Mouth breathers

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Sons of the revolutionNot long ago, we were a people who believed two very simple things about personal, American commerce:  First, that you had a right to deny business services to whomever you pleased, at your own risk, and secondly, that the federal government had no legal standing to compel a private business transaction between two parties.  Both of these beliefs have found themselves functionally murdered in a spectacular bloodbath over the course of the past several years, particularly with the enshrinement of Obamacare's individual mandate within the codices of Supreme Court jurisprudence and American case law and the most recent upholding of the New Mexico Supreme Court decision requiring that Elane Photography engage in a private business contract with a party it has deemed to be religiously questionable (a gay couple). The First Amendment expressly prohibits government from infringing upon the religious activities of Americans [1]:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

The word "Congress" in the First Amendment text has been expanded to include state and local governments by incorporation through the 14th Amendment in Cantwell v. Connecticut (1940) [2], a questionable process which itself is the product of the Progressive Era and deserving of further discussion another time.  Regardless, we are left with a restriction against national and local government prohibiting both the creation of a state religion (which lawfully existed in several states at the time of the Constitution's ratification) or the free exercise thereof.  In the New Mexico case at hand (Elane Photography v. Willock [3] [4]), the court determined that Elane Photography's refusal to provide professional business services to a gay marriage ceremony violated the New Mexico Human Rights Act (NMHRA) [5]:

We hold that Elane Photography’s refusal to photograph Willock’s commitment ceremony violated the NMHRA. In enforcing the NMHRA, the NMHRC and the district court did not violate Elane Photography’s constitutional and statutory rights based upon freedom of speech, freedom of expression, freedom of religion, and the NMRFRA. We affirm the district court’s denial of Elane Photography’s motion for summary judgment and its decision to grant Willock’s motion for summary judgment.

Elane Photography appealed to the Supreme Court, which denied the petition Monday afternoon [6], effectively stomping out the last vestiges of personal choice in business and suggesting that all businesses must engage in all business opportunities, even if they find them personally repugnant or otherwise questionable for any reason whatsoever.

This flies squarely in the face of the American concept of individual liberty because it abridges the freedom of the business owner to choose who he does business with in the name of political correctness.  That the Supreme Court allowed such an insulting ruling to stand without Constitutional review (and affirming the First Amendment right of business owners to control who they do or do not do business with) says a great deal about how far this nation has drifted away from the originally intended loose federalist framework wherein the only government on your mind throughout the day and continuously interrupting your weekly routine is the one assembled under the dome of your statehouse - in other words, the one closest to you and most readily changed by those it affects.

The Left has largely hailed the opinion, albeit blindly so (as is the case with so many things), without realizing the impact such a decision has on the free exercise of the individual to guide his own life, instead proclaiming that the courts and legislatures have somehow managed to stamp out yet another homophobic business practice in the name of "progress."

They are right, of course, that if such a decision existed during the 1960s and prior to the enactment of the Civil Rights Act of 1964, we would have had businesses everywhere openly refusing to do business with blacks and in fact did have plenty of such cases.  Unfortunately, the protection of the liberty of the individual reigns supreme over the feelings of any and all minority parties, however wrong that may seem, and is ultimately constrained by the goodness of the people and a trust that they will eventually right their own wrongs.  Few observers today of the younger generations, including those on the Right, would have a difficult time making the case that racism has been nearly expunged from society.  Not wholly, of course, as abject stupidity will always exist in any number of forms within groups of people as history has repeatedly borne out, but to the degree that instances of clear racism are rather rare for most people in modern America, including minorities.  The younger generations, such as my own, simply do not care about race and as a result tend to behave in a more or less colorblind manner.

But that's the problem - these colorblind generations are effectively self-regulating their own businesses in accordance with their own conscience and those in power simply can't have self regulation occurring outside of governmental control as allowing such a situation to exist and propagate throughout society might lead to people taking care of themselves and their neighbors without needing their Congressman to mandate equality for them.

If you'd like to open up a bakery and choose to exclude blacks from your business, you should be free to do so, because ultimately the decision to engage in stupidity is yours to make, and with the speed that information travels these days, your business is likely to sink long before your first tax bill ever becomes due.

Liberty or death,

The Bulletproof Patriot

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Sons of the revolution smallA very small percentage of the population is paying any attention at all to the ongoing deteriorating state of world affairs, although the once minuscule number has at least begun growing, albeit probably too late to make a difference.  Most Americans are comfortable simply sitting in the easy chair and fawning over the latest episode of The Bachelor and lapping up the latest Bureau of Lies and Scams (BLS) unemployment figure, assuming that the recent drop to 6.7% [1] indicates that the "recovery" is well underway, exactly as the President has been claiming for the past five years (while simultaneously avoiding taking responsibility for any of it) and as he will continue claiming in tomorrow's State of the Union address.

A systemic collapse is not a single, one time event, so if you're sitting around waiting for "it" to happen, you're more than likely going to be waiting an awfully long time.  A systemic collapse is much more likely a series of events over a somewhat more extended period of time which occurs in progressively worsening fashion until the country you once knew fades out of memory and the 'new' normal becomes the accepted status quo.  The inability of most of us to see this is not unexpected, particularly for older generations.  In their experience, we've simply always had an economy which, despite some bumps along the road, has lead to expanding GDP through domestic growth and innovation.  Jobs were plentiful and warnings about the ever increasing national debt and government's reliance upon large amounts of borrowing to fund basic social programs were inconvenient distractions from the otherwise splendid life outside our front window and the shiny new $60,000 truck in the driveway, purchased on a 3.9% loan from the nearest bank.  The sun still rises, most of us still pile into the car at 6:30 am and fight the traffic to the office, and food is still on the table at night.  We also still think our children will live better than we do.

The problem with all of this is that it ignores reality - the raw numbers themselves indicate that we are in the early stages of a systemic collapse today.  It's already happening all around us, it's just moving slowly enough that most people can still adapt to the changing circumstances and reasonably accept them as the new normal without constantly having to be reminded that things are changing - higher gasoline prices, higher food prices, higher tuition prices, etc.  There will be periods of substantial and obvious upset (the "it" events) as we decline further, but the trend will be smooth and people will, by and large, be caught both surprised and unprepared when the Titanic eventually hits the ocean floor, wondering why they weren't warned of the iceberg years ago as they cling to the floating door and watch Leonardo DiCaprio sink silently away.

Recall just a few years back when you were terrified about being laid off along with the millions of others who found themselves out of work in the "worst economic crisis since the Great Depression" and how many people you were competing against for each job application?  That situation still exists today.  Literally the exact same situation, because the foundational structure of the economy has not improved - at all.  We have not cured the "too big to fail" banks or the shadow/fractional reserve banking system (if anything, it's now worse than it was in 2007), we have not cured massive derivatives exposure (which today may be as high as $1.5 quadrillion), and we have not made legislative changes conducive to thriving business growth or innovation (if anything, we have inhibited it).

To fix our problems, we simply turn to government and have it legislate what all private insurance policies must cover and mandate that you purchase a policy.  Then, we call the resulting debacle a "marketplace" and blame Capitalism when it fails.  Problem solved.

In January 2008, the percentage of the working age population employed was 62.9%.  Today, it's 58.6% [2].  In other words, 4.3% of the working age population today is out of luck and hasn't "recovered" at all - that's 10,750,000 people.  Since the federal government doesn't count those who have given up looking for work as unemployed, the official unemployment rate falsely suggests that the employment situation is improving [3].  Mathematically, it is not.  The only reason anyone believes and feels that things have improved in the past few years is thanks to the papering over of the situation by the Fed and the extraordinary future mortgaging power of the Treasury.  We have succeeded in filling the 10 million job crater from 2008 not with jobs (as the President repeatedly claims) but with mountains of IOUs, every single one of which will eventually come due.

So, when the President re-re-re-re-re-focuses on "jobs" and the economy in tomorrow's speech, consider just how much success he has had during his tenture thus far and use that as the reference point to evaluate his future plans.  Obvious, abysmal, and repeated epic economic failure in 2009, 2010, 2011, 2012, and 2013 does not bode well for magical success in 2014.

Total Employment Situation 2014

Back on topic - all of this papering over and intentional ignorance of the true state of affairs will continue to happen, at least for a while, until the next stage of the game arrives.  Don't blink - signs have appeared over the weekend suggesting the next stage could be about to begin.

On top of the compounded problems with the nonexistent "recovery," questionable behavior and capital controls have begun to creep into foreign banks in what should be a shocking revelation to any working man, woman, or child.

Over the past week or so, stories have been floating around in several major media outlets regarding a looming $500 million default in China's speculative gold mining trust market, which would have blown a hole in the credibility of China's own shadow banking system [3].  Today, we discover that the entire deficit has been covered by some sort of "arrangement" behind closed doors [4].  Problem?  Yep - we have no idea who spontaneously came up with the $500 million to cover the losses and the trust manager isn't filling anyone in.  My guess is that we will eventually find out that it was the Chinese authorities who funded the backdoor bailout (either directly or through another bank) to prevent this crack from spreading further.

This is the exact same sort of crap that was happening in 2007 [5], before Round 1 of this crisis began.

It has also been reported by the BBC that HSBC Bank has begun limiting cash withdrawals to less than about $7,500 without a "satisfactory explanation of what the money [is] for [6]."  Excuse me?  Either cough it up or I flip a coin and return with either a gun or a Police Officer and take what is rightfully and lawfully mine.  After widespread public outrage, HSBC revised the restriction (to make it "voluntary") and posted the following statement on their website [7]:

Statement on large cash withdrawals

26 Jan 2014

As a responsible bank we must track all financial transactions. Cash presents more risk, and in particular financial crime risk, than other payment methods. It also leaves customers with very little protection if things go wrong. Therefore, we need to monitor particularly closely movements of cash in and out of the banking system. This is why we ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account.

Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for. However, it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We apologise to any customer who has been given incorrect information and inconvenienced.

Asking the right questions, protecting our customers and reducing the risk of money laundering, fraud and other crimes, means we are doing the right thing and fulfilling our responsibilities as a bank and to society at large.

In other words, the money in your account isn't yours and access to it is to be determined by a bank teller who may have barely completed high school.  What possible business is it of the bank's if I choose to roll in a wheelbarrow, pile it up with $250,000 from my own account, and dump it out a window in midtown Manhattan?  None.

But you're too stupid to figure that out for yourself.  So sit back, relax, and look forward to Recovery Summer - Part 5.  Coming this June!

Liberty or death,

The Bulletproof Patriot

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Sons of the revolution smallContent Warning:  I am unusually pissed off.

Well, well well... as the unintended (but completely predictable to anyone with a functioning brain stem) consequences of deepening government intervention in the health insurance industry, via a vis Obamacare, begin to explode in many places Progressives stupidly hadn't planned for (such as the 1 million individual policies being cancelled in California [1] or the 250,000 being cancelled in Colorado [2]), Congressional Democrats - including my own Senator Mark Udall - are scrambling to cover their own asses long enough to survive the 2014 midterm elections.

They're preparing a "fix" for these "unintended consequences" which fixes the problem for them, of course, and not for you.

Every single damn one of these "unintended consequences," including 1) individual policies being cancelled en masse, 2) prices for coverage rising beyond what 'subsidies' can cover, 3) reductions of the number of doctors and hospitals who are accepting Obamacare policies, 4) widespread apathy of the uninsured to purchase Obamacare policies (even if legally required to do so), and 5) worker hours being cut to less than 30 to avoid the mandates was absolutely, 100% predictable three fucking years ago.

The inability of Progressives in both parties to understand why this is happening is not surprising, but is nevertheless unforgivable; Congress is stuffed full of people who have zero appreciation for the operation and functioning of a free market which sets prices and benefits based upon costs, competition, and consumer demand.  A Congress operating largely on the predication of "do-gooding" a broad social benefit, such as health insurance, by government mandate, will fail - every single time.  The only question is 1) how long it will take to fail (i.e. Medicare and Social Security), and 2) how many unintended consequences it will create.

The problem with health care costs in this country is that Congress has actively bent over to special interests and created an industry in which prices and services are exempt from antitrust (monopoly) protections which would benefit the consumer.  Both Democrats and Republicans have created this mess and should be made to understand (by being both chastised at town hall meetings and ultimately fired from their positions in Congress) that THIS IS WHAT HAPPENS WHEN GOVERNMENT BUREAUCRATS WITH ZERO BUSINESS EXPERIENCE ATTEMPT TO CONTROL A FREE MARKET.  Virtually ALL government "fixes" serve only to create MORE UNINTENDED CONSEQUENCES, WHICH IS THE VERY REASON THE POWERS OF THE FEDERAL GOVERNMENT WERE INTENDED TO BE LIMITED TO ONLY THOSE ENUMERATED IN ARTICLE 1, SECTION 8 OF THE CONSTITUTION.

THIS IS WHAT HAPPENS WHEN CENTRAL PLANNERS AND BUREAUCRATIC KNOW-NOTHINGS ARE PERMITTED TO EXERCISE BROAD LEGISLATIVE POWERS - IN THE END, YOU THE CONSUMER WIND UP BEING ABSOLUTELY FUCKED AND THERE IS JACK SHIT YOU CAN DO ABOUT IT SHORT OF AN INTELLECTUAL OR VIOLENT REVOLUTION.

Today's latest story on this cluster is that the President (and my own Senator Mark Udall) are ready to concede to a TEMPORARY "delay" of the insurance minimum benefit requirements (to stop the mass cancellations of policies).  A TEMPORARY DELAY?  You mean a delay long enough to paper over the structural problems until, say, at least Wednesday November 5, 2014?  How strange that a TEMPORARY fix is being proposed to save politicians' exposed asses rather than a REAL, PERMANENT FIX that saves yours.

The "fix," as the President explained on television earlier today, would allow insurance companies who are cancelling "substandard" (Obama's words) plans to continue offering them through 2014.  Problem?  Yes - the President has zero legislative authority to alter the law.  Plus, I thought Ted Cruz and the House Republicans, who were SCREAMING ABOUT THE DANGERS OF THIS VERY PROBLEM JUST SIX WEEKS AGO were evil "extremists" and nutjobs for doing so who just wanted to starve kids, the elderly, and minorities?

Bottom Line:  Democrats (and many Republicans) will pass legislation that saves their own ass while accomplishing ABSOLUTELY NOTHING to repair the disaster from happening as soon as the "fix" expires.  You'll avoid the pain tomorrow, Democrats and Republicans will be re-elected without being held accountable for their mess, and in the end YOU WILL BE 100% AS FUCKED AS YOU ARE TODAY.

To the Progressives who favored this legislation - sit in the pile of shit you created and like it, you bunch of pathetic, ignorant sons of bitches.

OWN IT, YOU MISERABLE SACKS OF SHIT.

Liberty or death,

The Bulletproof Patriot

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Bell Icon - White EdgesFollowing the publication of a recent TBP post, "The Krugman Delusion: Why Capitalism is the only solution to our economic problems [1]," I received some commentary from readers in the usual fashion and while most was supportive, one was negative.  Not surprisingly, the negative commentary came from an obnoxious reader who long ago received several rounds of the banhammer for good reason.  While I typically welcome opposing commentary, I only do so if it is offered in honest debate and not the sort of whiny, neurotic, turd-in-the-punch-bowl fashion that this particular banned troll seems solely capable of.

Never the less, he did manage to inadvertently stumble across a few good opposing points (even if they were the result of a cold Google search) deserving of discussion in a broader forum and while I'm confident he won't extract anything from this discussion, no matter how many FRED or BLS statistics I cite, others may and it will do me well to go through the research and analysis for my own edification.

Several of these beliefs are espoused by the usual suspects arguing in favor of massive deficit spending, but most are taught as textbook economics, even in the general sense, from a young age.  As I will demonstrate, while widely held, many of these beliefs are provably false when the original sources are investigated.

Claim: Sweden exited the Great Depression first because it engaged in Keynesian deficit spending

To be fair, it is difficult to evaluate many of these Depression-era claims one way or the other, outside of simply citing 'common knowledge' on the internet, because several of the statistics available today only became available post-1940.  This one is no different - there is no Swedish government source of Depression-era GDP or spending data, so the evidence available to back this claim frequently relies on taking some faceless historian's word for it or simply propagating an unproven assertion from any number of anonymous sources.

For me, that's not good enough.  As the saying goes, statistics don't lie.  Statisticians do.

So, without government-provided GDP or spending numbers available, how can this claim be investigated?  Is it true that massive deficit spending was the reason that Sweden was the first country to recover from the Depression?

One of the statistics that is available from both the Swedish [2] and U.S. [3] governments is industrial production.  Since industry scales with employment and more generally with GDP, this is a reasonably sound data set on which to evaluate and compare the two national responses to the Depression using official data.

As you can see in the figure below, during the initial shock between 1929 and 1933, both countries suffered a decline in industrial production indicative of a large-scale recession.  However, while the Swedish decline was from an index of 83 to 72 (a loss of 13.3%), the U.S. decline was from an index of 125.2 to 67.3 (a loss of 46.2%).  The impact of the Depression upon the United States was nearly four times worse than the impact upon Sweden.  This makes perfect sense when one also considers that Sweden had not participated in World War I.

Industrial production index - sweden

Considering that Sweden had a 4:1 head start on 'recovery,' it would seem obvious that they would exit the Depression first.  However, the figure also shows that the rate of recovery for both nations from 1933 through to about 1937 is virtually identical.  This doesn't make sense in the Keynesian worldview because they also claim that the United States, under the direction of FDR, rejected Keynes' advice to engage in massive deficit spending [4].  Under this reasoning, the U.S. was Keynes-free until 1938 (John Keynes' letter to FDR can be read elsewhere [5]), meaning that the 1933-1937 recovery was theoretically during a period without Keynesian tampering and therefore the U.S. recovery from a deeper pit in the same time as Sweden actually shows that Keynesian spending was not necessary to recover.

Now, recall that I said there were no official data sets for GDP and debt at the time of the Depression.  There are, however, data available from economists Reinhart and Roghoff* which are comprehensive and widely cited [6].  When we consider gross public debt (as a percentage of GDP) for both Sweden and the U.S. over the same period as industrial production, we observe an awfully strange phenomenon which belies the claim that Sweden followed a strict policy of Keynesian deficit spending.

Over the period of 1929 - 1933, Sweden did not engage in the massive scale of deficit spending Keynesians claim - the data speaks for itself.  Sweden only increased the public debt from 17.8% to 25.6% of GDP (a net increase of 44%) over a four year period.  If anything, the United States was the one following the Keynesian model since its debt increased from 16.3% to 40.0% of GDP (a net increase of 145%) over the same period.

Industrial production vs Debt

To take this all the way down to brass tacks, the United States spent 3.3 times as much in terms of debt:GDP as Sweden to achieve the exact same recovery.  Since this is a gross public debt figure, all of this increase in debt was due to the spending of borrowed money - exactly what modern Keynesians are claiming needs to be done to end the Great Recession.

Conclusion

The Keynesian claim that Sweden engaged in massive deficit spending which resulted in a rapid recovery from the Depression is flatly disproven by the available data.  The United States outspent Sweden by 330% during the same period, so if deficit spending was responsible for fostering a rapid economic recovery, the U.S. should have blasted out practically overnight or at least earlier than Sweden.  The reason Sweden recovered faster is because the economic hole created by the Depression was far shallower than the one created for the U.S. and the large-scale borrowing under Hoover slowed our recovery, much the same as what's happening today.

Claim: Nazi Germany exited the Great Depression quickly because it engaged in Keynesian deficit spending

I have not come across a counter-argument claiming that Nazi Germany engaged in anything other than Keynesian deficit spending during this period - they most certainly did.  From 1929 - 1933, Nazi Germany increased their debt to GDP ratio from 11.3% to 23.9% (a net increase of 112%) [7].  As a result, German unemployment dropped sharply and eventually the number of jobs exceeded the number of available workers.  To the modern Keynesian, this sounds like a diamond-encrusted prescription for success.

However, consider the following:

  • Deficit spending in Nazi Germany was so large that it naturally created large-scale inflation, something which the German people had seen very clearly in the hyperinflation of the early 1920s.  To artificially suppress the effects of this inflation, the government instituted price controls.  These worked just long enough to get the country into World War II, where it was effectively destroyed.  Price controls are almost universally condemned by economists on both sides of the deficit spending issue - they are a very strong indicator of an unstable economy risking a bout of hyperinflation (this is exactly what is happening today in Argentina following a decade of reckless spending and as a result Argentina is facing its third period of hyperinflation in less than 40 years [7a]).  In other words, the need for price controls in Nazi Germany doesn't exactly scream "Keynesian Success!" from the tops of the labor camp guard towers.
  • During the period of extremely low unemployment, the Nazis were building and using forced labor camps.  What better way to reduce the unemployment rate than by jailing citizens and forcing them to labor!
  • A large percentage of the spending was directed at military buildup and recovery from World War I.  This is a temporary phenomenon since wars don't last forever and are fleeting events.  The jobs produced during the Nazi Germany 'recovery' were hardly organic or self-supporting.
  • The German people were suffering during this 'recovery' since the government regularly chose military buildup over domestic tranquility.  Since Keynesians tend to measure the success of an economic stimulus by either 1) increase in GDP or 2) reduction in the unemployment rate, having the populous starving in the street while GDP rises is never considered.
  • The Nazi regime was well known for falsely inflating their own statistics to maintain appearances.

Conclusion

The example of Nazi Germany's large scale deficit spending to support modern Keynesian stimulus is a poor example because it ignores the deplorable condition of the citizens, many of whom were starving or in forced labor camps, and the widespread presence of price controls which masked the fundamental problems within the economy which were caused by the stimulus.

Claim: The United States only exited the Great Depression because of massive deficit spending in World War II

Of all the claims I've investigated, this one is by far the most prolific - even I have blindly accepted this reasoning since it is widely cited by economic textbooks and generally believed by the public.  However, after taking a look at the data, this belief is less well founded than I originally thought.  Convention wisdom tells us that the enormous mobilization for the war and the deficit spending brought about by the same were responsible for carrying the United States out of the Great Depression, since FDR had failed to engage in enough deficit spending prior to the war (according to the Keynesians).

This claim is muddy because several variables are mixed together and it's not possible to evaluate which one in particular was solely responsible for ending the Great Depression.  However, the data [8] does indicate something very important - while unemployment declined significantly in the run-up to the war, the unemployment rate was already in significant decline before the war or war spending had even begun.

Unemployment vs Debt

This may or may not matter in the end, because the primary reason unemployment declined during the war is obvious - 16 million men were enlisted in the military (12% of the U.S. population) and millions of women were making uniforms, tanks, and food to support the war effort.  If a decline in a statistical indicator such as the unemployment rate is all that is required to declare economic success (and for Keynesians, it is), then the 2008 "recovery" is complete - the unemployment rate has dropped to 7.3%.  Never mind that the number of adults employed as a percentage of the population has not changed since 2009.  Never mind that nearly the entire reduction to 7.3% is due to adults dropping out of the work force.  Never mind that if the labor force were the same size today as it was in 2009, the official unemployment rate would be closer to 11.4% [9].

You should also never mind that massive war efforts represent sacrifice and not prosperity.  Yes, deficit spending can put people to work and reduce the unemployment rate, but it cannot produce lasting, organic growth because government spending removes capital from the private sector.  Claiming otherwise is simply a denial of mathematics.

Claim: Japan's pursuit of deficit spending ('Abenomics') is working

The claim that Japan's incredibly aggressive pursuit of stimulus, money printing, and borrowing has somehow benefited the Japanese economy (or the state of the Japanese worker) is laughable because their own government data shows the country to be in quite obvious decline.  Again, however, the Keynesian belief relies upon two statistical numbers - the unemployment rate and GDP - to reach this conclusion and disregards the impact of debt and the state of the people.

Japan has been in the process of massive deficit spending for literally decades and recently breached a national debt exceeding 230% of GDP.  Since Japan is still in existence and hasn't yet collapsed, the Keynesians point to this as proof that the U.S. can simply borrow and print forever without any negative consequences.  It is easy to see, however, that the Japanese economy isn't nearly as much of a success story as many would like you to believe.

Take, for example, what I have termed to be the "debt multiplier" - this is a comparison of the number of dollars of GDP produced for each dollar of debt, normalized annually.  Any number less than one indicates a net loss - you've borrowed a dollar in debt and created less than a dollar in GDP in return.  Japan has been in this situation consistently for nearly 30 years.  The U.S. first reached this predicament in 1991 and again in 2000.  The long-term trend is clearly down and the impact of deficit spending is becoming smaller and smaller every year.

3 - DEBT MULTIPLIER

Similarly, the annual change in both GDP and public debt indicates that debt is outpacing growth.

2 - GDP VS DEBT

This problem is made more clear by looking at the net GDP (GDP minus debt).  Japan has failed to produce a significant positive GDP increase since 1990.  The U.S. has been in the same situation ever since we began massive stimulus measures in 2008.  Since then, net change in GDP has been negative, following the example set so clearly by Japan.

1 - GDP - DEBT

Japan has been able to borrow enormous amounts of money for decades at low interest for two reasons:  1) they have a substantial reserve of both cash and gold (the U.S. does not), and 2) virtually all borrowing is occurring domestically.  Japan needs to continually roll its debt over, just the same as the U.S., and when bond yields rise (as they are for the U.S.!), Abenomics will come crashing to a halt and the curtain will be pulled away to reveal a stagnant nation with a cracked foundation.

These cracks are most obvious today in the rapid decline in employment.  The labor force participation rate has been continually declining in Japan since 1970 - Abenomics hasn't helped.  Not surprisingly, when the U.S. embraced the Keynesian/Abenomics/deficit spending tactic in 2008, we began a continual decline as well.  Failure follows failure every single time.

LABOR FORCE PARTICIPATION (US VS JAPAN)

Conclusion

If a weak currency (and associated loss of purchasing power for Japanese citizens) and GDP decline are considered success, then yes, Abenomics is a wild success.  If a strong currency, rising standard of living, and strong organic GDP increase are the standard, then Abenomics is a miserable failure.

Actual economic growth must be measured with debt excluded

Increasing GDP with debt does indeed work (for a while) and the process behaves something like a classical control system.  In electronics, a control system (or feedback loop) takes an input and determines whether to raise or lower the output of the system based upon the input - take, for example, the cruise control on a vehicle.  You set the cruise speed to 75 and the computer holds the gas pedal for a few seconds where it was when you set the speed.  Then, it measures how fast the car is going.  If the car is going too slow, the control system increases the amount of gas and checks again.  If it's going too fast, the control system reduces the amount of gas.  The process continues indefinitely until the control system is stopped or the car is turned off.

One of the elements within the control system is the gain parameter.  Gain is a setting which determines how much correction is applied for a given input measurements difference from the set point.  In a cruise control system, the gain variable is normally very low so that the adjustments the computer makes are small.  If the gain were large, the vehicle would be rocking back and forth as the pedal was alternatively pressed to the floor and then immediately let off.  The trick is to set the gain wherever necessary within the stability envelope of the system - a gain set too high and outside of the envelope will result in an unstable control system and the computer will be unable to control the vehicle's speed.

In the economy, the public debt and GDP behave similarly to a classical control system and the gain of the system can be set.  In the earlier part of the 20th Century, the gain of the system was set quite low because it only took a small amount of debt to create an equivalent increase in GDP.  Today, the gain is being set higher and higher as each dollar of new debt produces only $ 0.50 of GDP.  Eventually, the gain will need to be set so high that it can no longer operate with any stability.

As the impact of new deficit spending becomes less and less (because deficit-financed 'growth' is not organic and cannot support itself when the debt ceases), more and more money will need to be printed or borrowed to hold GDP anywhere even close to neutral - mathematically, this figure will approach infinity.

Anybody who believes that a nation can survive forever by continually borrowing and printing money to prop up the false appearance of GDP "growth" and "reduction" in the unemployment rate is delusional.

Liberty or death,

The Bulletproof Patriot

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Note:  The Reinhart and Rogoff controversy this summer indicated a serious error in their claim that countries exceeding 90% debt:GDP suffer slower economic growth.  I am not relying upon this claim for any of my arguments.  However, the dataset used in the analysis remains intact and is one of the most comprehensive available.

Correction (16-Sep-13):  Percentage increases in the first two claims erroneously included an additional factor of 100% (thus suggesting the U.S. debt change during the Depression was an increase of 245% rather than an increase to 245%).  This has been corrected to accurately reflect the increase.  Additionally, all un-cited statistics (i.e. Japanese govt) are sourced from the St. Louis Federal Reserve Economic Data set (FRED) located here.

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Sons of the revolution smallIn the second historic and resounding victory for civil rights in Colorado tonight, Senator Angela Giron (D-Pueblo) has been recalled from office by an overwhelming margin of nearly 12 points [1] with all votes counted.  Giron's district had an enormous registration advantage in her favor (47% D to 23% R), meaning that a large part of those voting to recall her are registered Democrats.  She has been replaced by former Deputy Chief of Police George Rivera.

This victory represents not only a change of the tide for part of Colorado politics, but should serve as a warning that the belief that Colorado is a "purple" state is less true than many Democrats like to believe.  While Colorado may vote to legalize marijuana, we won't sit idly by and allow our civil right to own whatever size magazine we damn well please to be eroded by a bunch of nanny-state Progressives looking to protect us from ourselves.

Progressives in Colorado should sit up and take notice, and no doubt they are, because the old adage that messing with gun rights is political suicide has returned with a vengeance.  And the carnage may well not stop with Giron's ouster - although other recall efforts failed to achieve enough signatures to trigger an election, polling strongly suggests that the reason was not over voter support of gun control, but rather over a disenfranchisement with the recall process.  According to a Quinnipiac poll taken late last month, Colorado voters preferred to use regular elections to remove representatives rather than special recall elections by a 30 point margin [2].  However, the same poll found that Colorado voters rejected the state's new gun control laws by a 54 - 40 margin.

With Governor John Hickenlooper's approval rating tanking from its previous high [3], largely over his support for the gun control legislation and his flip-flopping on the execution of convicted murderer Nathan Dunlap (which he supported during his campaign and rejected once in office), and his statistical tie with libertarian firebrand Tom Tancredo [3] for next year's gubernatorial election, Democrats may be well advised to sit back and shut up if they aim to keep their seats and legislative majority.

Apparently, Progressives have taken Colorado's recent "purple" swing far too lightly in their assumption that Colorado was ready to simply be annexed into a remote part of East California.

It's always a great day when individual liberty roars back out of the shadows.

Liberty or death,

The Bulletproof Patriot

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Bell Icon - White EdgesWhen I was about 10 years old, I was at a neighbor's house down the street overnight, more or less alone with several other neighborhood friends for a birthday party. We stayed up most of the night, watched Predator 2 (not the best idea at 10), shot off bottle rockets, and fired a BB gun into the woods. When a BB ricocheted off a tree and hit me in the front tooth, my mother held me accountable for being an idiot - I could have lost an eye had that BB hit a few inches further up my face. As I recall, she also called the parents of the neighbor kid and probably expressed her disinterest in me visiting their house again with such poor supervision.

She also started a national campaign to ban the sale and possession of military-style assault BB guns, regulate the purchase of BBs, and require all existing 10 year old BB gun owners to register their assault weapons with the state - the campaign was called "Moms Against Senseless BB Gun Violence"... or at least it would have been, had she been a modern, collectivist Progressive hell bent on holding the entire nation responsible for the actions of her idiot son. After all, it "takes a village," doesn't it? Of course. As we learned from MSNBC last week [1], children "belong to whole communities... we have to break through our kind of private idea that kids belong to their parents."

And so goes the modern debate on public safety and responsibility.

Some mentally deranged lunatic kills his own mother, steals her firearms, and murders 26 people at an elementary school in Connecticut and rather than holding that individual accountable for his actions, all gun owners are now treated as potential mass murderers. That's why they can't be allowed to have "high capacity" magazines or AR-15s, despite literally millions of these weapons being in private ownership having never been used to commit a crime. It's the fault of the collective, not the individual. The individual can't afford to have his feelings hurt.

In the wake of the Newtown massacre, the group Moms Demand Action [2] has released three advertisements which perfectly (although unintentionally) illustrate the problem with modern, Progressive parenting - namely, that the entire world is responsible for their children, because they're too busy to raise their kids up correctly themselves. Therefore, all things even slightly dangerous must be banned.  (I also have submitted a lengthy and well thought out, respectful comment noting actual murder rates and how rarely "assault weapons" are used in crimes on their website.  Not surprisingly, my comment was removed by the moderator every time it was posted.  So much for "honest" debate, but I really shouldn't be expecting much from people who are driven on a 90/10 mixture of emotion/logic.)

The first ad reads, "We keep Little Red Riding Hood out of our schools because of the bottle of wine in her basket. Why not assault weapons?"

Little-Red-Ridinghood-620x401

Well, gee. A cartoon bottle of unopened wine in the basket of Little Red Riding Hood is so dangerous that it is now banned from schools? Perhaps if Riding Hood was passed out next to the empty bottle and slumped in a chair at the entrance to a brothel we should be concerned. But a bottle of wine laying harmlessly in her basket? Common sense has lost all meaning. Not to mention, children cannot purchase "assault weapons," so I fail to see how keeping them "out of our schools" would change anything at all, except making the Progressive parent feel as if they have "done something" to repair the false sense of security they strive to live under (at the expense of your liberty) - in fact, firearms are already illegal on public school property, yet that didn't stop Adam Lanza.  But they don't actually want to participate in the safety of their own children, you see - they want you to make them feel as if they've done something of substance by banning something of which they have an irrational fear.  This is parental laziness at its best.

It's no wonder modern children have no idea how to behave in the real world where violence and hard decisions actually exist. They've never been taught how to deal with them or take responsibility for themselves because we're so busy "protecting" them from a cartoon drawing of a bottle of wine.

The second ad reads, "We ban the game dodgeball because it's viewed as being too violent. Why not assault weapons?"

Choose-One_Dodgeball-620x401

The game dodgeball is too violent? Let's hope your son or daughter never goes to war, because the enemy is an excellent "dodgeball" player and a bouncy rubber ball would be the least of their worries.

If we ban dodgeball, why don't we ban baseball? Or football? Or art class? After all, a child could draw a dodgeball cartoon scene on paper, become terrified, and breathe his last breath slumped over a chair in front of a brothel, err... art class desk. Why not ban pencils? Or paper?  It's to "protect" them, after all, so we should stop at nothing!

The third ad states, "We won't sell Kinder chocolate eggs in the interest of child safety.  Why not assault weapons?"

Choose-One_Kinder-Egg-940x608

I admit, I had no idea what a "Kinder egg" was, but I looked it up and thank God it's banned.  According to Wikipedia, a Kinder egg is "a chocolate egg containing a small toy, often requiring assembly [3]."  Assembly with what?  Large construction equipment?  Chainsaws?  Matches and gasoline?  Unexploded nuclear warheads?  Surely, if children can handle parents who guard them against cartoon drawings of wine bottles without becoming mentally ill and going on shooting rampages with cartoon drawings of "assault weapons," they can handle a chocolate egg with a toy inside, but what am I thinking?  We have to act!  Cheap plastic toys inside chocolate eggs are responsible for literal ones of deaths in this country (a total of six in the entire world, apparently [3]).

Take a look at the second and third ads again - the kids have their fingers on the trigger. Perhaps the reason these kids and their parents are terrified to death of AR-15s is because nobody taught them basic gun safety as children, probably because the parents were curled up in the corner shivering in fear over an advertisement for Bud Light they happened to see on the television out of the corner of their eye. When children and parents lack even the simplest level of understanding and respect for firearms, it's no wonder they're scared to death of them.

Despite the hysteria propagated by Moms Against Hurt Feelings, or whatever the group is called, I fully intend to have my own children out on the range at a very young age. Shooting a .22 at five years old, under close supervision of course, is a great start to teaching children to respect firearms. Learning to shoot a 20 gauge at 10 years old and a 9mm at perhaps 15 are logical next steps. My children will respect firearms. They won't be terrified of them, even if society is convinced they need to be.

If we continue allowing this sort of message to continue largely unchallenged in the public arena, rather than philosophically beaten to a bloody pulp as it deserves, we will continue to have children who are terrified of cartoon drawings, dodgeball, and plastic toys.  We will have officially completed our transformation from "rugged individualism" to "pansified collectivism," where the men will have become so caked with hand lotion and cologne that they can no longer grip a tackle box or hunting rifle, let alone build a house, clear a forest, or defend their families against physical harm.

Progressivism is a disease, as I have long argued.

This disease kills the host, every time, and it will consume your life and liberty along the way.

In love of liberty,

The Bulletproof Patriot

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TBP supports the Convention of States project to call an Article V convention for the purpose of amending the Constitution to limit the powers of the federal government.

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