Bearish News

In the passage below Frédéric Bastiat comments on a few of the problems experienced in crony capitalistic societies such as ours:

But how is this legal plunder to be identified? Quite simply. See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.

Then abolish this law without delay, for it is not only an evil itself, but also it is a fertile source for further evils because it invites reprisals. If such a law — which may be an isolated case — is not abolished immediately, it will spread, multiply, and develop into a system.

The person who profits from this law will complain bitterly, defending his acquired rights. He will claim that the state is obligated to protect and encourage his particular industry; that this procedure enriches the state because the protected industry is thus able to spend more and to pay higher wages to the poor workingmen.

Do not listen to this sophistry by vested interests. The acceptance of these arguments will build legal plunder into a whole system. In fact, this has already occurred. The present-day delusion is an attempt to enrich everyone at the expense of everyone else; to make plunder universal under the pretense of organizing it.

Connecting the dots from 1850, when Bastiat wrote this, to today, hardly seems necessary. 162 years later, and Bastiat’s The Law is fresh as a daisy.

I don’t believe GDP is nearly as important as most econ types do, but the chart below is interesting nonetheless.

When measured on a per capita basis, cumulative GDP growth since the start of the recession in ’08 is extremely disappointing. Especially when you consider all the measures which were supposedly designed to boost growth.

QE1, QE2, TARP, ZIRP, stimulus (think Solyndra & Fisker, not roads & bridges). Failure & wealth transfer have resulted.

Perhaps the most economically impactful “stimulus” enacted so far is the payroll tax cut. Social Security payroll tax deductions were temporarily reduced from 6.2% to 4.2% in 2011. Although there will be bickering, for now it seems like the tax cut will be extended indefinitely (ignore the unsustainable long-term nature of it all, if you can).

Some economists venture to guess that the payroll tax cut (2% less taxes on all wages/salaries below a certain threshold) will contribute 1-1.5% to annual GDP as long as it remains in place.

So picture the chart to the left, without a big chunk of the recent upturn. Now picture it if properly adjusted for inflation. It’s not a pretty picture.

Conclusion: any economist that says we’re not currently in a recession/depression is trying to sell you something.

Chart via WSJ’s Jason Lahart.

When nothing seems to help, I go and look at a stonecutter hammering away at his rock, perhaps a hundred times without as much as a crack showing in it. Yet at the hundred and first blow it will split in two, and I know it was not that blow that did it, but all that had gone before.

Jacob Riis

Gold had another up day with stocks, as it was ‘risk on’ with renewed hopes for fresh infusions of liquidity as we saw from the Bank of England.

I tended to view this action as more ‘technical’ than fundamental.

I don’t like the headline correlation between stocks and the metals like gold and silver which would normally function as a safe haven in a time of increased risk.

Notice the new lines of broad support and resistance levels on the gold chart. We have not yet broken to the upside, so caution is advised.

Iraq has not done so well post-”liberation”, at least when it comes to life expectancy. Will Libya fare better? I certainly hope so, but remain skeptical of this endeavor. The War Nerd offers quite a non-traditional take on Libya, over at ex-Taibbi haunt The Exiled.

Used Google’s Public Data Explorer for this. Very neat tool, could get lost in it for a while.