Real Trust Requires Real Capitalists

Plowing through the hyperbole that the financial sections have become, one can sometimes find a little perspective. Rob Kirby writing in Financial Sense looks back on the road we have traveled:

Banks in the 19th century were owned by real capitalists and the equity capital of banks was about 60–80% of their balance sheets: bankers were lending or investing their own money, so they were responsible and did not accept excessive risks.

The 19th century also had what were called "wildcat" banks. These were often owned and operated by thieves and counterfeiters. They were located throughout the country, but were especially prevalent in the territories. They were characterized by the fact that they only had enough money to convince the locals that they had more. Today, we call that "a low reserve ratio".

Following a succession of bank panics, the central banking system was created in 1913 and called the Federal Reserve. And here is where it gets really interesting. The reserve ratio was set at 3%-12% depending on the size of the bank. What only a year before had been considered dishonest at best and criminal at worst, was now institutionalized as the norm. Shortly after this, the honest banker disappeared. The gold standard became a political football, before being phased out. With no cultural pressures, and no system of measurement, the wildcats could run free.

The required reserve ratio at the Fed is currently 10% on transaction deposits (checking and savings), and zero on everything else. Homes, cars, credit cards, entire businesses, have all been financed with nothing. And what of those savings accounts? Of course, there are plenty of exemptions and waiver rules included for favored political donors. Mr. Kirby continues:

...an accurate and logical accounting of where we are would amount to a confessional by the powers-that-be, punishable by law.

I don't see that anything is punishable by law. Inaccuracy and illogical accounting is the law. The lack of trust we see today is only the widespread realization that the money center banks are insolvent. They have been for a very long time. The banks are broke and everybody knows it. If the banks had been built on real wealth, regaining trust would be quick and easy. As it stands, what's to trust?

Leeches On the Back of Society

A universal constant in the world of the rich and powerful is that they will always do what is in their own self-interest. It's how they became rich and powerful to begin with. I have no problem with that, but anytime one of them says something that ordinarily would not be in their own self interest, I have to wonder; What's the game?

The Drudge Report carried a story from Reuters about "renowned investor" George Soros, saying:

the world financial system has effectively disintegrated, adding that there is yet no prospect of a near-term resolution to the crisis.

Really? It's more likely that Soros Fund Management Inc. has effectively disintegrated and there's no near-term resolution to George Soros' crisis. But, it gets even better:

...the turbulence is actually more severe than during the Great Depression, comparing the current situation to the demise of the Soviet Union.

Let's take a deep breath and calm down for a minute. Hedge funds have been taking an even worse beating than the New York banks. Hedge funds borrowed from the banks to buy the toxic assets that are causing all the problems. The banks are in trouble, not just because they too own some toxic assets, but because the hedge funds can't pay off the loans for theirs.

Soros Fund Management, located in the Cayman Islands (where else?), is a group of hedge funds. The largest of these funds, Quantum Fund, plays the currency markets. Mr. Soros and his ilk take the money of the rich and move it from country to country, going long on strong currencies and short on weak currencies. If you can talk enough rich people into letting you manage their money, you can do what Mr. Soros did.

In 1992 he bet the whole wad on shorting the English pound. The attack on the pound was so overwhelming that it became a self fulfilling prophesy. It broke the Bank of England and caused a devaluation in the pound. Mr. Soros and his wealthy clients walked away with billions, while the English working class saw the price of everything go up. Later in the decade, he nearly destroyed several Asian currencies. The farmers, the fishermen, the shopkeepers, all paid the price for the fame and fortune of Mr. Soros.

So what's the game today? I'll take a wild shot in the dark and say that Soros Fund Management needs a big government intervention; not only to help their currency positions, but in applying the Treasury Dept.'s magic eraser to all those toxic assets sitting in the Cayman Island offices.

But not to worry, Mr. Soros and his wealthy clients are philanthropists. They help all sorts of working class people with all sorts of problems. In other words, they destroy the working class, so they can help them. This is how the rich get richer, the poor get poorer, and the powerful solidify their grip. This kind of game is beyond mere hypocrisy, it's beyond even simple BS. It's dangerous.

Deconstructing the Lost Decade

There has been much talk of Japan's "Lost Decade" recently. In the IBD this morning, Robert Samualson lays out a few pertinent facts.

First and foremost is that, historically, government stimulus has a mixed record. Sometimes it works and sometimes it doesn't, and nobody knows why. Each situation is different enough that there is no conventional wisdom that applies to all.

Today, on one side of the argument, President Obama warns of a Japanese style stagnation; on the other, conservatives argue that the Japanese government instituted eight stimulus packages, none of which accomplished anything. They are both right and wrong at the same time. The Japanese experience has little to do with what we are going through now for the simple reason that we are not Japanese.

Japan has what Richard Katz, editor of the Oriental Economist, terms a "dual economy." On the one hand, export industries (autos, steel, electronics) are highly efficient. They face intense global competition. On the other, many domestic industries (food processing, construction, retailing) are inefficient and sheltered from local competition by regulations or custom.

Since the early '80s, U.S. economic growth has depended on a steady rise in consumer spending supported by more debt and increasing asset prices (stocks, homes). Just as the mid-'80s signaled the end of Japan's export-led growth, our slump signals the end of upbeat consumption-led growth.

The problem in both cases is, once the formula has played itself out, where to find new areas of growth. Our government has been driving out manufacturing, or inviting them to leave, for decades. Americans really don't make much anymore. Now that consumers are staying home, we don't buy much anymore either. If we don't make anything or buy anything, then what are we doing?

This problem is bigger than any stimulus can solve. If we bring back the factories, we'll bring back the jobs, and bring back the growth. Anything less is wasted effort.

When Subs Collide

The Sun newspaper is reporting that a British nuclear submarine collided with a French nuclear submarine somewhere in the north Atlantic. There doesn't appear to have been a breach of the hull in either vessel and no loss of life.

My dad served as a sonar man on a submarine in the north Atlantic during WWII. When I was a kid, I would ask him if he ever saw any action. Did he ever sink any Germans? He would calmly reply, "Heavens no, being 300 feet underwater with 100 drunken sailors was dangerous enough."

I wonder if the British Navy still serves rum rations?

Economic Fascism?

I'd been thinking about this subject for a while now, and this morning Michael Ledeen had an article on it. Is what's going on in Washington socialistic, fascistic, or just plain bad policy?

It has always been easy to tell the difference between capitalism and communism. They are divided by property rights and the means of production; capitalists have them and individual communists don't. But economically speaking, there are no clear lines of demarcation between capitalism and socialism, or capitalism and fascism. These three "isms" all allow some degree of property rights and some degree of government intervention, but are largely social constructs with no clear economic distinctions.

Hitler's Germany is a good example of the lack of distinctions, as the NAZIs never gave much thought to economics. There was no NAZI economic policy that I've ever found. They tended to do whatever worked best in supporting the military machine and left it at that. Mussolini's Italy is a little better, but even there they were heavily militaristic with no clear economic philosophy. Industry was directed to the betterment of the state, whether nationalized or left in private hands.

Wikipedia may not be the best source, but I did find this:

Historian Gaetano Salvemini argued in 1936 that fascism makes taxpayers responsible to private enterprise, because "the State pays for the blunders of private enterprise... Profit is private and individual. Loss is public and social."[26]

Sound familiar? I don't know what we are heading towards, but whatever it is, it makes unbridled capitalism look pretty good by comparison.

New Improved Zombies

There is a new phrase being coined regarding a perceived impending disaster that is our economy. It is the "Zombie Bank". I vaguely remember this term being used during the Japanese banking crisis in the 1990's. It's origin may be older, but I'm beginning to see it used in the US financial pages more often now. It's loosely defined as a bank that the market (us) sees as obviously insolvent, that the government central planners (them) refuse to allow to go naturally. Andy Kessler, writing in The Wall Street Journal gives an example:

Despite over a trillion in assets, Citigroup is worth a meager $18 billion, Bank of America only $28 billion. The market has already figured out that the banks and their accountants haven't fessed up to bad loans and that their shareholders are toast.

Citigroup, having had a $25 billion infusion from Old Uncle Larry, is set for round two with Tim Geitner. Like a young Dr. Frankensteen, Geitner is sure to have a pocket full of treats, as he leads the Citigroup Zombie through "Puttin' on the Ritz". I know I'm mixing metaphors here, but the question of the day is this; How well can the Citigroup Zombie sing and dance? Simply eating the flesh of the living just isn't going to be good enough anymore. We need zombie banks that can carry a tune; and if not dance the Tango, at least a saltzy Texas Two-Step to please the crowd.

And to think, the only price of admission is a fistful of toxic assets. Be sure to keep them in your pocket, you may need to show them later. They'll also make a nice souvenir for your memory book. So, sit back and enjoy the new improved zombie banks doing the high step down the avenue while singing, "We're All Keynesian's Now!", and prepare for the zany hijinks of the hit comedy of the season; "Honey, I Shrunk the Capitalists".

It's going to be quite a show. If not a Golden Age of Zombie Bank entertainment, certainly a Copper/Zinc Age.

The Individual Power Station

Scott Adams, the Dilbert cartoonist, has identified a basic modern problem, and the beginnings of how to solve it.

One of the frustrations people have with the current economic downturn is feeling they are helpless to do anything about it. We are told by the media that only the government is big enough to fix our problems.

Remember after 9/11 how President Bush told us to just go about our business? It was as if to say, "Move along folks, nothing to see here, just move along." Why doesn't the government ask anything of us? Isn't it strange that they don't?

It wasn't so long ago that President Kennedy said, "Ask not what your country can do for you. Ask what you can do for your country." 300 million individuals working towards a common goal could accomplish anything. But, nobody's asking us. Apparently, at some point between Kennedy and Obama, we stopped offering. So, leave it to a cartoonist to have the best idea yet.

Suppose President Obama ordered the power companies to make one change in policy. Not only would they credit the bills of customers who have solar panels on the roof when they generate more power than they use, as is the current situation, but they would actually pay customers cash for any energy created beyond the limit of their own monthly bill. That would make any home with a Southern exposure a potential generator of electricity. The President could ask citizens to invest in solar panels, as an act of patriotism, knowing the payoff would take years, but the collective benefit to the country would be great. It would stimulate the economy, create jobs, and drive down the cost of solar panels. And your neighbors could see your new solar panels and know you were doing your part.

Imagine tens of millions of clean energy companies run by private individuals. Each one energy independent, with at least the beginnings of a multiple income stream, and the costs to the poor being only in the distribution. Think of the effect on Nevada property values.

If the people in Washington DC would look at the governed as something other than a potential threat to their power, they might think of something like this. As things stand now, we are left with presidential decree's, legislative pissing contests, and the idle musings of cartoonists.

The Comedian's Craft

A confluence of events yesterday led me to Barnes & Noble bookstore to spend my Christmas gift card. One of the books I bought was "Born Standing Up" by Steve Martin. It's a very readable book about his early years and has quite a few surprises.

The biggest surprise is the story itself. When Steve Martin burst on the scene in the mid-seventies, we all thought he was a new comic. In fact, what we were witnessing was a performance artist at the end of the road. Weaving music, magic, salesmanship, and just plain entertainment, all the while taking classes in philosophy, psychology and art at Long Beach and UCLA, Mr. Martin developed his craft for the better part of two decades. This is the story of a guy who was willing to lay it all on the line for two dollars a show in near empty rooms.

Another thing I really liked about this book is there's not much name dropping. The names are largely unfamiliar; Magicians at Disneyland, theater actors at Knott's Berry Farm, and nightclub managers in San Francisco. Occasionally, he meets someone I'd heard of before, but not often. It was a tough life. It's the kind of life only the most dedicated romantic could stay with.

Mr. Martin also includes some pretty personal stuff about his family. This is not a tell all, but as he explains it"...a complicated childhood can lead to a life in the arts. I tell you this story of my father and me to let you know I am qualified to be a comedian." For all the silliness of his stage act, Steve Martin is a serious, logical thinker. This heartfelt telling of his own story shows a complicated man struggling to create something new, and once created, walking away from it to create something else.

Broken Windows and the Unseen

I happened across an interesting chart earlier this week. With all the back-and-forth about the next Great Depression one is tempted to look at the years 1930 to 1940. What is really instructive are the years 1941, '42, and '43. We might conclude from this chart that WW II was a wonderful time.



And, why not? Employment was at an all time high; anyone who wanted a job could get one. Real wages rose as a large part of the labor force was directed into unproductive endeavors, never to return. Exports were, well, booming. (Pun intended). There are some who say that war is good for an economy; and the bigger the war the better. These people, needless to say, are idiots. Economics, like everything else, is ultimately about people. Numbers are only a reflection of the lives people are living, and sometimes that reflection can be a poor one.

Another trail I followed led to Frédéric Bastiat and his Broken Window Theory. Briefly, it is the story of a shoemaker's son who one day breaks a window at the shop. All the neighbors agree that fixing a broken window has many benefits, one of which is that it provides a job for the glazier. Left unseen, is the productive use the money paid to the glazier might have gone to. Bastiat goes on to argue that any ruler can immediately double employment simply by cutting off the right hand of everyone in the kingdom. (I need to find out more about this guy).

Today, there is general agreement that the Bush bank bailout was an unproductive use of our national wealth. The folks in Washington seem determined to try something similar in other areas. All manner of numbers are being tossed around to "prove this, and "prove" that. No doubt, there are some bridges that need fixing, and reducing the long term energy costs of government buildings seems reasonable enough. Still, those of us who continue to "stand athwart history yelling stop" can only look on in sadness. Our leaders have been foolish. There are precious few left to count the unseen costs of fixing our country's broken windows. Who will ask, "What future improvement will be left undone because we used our money recklessly today?"

Chinese Automakers Outsell US

For the first time in history, the automakers in China have outsold their US counterparts. January auto sales fell to 9.8 million, compared to China’s estimated selling rate of 10.7 million. With our rising unemployment, one has to wonder when China will start shipping jobs over here to take advantage of our cheap labor.

Emily Kolinski Morris , Ford’s senior economist is quoted as saying, “There are some faint signals emerging that we may be nearing the bottom.”

I doubt it. The Obama Administration seems determined to repeat the mistakes of Herbert Hoover by raising taxes and dishing out money we don’t have to the states for infrastructure. The good news is, that Hoover increased federal spending by 30% in 1930, while President Obama is only planning a 25% increase in 2009. I suppose we can call that progress.

Geezer Misses Blogger Dinner

One of the signs of the ageing process is that you stop paying attention to modern culture. You don’t know where the hangouts are anymore. For me, this happened about 20 years ago, before I moved to Reno. The announcement for the Blogger Dinner just said it would be at the Imperial Bar. No street address was given. Six months ago, I would have just looked in the phone book, but not now. Oh no. I’m a new/social media kind of guy now. I’m up to date. I’m connected.

So, I googled Imperial Bar Reno, and the first one on the list said it was on 4th Street…4th Street? That seemed like an odd place to have a dinner, even by blogger standards. So, I checked the website. I thought it said they serve tall cans there. That’s got to be it. This was going to be an interesting evening.

So, there I was, your friendly neighborhood, mild-mannered Republican, cruising up and down Reno’s notorious Red Light District. I think we can all be thankful that Jerry Falwell did not live to see this day come to pass. One good thing to come out of the experience though, was that I now fully realize just how dark 4th Street is after the sun goes down. It’s very dark. It’s Vincent Price Movie dark. It could definitely use a few more lampposts, like say, one every 4 or 5 blocks, just to get the process started.

A little game I like to play whenever I’m looking for a place I’ve never been before is to count the number of u-turns I have to make before parking the car. Five or less is considered good; two or less is excellent. I stop counting at six. I can say with absolute authority though, that I managed to turn the wrong way on a one-way street only once all evening. There was no traffic, and no cops around, so it doesn’t count. No harm, no foul is the general rule there.

Hopefully there will be another dinner next month. Maybe that announcement will contain a street address as well, like 150 N. Arlington for instance. Or, I could just revert to my old fashioned ways and look in the phone book.

What Dollar Devaluation Looks Like

This morning brings another eye-popping chart from Shadow Stats.


This chart is designed to track M3 (total wealth), since the government stopped in 2006. This time it's the M1 money supply (circulating currency) that concerns me the most. When the government sets the prime rate at 0%, literally giving money away, this is the inevitable result. The gap between circulating currency and wealth is the amount of devaluation.

The dollar is best defined as a storehouse of wealth. When it is given away for free, then what is it really worth? Our soon to be Treasury Secretary is likely to follow the pattern. Since he "forgot" to pay his taxes (cue laugh track), and having blown a perfect opportunity to head off the bank crisis as Chairman of the New York Reserve Bank, there is little hope that he will change anything. By re-inflating the false-wealth bubble, the government is proving Lincoln's adage that some of the people can be fooled all of the time.

And before I'm done; A hearty thanks to Senator Ensign, from those of us about to lose what little wealth we have left, for rolling over and playing dead in the Senate confirmation hearings yesterday; way to go along to get along. It's enough to make me wonder if the good Senator has a hoard of silver ingots stashed under the floorboards of his mansion.

Burning Carbon to Reduce Carbon Burning

The Drudge Report links to a Times On-Line article this morning, about the British government's new super computer. They will be using the computer to predict weather patterns, monitor global warming, and help reduce CO2 emissions. The real problem, of course, is that Britain produces most of it's electrical power from fossil fuels. The super-computer will...

"...emit 14,400 tonnes of CO2 a year,” said Dave Britton, the Met Office’s chief press officer. This is equivalent to the CO2 emitted by 2,400 homes – generating an average of six tonnes each year.

Meanwhile, Dennis, commenting from Abiline, Los Estados Unidos says...

Simple solution: move the computer to France where 80% of electrical energy comes from nuclear power plants as compared to fossil fuel. This will reduce the carbon footprint of the computer by a factor of 5.

A factor of 5 would reduce the carbon footprint down to 2,880 tonnes of CO2/year, or the equivalent of 480 homes in Britain. Even better, if the British would build a nuclear power plant near the computer, the carbon emissions would be close to zero. They could measure global warming and support 2,400 plus homes relatively carbon free. Environmentalism would do much better if the experts would drop their ideological purity, and think outside the box at least once in a while.

A Republican's Hope

There has been much written lately in the press and in the blogosphere about Herbert Hoover and FDR. Many comparisons are being made between then and now. It is mostly meaningless ideological point scoring. A few facts are in order, such as the federal deficit under Hoover rose every year he was in office. If you’re a Democrat looking for a do-nothing Republican president, Calvin Coolidge is a much better choice. However by doing nothing, he sat and watched his country rise up from a post war recession into one of the greatest periods of growth then seen, so keep an open mind.

Here’s another fact: FDR campaigned on a “balance the budget” platform in 1932. It wasn't until after he was elected (and before the inauguration) that he set about creating programs on a massive scale. The bank collapse of late’32 and early ’33 was a phenomenon that neither he nor Hoover had anything to do with. And just for the record: when Social Security was instituted, and the retirement age was set at 65, the average life span of an American man was 63. It was medical science operating in a free market that transformed what was meant to be a cash cow for the Treasury into a constantly bankrupt retirement plan.

There are some interesting coincidences between then and now, but the simple fact is we are in uncharted territory. We are in the wilderness, with no Indian guides, no footpaths and no rivers to follow. The only real similarity is that the experts, both then and now, don’t have any answers. Vox Day sums it up with a quick look at the 4 major economic schools, and their inability to solve the current dilemma:

The Marxian model breathed its last breath in the early 1990s. While the Keynesian model is seeing a revival in the misguided enthusiasm for public works spending in the United States and United Kingdom, a second transmutation of a severe recession into a great depression should kill it off for good. The Monetarist model is already on its last legs; the failure of the Fed to inflate its way out of the current crisis should suffice to finish it off. Even the Austrian theory, without question the most useful of the four economic schools, is poorly suited to account for the problems presented by exogenous factors.

The downturn in the stock market wasn’t just people losing money; it was people getting the hell out. It is said that there is $13 trillion in private capital parked offshore in Caribbean banks. God only knows how much is in Switzerland, or a thousand other places. Americans have plenty of money. What we don’t have is trust in the rules of the game, or the fairness of the referees. Restore the trust, and the players will return.

My hope for the next few years is that the rulebook will be rewritten, not just added to. I hope those in positions of responsibility will act responsibly, and for the good of their country. When the new rules come up for consideration, the rulers will need to write them with the good of the ruled in mind. For that to happen, they will need to trust us- the marketplace, we the people. Even Silent Cal could get behind that.

My Carbon Footprint

When it comes to the global warming debate, call me skeptical. Not making a huge mess is always a good idea, but environmentalism is more political than scientific. One thing that bugs me as much as anything is that tight-fisted, miserly Republicans, like me, don't get nearly the credit we deserve. The thermostat on my water heater is as low as it will go. I turn off lights, shut down the furnace, walk to the bank and grocery store, I've never been to Kyoto, and on and on, just to save a few cents.

Wandering around the internet this morning, I found a Harvard physicist who has calculated the carbon footprint of a Google search (7 grams of CO2). This led to the Carbon Footprint Calculator. I see several problems with the calculator, which I'll get to, but apparently I generate 15.41 tonnes of CO2 a year. The American average is 20.4, which means, among other things, I can Lord it over, and act superior, towards roughly 75 % of my fellow Americans. The bad news is that we're all supposed to get down to 2 tonnes per year worldwide in order to save the planet. According to the calculator, I would have to live outside, stop driving, as well as stop eating.

Living in my little hole-in-the-wall apartment generates 3.9 tonnes of CO2 a year. This must have more to do with where I live than how I live. The overwhelming majority of electrical generation in Nevada comes from burning coal, and not the "clean" kind either. Driving my car 10,000 miles a year generates 4.27 tonnes of CO2.

I took an airplane to Las Vegas 2 years ago that produced 0.28 tonnes of CO2. But here is where I became suspicious. Had I flown 1st Class instead of economy, I would have produced 0.42 tonnes. Does sitting up in front make a difference? It's the same airplane, right? Are 1st Class passengers a bunch of tubbies or something?

It was the section called "secondary" that really gave it away. It's heavily wieghted to vegan's who grow their own vegetables. There's also a thing about not buying packaged products of any kind. OK, a lot of things have too much packaging. But, how would one go about selling crackers without putting them in a box? How about toothpaste; are we going to have to scoop it out of a bin and deposit it in our canvas bags?

There is a lot we humans do that just has to be the way it is. Add to that, we each do the same things in different ways. I don't see a computer program that could possibly figure in all the human idiosyncracies, much less predict the weather.

The Ultimate Internet Dating Trainwreck

This is the story of an incredibly dumb young lady who matches up with an equally oafish young man on an internet dating site with predictable results. And then, she ADVERTISES IT!?! A 200 plus comment thread so horrifyingly funny that, as appalling as it is, I couldn't turn away.

Thanks to Vox Day.

Social Media Social

I've been debating whether or not to attend the Inaugural Semi-Bi-Monthly Reno Blogger Dinner. I made lists of why I should go and why I shouldn't go. The only reason I shouldn't is that I'll probably be the oldest guy there, and old guys are inherently creepy. But, there are several good reasons to go. The top 9 reasons why I RSVP'd for the Semi-Bi-Monthly Reno Bogger Dinner are...

9)It forces me to put on my pants and go outside.

8)I haven't had a decent meal in a month.

7)Barring a decent meal, at least I can eat something other than the usual crap.

6)I might get a clue as to why Twitter is such a big f*kin deal.

5)Since Mr. Jerz isn't going, I can get in on the latest dirt when they talk smack about him.

4)I'll find out if the Tall Can TV crew really does drink that mislabeled port-a-potty water.

3)If anyone from the Nevada New Media shows up, there could be a really righteous food fight.

2)Mixing with young people keeps the mind active, and besides, they might think I'm "one cool dude".

...and the number one reason to go to the Semi-Bi-Monthly Reno Blogger Dinner is...

1)Ah hell, why not?

I hope to see you there.

E!! Is Back

E!! The True Conservative Story is back, and with a vengeance. I'm glad she's on our side. It's a good illustration of the problems "spreading the wealth" creates.

Progressives would do well to remember that Robin Hood was a thief. The Sherrif of Nottingham, for all his mean-spiritedness, was essentially righ to throw him in jail.

Finally Some Good News

I've been meaning to write about a book I read over the summer called Ahead of the Curve by Joseph H Ellis. It's by far the best book on the economy and the business cycle that I've ever read. Mr. Ellis was a retail analyst at Goldman Sachs for 30 years. In his book, he uses charts that measure different parts of the economy that go back to 1960. They track year-over-year percentage differences. Everything is measured the same way over the same time period, and measured against each other, so you can see how one part of the economy affects the other.

The book was written in 2004, but the really nice thing about that is the charts are constantly updated here. According to Mr. Ellis, the first sign of a recovery after a recession is an upturn in real wages, followed by consumer spending. Real wages are defined as the buying power of the dollar. With falling commodity prices it makes sense that real wages would be rising. Rising unemployment is a trailing indicator and therefor meaningless as an indication of recovery. The real wages versus consumer spending chart is here. Notice the green line at the extreme right of the chart.

We're still at least 2 months away to know if this really means anything. Real wages need to keep rising in order for consumer spending to turn. But, it's the first good sign I've seen in a very long time.

Weird Weapon

Does anybody know what kind of weapon this is? I though it might be a cluster bomb, but it looks like something new. Did we sell this to the Israelis, or did they think of this themselves?


It's no cluster bomb.

Photos courtesy The Drudge Report.