariffs and Trade -- which gave rise to the World Trade Organization and the current regime of largely free global trade in goods and services -- inevitably resulted in a tremendous manufacturing boom in China and other low-wage economies, while it sent manufacturing in America and other high-wage economies into sharp decline.

And it was not only manufacturing that was affected by this fever of global wage arbitrage.

Congress Tiring of War Powers Scam

BY PATRICK BUCHANAN

Miami Herald, June 7, 2011: Late last month, when U.S. air strikes caused civilian casualties in Afghanistan, an angry Hamid Karzai issued an ultimatum.

If future U.S. strikes are not restricted, we will take “unilateral action” and America may be treated like an “occupying power.”

That brought this blistering retort from one Republican hawk.

“If President Karzai continues with these public ultimatums, we must consider our options about the immediate future of U.S. troops in his country. If he actually follows through on his claim that Afghan forces will take ‘unilateral action’ against NATO forces which conduct such air raids to take out terrorists and terrorist positions, that should result in the immediate withdrawal of U.S. forces from Afghanistan and the suspension of U.S. aid.”

Who was the GOP hawk shaking the fist at Karzai? Sarah Palin.

Insiders attribute Palin’s shift from the neocon party line to the departure from her staff of Randy Scheunemann and Michael Goldfarb, and their replacement by Libya war skeptic Peter Schweizer.

Perhaps. But there are other straws in the wind that the GOP is coming to see that, like his “big government conservatism” ballyhooed by The Weekly Standard, Bush II’s compulsive interventionism has proven as great a disaster for his country as it did for his party.

Last week, House Speaker John Boehner had to scramble to cobble up a substitute resolution to prevent half his GOP caucus from joining with Democrats to denounce President Obama’s war in Libya as unconstitutional and to demand a total U.S. pullout in 15 days.

Boehner’s resolution, which gives the president longer to comply with the act and involves no deadline for withdrawal, passed 268 to 145. But more than a third of House Republicans voted to pull out of the NATO coalition attacking Moammar Gadhafi’s forces, which would have forced a NATO withdrawal from that civil war.

This is historic.

Read more

7/7: Seeds of Deconstruction (Full Version)

U-Tube is well named. Anything that questions the narrative gets flushed.

Here's an alternative link to the deleted video below.



Full version of investigative documentary 7/7: Seeds of Deconstruction. Examines many of the outstanding questions and conspiracy theories about the 2005 London Bombings. Available for download via http://blip.tv/file/3985398 and http://www.archive.org/details/77SeedsOfDeconstruction and http://stagevu.com/video/bzmyohjuatvm

The sequel to Seeds of Deconstruction



Thanks, Anon, for the link.

Who Really Did the July 7 London Tube Train Bombings?

Further to his account of a harrowing confrontation with security officials at the British Library (see my last post), Craig Murray, former UK Ambassador to Uzbekistan, today reviews the British Government's terrorism Prevent Strategy paper.

In so doing, he states:

with stunning intellectual dishonesty the government refuses to tackle in the report the fact that terrorism in the UK has been driven by disgust at British foreign policy, and especially the invasion of Iraq, and the continuing occupation and civilian deaths in Afghanistan. This is not speculation on my part; the 7/7 bombers not only referred to this specifically in suicide videos, they also indeed cited extraordinary rendition and torture as motives of their actions.

This is a remarkable claim, asserting a mere hypothesis as a fact and then stating that it is not a speculation.

And on what basis are we to accept Murray's claim as a fact? Why, on the authority of a suicide bomber's video* conveniently provided by Britain's ever trusty police. LOL.

And if Murray is incorrect in his hypothesis about the motivation of the 7/7 bombers and indeed in his assumption about the identities of the bombers -- something never proved in court -- an assumption claimed as a fact and not a speculation, then the actual motivation of the bombers remains a legitimate subject of inquiry.

In turn, this means that the Prevent Strategy report may not, as Murray claims, be in error in "its explicit assumption that terrorism is actuated by a hatred of democracy."

But the question then would be who is it that so hates democracy that they are ready to commit acts of terrorism to subvert it: some group within the general populace? Or could it be some group within the ruling elite?

Furthermore, if Murray's hypothesis about the motivation of the 7/7 bombers, claimed as a fact and not a speculation, is incorrect, it remains open to question whether the Prevent Strategy report is in error in stating that:

"There is evidence to indicate that support for terrorism is associated with rejection of a cohesive, integrated, multi-faith society and of parliamentary democracy"?

But if so, it is not necessarily correct in the sense that most would understand.

When states fail to apply the normal investigative and legal procedures in identifying terrorists (as in the case of 9/11 and 7/7) it is reasonable to question who exactly are the perpetrators of terrorism and what exactly are the intended effects of their violence.

The 7/7 Tube train bombings could surely have been expected to mobilize public opinion against fundamentalist Muslims who oppose multi-faith integration, i.e., the bombings must have created pressure for the reduction of Islam to a secularized vacuity equivalent to Anglican Christianity in which form Mullahs can join with Arch-Bishops in interfaith communion with an all-inclusive, bisexual, feminist Allah.

* According to the Guardian article linked above, the suicide video script appears to have been written by Adam Yahiye Gadahn. American-born Adam Gadahn is, so it has been alleged, a fake Al Qaeda operative whose real name is Adam Pearlman. Adam Pearlman, it is further alleged, is the grandson of the late Carl K. Pearlman, a prominent Jewish urologist in Orange County. Carl was also a member of the board of directors of the Anti-Defamation League.

Annoying Bureaucrats No. 23: British Library Security Officials

Former UK Ambassador to Uzbekistan, Craig Murray, had a blog post yesterday relating how he had been denied access by the British Library to some obscure documents concerning a dead, white, Scotch, male imperialist.

Difficulty arose when a "half-educated low paid staff [member] steeped in the insolence of office" refused to accept as proof of identity a crumpled laundry ticket, a hand-written letter allegedly in the Uzbek language, or a press clipping of a ridiculous article about men in skirts.

But then Murray rather spoiled his own case against officialdom by saying "Karl Marx famously wrote Das Kapital in the reading room of the British Library. He would never get in now," which naturally prompts the thought that it would have been just as well for humanity if that old terrorist had been put on the No-Read List.

Come to think of it, Murray himself is something of a revolutionary, a Scotch Nationalist who wants to break up the United Kingdom, which suggests that anti-terrorism measures at the British Library are working as one would wish.