Tweet of the Day: 'Reform' China's Strong Man Rule Edition

From journalist George Chen

More examples of what a strongman rule bubble will bring about

China’s Beige Book exhibits why official statistics can’t be trusted

Two weeks back I expressed doubts on the supposed recovery of the Chinese economy as partly a statistical mirage. I noted

I am not comfortable with statistics from the Chinese government in the recognition of the hiding, censoring and editing of data which has not fitted with the government’s agenda

Well more signs that the Chinese government has been data mining their economic figures

From Bloomberg (bold mine, hat tip zero hedge)

China’s economy slowed this quarter as growth in manufacturing and transportation weakened in contrast with official signs of an expansion pickup, a private survey showed.

Increases in business-investment and real estate revenue also slowed, while service industries picked up and employees became tougher to find, the survey from New York-based China Beige Book International said yesterday. The report is based on responses from 2,000 people from Aug. 12 to Sept. 4 as well as 32 in-depth interviews conducted later in September.

The quarterly report, which began last year and is modeled on the U.S. Federal Reserve’s Beige Book business survey, diverges from government figures showing faster factory-output gains in July and August that have spurred analysts from Citigroup Inc. to Deutsche Bank AG to raise expansion estimates. Nomura Holdings Inc. is among banks skeptical that any rebound will be sustained next year.

The results “show the conventional wisdom of a renewed, strong economic expansion in China to be seriously flawed,” China Beige Book President Leland Miller and Craig Charney, research and polling director, said in a statement.

The data “reveal weakening gains in profits, revenues, wages, employment and prices, all showing slipping growth on-quarter -- no disaster, but certainly not the powerful expansion suggested by the consensus narrative.”

It seems that the recent rise in China’s equity markets, as measured by the Shanghai Index, may have been designed as part of the campaign to create the impression of ‘recovery’. 

I say designed because the Shanghai index recently experienced a “flash spike” which the government blamed on fat finger (trading error) by a state owned firm rather than from what I suspect as a botched attempt at manipulation.

And copper has not chimed with a supposed recovery in China’s fixed investment

Nonetheless whatever stealth stimulus--that the government has been applying to boost her statistical economy that will lead to more debt--is likely to be limited.

That's because rising yields of 10 year China’s sovereign bond are likely to impact her already precarious debt position.

Argentina Government Threatens Jail Terms for People who Question Inflation Data

Inflationism and interventionism are intertwined. When governments resort to inflationism, the next step is to shift the blame on the public in order to justify price controls. The ensuing feedback loop between inflation and price controls would mean throwing in many other forms of social controls or interventionism, specifically wider trade controls, foreign exchange and capital controls, wage and labor controls, border and travel controls, controls on population and household activities as well as censorship and media control. 

In Argentina, those who question the government’s inflation data have been at risks of landing in jail

From Yahoo/AP (hat tip Zero hedge)

Argentina is trying again to criminally prosecute people who publish independent inflation data, just as Congress opens debate on a 2014 budget that assumes economic good times next year.

The government is predicting strong annual economic growth of 6.2 percent, inflation of just 10.4 percent and a peso dropping only 10 percent against the dollar.

Independent economists call these numbers wildly optimistic, and say that Argentina's growth prospects are troubling and inflation is actually running more than twice as high. They maintain that illegal currency trading reflects much greater pressure to formally devalue the currency than the government has acknowledged.

As Economy Minister Hernan Lorenzino proposed the budget to Congress, Commerce Secretary Guillermo Moreno went to court, accusing four different consulting firms of criminal "speculation" for publishing inflation data that contradicts official reports.

And why price inflation has been expected to balloon

The proposed budget calls for roughly $162 billion in national government spending, which is a 29 percent increase in peso terms on revenues of roughly $192 billion.

The plan also says Argentina's central bank will spend $9.8 billion in foreign reserves on bond payments in 2014, a number that does not include U.S. court-ordered payments of $1.4 billion to holders of defaulted debt that has gone unpaid since the country's 2001 economic crisis. Lorenzino defended this gamble — which risks pushing Argentina into another default if it refuses to pay the plaintiffs — saying Argentina "has lowered its debts while growing the economy and maintaining political autonomy and sovereignty."

Never mind if Argentine officials recently admitted that price inflation is higher than official figures. Since they are in power they are excused to do so, let the private sector be damned.

Yet in an interview with a Greek TV last April, Argentina’s economic minister made a booboo defending official inflation numbers by blatantly eluding repeated queries on them

Here is Argentina’s official inflation rate.

Here is the unofficial inflation rate. Contra official figures, Argentina has been in the throes of hyperinflation.

Reason? As pointed above, Argentina’s government has been in a spending binge and these are being manifested in the dramatic collapse of the Argentine peso (both charts from Cato Institute’s Troubled currency Project)

Take note, Argentina’s Merval equity benchmark have been reflecting both the Peso and unofficial inflation rates.

The Merval index peaked in May a month after the unofficial inflation rates soared beyond 100% (hyperinflation), and declined as the Peso rallied and when the inflation numbers dropped to the 30% levels. 

Apparently the new record highs of Merval suggests that inflation numbers have been rising and that the Peso has been tanking again. The Merval has been up 50% year to date.

In a world dominated by inflationism, stock markets have hardly been driven by real earnings and by the real economy, instead stock markets have been manifestations or symptoms of inflationary policies via inflationary credit and monetization of debts.

Argentina's case partly represents what has been a global phenomenon (except on the price inflation part yet).

But don’t worry says Argentine officials, official data debt (debt to GDP) has hardly been a problem.

But again that’s not how markets or creditors perceive them. 

Premium on Credit Default Swaps CDS have soared and have remained at levels indicative of a large risk from a credit event.

The bottom line is to never trust government statistics.

Argentines Flee to Gold on Financial Repression, Devaluation

Escalating financial repression implemented by the Argentina government has been prompting its citizenry to seek gold as safehaven. 

From the International Business Times:

Argentines are utilizing gold to hedge their savings as economists forecast the peso will lose more value than any currency in the world, and President Cristina Fernandez de Kirchner forbids dollar purchases.

The nation’s inflation rate of 26% is also eroding Argentina’s peso- denominated bonds to fall 5.5% ytd.

With Argentina printing pesos to finance itself, the growth of pesos in the economy has rose 38% in the past year, leading analysts to predict that the currency will depreciate 12.9% through year-end, the highest of currencies tracked by Bloomberg.

Banco Ciudad is the only bank left that trades in gold after Fernandez  banned the purchase of certified 99.99% pure gold for savings in July. The bank sells it at 99.96% purity, according to Carlos Leiza, who oversees the lender’s gold trading.

There is a 35% gap in the prices to buy and sell physical gold at Banco Ciudad, while there’s no premium to sell the country’s benchmark 2017 dollar bond in the local market, according to the Buenos Aires-based Open Electronic Market, known as MAE.

Gold sold by Banco Ciudad also isn’t recognized internationally, making it more difficult to determine its value, he said.

Watch Bloomberg’s news video on this here

I must say that Argentina’s inflation rate must have been severely understated by the mainstream. Price controls have been distorting real conditions in Argentina. The Argentine government even recently banned advertising as part of price controls.  Official inflation rates are way below private estimates. Argentina’s government has also been censoring private sector economists from making inflation forecasts.

Argentina’s “blue dollar” or the nickname for the US dollar based on the black market rate has fallen to a new low yesterday, at 8.27 from 8.07 last Monday or a decline of about 2.4% in just a few days. The Peso is far from the official rate of about 5.1. The gap between the black market rate and the official rate continues to widen.

The increasingly desperate government has imposed more capital controls through a 15% tax hike on the use of credit cards abroad aside from new 20% levy on airline tickets.

Unlike Venezuela, so far, Argentina’s stock market has yet to manifest symptoms of hyperinflation. The Merval index has been up 22.23% year to date, as of Friday’s close, and nears a milestone breakout.

We should not confuse rising stock markets with prosperity or even bubble cycles, when they serve as evidence of worsening monetary disorder. Nonetheless a breakout of the Merval along with increased panic buying on gold will could mean a tipping point towards hyperinflation and a crisis.

Argentina Expands Price Controls By Banning Advertisement

From the Economist

Not content with the harassment and the persecution of private sector economic profession for making estimates on price inflation, which widely departs from government's figures, Argentina’s government has embarked on banning advertising.

From the Washington Post

Argentina’s newspapers say supermarket and appliance companies have been told to stop advertising during a price freeze the government imposed to stem inflation.

The government denies this: Consumer protection official Maria Colombo calls it “an invention” of the daily newspaper Clarin.

This is simply a showcase of how intervention begets intervention, i.e. from price controls to censorship.

Yet the sustained pursuit of the policy of price controls translates to incremental expansion to cover a bigger or wider sphere of the economy until the government entirely replaces the private sector.

Warned the great Austrian professor Ludwig von Mises, (bold mine)

If this unpleasant experience does not teach the authorities that price control is futile and that the best policy would be to refrain from any endeavors to control prices, it becomes necessary to add to the first measure, restricting merely the price of one or of several consumers' goods, further measures. It becomes necessary to fix the prices of the factors of production required for the production of the consumers' goods concerned. Then the same story repeats itself on a remoter plane. The supply of those factors of production whose prices have been limited shrinks. Then again the government must expand the sphere of its price ceilings. It must fix the prices of the secondary factors of production required for the production of those primary factors. Thus the government must go farther and farther. It must fix the prices of all consumers' goods and of all factors of production, both material factors and labor, and it must force every entrepreneur and every worker to continue production at these prices and wage rates. No branch of production must be omitted from this all-around fixing of prices and wages and this general order to continue production. If some branches were to be left free, the result would be a shifting of capital and labor to them and a corresponding fall in the supply of the goods whose prices the government has fixed. However, it is precisely these goods which the government considers as especially important for the satisfaction of the needs of the masses.

But when such a state of all-around control of business is achieved, the market economy has been replaced by a system of centralized planning, by socialism. It is no longer the consumers, but the government who decides what should be produced and in what quantity and quality.

Argentina has embarked on a slippery slope towards totalitarianism. And this is likely to lead to crushing hyperinflation that would result to dystopia.

In the world of politics, politicians fervently hope and desire that they can legislate away the law of demand and supply.  They fail to heed the lessons of King Canute (or Gnut the Great) who, according to a legend, futilely ordered the ocean waves to stop advancing. King Canute only wanted to prove to the courtier- sycophants that he was not omnipotent or that his power was limited.

Hubris at the expense of society.

Obama’s Push for Gun Prohibition

US President Obama pushes for a radical overhaul of gun laws.

From Bloomberg,

President Barack Obama unveiled the most ambitious gun-control agenda in decades today, announcing a $500 million package of legislative proposals and executive actions aimed at curbing firearms violence, from mass shootings to street crime.

The president, counting on a shift in public opinion since the shooting rampage at a Connecticut elementary school last month, challenged Congress to mandate background checks for all gun buyers, ban high-capacity ammunition clips, and reinstate a ban on sales of assault weapons

Obama signed 23 executive actions aimed at circumventing congressional opposition to new gun restrictions, including several designed to maximize prosecution of gun crimes and improve access to government data for background checks.

Couched in social morality, Obama’s proposal, which has been psychologically anchored on spur of the moment public impulse (availability heuristic), resonates of his predilection for the expansion of government, and importantly, for a spending $500 million blitz.

Again from the same article:

The administration also plans to address legal barriers that may prevent states from sharing relevant medical information, to review standards for gun locks, require federal authorities to trace firearms recovered in criminal investigations and direct the Centers for Disease Control to research the causes of gun violence.

The new spending would go mostly for training and data- collection programs. Obama wants $10 million for the CDC to conduct further research, “including investigating the relationship between video games, media images, and violence.”

Another $20 million would expand a reporting system to gather data when firearms are used in violent deaths, whether homicides or suicides. To encourage states to share criminal and mental health records for the federal background database, Obama proposes spending $20 million this year and $50 million next year.

School districts and police departments would get $150 million to hire school resource officers, psychologists and social workers and another $65 million for teacher training.

Obama again urged lawmakers to approve an existing request for $4 billion to help communities keep 15,000 police officers on duty.

So gun control looks like stimulus camouflaged mostly for the bureaucracy.

Yet like almost all prohibition laws once this gun control comes into effect the likelihood is to bring the assault weapon and sporting rifle ban into the underground (shadow economy).  And along with the other typical consequences: greater fraud, corruption, and higher risks of violence.

This reminds me of a quote attributed to Russian revolutionary and USSR Premier Vladimir I Lenin

A system of licensing and registration is the perfect device to deny gun ownership to the bourgeoisie.

Incidentally, Lenin’s Russian Civil War resulted to a death toll of 8 million people where only 2 million were from combat deaths according to eNotes.com.

Of course, Lenin introduced the infamous concentration camps or the Gulag

So like all aspiring tyrants, gun control has been the traditional recourse for assuming total social control.

Further, Obama’s thrust to use of “mental health” as checks on gun ownership represents the assumption that bureaucrats know better and have better moral standings than the citizenry have been premised on statolatry or the fiction of the puritanical or deifed state.

Additionally, the gun control regulation opens the portals of public censorship via "investigating the relationship between video games, media images, and violence.” 

The psychiatric treatment approach through social policies has been used as a prominent tool to attain total social control—the therapeutic state

Writes Professor Thomas Szasz at the Citizens Commission on Human Rights International: (hat tip Bob Wenzel) [bold and italics original]

“Although we may not know it, we have, in our day, witnessed the birth of the Therapeutic State. This is perhaps the major implication of psychiatry as an institution of social control.”

“When I use the term therapeutic state, I use it ironically, it’s therapeutic for the people who are doing the locking up, who are doing the therapy, it’s not therapeutic for the victims, for the patients.”

“In the therapeutic state, treatment is contingent on, and justified by, the diagnosis of the patient’s illness and the physician’s prescription of the proper remedy for it… Today, the therapeutic state exercises authority and uses force in the name of health.” The Founding Fathers “could not have anticipated…that an alliance between medicine and the state would then threaten personal liberty and responsibility exactly as they had been threatened by an alliance between church and state.”

“Inasmuch as we have words to describe medicine as a healing art, but have none to describe it as a method of social control or political rule, we must first give it a name. I propose that we call it pharmacracy, from the Greek roots pharmakon, for ‘medicine’ or ‘drug,’ and kratein, for ‘to rule’ or ‘to control.’”

“Formerly, people rushed to embrace totalitarian states. Now they rush to embrace the therapeutic state. When they discover that the therapeutic state is about tyranny, not therapy, it will be too late.”

“This phenomenon illustrates what I call the creeping therapeutic state. I see it as insidious, especially given the cooperation between the government and the media. This is allowed on television. But advertising Scotch, a legal drink, is not allowed. This subtly undermines the rule of law, the principle that if something is legal, then it’s legal, and if it’s illegal, then it’s illegal. A prescription drug is illegal; pharmacists cannot sell it to you unless you have a prescription. These are illegal drugs, but nobody calls them illegal drugs. So I see this as pernicious, as an example of what F.A. Hayek and Ludwig von Mises talked about—that the opposite of freedom is not brutal tyranny but capriciousness.”

The US has been in a transition to the land of the UNfree or what I call as the Philippinization of the US, and the consequences that goes along with it.

As I previously noted,

F. A. Hayek once warned that Americans are headed towards the road to serfdom. His admonitions appear as becoming a reality with the deepening of America’s police state aside from snowballing political and economic fascism, signs of which the US could be in a slippery slope towards dictatorship.

Bloomberg Censored in China

China’s authoritarian tendencies can still be seen from her continuing censorship of Bloomberg which seems in retaliation for the latter’s recent exposure of the China’s crony capitalist political economy.

Notes the CNN/Financial Times

Bloomberg's news website remains blocked by China's state censors a full month after it detailed the riches amassed by the family of Xi Jinping, the man who is expected to be the country's next president.

Although periodic outages of foreign media websites in China are common, the month-long total blackout of Bloomberg is an unusually harsh response, highlighting the extent to which its coverage angered the government.

Beijing has tried to apply pressure in other ways, too. In the weeks since the article was published, people believed to be state security agents have tailed some Bloomberg employees; Chinese bankers and financial regulators have cancelled previously arranged meetings with Matthew Winkler, Bloomberg's editor-in-chief; and Chinese investigators have visited local investment banks to see if they shared any information with Bloomberg, according to people with knowledge of these incidents…

In the report published on June 29, Bloomberg used publicly available records to show that Mr Xi's extended family had investments in companies with total assets of $376m; an 18 per cent indirect stake in a rare earths company with $1.73bn in assets; a $20.2m holding in a publicly traded technology company; a luxury villa in Hong Kong worth about $31.5m and at least six other Hong Kong properties worth a combined $24.1m.

Bloomberg was unable to trace any assets to Mr Xi himself, or to his wife or daughter. There was also no evidence of any wrongdoing by Mr Xi or his family.

Nevertheless, the report was seen as embarrassing for Mr Xi, threatening to undermine his image as a clean official in a country rife with corruption just months before he is set to succeed Hu Jintao as president in a once-in-a-decade leadership transition…

No other English-language mainstream media website has been blocked in China for longer than a few days since the 2008 Beijing Olympics. Censors now target specific articles or disrupt access to sites at politically sensitive times such as when dissident Liu Xiaobo was awarded the Nobel Peace Prize in 2010.

This just goes to show why the Panglossian view of China’s future seems unwarranted.

China’s fate will ultimately depend on how political trends evolve (Will China revert to socialism or statism or a closed economy? Or will China embrace deeper liberalization?).

This cannot be interpreted merely from past performance. The above may also be symptoms of the strains from ongoing political deadlock and from economic slowdown (or bubble bust?).

For now China’s bubbles from previous Keynesian quasi boom bust policies will have to be addressed.

So far, the Shanghai Composite index keeps plumbing to new depths.

War on Credit Rating Agencies: EU’s Proposed Ban Eased

A stereotyped and knee jerk way politicians deal with crisis has been to shoot the messenger, particularly through various forms of price controls or through muzzling of information.

EU politicians believe that credit rating agencies help fueled the crisis and thus earlier moved to ban them.

From Reuters,

A central plank of European moves to rein in credit rating agencies was diluted by lawmakers on Tuesday, bowing to pressure from banks and companies who argued that proposals were unworkable or counterproductive.

An initial plan for ratings agencies to be rotated or switched every three years will be weakened to apply only to very specific types of credit and only every five years, the source said.

The pullback comes after Europe's biggest companies and banks warned that forcing them switch between so few global agencies could force them to use less well-known bodies carrying less credibility particularly with investors from the United States or Asia.

The proposed reforms come after the credit ratings sector, dominated by the "Big Three" of Standard & Poor's, Moody's and Fitch Ratings, was slammed for giving high ratings to securitised debt or ABS linked to U.S. home loans, leading to the market crisis of 2007 through 2009.

Policymakers worry ratings carry too much clout and have blamed the timing of Greek debt downgrades for making an EU bailout harder. The issue remains pertinent as Moody's is expected to downgrade some of the world's top banks this month.

Politicians believe they can censor away the crisis through price manipulation. Credit rating agencies help shape investors valuations and perceptions of financial securities and consequently their prices.

Although I have a beef with credit rating agencies over their integrity, as conflict of interests have hounded the industry (yes they functioned as institutional accomplices to the bubble blowing phenomenon of the US real estate boom), shooting the messenger will not solve the crisis rooted on an unsustainable and insolvent parasitical arrangement inherent in the structure of incumbent political institutions.

Argentina’s Road to Serfdom: Book Import Bans

From Cato’s Juan Carlos Hidalgo,

The Argentine government has severely restricted the importation of books due to “human health concerns” [in Spanish]. That’s right. According to the government, it can be dangerous to “page through” a book that has high lead quantities in its ink. “If you put you finger in your mouth after paging through a book, that can be dangerous,” said Juan Carlos Sacco, the vice-president of an industrialist organization that supports the measure.

The government claims that this is not a ban. However, since each buyer has to demonstrate at the airport’s customs office that the ink in the purchased book has lead quantities no higher than 0.006% in its chemical composition, the result is that all book imports into the country are stalled.

The measure has a lot to do with the increasing efforts of the Argentine government to stop the flight of dollars out of the country. Capital flight in 2011 reached $21.5 billion, and it accelerated after the reelection of Cristina Fernandez de Kirchner in October. Facing increasing fiscal pressures, and after seizing private pension funds and raiding the Central Bank’s reserves, many people expect the government to go after their bank savings.

The government has reacted with increasingly ridiculous measures. Sniffing dogs are being deployed at airports and border check points to detect the ink used to print U.S. bills, so Argentines cannot take out of the country more than $10,000 without declaring it to the government. The Fernandez administration is also requiring major importers such as automakers to match the price of their imports with that of goods they must now export. As a result, Porsche is exporting Malbec wine and Mitsubishi is now selling peanuts.

Desperate governments will resort to any measures to advance their interests. And to stem capital flight from the private sector in reaction to their spendthrift ways, the Kirchner government now attempts to curtail freedom of speech through policies that promotes ignorance and illiteracy. Talk about ‘noble intentions’.

And of course, part of these mind control measures, imposed through propaganda and censorship, has been for the President of Argentina’s central bank to declare that printing money does not lead to inflation, as well as, to ban the private sector from making public estimates of statistical inflation which went against the government’s data.

As Benjamin Franklin once said,

A nation of well-informed men who have been taught to know and prize the rights which God has given them cannot be enslaved. It is in the religion of ignorance that tyranny begins.

Any government cannot simply wish away the laws of scarcity, which in fullness of time will be vented over the marketplace and eventually would incite a tempestuous political response.

Argentinians have yet to slough off their tolerance for despots which has brought about a cycle of political and economic crisis since the 20th century (as previously discussed here)

Signs of Intensifying Political Woes in China?

Is it really China’s growth story that has distressed the markets as alleged by media?

Let us further examine what media imputes as the cause of this week’s profit taking—a purported slowdown of China’s economy

While recent economic data may have been a valid bearer of bad news, correlation does not necessarily translate to causation.

Movements of the China’s Shanghai index (right window) have not aligned with the motions of the China’s industrial production index (left window; blue line) which seesawed throughout 2010-2011.

In addition, the vigorous rally by the Chinese equity benchmark this year seems to have little relevance with the movement of the (HSBC PMI Index) manufacturing survey and of the ex-post statistical data.

China bulls have been arguing the case that the Chinese government would ease further[1] given the ‘moderating’ pace of price inflation attendant to the current slowdown. And they just may be right.

Almost as reports came where manufacturing in China’s economy contracted for the fifth month[2], the Chinese government selectively cut reserve requirements[3] for the Agricultural Bank of China, to supposedly boost rural credit.

With emergent signs of heightened political risks, a full blown economic crisis would magnify the prospects of a potential upheaval, which should compel authorities to resort to magical tricks by resorting to monetary palliatives.

Incipient signs political destabilization may have resurfaced. Aside from previous instances of riots[4], rumors swirled on the cyberspace of a coup attempt following the removal[5] of the Communist Party’s Chongqing city head Bo Xilai from his post as his deputy and has reportedly sought asylum in the US.

The rumors have been censored and have been temporarily concealed from the public.

But markets may have been exhibiting otherwise. China’s credit default swap or the cost of insuring China’s debts rose significantly the highest in four months[6] The Shanghai index staggered to close the week down 2% despite the monetary easing policies.

Nonetheless this is a revelation that there may have been intensifying political tensions from an ongoing ideologically based power struggle[7].

Entrepreneurs seem to have been gaining political clout in China, enough to exert influence on Communist party members to call for economic reforms based on liberalization.

Bottom up forces have been vastly eroding the command and control politics and thus the ideologically based political infighting.

As I said last October[8], China represents as my potential black swan (low probability high impact event). The risks from China’s unique political economic conditions have been substantially underrated. China, for me, has greater immediate term risk relative to that of the US or the EU, where political authorities of the latter seem to be working in close collaboration.

It should be noted that the political spectrum of the EU and the US seem to be deeply intertwined (e.g. Mario Draghi is a Goldman Sachs alumnus[9]) and has been manifested through revolving door relationships[10]. In short, vested interest groups through captured political authorities can coordinate policies, to the extent where the adverse effects from such policies may be deferred.

It’s a lot different in China.

China’s copycat of western Keynesian policies have led to massive internal bubbles, blatant misreporting of issued loans and financial innovative arbitrages by the political class, particularly the local governments, whom has circumvented party regulations by setting up 6,000 finance companies to raise funds for public works[11].

The negative effects of such top down policies have not only bred corruption, it has sown political conflicts which run the risks of escalation and transition to violent political uprisings.

The bottom line is that China’s behind the scene political struggles have been seeping out into the public and will be manifested through price signals in the marketplace, despite repeated attempts by political authorities to expurgate such developments.

This should be monitored closely.

Until further evidence shows of a serious deterioration of China’s political conditions, then my assumption would remain transfixed towards the politicized nature of today’s global marketplace which has been designed to support financial markets for the benefit of the banking system and the welfare state.

As for media, they could be looking at the wrong angle.

---

[1] US Global Investors Investor Alert - Appreciating China to its Fullest, March 9, 2012

[2] Bloomberg News China Manufacturing Contraction May Worsen, HSBC PMI Shows Bloomberg News March 22, 2012 SFGate.com

[3] Nasdaq Brace for more stimulus: Central Bank of China slashes reserve requirements, March 22, 2012

[4] See Does Growing Signs of People Power Upheavals in China Presage a ‘China Spring’? September 26, 2012

[5] The Economic Times, Censors block online rumors about coup as China battles infighting within ruling party March 24, 2012

[6] Thestandard.com.hk Business as usual after coup rumors spark jump in credit-default swaps March 22, 2012

[7] See China’s Coup Rumors: Signs of the Twilight of Centralized Government? March 22, 2012

[8] See Can China’s Slowdown Trigger a 1987 moment? October 23, 2011

[9] See ECB’s Mario Draghi’s Baptism of Fire: Surprise Interest Rate Cut, November 4, 2011

[10] Corporate Europe Observatory Block the revolving door, November 23, 2011

[11] Bloomberg.com China Banks Said to Underestimate Local Government Risks March 24, 2012

Japan’s Speech-jamming gun and Censorship

From My Fox Orlando, (hat tip Bob Wenzel)

Japanese researchers have invented a speech-jamming gadget that painlessly forces people into silence.

Kazutaka Kurihara of the National Institute of Advanced Industrial Science and Technology, and Koji Tsukada of Ochanomizu University, developed a portable "SpeechJammer" gun that can silence people more than 30 meters away.

The device works by recording its target's speech then firing their words back at them with a 0.2-second delay, which affects the brain's cognitive processes and causes speakers to stutter before silencing them completely.

Describing the device in their research paper, Kurihara and Tsukada wrote, "In general, human speech is jammed by giving back to the speakers their own utterances at a delay of a few hundred milliseconds. This effect can disturb people without any physical discomfort, and disappears immediately by stopping speaking."

Question is who benefits from this invention, will it be the public or political authorities? Since National Institute of Advanced Industrial Science and Technology is a public research institution and Ochanomizu University is a public national university for women, round 1 goes to the politicians.

Video: Jon Stewart on the Media's Blackout of Ron Paul

(hat tip Bob Wenzel)

Notable Quote from Jon Stewart (6.43)

Libertarian Ron Paul becomes the 13th Floor in a hotel!

Just shows how the mainstream has been very afraid of Ron Paul, enough to act in cahoots to censor Ron Paul's 'existence' in media's reporting.

Censorship as Price Controls

The problem of inflation has usually been met by policy responses of price controls. This basically signifies deflection of culpability from government policies to the private sector.

But when reality becomes too hard to contain, the next step would be for government to impose censorship on media so as not to upset the political environment.

Argentina seems to be applying this recourse.

Reports the Wall Street Journal, (hat tip: Douglas French of Mises Blog)

Argentina's government has filed criminal charges against the managers of an economic consulting firm, escalating its persecution of independent economists.

A federal court official said Friday that a judge is evaluating the charges but has yet to decide if it is appropriate to begin investigating them.

The government is charging MyS Consultores with "publishing false information about inflation data" to benefit themselves and their clients. The criminal complaint alleges that MyS's data also lead to speculative behavior in Argentina's bond market.

MyS Managing Partner Rodolfo Santangelo described the charges as "ridiculous" and said the firm's inflation data do not affect financial markets.

Consumer prices rose 9.7% in May from a year ago, according to the national statistics agency, Indec. But virtually all economists say annual inflation surpasses 20%—one of the world's highest rates—angering government officials who dismiss inflation as a problem.

It won’t be long when such machination will be applied elsewhere including the Philippines.

Political Repression: Sacrificing Lives of Constituents and Mind Control

Here is another example of the myth of good government.

When political leaders are faced with the risks of losing their power, they will abandon or put to risk the lives of their constituents.

In fearing the ripple effect from the Arab Spring (wave of recent uprisings), the North Korean government has responded by refusing to repatriate her citizens stranded in the chaotic Libya.

The Foreign Policy reports, (bold emphasis mine) [pointer to Mark Perry]

In mid-February, as Libya shook to the incipient revolt against Muammar al-Qaddafi, around 200 North Korean migrant workers found themselves stranded. Like their compatriots in other parts of the Middle East, they had been brought in to work as cut-price doctors, nurses, and construction workers. But with a popular uprising unfolding, their government now refused to repatriate them.

According to reports, Pyongyang ordered the workers to remain in Libya out of fear that what they witnessed -- a full-blown popular rebellion against Qaddafi's dictatorship -- could lead to a copycat rebellion back home. "The fear was obviously that these 200 would have a kind of a viral effect, bringing news and information about what was happening in Libya," said Tim Peters, founder of Helping Hands Korea, which aids North Korean refugees.

Mass popular uprisings, so often a contagious affliction, pose problems for any dictatorship. For North Korea, the outbreak of revolts in Egypt and Libya -- two steadfast allies of the hermit regime -- has prompted swift moves to head off a similar outbreak of democracy on its own turf.

And it’s not just that, leaders will even turn to repress on their people when their political interests are at stake such as what has been happening in Libya, Yemen, Syria or elsewhere.

In the North Korean experience above, part of the crackdown against the prospect of a People Power revolt has been to seize possession of cellphones and to clamp down on access to foreign media, because...

(from the same article; bold emphasis added)

"What the authorities fear the most is in fact information," said Hyun In-ae, vice president of NKIS, which smuggles USB sticks containing entertainment and political materials into North Korea...

In recent interviews with North Korean refugees, Noland has detected what he calls a "market syndrome," suggesting a link between participation in illicit market activities, foreign news consumption, and negative views of the regime. Black markets, he said, have the potential to turn into a "semiautonomous zone of social communication" and a possible space for political organizing. "In short," Noland said, "information and markets are linked."

That’s why governments abhor free markets, because free markets are the epicenter of information that coordinates people’s actions. And such actions may include the power to neutralize the political interests of tyrannical leaders.

But one might be tempted to object:

“but that is North Korea and should not apply to the US or the Philippines.”

As the great Friedrich von Hayek reminds us, (The Road to Serfdom) [bold emphasis mine]

Collectivism means the end of truth. To make a totalitarian system function efficiently, it is not enough that everybody should be forced to work for the ends selected by those in control; it is essential that the people should come to regard these ends as their own. This is brought about by propaganda and by complete control of all sources of information.

In short, control of information, which leads to mind control or indoctrination for political subjugation, is the essence of totalitarianism. And this has universal application.

Should Doomsayers Be Censored?

It had been a calculation error says the California preacher, thus doomsday will be reset on October 21. Booooo!

Reports the Yahoo, (bold highlights mine)

A California preacher who foretold of the world's end only to see the appointed day pass with no extraordinarily cataclysmic event has revised his apocalyptic prophecy, saying he was off by five months and the Earth actually will be obliterated on Oct. 21.

Harold Camping, who predicted that 200 million Christians would be taken to heaven Saturday before catastrophe struck the planet, apologized Monday evening for not having the dates "worked out as accurately as I could have."

He spoke to the media at the Oakland headquarters of his Family Radio International, which spent millions of dollars_ some of it from donations made by followers — on more than 5,000 billboards and 20 RVs plastered with the Judgment Day message.

It was not the first time Camping was forced to explain when his prediction didn't come to pass. The 89-year-old retired civil engineer also prophesied the Apocalypse would come in 1994, but said later that didn't happen then because of a mathematical error.

Not only has the events proven him wrong, but the preacher even admits to it: econometrics has failed him as I predicted. Yet he continues to apply the same methodology.

But I hear some people clamor that government has to “act” on Mr. Camping’s doom mongering.

Should the US government apply censorship on Mr. Camping?

Does it mean that we should rely on his poor track record to use force against what we may perceive as wrong predictions or ideas we don’t agree with?

But what if he will be correct and October will indeed account for as doomsday? Remember Aesop’s famed fable, The Boy who cried Wolf?

I am not saying that I agree with or believe in him. I think his overdependence on math camouflaged by religious creeds will continue to lead his predictions astray. But I could be wrong.

But there are two important points here:

-he is selling an idea of what he purportedly believes in and

-two we don’t know the future.

On the issue of selling ideas, marketing guru Seth Godin has a terrific commentary on the possible lessons gleaned from the recent apocalyptic prophesy.

Mr. Godin writes, (italics original)

Sell a story that some people want to believe. In fact, sell a story they already believe…

Not everyone wants to believe in the end of the world, but some people (fortunately, just a few) really do. To reach them, you don't need much of a hard sell at all.

In other words, many of those who listen to Mr. Camping’s prophesies could be people who already believed in them or that Mr. Camping merely personifies the belief of an extant segment of captive audiences. That's why he gets donations.

If Mr. Camping’s followers represent as zealots of doom, can we legislate away beliefs or faiths? Are we supposed to prevent the expression of ideas that doesn’t mesh with ours?

Besides, who should decide whose ideas are accurate anyway, the President? If governments have been shown as unable to sufficiently resolve social problems, then why should we expect them to know the substance of information which signifies relevance for us and what are not? Have you ever heard of propaganda or indoctrination-false information deliberately spread as truths for political ends?

This shows of the assumptions that government have superior knowledge accounts for as fatal conceit-the fallacious presumption of omniscience.

As US playwright and Nobel awardee Eugene Gladstone O'Neill said,

Censorship of anything, at any time, in any place, on whatever pretense, has always been and will always be the last resort of the boob and the bigot

Second is the issue of uncertainty.

All of us speculate about the future, that’s because we don’t know exactly how things will turnout. That’s why markets are there. And that’s why money exists. And that’s why people use mathematics, such as statistics, in the perpetual attempt to “smooth out” risks and uncertainties.

True, some issues are more predictable than the others, but again that’s why markets exist—to allocate resources according to one’s perception of time variant needs (satisfying one’s unease, e.g. some people see the need of believing in doomsdays).

As Professor Art Carden writes

People with strong beliefs should be willing to put their money where their mouths are. The late Julian Simon was a master of this. Superior knowledge and insight can be turned into profitable opportunities. My personal property no longer has value to me after the Rapture, but it might have value to someone else. If I knew the precise date of the end of the world, I would sell everything in the months leading up to it and use the resources to spread the word, as some of Camping’s followers have apparently done.

If I were pretty sure the Rapture might happen sometime over the next 40 years, I should be able to make a deal with someone who disagrees but who would be willing to pay me now in exchange for title to my property after the Rapture. I could then use the resources to spread my message. I got no takers on my offer of $1000 for all of one apparently Camping-affiliated group’s earthly belongings I made after I first learned about the claim that Judgment Day would happen on 5/21/2011.

Harold Camping isn’t the only discredited doomsday prophet among us. As I’ve followed this, I’ve wondered what percentage of the people who laugh at Camping and his misled followers nonetheless nod sagely, furrow their brows, and reach for their checkbooks whenever professional doomsayers in the environmental movement like Lester Brown and Paul Ehrlich warn of overpopulation, the end of oil, and the end of prosperity in spite of track records littered with doomsday predictions that failed to come true.

Indeed, beliefs can be parlayed into profit opportunities. We can profit from someone else’s mistakes, so why apply censorship?

This is like investing the stock market where wrong analysis or flawed theories or inaccurate information can lead to losses. So given the logic of advocates of censorship should we effectively ban losers (applied not only to stockmarkets but to all markets)? Or should we also apply censorship on newsletters fund managers and analysts whose prediction of the markets have been inaccurate?

What people say and do are frequently detached. Did global economic activities stop prior to May 21^st in anticipation of the rapture? Did you sell or give away your assets because of this?

If not, then the obviously you were not affected, because you didn’t believe, you were a skeptic. This is called demonstrated preference. Because the world didn’t fall into a stasis, most people around the world simply ignored such cataclysmic prophesy.

Only media likes to drum up on sensational issues because they profit from them. Fear draws attention. Yet shooting the messenger won’t eradicate the message. So censorship would signify as a fool’s errand.

At the end of the day, the issue of Judgment day will be one decided by your and my personal disposition and not by the government. Unless you honestly believe that governments can stop doomsday [har har har].

Finally, it would be an issue of legal fraudulence if modern day Cassandras engage in purposeful misrepresentation or deception to profit from prophesies of Armageddon.

But that would mean personal issues of those who felt affected or victimized, whose recourse should be channeled through the courts of law.

I close this anti-censorship ‘freedom of speech’ rant with this prominent quote which has been frequently (mis) attributed to Voltaire (but according to Wikipedia is from Evelyn Beatrice Hall who wrote “under the pseudonym of Stephen G Tallentyre in The Friends of Voltaire (1906), as a summation of Voltaire's beliefs on freedom of thought and expression)

I disapprove of what you say, but I will defend to the death your right to say it.