Why I Don’t Bother to Give Talks

I didn't realize, until reading Seth Godin’s latest advice which he transcribes so well, the reason why I refuse or turn down invitations to talk in public.

Before you give a speech, then, you must do one of two things if your goal is to persuade:

Learn to read the same way you speak (unlikely)

or, learn to speak without reading. Learn your message well enough that you can communicate it without reading it. We want your humanity.

If you can't do that, don't bother giving a speech. Just send everyone a memo and save time and stress for all concerned.

That’s why I just write or blog.

Declining Fatalities of Natural Disasters

This should be another good news; despite the many accounts of natural disasters, the overall impact has been diminishing.

Writes the Economist, (bold emphasis mine)

THE world has succeeded in making natural disasters less deadly. Annual death tolls are heavily influenced by outliers, such as Haiti’s earthquake in 2010 (which killed more than 200,000) or the Bangladeshi cyclones in 1970 (300,000). But, adjusted for the Earth’s growing population, the trend in death rates is clearly downward. Economic costs, though, are rising as people and industrial activity cluster in disaster-prone areas such as river deltas and earthquake fault lines. The world’s industrial supply chains were only just recovering from Japan’s earthquake and tsunami in March when a natural disaster severed them again in October. The deluge in Thailand cost $40 billion, the most expensive disaster in the country’s history. J.P. Morgan estimates that it set back global industrial production by 2.5%. Five of the ten costliest, in terms of money rather than lives, were in the past four years. Munich Re, a reinsurer, reckons their economic costs were $378 billion last year, breaking the previous record of $262 billion in 2005 (in constant 2011 dollars). Besides the Japanese and Thai calamities, New Zealand suffered an earthquake, Australia and China floods, and America a cocktail of hurricanes, tornadoes, wildfires and floods. Barack Obama issued a record 99 “major disaster declarations” in 2011.

Yet the Economist has been reticent about the cause of the accounts of diminishing death toll of natural disasters: Rising global wealth.

Google Public Data

As Professor Christopher Westley writes,

the best protection against natural disasters is not an expansion of the public sector on an international basis, but wealth creation. It is no mistake that natural disasters, which are quite equitable in distribution between rich and poor countries, are more devastating to the poor than the rich. The establishment of a thriving private sector in Sri Lanka, India, and Indonesia is crucial for a quality of life to develop there that can withstand earthquakes and their aftermath as well as does the California coast.

Higher quality or standards of living allows people to take on more protection against prospective calamities.

Video: Ron Paul on Iran: Our Policy Actually Do The Opposite Of What We Intend Them To Do

The common view is that meddling with the political economy of other nations has neutral effects to the nation which is being interfered with. And that they further think that whatever evil or criminal or militant behavior seen represents as internally driven dynamics.

This view misreads or downplays or ignores the causal influences of foreign interventions.

Ron Paul addresses this popular error here on the Iran issue.

[2:15] [bold emphasis added]

You know they are a very week nation, they are responding in a natural way. But they don’t want trouble because they can be annihilated in about 40 minutes. You know even by Israel or the United States, this idea that they are looking for a fight I think that they are a concoction of the West to prepare people for a war that is likely to come when there is a policy like this. I think it makes a perfect argument for my non-intervention foreign policy that we shouldn’t be engaged in stirring up trouble, and all these things we try to do to get rid of the regime in Iran right now actually plays into their hands because once we interfere to put on sanctions this brings the Iran people together.

They are having an election in a few months, Ahmadinejad is not strong politically, but when we interfere as an outsider, those dissidents who are struggling to get control of their country and their government and have a more sensible government, we have to drive them into the arms of the government. Just as we were brought together after 9-11, we were no dissenters, we all came together, they were republicans and democrats, we have to try to understand how our policy actually do the opposite of what we intend them to do.

When we impose restrictions or culture/religion or anything else to foreigners who resist, then the expected outcome would be conflict or trouble.

Global Equity Markets: Philippine Phisix Grabs Second Spot

Below is a year to date table of 78 nations monitored and tabulated by Bespoke Invest

Bespoke Invest writes

Nine trading days into 2012, the S&P 500 is currently up 2.25% year to date. So how do we stack up with the rest of the world so far this year? Below are the year-to-date returns for the major equity market indices of 78 different countries.

The average year-to-date change for all 78 countries is currently 1.13%, so the US is outperforming the average. There are 49 countries that are in the black for the year (63%) and 29 that are in the red (37%). The US ranks 24th out of 78 in terms of performance.

Just like last year, Greece is currently down the most out of any country with a YTD decline of 5.21%. Jamaica is 2nd to last with a decline of 3.99%, and Pakistan is the third worst at -2.94%. Argentina currently ranks first out of all countries with a gain of 11.26%.

The only G7 country that is down for the year is Italy with a decline of 0.52%. Germany has been the best G7 country with a gain of 4.15%, followed by the US, Canada (1.87%), France and Britain (1.16%) and Japan (0.53%).

The overall good news is that compared to last year, the bulls seem to have reclaimed dominance. The jury is still out as to whether the salutary start can be sustained.

Further, former laggards the BRICs (excluding China) appears to be on the top ten of the list revealing rotational moves anew.

Whereas the Philippines seem to have outsprinted everyone else, including neighboring Thailand, Indonesia and Malaysia but trails Argentina whom has leapt out of the gate to take clear command of the pack (horse racing vernacular). Singapore has been in close second.

Am not sure if the regional outperformance by the Phisix will last though, but this sterling performance certainly has been validating my predictions, here and here

World Economic Freedom Down, Asia and Africa Up

Writes Mike Brownfield at the Heritage ‘Morning Bell’ Blog

Economic freedom — the ability of individuals to control the fruits of their labor and pursue their dreams — is central to prosperity around the world. Heritage and The Wall Street Journal measure economic freedom by studying its pillars: the rule of law, limited government, regulatory efficiency, and open markets. Things like property rights, freedom from corruption, government spending, free trade, labor policies, and one’s ability to invest in and create businesses all factor in to a country’s economic freedom.

Sadly, economic freedom declined worldwide in 2011 as many countries attempted — without success — to spend their way out of recession. The editors of the Index explain what has led to this troubling decline:

“Rapid expansion of government, more than any market factor, appears to be responsible for flagging economic dynamism. Government spending has not only failed to arrest the economic crisis, but also–in many countries–seems to be prolonging it. The big-government approach has led to bloated public debt, turning an economic slowdown into a fiscal crisis with economic stagnation fueling long-term unemployment.”

Though some might think that the United States — the land of the free, the home of the brave — is of course a leader in economic freedom, they would be wrong. The United States fell to 10th place in the world for economic freedom, and its score continues to drop. The U.S. ranked 6th in 2009, 8th in 2010 and 9th in 2011.

The Keynesian (kick the can) approach in resolving crises via government (deficit) spending has been experiencing rapidly diminishing returns. So the developed crisis afflicted world now utilizes more of central bank actions to supplement or buttress fiscal policies.

Yet with far more debt and accreted imbalances from inflationism, such implies temporary fixes and that we should expect another crisis down the road (perhaps at a far larger bigger scale)

Not all is bad news though. The little crisis scathed regions of Asia and Africa appears headed in the opposite direction, again from Heritage…

The United States isn’t alone in the trend away from increased economic freedom. Canada and Mexico lost ground in the Index, and 31 of the 43 countries in Europe saw reduced freedom, as well. Given Europe’s huge welfare programs and out-of-control social spending, that’s unfortunately not surprising. As the world suffers the economic repercussions of Europe’s debt crisis, the price of pursuing policies that constrict economic freedom should be clear.

For all the bad news that the Index uncovered, there is some good news for economic freedom around the world. Four Asia-Pacific economies–Hong Kong, Singapore, Australia and New Zealand–lead the Index with top scores this year, Taiwan has seen increased gains in economic freedom, and eleven of the 46 economies in sub-Saharan Africa gained at least a full point on the Index’s economic freedom scale. And Mauritius eighth place score is the highest ever achieved by an African country.

Much of the world, though, isn’t so lucky. While some countries have seen their economic freedoms increase, others such as India and China are constrained by government control and bureaucracy.

This only means that the wealth convergence dynamic will continue to intensify and that the wealth gap between the West and Asia, Africa and other emerging markets, who continue to embrace economic freedom, will persist to narrow.

Despite my cynicism, I still put some hope into meaningful reforms that can be made in the Philippines. This signifies a mixed opinion of mine, which can be called as the endowment effect or the home bias. The Philippines has shown some progress which means kudos the current administration (if true).

Yet our deepening linkage with the world will represent as the ultimate driver that would pressure the domestic political economic policies to align with the underlying trend, globalization, which drives the rest of the world.

As proof, if Cuba has been opening up her economy, which is not just statistics, (chart from Heritage Foundation), then so should the Philippines.

S&P Downgrades Ratings of 9 European Nations, Affirms Seven

The Bloomberg reports,

France and Austria lost their top credit ratings in a string of downgrades that left Germany with the euro area’s only stable AAA grade as Standard & Poor’s warned that crisis-fighting efforts are still falling short.

France and Austria were cut one level to AA+ from AAA and face the risk of further reductions, the rating company said in Frankfurt late yesterday. While Finland, the Netherlands and Luxembourg kept their AAA ratings, they were put on negative watch. Spain and Italy were also among the nine nations downgraded.

It’s important to stress that the S&P has only been reacting to what the market has already done.

Major credit ratings in the US are limited by regulation, particularly the Nationally recognized statistical rating organization, thus operates as a quasi-cartel, specifically, the big three: S&P, Fitch and Moody’s. Since these firms apply ratings not only to private companies but to sovereign securities, they are largely sensitive to political influences.

S&P’s recent downgrade of US debt was apparently timed during the congressional debate on the debt ceiling, perhaps or most likely aimed at influencing the political outcome, which of course earned the ire of the Obama administration.

Nevertheless so far the markets has proven S&P’s US downgrade as largely ill-timed as 30 year US treasury bonds gained an astounding 35%!

This seem to validate predictions of deflationists but for the wrong reason. Global bond markets have been manipulated by regulation (Financial Repression-forcing financial institutions to hold or own sovereign papers, based on Basel Accords) and by monetary policies. The outperformance of the US bonds has been magnified by the Euro crisis, and importantly, the US Federal Reserve act to monetize debts. Deflation proponents should thank the US Federal Reserve for actualizing most of their predictions.

The red circle shows of Fed’s purchases of long term treasuries (chart from Cleveland Fed)

Going back to the issues of debt, a similar furor today over S&P’s European downgrades seems to hug the headlines as Europe’s politicians/bureaucrats contest S&P’s decision.

From the G7Finance.com

The EU’s top economic official criticised Standard & Poor’s downgrades as “inconsistent” on Friday and said the currency area was taking action to resolve its debt crisis.

“After verifying that this time it is not accidental, I regret the inconsistent decision,” EU Economic and Monetary Affairs Commissioner Olli Rehn said in a statement, taking a jab at the ratings agency in recalling its November accident in which it informed some clients of an erroneous French downgrade.

Anyway, these represents no more than histrionics to the crisis havocked Eurozone.

Bottom line: you can’t count on what credit rating agencies say. And you can’t rely on them to materially influence the markets. Rather, these firms act largely on market’s influences, except for some instances.

And there has been no better proof than the ‘stamp pad’ activities undertaken by these credit rating agencies on mortgage securities which help facilitated the US housing bubble.

Of course the operational “conflict-on-interest” relationship which has been enabled by above cartel inducing regulation, has produced a business paradigm where debt organizers and issuers compensated the credit rating agencies. So US credit rating agencies served the interests of their consumers. The rest is history.

Andrew Napolitano on Elections: What If…?

Another gem from Judge Andrew Napolitano

What if elections were actually useful tools of social control? What if they just provided the populace with meaningless participation in a process that validates an establishment that never meaningfully changes? What if that establishment doesn't want and doesn't have the consent of the governed? What if the two-party system was actually a mechanism used to limit so-called public opinion? What if there were more than two sides to every issue, but the two parties wanted to box you in to one of their corners?

What if there's no such thing as public opinion, because every thinking person has opinions that are uniquely his own? What if public opinion was just a manufactured narrative that makes it easier to convince people that if their views are different, there's something wrong with that -- or something wrong with them?

What if the whole purpose of the Democratic and Republican parties was not to expand voters' choices, but to limit them? What if the widely perceived differences between the two parties was just an illusion? What if the heart of government policy remains the same, no matter who's in the White House? What if the heart of government policy remains the same, no matter what the people want?

What if those vaunted differences between Democrat and Republican were actually just minor disagreements? What if both parties just want power and are willing to have young people fight meaningless wars in order to enhance that power? What if both parties continue to fight the war on drugs just to give bureaucrats and cops bigger budgets and more jobs?

What if government policies didn't change when government's leaders did? What if no matter who won an election, government stayed the same? What if government was really a revolving door of political hacks, bent on exploiting the people while they're in charge?

What if both parties supported welfare, war, debt, bailouts and big government? What if the rhetoric that candidates displayed on the campaign trail was dumped after electoral victory?

Read the rest here

I view Mr. Napolitano’s trenchant questions as universally applicable to democracies including the Philippines.

Big Mac Index: Swiss Priciest, India Most Affordable

The Economist gives us an update on their Big Mac Index.

They write,

THE ECONOMIST's Big Mac index is based on the theory of purchasing-power parity: in the long run, exchange rates should adjust to equal the price of a basket of goods and services in different countries. This particular basket holds a McDonald's Big Mac, whose price around the world we compared with its American average of $4.20. According to burgernomics the Swiss franc is a meaty 62% overvalued. The exchange rate that would equalise the price of a Swiss Big Mac with an American one is SFr1.55 to the dollar; the actual exchange rate is only 0.96. The cheapest burger is found in India, costing just $1.62. Though because Big Macs are not sold in India, we take the price of a Maharaja Mac, which is made with chicken instead of beef. Nonetheless, our index suggests the rupee is 60% undercooked. The euro, which recently fell to a 16-month low against the dollar, is now trading at less than €1.30 to the greenback. The last time we served up our index in July 2011, the euro was 21% overvalued against the dollar, but it is now just 6% overvalued. Other European currencies have also weakened against the dollar since our previous index, notably the Hungarian forint and Czech koruna, which have fallen by 23% and 16% respectively. Six months ago both currencies were close to fair value, but they are now undervalued by 37% and 18%.

Except for the Philippines, neighboring ASEAN economies as Thailand, Indonesia and Malaysia’s currencies are now in China’s levels whom represent the cheapest in the world, outside India, Ukraine and Hong Kong.

The Philippine Peso from last year’s USD $2.78 seem to have narrowed the gap with a US based Big Mac to $ 2.68 (due to perhaps real appreciation, although in 2011 the Peso was unchanged nominally speaking).

Economic Freedom: Philippines Gains on Regulatory Improvements

At last some genuine good news for the Philippines.

According to the latest Heritage Foundation study on the state of world’s economic freedom 2012 Index of Economic Freedom, regulatory efficiency has significantly improved to nudge our ranking up from last year’s 115 to 107.

Here’s the Heritage,

The Philippines’ economic freedom score is 57.1, making its economy the 107th freest in the 2012 Index. Its score is 0.9 point higher than last year, with a significant improvement in business freedom. The Philippines ranks 19th out of 41 countries in the Asia–Pacific region, and its overall score is slightly below the world and regional averages.

Despite the challenging global economic environment, the Philippine economy has been on a steady path of economic expansion. The government has pursued a series of legislative reforms to enhance the entrepreneurial environment and develop a stronger private sector to generate broader-based job growth. Overall progress has been gradual, but regulatory efficiency has been notably enhanced. The economy has expanded at an average annual rate of close to 5 percent over the past five years.

There are lingering institutional challenges that will require deeper commitment to reform. Despite some progress, corruption continues to undermine prospects for long-term economic development. The inefficient judiciary, which remains susceptible to political interference, does not provide effective protection for property rights or strong and transparent enforcement of the law

While such improvements should be cheered at, we need broader advances not just in regulatory efficiency, but also in property rights, rule of law, open markets, the size and scale of governments founded on less interventionism.

But in watching mainstream media's penchant for government is the solution to our social problems, and political developments mainly focused on generating approval ratings via controversies, and by my recent experience, count me skeptical of such (statistical based) improvements.

Quote of the Day: Real Economic Power

From Robert Lawson and Richard Alm, (hat tip Professor Arnold Kling)

In 2010, a tiny cabal of 535 individuals — just 0.00017% of the population — spent $3.5 trillion, or about 23% of the $14.5 trillion U.S. economy. That leaves 77% for the other 99.99983% of us.

The group is the U.S. Congress — whose members have enormous powers to tax and spend. And they've used them to grab economic power well beyond anything found in the private sector.

If we look at the richest 535 private citizens, measured by the Forbes 400 list combined with estimates for the nation's next 135 wealthiest people, we estimate these rich people probably have about $166 billion in spendable income each year.

Internal Revenue Service data from the 535 highest tax returns give a somewhat lower figure of $135 billion.

Thus, the members of Congress wield 20 to 25 times more economic power than the same number of richest private citizens in the country.

In a heavily politicized economy, inequality mostly springs from actions of political agents whose escalating interventionism bloats the bureaucracy and the pockets of political stewards by compelling economic agents, not only to comply and finance their desires (at the expense of the consumers) but to also lobby for privileges. The result is a vicious cycle of feeding the leviathan to unsustainable levels.

US Equity Markets: Sectoral Rotation

I have been pointing out how asset markets have increasingly been driven by monetary factors, which leads to the interim relative price changes and eventually to tidal flows that in the end accounts for boom bust cycles or what I call the Machlup-Livermore paradigm.

Activities in the US equity markets seem to be following this pattern.

Here is last year’s performance by industry

Table from Money and Markets

Now we seem to be seeing a rotation of leadership away from the previous leader, i.e Utilities.… [The following great charts from Bespoke Invest]

…to the laggards…

US Debt Ceiling Breached, President Obama to Seek Increase

From the International Business Times,

President Barack Obama will ask Congress to raise the federal debt limit in "a matter of days," White House Press Secretary Jay Carney said on Tuesday.

Although the president was scheduled to ask for $1.2 trillion in additional borrowing authority on Dec. 30, the action was delayed because Congress has only been holding pro forma sessions, meaning no formal business has been conducted. Still, Carney told reporters the White House will request the third and final increase, as determined by the debt-ceiling deal reached by Congress last August.

"I'm confident it will be executed in a matter of days, not weeks," Carney said.

The vote could come as early as Tuesday Jan. 17, after lawmakers officially begin the second session of the 112th Congress.

The U.S. reached the current $15.2 trillion debt limit on Wednesday Jan. 4, The Hill reported. Since then, the federal government has reportedly tapped into its Exchange Stabilization Fund in order to avoid exceeding the limit. The U.S. Treasury Department Web site states the fund consists of three types of assets: U.S. dollars, foreign currencies and Special Drawing Rights.

More signs of the Obama administration’s insatiable appetite for spending… (the following charts from Heritage budget chart book)

…a trend where mounting deficits continue to drive US debt levels vertically

…which if sustained would eventually reach crisis levels.

Yet if other countries desist from funding skyrocketing debt, and with lack of internal savings, this means either default or the Fed’s monetization of debt, that risks an inflation spiral.

It appears that President Obama is on track to take the US to a tipping point or what I call the Mises moment.

Greece Bailout: The Military Industry as Beneficiaries

If you think that Greece’s bailout has been about genuine reforms, think again.

As previously explained, Greece’s bailout isn’t about freeing up resources, which had been tied to the welfare state that would have been made available to private enterprise, but rather a transference to the political protected banking system and the embattled welfare based governments.

Well it figures that the military industrial complex has a hand in this too, or will be part of the beneficiary from the political deals.

Writes the Zero Hedge,

As Greek standards of living nose-dive, loans to households and businesses shrink still further, and Troika-imposed PSI discussions continue, there is one segment of the country's infrastructure that is holding up well. In a story on Zeit Online, the details of the multi-billion Euro new arms contracts are exposed as the European reach-around would be complete with IMF (US) and Europe-provided Greek bailout cash doing a full-circle into American Apache helicopters, French frigates, and German U-Boats. As the unnamed source in the article notes: "If Greece gets paid in March the next tranche of funding (€ 80 billion is expected), there is a real opportunity to conclude new arms contracts." With the country's doctors only treating emergencies, bus drivers on strike, and a dire lack of school textbooks and the country teetering on the brink of Drachmatization, perhaps our previous concerns over military coups was not so far-fetched as after the Portuguese (another obviously stressed nation), the Greeks are the largest buyers of German war weapons. It seems debt crisis talks perhaps had more quid pro quo than many expected as Euro Fighter commitments were also discussed and Greek foreign minister Droutsas points out: "Whether we like it or not, Greece is obliged to have a strong military".

Read more here

It’s a truism that in every crisis lies opportunities.

And as shown above, politicians and their cronies wield political actions, whom leverages and exploits on the crisis exceptionally well to their advantage, by gaming the system. Yet, blames will eventually be pinned on capitalism when it's about cronyism.

And since the current policy thrust by supposed rescuers ensures that the imbalances will be maintained, the current crisis will hardly be resolved but will get extended or could likely even worsen.

Video: Ron Paul: A Victory for the Cause of Liberty

Mr. Ron Paul has had a remarkable showing at the New Hampshire Republican primaries. In contrast to other opponents whose surge and fall has been abrupt, Mr. Paul's rise has, so far, been surprisingly consistent.

Here is Mr. Paul's fantastic speech after a strong second place finish (hat tip Bob Wenzel)


Despite mainstream media's blatant blackout in the coverage of Mr. Paul in the recent past, the apparent snowballing of the Ron Paul revolution have been symptomatic of the marginal changes in the way forces of decentralization have been upending traditional media and the way conventional top down politics has functioned. As mainstream personality the former chief economist of the IMF Simon Johnson said, despite his flawed criticism, Ron Paul must be taken seriously.

Yet unknown to most, such phenomenon has partly been facilitated or amplified by the advances of technology.

Importantly, Mr. Paul in the above video underscores on what has been a growing or deepening trend: the emerging receptiveness of the public to the cause of liberty as previously discussed.

Ron Paul's campaign, even if he loses the nomination, will serve as showcase to inspire, not only in the US but around the world, the importance of civil liberties and economic freedom.

Interesting signs of times.

Infographics: All The World's Gold

Basic facts about gold in a splendid graph [Hat tip Zero Hedge]


From: Number Sleuth

Quote of the Day: Real Money

From Jeffrey A. Tucker (Daily Reckoning)

The new coins we use in transactions are not real. They are wearing a mask, a disguise, one put on by the state. More absurdly, the state tells us not to look at the reality, but rather to trust God that all is right with the money in the realm.

The old coins, in contrast, are precisely what they say they are and, therefore, have nothing to hide. There are no invocations that require a leap of faith. The truth is found on the scale and is told in ounces.

The gold ones are, of course, the ones you really want to hold. Their value reflects the metal content. Melt them, restamp them, make them into jewelry and they are still worth no less than the market value of the metal.

And who decides what the values of these old coins are? The coins might bear the likeness of a politician. They might bear the name of the nation-state. But these pictures and slogans are merely interlopers on the real point. What you hold is valuable not because some legislature, Treasury Department or central bank says it is valuable. Its worth was and is dictated by the market, which is to say, the choices and values of human beings. No government can add to or take away this value except by physically manipulating the coin itself.

Not only that. If you dig deep enough in the coin shop, you might run across coins that were not minted by governments at all, but by private manufacturers. In the early years of the Industrial Revolution, this was the way coins were made in Britain. Not by the Royal Mint, but by entrepreneurs no different from any other.

Falklands 2.0: War in South America?

The drums of war seem to reverberate not only in the US but also in parts of South America, as several politicians desperately look for scapegoats or political artifices to conceal economic woes in order to cling onto power.

Writes Simon Black (source: lewrockwell.com)

Naturally, the administration of President Cristina Fernandez insists that inflation is not a problem, despite the Argentine peso losing 25% of its value against the US dollar over the last three-years (and far more against gold).

Meanwhile, Fernandez has borrowed her plays from Atlas Shrugged. She’s imposed capital controls, raided pension funds, nationalized private property, and taken control of the media… all in a vain attempt to delay the endgame.

A few weeks ago, the government passed a package of new laws, essentially criminalizing public protest under the auspices of combating terrorism. The legislation, snuck in at a midnight session during the holiday period, provides severe punishment for various crimes under a very broad definition of terrorism.

Fernandez herself maintains that the law would -never- be invoked to restrict the legitimate rights of Argentines. This, from a woman who simultaneously passed legislation to seize control of the country’s newspaper industry.

In her latest move, Fernandez has stepped up her saber-rattling over the Falkland Islands, a nearby archipelago that has been a British territory since 1833 (it is now self-governing). You may remember that Argentina invaded the Falklands in 1982 and was subsequently defeated after a bloody conflict with Britain.

It’s a sore subject in Argentina; the government still claims sovereignty over the Falklands (known as Las Malvinas in Argentina), and Fernandez is waving the flag once again.

Last month Argentine naval forces were sent to frustrate commercial fishing around the disputed territory. And in the most recent development, Argentina, Brazil, and Uruguay announced that they were closing their seaports to any ship flying a Falklands flag (all 25 of them…)

Argentina has also mounted pressure on the British government to reopen negotiations over the Falklands’ sovereignty. Thus far, the Brits have refused.

Cristina Fernandez’s BFF Hugo Chavez recently added to tensions by saying, “The English are still threatening Argentina. Things have changed. We are no longer in 1982. If conflict breaks out, be certain Argentina will not be alone, as it was back then.”

At this point, it’s all just tough talk and petty annoyances. But here’s the thing – there are four billion barrels of oil estimated to be within the Falklands’ territorial waters.

Given the utter insanity with which Fernandez governs her country and the desperation in the Argentine economy, one cannot rule out the possibility of her trying to grab Las Malvinas by force. After all, military conflict is the ultimate social distraction.

Looks likely that a Fernandez led Argentina seems bound for a 1999-2002 crisis relapse.

Chart of the Day: Debt Causes Global Warming

Below is an example of how mathematical correlations (via models) can be used to manipulate public’s opinion on social issues as global warming.

The graphs show that temperature anomaly has higher correlation with debt than with carbon concentrations where a deduction can be made to say that debt may have caused global warming.

Or that maybe the faithful will suggest that ‘consumerism’ via debt has led to increased carbon emissions. But this would signify as speculative baloney.

Zero Hedge nails it… (bold emphasis mine)

since global leverage (via Debt-to-GDP) has a greater correlation to the "Temperature Anomaly" aka Global Warming, at 0.79, than CO₂ concentration, at 0.69, it is obvious that global warming is purely a function of ever increasing leverage, and not, as is widely accepted by various ecological consultancies, carbon dioxide concentration. And now you see how easy it is to make idiotic, and totally spurious statements (which however serve as fodder for even more idiotic peer-reviewed white papers and journal submissions this keeping lots of people employed while contributing absolutely nothing to society), which given enough time, will become religion to a new breed of shamans once the old ones are forcibly kicked out of their comfortable corner offices.

Amen.

As previously argued, the public hardly questions or applies critical thinking to the methods used to derive at conclusions and simply take whatever is fed to them 'hook, line and sinker'.

Many reasons for the popular appeal: many are overwhelmed or intimidated by the facade of science and math, many use maths or science as social signaling or for social status and many are allured by the appeal to the majority or etc... Yet unknowingly, this makes them very vulnerable to manipulations by politicians and their followers.

Quote of the Day: Making a Difference

One option is to struggle to be heard whenever you're in the room...

Another is to be the sort of person who is missed when you're not.

The first involves making noise. The second involves making a difference.

From my favorite marketing guru Seth Godin

Gold Flip Floppers: George Soros and Dennis Gartman

In the second half of last year, gold bears made an appeal to authority by citing George Soros and Dennis Gartman as noteworthy investors who jumped into their bandwagon.

Here are the reports:

From Bloomberg

George Soros, the billionaire who two years ago called it the “ultimate asset bubble,” cut 99 percent of his holdings in the first quarter, Securities and Exchange Commission data show.

From San Francisco Chronicle

Gold is in the "beginnings of a real bear market," economist Dennis Gartman said today in his daily Gartman Letter.

Yet in very little time the so-called new converts suddenly backslid or retracted.

From Newsmax

Legendary financier George Soros returned to buying gold in late 2011 after selling it earlier, and is due to reap the benefits later this year when Fed policies will likely weaken the dollar and send the precious metal climbing, Emerging Money reports.

In the first quarter of 2011, Soros Fund Management sold almost all its shares in the SPDR Gold Trust and the iShares Gold Trust exchange-traded funds, Bloomberg reports, citing SEC data.

From Financial Post

Investment letter publisher Dennis Gartman declared Thursday that he was wrong about his bearish call on gold last month.

Writing in his daily investment letter, Mr. Gartman said he was reversing his position on gold, and now views the precious metal as being in a bull market.

Well, one is devout statist and the other is a chart technician. Apparently, gold has proven them wrong.

Humor: Can a Noah’s Ark be Built in the US today?

What if God ordered Noah to build an ark in the US today?

Thanks to Dan Mitchell for a good laugh

…..And the Lord spoke to Noah and said:

“In one year, I am going to make it rain and cover the whole earth with water until all flesh is destroyed, but I want you to save the righteous people and two of every kind of living thing on earth. Therefore, I am commanding you to build an Ark.”

In a flash of lightning God delivered the specifications for an Ark. In fear and trembling, Noah took the plans and agreed to build the ark.

Remember,” said the Lord: “You must complete the Ark and bring everything aboard in one year.”

Exactly one year later, fierce storm clouds covered the earth and all the seas of the earth went into a tumult. The Lord saw that Noah was sitting in his front yard weeping

“Noah,” He shouted

“Where is the Ark?”

“Lord, please forgive me,” cried Noah. “I did my best, but there were big problems: First, I had to get a permit for construction, and your plans did not meet the Chicago codes. I had to hire an engineering firm and redraw the plans.

Then I got into a fight with OSHA over whether or not the Ark needed a sprinkler system and approved floatation devices. Then, my neighbor objected, claiming I was violating zoning ordinances by building the Ark in my front yard, so I had to get a variance from the Chicago planning commission. Then, I had problems getting enough wood for the Ark because there was a ban on cutting trees to protect the Spotted Owl…and finally convinced the U. S. Forest Service that I really needed the wood to save the owls. However, the Fish and Wildlife Service won’t let me catch any owls, so, no owls.” The carpenters formed a union and went on strike. I had to negotiate a settlement with the National Labor Relations Board before anyone would pick up a saw or hammer. Now, I have 16 carpenters on the Ark, but still no owls. When I started rounding up the other animals, an animal rights group sued me. They objected to me taking only two of each kind aboard.

Just when I got the suit dismissed, the EPA notified me that I could not complete the Ark without filing an environmental impact statement on your proposed flood. They didn’t take very kindly to the idea that they had no jurisdiction over the conduct of the Creator of the Universe. Then, the Army Corps of Engineers demanded a map of the proposed new flood plain…. I sent them a globe.

Right now, I am trying to resolve a complaint filed with the Equal Employment Opportunity Commission that I am practicing discrimination by not taking godless, unbelieving people aboard. The IRS has seized my assets, claiming that I’m building the Ark in preparation to flee the country and not pay taxes. I just got a notice from the state of Illinois that I owe them some kind of user tax and failed to register the Ark as a “recreational water craft.” And finally, the ACLU got the courts to issue an injunction against further construction of the Ark, saying that since God is flooding the earth, it’s a religious event, and, therefore, UNCONSTITUTIONAL. I really don’t think I can finish the Ark for another five or six years.”

Noah waited…

The sky began to clear, the sun began to shine, and the seas began to calm. A rainbow arched across the sky. Noah looked up hopefully.

“You mean you’re not going to destroy the earth, Lord?”

“No,” He said sadly.”

“I don’t have to. The government already has.”

Germany’s Negative Yielding Debt

In Europe, desperate times calls for desperate measures. Now the public pays the government to hold their money.

From the Wall Street Journal, (bold emphasis mine)

Investors agreed to pay the German government for the privilege of lending it money.

In an auction Monday, Germany sold €3.9 billion ($4.96 billion) of six-month bills that had an average yield of negative 0.0122%, the first time on record that yields at a German debt auction moved into negative territory.

This means that unlike most other short-term sovereign debt, in which investors expect to be repaid more than they lend, investors agreed to be paid slightly less. And they are willing to do that because they are so worried about the potential for big losses elsewhere.

That is particularly the case in Europe, where sovereign-bond markets have been rocked by a years-long crisis. Switzerland and the Netherlands, also seen as relatively safe countries in which to invest, are among the few that have sold debt with negative yields in recent months.

In other words, German, Swiss and Dutch debt holders are losing money in exchange for safety.

Negative yields are symptomatic of an aura of uncertainty, the intensifying state of distress, the insufficiency of an alternative and the urgency to seek safehaven.

Interesting times indeed.

State Propaganda, Post Hoc Fallacies and Critical Thinking

The North Korean government says that nature has been sympathizing with the recent loss of their leader.

The Reuters reports,

The passing of North Korean strongman Kim Jong-il has been marked by plunging temperatures, mourning bears and now, according to North Korean state media, by flocks of magpies.

Kim, who died in December aged 69 years after 17 years running the world's most reclusive state, was reputed to be able to control the weather, as well as to have scored a miraculous 38 under par round of golf.

"At around 17:30 on December 19, 2011, hundreds of magpies appeared from nowhere and hovered over a statue of President Kim Il Sung on Changdok School campus in Mangyongdae District, clattering as if they were telling him the sad news," state news agency KCNA reported on Monday.

To an outsider this would be read as absurd, because it is.

But unknown to most, such medium of political communication represents the dominant or mainstream way of how social issues are dealt or tackled with by the political order and by the political establishment influenced media—whether in the US, the Philippines or anywhere around the world.

Most of media’s treatment revolves around the same fallacy: Post hoc ergo propter hoc or “after this, therefore because of this"

Whether social issues as anthropomorphic global warming, trade imbalances, the ‘necessity’ of government spending, militant foreign policy, retributionist healthcare and education and others, hardly anyone seem to care about the research or analytical methodologies used for arriving at implied conclusions.

These social events are considered as given or as ‘facts’ which are mostly backed by references of politicians and or their academic and or institutional factotums (where the latter’s arguments have been premised on math ‘models’).

That’s the difference between the blatant propaganda by the North Korean media and the subtle propaganda masqueraded as well thought public issues in mainstream politics and media.

And the ensuing public debate would mostly center on these assumed ‘facts’ which only magnifies the influence of state propaganda to the public—mostly through the power of suggestion, which again are predicated on the veracity of these assumptions.

As Lenin once said,

A lie told often enough becomes the truth

In short, what the public sorely lacks is critical thinking. Yet the absence of critical thinking is what makes the public crucially vulnerable to political manipulation.

Quote of the Day: Limits of Knowledge

time is too short to worry about what’s merely possible. Nearly everything that is possible will never occur. The range of the possible is enormously larger than is the range of the plausible; the range of the plausible is larger than is the range of the probable; and the range of the probable is bigger than what (if we’re speaking of the past) has actually occurred or (if we’re speaking of the future) what will actually occur.

Part of what separates good thinkers (including those who are formal scholars) from poor thinkers is their wisdom in sensing what is relevant enough for analysis. Beyond an exposure to history and wide reading, I know of no recipe for instilling such wisdom. And I realize that if you lack such wisdom you necessarily lack the ability to understand that you lack such wisdom. We all think we have that wisdom; we all understand – correctly – that not everyone does have that wisdom.

From Professor Don Boudreaux.

The short version of this comes from Confucius

Real knowledge is to know the extent of one's ignorance.

How War Policies will Hurt the US

The economics of war will eventually weigh on the US.

The following is an excerpt from a must read article by investing guru Doug Casey (bold emphasis mine)

An AK-47 costs less than $500 most places in the world; the bullets cost about 20 cents apiece, and the teenager to employ them costs nothing at all. In fact, teenagers in the Muslim world are in such oversupply that they can be said to have a negative cost.

A US soldier, by contrast, is immensely expensive. Even though most of them come from lower socio-economic levels, a substantial investment has been made in taking them even through Grade 12. Then comes the cost of recruiting, training, equipping, paying, insuring, housing and transporting them in the military. I’m not sure the cost of a US soldier in the field has ever been accurately computed, but it has to be well over a million dollars for a simple grunt and much more for a specialist. That’s not counting the lifetime of pension benefits and medical care for the maimed. And with battlefield medical as good as it now is, the ratio of seriously wounded to dead is much higher than ever before. You may sympathize with the US soldier, but he’s definitely on the wrong side of the equation.

An M-1 tank costs about $5 million a copy. It, or any other vehicle, can be destroyed by an IED fabricated from fertilizer or unexploded ordnance. Even if it’s not destroyed, or not even severely damaged, the brains of its occupants are likely to be scrambled by the blast wave. This is, incidentally, something that is underappreciated. A blast wave bounces a brain around in a skull like an egg inside a tin can. Considering that IEDs are both devastating and extremely hard to detect, it’s no wonder they’re so popular.

Have you ever wondered why there’s no reporting on the numbers of tanks, APCs, Humvees, helicopters and other (immensely expensive) hardware being destroyed in the current US wars? It’s classified, because the numbers would be so embarrassing. Unlike in Vietnam, there’s no longer any body count of the enemy because that would be politically incorrect. But it doesn’t matter how large it is; every dead jihadi is a dragon’s tooth that will grow back as ten replacements. That’s why there’s really no way to win a guerrilla war before you go bankrupt – no way short of genocide or at least serious mass murder.

A $1,000 RPG will easily destroy a million-dollar armored personnel carrier and its occupants. A $10,000 shoulder-launched missile can take out a $10 million helicopter or a $40 million F-16. It may be practically impossible to shoot down a $1 billion B-2 bomber, but that’s academic; they were built to fight a nuclear war against the USSR. They’re useless except to deliver atomic weapons, but the new enemy lives in refugee camps and scattered within teeming cities. The B-2’s codename should be changed from Spirit to Albatross, because it’s not only totally uneconomic, it’s almost totally useless.

So the economics of guerrillas attacking an invading superpower are excellent. In response, the economics of a superpower attacking guerrillas or terrorists are disastrous. In its current wars, the US winds up using cruise missiles, at around $1.5 million each, to blow up wedding parties. The direct expense is bad enough; the vastly greater indirect expense is the creation of a clan of new enemies. The best result is for the missile to just pulverize some sand. Even if it hits a few mujahidin, that’s placing an implied value of several hundred thousand dollars apiece on their heads.

In other words, whether we’re looking at offense or defense, the economics of destruction are tilted not just 10 to1, not just 100 to 1, but probably closer to 1,000 to 1 in the favor of insurgents.

Perhaps you’re thinking further advances in technology will tilt the equation back toward the US. But as I explained above, the effect of each innovation will be just the opposite after only a short period of technological monopoly. People have a lot of misplaced confidence in the so-called "defense" establishment to come up with marvelous devices to confound groups designated as the enemy. Of course advances will be made, at least for as long as the US government has scores of billions to spend on R&D annually – which it soon may not, for financial reasons. But even if it diverts funds from its myriad other projects, the procurement process is stultifyingly bureaucratic, slow and costly. It’s not at all entrepreneurial, which it still was to a degree even during WWII, when the P-51, the best fighter of the war, was taken from concept to production in nine months and turned out for $50,000 a copy.

The US will even lose the war for new weapons as time goes on, simply because the Defense Department bureaucracy is so counterproductive. It’s like the company Dilbert works for in the cartoon pitted against millions of independent entrepreneurs in the Open Source world. Dilbert’s company moves like a dinosaur, while the Open Source world watches, imitates, innovates and improves at warp speed.

Today a ponderous state supposedly represents our side (I italicize that because, although I truly dislike many of the people it’s fighting against, I consider it to be an even greater danger). At best, it resembles a dim, tired old Tyrannosaurus up against hundreds of smart young Velociraptors intent on eating it. The outcome is obvious: a bunch of the attackers will get killed, but the T-Rex is dead meat.

Remember that there are more scientists and engineers alive today than in all of human history before them, the vast majority from non-OECD countries. The ones who are any good don’t want to work in a constrained, bureaucratic environment with no financial upside. Entirely apart from that, if the minions of the perversely named Defense Department come up with a real super-weapon, in today’s world it’s easy to replicate and improve on, and for a fraction of the original cost. That’s why there are scores of thousands of apps developed for most any electronic device that hits the market today – in addition to the device itself being "knocked off" illegally by small factories that could be anywhere.

Terrorism icon Osama bin Laden’s goal was reportedly to bankrupt the US. And the US has been fighting a 20th century modeled war, when times (or warfare’s evolving dynamics) has been dramatically changing.

In line with the way incumbent political institutions have been structured, the US political establishment has been failing to keep with the new realities (or with the emergent forces of decentralization). And at worst, they seem to be falling right into bin Laden’s ‘war of attrition’ trap.

Yet you can profit from terror (or political folly) as Doug Casey points out, read the rest here