The defaults cometh

Commercial bank loans continue to collapse amidst signs that the banks are about to undergo a crisis of confidence and a large wave of FDIC seizures. Total loans and leases at U.S. banks have already contracted more in the first seven weeks of 2010 than they have over the course of any year since 1947 excluding last year; $132 billion in loans have defaulted or been paid off.  At 14.7%, the pace of annual credit contraction is still running more than twice that of 2009's record decline.

The red bars show the cumulative percentage decline by week since the beginning of the year.  The light blue bars show the cumulative percentage decline by week since the financial crisis began to appear in the loan statistics on October 22, 2008; this is now in excess of 10.2%.  The bank problem is not solely an American one. In fact, as Sam explains at the RGD blog, a number of European economies are facing even more serious debt problems.

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Mailvox: the key to civilization

RB poses a question:

Your blog rocks! Anyways, I have a question I think you may know the answer to: Why is it that in Europe, the Middle East, and Asia, people developed into advanced civilizations? Yet, when you look at the American Indians, [most] tribes in Central and South America, and Africa, these people were ages behind everyone else? I figure that commerce and perhaps the conquering of other peoples and their technologies had something to do with it, but when you look at the folks who did not advance, it's like they decided to work harder and not smarter. I mean, look at the regions these people came from. They were resource rich, yet no one got off their butts to make life easier.

There are rival theories that attempt to explain the variance in technological advancement across various societies and cultures. For example, Jared Diamond's famous hypothesis encapsulated in Guns, Germs, and Steel is little more than an attempt to blame anything but human evolution and racial differences. He'd rather hypothesize causal differences between horizontal and vertical continental geographies than observe the simple fact that the cultures that are known to have produced relatively advanced civilizations also happen to feature populations that presently posses higher intelligences. One can certainly argue that smarter populations are the result of advanced civilization rather than its cause, but logic suggests that the relationship between civilization and intelligence is unlikely to run in that direction due to the way in which civilization and technology are known to increase the survival and breeding rates of the less intelligent portions of the population.

However, the mere advantage of higher intelligence possessed by the European, Semitic and Asian peoples is simply not enough to account for the vast difference between different civilizations such as the tribal cultures of Papua New Guinea and Western European culture circa 1800. Keep in mind that the technological advancement of the Egyptians came to a halt long before Alexander the Great. Europe may not have experienced any Dark Ages, but its southern civilization certainly took a step or two backward during the decline and fall of the Roman Empire, and similar periods of arrested and even retarded development is known to have taken place in China and Japan as well.

So, the more informative question probably does not surround what advantage permits technological and societal advancement towards civilization, but rather, what are the factors that are capable of retarding them. It's a complicated question; for example, while matriarchy clearly retards civilization, patriarchy doesn't necessarily advance it. Christianity helped in Europe, but played no similar role in the Levant. So, I don't have an answer, except to say that when it is figured out it will likely involve a complicated mixture of factors that don't easily permit pointing to any two or three of them and declaring that they are the magic key.

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Dante's Inferno Cantos VIII and IX

Next week's reading is Cantos X and XI

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Mailvox: No greenhouse effect

Dominic updates us on the latest AGW/CC-related science:

Here's a pair of physicists reviewing the issue. Don't know if you're aware of this particular paper yet, but it's certainly blogworthy, at least. They basically prove, using straightforward physics, that there is no such thing as The Greenhouse Effect(TM). Heating in greenhouses is from trapped air, not trapped radiation, thus the idea that trace of amounts of CO2 reflecting solar energy back to the Earth rather than letting it escape the atmosphere causes a rise in temperature is unfounded. The Greenhouse Effect(TM) is a myth.

The physicists couldn't be much more clear: "There are no common physical laws between the warming phenomenon in glass houses and the fictitious atmospheric greenhouse eff ect, which explains the relevant physical phenomena. The terms "greenhouse e ffect" and "greenhouse gases" are deliberate misnomers."

I can't say I'm surprised. Since global warming isn't happening, the mechanisms that supposedly underlie it are presumably false. Notice the charge of "deliberate misnomers". As with most lies, it's seldom possible to stop with just one, which is why the truth will usually come out in time. And that's exactly what is happening with the AGW/CC deception and all of the faux scientific falsehoods that have been used to sustain it.

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It's not worth it, gamma males

Stay away from strong, independentpsycho women:

A 45-year-old woman, charged with ending a domestic dispute by killing her 26-year-old husband of five days, is a registered lobbyist for a group fighting domestic violence.

Oh, the irony... anyhow, sexbots are not only better than middle-aged feminists, they're safer.

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When science is no longer science

Or, at least, finds itself directly contradicted by the basic scientific method:

The problem now is that we're rapidly expanding our ability to do tests. Various speakers pointed to data sources as diverse as gene expression chips and the Sloan Digital Sky Survey, which provide tens of thousands of individual data points to analyze. At the same time, the growth of computing power has meant that we can ask many questions of these large data sets at once, and each one of these tests increases the prospects than an error will occur in a study; as Shaffer put it, "every decision increases your error prospects." She pointed out that dividing data into subgroups, which can often identify susceptible subpopulations, is also a decision, and increases the chances of a spurious error....

It's pretty obvious that these factors create a host of potential problems, but Young provided the best measure of where the field stands. In a survey of the recent literature, he found that 95 percent of the results of observational studies on human health had failed replication when tested using a rigorous, double blind trial. So, how do we fix this?

The consensus seems to be that we simply can't rely on the researchers to do it. As Shaffer noted, experimentalists who produce the raw data want it to generate results, and the statisticians do what they can to help them find them. The problems with this are well recognized within the statistics community, but they're loath to engage in the sort of self-criticism that could make a difference. (The attitude, as Young described it, is "We're both living in glass houses, we both have bricks.")

To me, the central problem appears to be that few scientists understand statistics and probability well enough to be permitted to make use of them in a manner which merits any credibility. The widening gap between econometric models and the performance of the real economy, combined with situations like the recent revelation that many, if not most genetic studies purporting to show natural selection were based entirely upon false positives, highlights the importance of performing actual science according to the scientific method rather than substituting a derivative and passing it off as science.

Like logic and philosophy, statistical analysis is informative and useful, but it is not intrinsically science.

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Mailvox: Smith vs Ricardo

LS emails a 2003 essay by R.B. Calco published in the American Conservative. Here's an excerpt:

The Father of free trade was no globalist.

Adam Smith is commonly regarded as the father of modern economics. Free traders claim he is also the father of free trade and credit him with the first systematic attack on government regulation of trade ever written. This is true as far as it goes. This is not to say, however, that Adam Smith was a free trader in the same sense that the term is promoted today. Since David Ricardo and the Austrians took hold of it, the term has acquired a dimension and a purpose that was, to paraphrase Smith, no part of his intention. Or, in any event, it was no part of his definition. Smith's argument for trade was rooted in what economists today refer to as "Absolute Advantage"; it was left to the crafty mind of David Ricardo half a century later to invent a justification for trade on the basis of the far more subjective "Comparative Advantage" that today the economists tell us we need to consider instead.

While the dull, pencil-headed, pocket calculator logic of Comparative Advantage works fine for the textbook laboratory example f two nations and two products, it falls apart entirely the minute real-world constraints or considerations are introduced. It becomes absurd when you attempt to factor "comparative advantage" across three nations and three products, let alone the hundreds of nations and millions of products of the real world. Try it - you will lose your mind.

All Comparative Advantage amounts to, reduced to its essential components, is a sophistic argument for international division of labor -- for global economic union -- without dealing with any issues of political union. It is the economic equivalent of living in sin, so to speak. For whatever intuitive sense it claims to have, this argument relies on a fundamental confusion between trade -- economic activity between economic systems -- and division of labor -- economic activity between individuals in a single economic system.

At bottom, this argument is a bait-and-switch for a global system, not a plan for any one nation to become wealthy, least of all the United States, which, according to the law of equilibrium, would be forced under a free-trade regime to sustain massive losses of jobs and wealth to pull all other nations up in the new global wage and price structure.

There is little question that global free trade tends to raise the overall level of global wealth. But what consequence-blind Ricardians stubbornly refuse to understand is that Comparative Advantage simply does not work on a macroeconomic level. The falsity of their assumptions is easily determined both logically and empirically; in RGD, for example, I show how the historical trade statistics prove that the Smoot-Hawley tariff could not possibly have played a major role, let alone a causal one, in causing the Great Depression.

The important logical question that the Ricardians have to answer is this: Does the level of rising global wealth come at the benefit or the expense of the wealthiest nations? The important empirical question is this: What is the rate of increase in U.S. national wealth per capita compared to the rate of increase in global wealth per capita? Those who are intellectually honest enough to contemplate answering those straightforward questions of applied theory instead of retreating to the safety of the abstract will soon recognize that the Comparative Advantage is a fundamentally incorrect doctrine and the Ricardian case for free trade is strictly dependent upon circumstances that do not apply to many situations, presently including that of the United States.

Those who disagree are certainly welcome to answer those two questions so long as they provide an amount of reason and evidence in support of their answers. And it is worth keeping in mind, as Joseph Schumpeter pointed out, that David Ricardo was first and foremost a political creature and an ideologue, he was not an intellectual driven by a natural interest in the truth of the matter. This is not to argue that what is known as the Ricardian theory of Comparative Advantage is incorrect on an ad hominem basis, I am merely pointing out the historical fact that his case was a political one with a specific policy objective in mind. It is also worth noting that the this case was not even original to him, as the idea of Comparative Advantage was first introduced by Robert Torrens in An Essay on the External Corn Trade two years before Ricardo published On the Principles of Political Economy and Taxation.

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Turnabout is fair play

I'm on the other end of the interview for a change:

Mr. B.A.D.: Does your greater intelligence give you grace for dealing with people less capable than you, or do you spend most of the day sighing and irritated?

Vox Day: Absolutely not. Unfortunately, it took me a very long time to learn to regard people of relatively normal intelligence with sympathy and amusement rather than simple contempt. What still remains annoying are the people of moderate intelligence, say the 110 to 120 range, who simply don't understand that they are closer to the normal people to whom they condescend than I am to them. So it's annoying when they assume I'm talking gibberish just because they aren't capable of understanding something.

This was for Facebook or Myspace or something. I'm not entirely clear on why, but I have to admit that it was the first time I have ever thought about fictional characters and with whom I might identify.

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Productivity and deflation

Karl Denninger reaches a conclusion:

The Labor Department reported Thursday that productivity jumped at an annual rate of 6.9 percent in the fourth quarter, even better than an initial estimate of a 6.2 percent growth rate. Unit labor costs fell at a rate of 5.9 percent, a bigger drop than the 4.4 percent decline initially estimated.

In the real world this means:

Work harder and get more done. Get paid less. Suck it up, don't complain, or you're fired. That's all.

And by the way, reduced pay per unit of work spells DEFLATION.

That's not necessarily so. Inflation and an increase in the supply of labor can lead to reduced pay per unit of work; real weekly wages haven't increased in the USA since 1973. But in general, declining labor costs do tend to point towards deflation, especially if they are nominal as well as real. Productivity up and costs down is a good thing for corporations; whether that is good for the smaller number of workers working and the reduced pay they are receiving may not turn out to be good for an economy already facing widespread defaults. Especially if those corporations happen to be foreign corporations sending those profits overseas.

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Exploding government debt

Carlton has a nice series of charts providing a graphic representation of the rapid growth of U.S. debt over at the RGD blog:

Even more striking is the annual percentage change in the debt. Between 2002 and 2006 there is a surge in growth, presumably to fund the wars in Afghanistan and Iraq, peaking in 2003 at around 9%, but the growth begins to slow down again until 2008, when it surges over 11%, and then in 2009 it jumps to almost 19%.

Needless to say, the recent post-2007 surge is in direct contradiction to the 10% contraction in private debt that has taken place over the same period.

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It's never enough

Once more, a woman attempts to shame men into not responding rationally to consequences of female actions:

There is a message to be delivered to men, and it may not be popular. We hear a lot about the injustices visited on fathers over divorce and access: for the record, I am largely on their side and dislike the thoughtless and sentimental favouring of mothers in residency disputes. We also hear a bit about the flailing ineffectiveness of the former Child Support Agency. What we do not often hear is the bald, uncompromising truth that if you father a child, you set up a non-negotiable duty.

Sorry, men, but it really is so. We may live in a shag-happy porno culture, where flings and “hotties” and zipless one-nighters are seen as the norm; we may be liberal about divorce, stepfamilies and serial cohabitation. Some of this is good, some of it bad. But none of it negates biology, or the entry-level ethical fact that when a sexual act creates a human child, that child is as much of a moral burden to its father as to its mother. Unless it is a matter of sperm donation or formal adoption with a clear contract, the man has, at the very least, a duty to monitor the child’s physical safety.

This is absolutely and utterly false under the current legal regime. It is totally unconscionable to claim that men who have been forcibly stripped of their paternal rights by the unilateral decision of the mother supported by the anti-paternal legal system have any duty whatsoever to the children that have been taken away from them. If it is the man's decision to leave the family, then yes, his paternal responsibilities remain intact. If he fathers a child unintentionally his paternal responsibilities remain, barring the commission of intentional fraud on the part of the mother.

But if his paternal responsibilities have been stripped from him by the unholy alliance of ex-spouse and state, if he has been threatened with the full force of the law if he so much as attempts to contact them without the permission of the mother, then the onus for the children's well-being lies with those who have assumed the full responsibility for it. It is absurd to write, as this woman does, that "men who turn aside from this duty should be looked at askance, stigmatised as dishonest weaklings." The fact is that men who do not turn aside from this "duty" under these circumstances and this system are doing nothing more than enabling it. The writer's real agenda is revealed in this sentence.

"Most mothers do their best but some are weak, depressed, drugged, or just lovelorn and intimidated by violent boyfriends."

In other words, it's the same old line that is based upon the underlying assumption that because women are children who can't be held responsible for their actions, every female failing must ultimately be blamed on men. Clearly the logical solution is beyond her, which is to stop permitting mothers to unilaterally exclude fathers from the lives of their children. The concept is really not that hard to understand. Assuming that one considers the rule of law to be legitimate, once a man has been stripped of his status as a father by other parties, he no longer has any paternal responsibilities. They have been assumed by the parties that stripped it from him.

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Sexbots > rainbow-striped unicorns

This was the attempted rebuttal of one Roissy reader, presumably female, to his warning of sexbots on the technological horizon:

A sexbot won’t be your cook, cleaner, masseuse, secretary, arm candy, and public sex kinky bitch. She won’t be social with you, won’t laugh at your jokes, won’t adore you madly, and won’t make you feel alive and fulfilled.

Well, that should certainly end the silly notion that a Victoria's Secret sexbot line might harbor some appeal to men. Everyone knows that romance has far more appeal to men than a combination of sex and cutting edge technology, right? One wonders if this individual has ever talked to a real man or woman.

I imagine more than a few men read that and immediately thought "On the other hand, she also won't be my surrogate mother, thought police, social fuhrer, and ISO 9000 examiner. She won't prefer TV to sex, won't glare at me when I am insufficiently obedient to her momentary whims, won't disrespect me, and won't make me feel as if at any moment I am going to lose half of everything I have ever worked for."

Some men are certainly fortunate enough to be married to beautiful women who love them and treat them well. However, I very much doubt that describes most men, especially the betas and gammas. And the simple fact is that men have no intention of trying to bitch, complain, and nag society into changing to accommodate their preferences, instead they are going to do what they always do and quietly go about finding a more acceptable solution. I'm just hoping that the technologists get those artifical wombs working before the sexbots are perfected, otherwise it is certain that it is the technophobic who will inherit the Earth.

There are very few equity investments I would advise making in this economy. AI-controlled sexbots, preferably with a solar-powered option, is definitely one of them.

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RGD for $4.95

If you were interested in picking up a copy of The Return of the Great Depression but hadn't gotten around to it for one reason or another, WND is offering it for only $4.95 today. A hardcover for what used to be a paperback price, not a bad deal.

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There is no Labour, there is no Tory

David Cameron's backtrack on the promised Lisbon referendum was more revealing and will arguably be more electorally self-destructive than George Bush's disavowal of "Read my lips."

it is interesting to see that the Conservative lead started to narrow shortly after the Tories reneged on a pledge to hold a referendum on the EU’s Lisbon Treaty in the event that they were to be elected.... Then there was the spectacle of Ken Clarke, the most Europhile senior Tory, being dispatched to meet with EU high-ups in Brussels.

It is now clear that the so-called Conservative party is totally useless, they're nothing more than the centrist wing of the UK's EU party. Those who wish to see the restoration of a strong and independent UK, or at least an independent and sovereign England, shouldn't even consider voting Tory. In effect, there is no Labour, there is no Tory, there is no LDP, there is only the BNP on the left, the EU party in the center and UKIP on the right. As of now, those are the only relevant choices for UK voters, which comes down to voting UKIP or abstimmen auf Deutsch.

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Ender's scenario

It isn't an exaggeration to say that I am a highly skilled gamer. I have been playing a variety of strategy, arcade, console, and computer games for nearly five times longer than Malcom Gladwell claims it takes to become unusually skilled at something. Now, I'm not a freakish game savant like Big Chilly, who has blown away even the most hard-core gamers away by playing through console games that he's never played before without losing a single man. (Note: by hard-core, I don't mean guys who like to play the occasional PS3 game online, but junior high friends who happen to be long-time editors at the one of the game industry's leading magazines.) But if you give a me a shot or two at any given game, I can usually figure out the basic mechanics and figure out how to make effective use of them.

A teenage friend of ours once challenged me to a game of Maddens. He was in high school, was better than all his friends, and was utterly convinced that he would have no problem at all pwning the old guy. Not even a gentle pre-game reminder that I'd been playing Maddens since the original Genesis game dented his confidence. A 63-7 loss, on the other hand, just about had him in tears. Score one for the Original Gaming Generation!

Anyhow, Advanced Squad Leader is the Game of Games in my opinion. It occupies six shelves in my office, and while I'm not a rulesmeister or a member of the tournament elite, I can more than hold my own. I started playing Squad Leader and Cross of Iron by myself when I was ten, and over the years I never lost a single scenario at the monthly TCASL meetings, was well on the way to victory playing the Red Barricades campaign game as the Germans when we had to stop playing, won my beach in the two-day Normandy landings in Geneva, and have a ROAR record over .800. I now have the pleasure to be introducing a young commander to the game, and it's wonderful to see the combination of interest, wonder, and awe at the vast horizon of possibilities that the game system contains.

We've started out with the excellent ASL Starter kit that MMP put together. I have to admit that I'd been a little annoyed by the switch to custom starter kit boards, since the first scenario I'd ever designed had been accepted for publication when the kit was going to make use of the standard boards. (It was a unique setup that involved the use of the Japanese counters against the Germans in a simulation of the 442nd's rescue of the Lost Battalion.) But it's really well-done, the abridged rules make for relatively easy reading, and the bite-sized scenarios are perfect for beginners. We started with scenario S1 Retaking Vierville, as you do, and my young apprentice chose the defending Americans with my encouragement since it's usually a little easier on defense.

The image above showed how it finished. He was too cautious, as beginners usually are, and I took advantage of that to quickly grab the victory condition building hex L3. I didn't give him time to react to that, and even briefly managed to punch two squads with an 8-1 leader into a second VC building, M4, before being broken and driven back by point-blank fire from three elite squads of 7-4-7 paratroopers. The key tactic was sending my reserve of two Fallschirmjager squads with a 9-1 leader to ambush the incoming American reinforcements coming from the north. They bounced back quickly from breaking thanks to their 9-2 leader, but it delayed their attack on the western edge long enough that not even repeated charges from a pair of HoB-created fanatic squads managed to drive all my second-line Grenadiers from L3.

He wasn't bothered by the loss, as I'd warned him beforehand that it's possible to play for a long time before you chalk up your first win, particularly if your only opponent is a very good player. We went on to play S2 War of the Rats, and again I had the attacking Germans. I thought his setup was much too exposed to the initial German prep fire, and expected that my death star under the command of the 9-2 leader would quickly blow a hole in the heart of his defense and allow me to hit the remnants from both sides after I rolled over his two conscript squads in the east and took the key VC L6 building with the 9-1 platoon. Things went exactly as I expected, the bulk of his forces were broken and my eastern platoon had L6 open for the taking when I made the mistake of deviating from the plan and advancing into close combat in the hex marked with the yellow-bordered red star in order to finish off the one remaining squad.

That was when he hit on a 1 in 36 chance and eliminated all three of my squads and my leader... and I blew my kill roll. That left me with no troops on the eastern side, which would permit him to regain control of all the buildings I'd just taken and force me to grab those buildings before his shock group of three 5-2-7 squads under a 9-2 showed up as randomly determined reinforcements. It looked pretty good for me, as they didn't show up in turn four and I was rapidly rolling up his forces until two of my squads got locked in melee in the hex marked with a white-bordered red star with a half-squad in the process of taking control of the last Russian-controlled hex of building L6. Despite reinforcing the melee, I just couldn't kill that conscript half-squad, which slowed me down enough so that I only had one squad in position to shoot at the reinforcements as they moved up hexrow O to claim VC building O6. I finally killed the half-squad and brought all my forces to bear on the shock group. I forced them out of O6, but my need to focus on the reinforcements allowed his broken 7-0 to rally a broken conscript squad in M2 and move in behind my forces to reclaim L6 and win the game.

Big Chilly plays ASL from time to time, so he knows how difficult it is to beat a more experienced player. He absolutely howled with laughter when he found out that my young apprentice not only wasn't discouraged after playing his first two scenarios, but had actually beaten me without me pulling any punches. We discussed how his early decision to attack all three of my squads and leader at a 1-4 disadvantage instead of the more usual one-to-one attack had led to the timely snake-eyes looked like beginner's luck, but concluded that it was actually the right decision to make given that 1 in 36 was probably better odds than you'd normally give a boy to beat a veteran ASL player.

"Did you give him the Balance?"

"No! I didn't."

"Good grief! He's Ender!"

The next day, Ender and I set up S3 Simple Equation. Ender wanted to play the Americans despite being warned that it was a little more difficult being the attacker. And then he beat me again!

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Mailvox: the implications of evolution

John C. Wright responds to the recent CNN report on religion, political tendencies, intelligence, and evolution that cited a 6-point average IQ advantage for liberal atheists:

I love how these 'Just So' stories always just so happen to flatter the person telling it. Just for the sake of contrast, I'd like to see an evolutionary sociobiologist
say something along the lines of: "Being an atheist, like being a sociopath, is a defective mutation of the genes human beings use to recognize meaning in life. Robbed of this basic faculty of human thought, atheists tend to retreat into paranoid fantasies of superiority, as if their inability to grasp reality were a result of greater, rather than lesser, intellectual activity.

"Consequently they tend to be bookish, and selfish, and to cut social ties to family and friends: but this crippling isolation and arrogance, ironically, allows some of them to score well on I.Q. tests, which do not, after all, measure those social skills that tribes of hunter-gatherers need to survive.

"The fact that no civilization and no tribe in the history of the world has been atheist, except for a very few malignant Twentieth Century regimes of unparalleled savagery and bloodshed, might indicate why atheism has had no positive influence on the philosophy, art, culture, law or advancement of civilization since the dawn of time. Natural selection culls this unfavorable mutation, and only in the
luxurious modern day, when science can keep alive even worthless and backward members of the bloodline, has it been possible to preserve a statistically significant moiety of this evolutionary dead end.

"Sufferers of what is now called 'The Dawkins Syndrome' are generally acknowledged to be harmless irritants in their host sociieties, but, as the cases of Russia and China make abundantly clear, when this dangerous 'meme' of self-centered defensive arrogance spreads to others, the result is genocidal levels of mass murder."

There are several amusing aspects to this. First, I find it very funny indeed to see people whose IQs are more than thirty points lower than mine attempting to cite a six-point average IQ advantage as proof of their superior intelligence, and therefore, their belief systems as well. I'm impressed, to be sure, albeit not exactly in the way they intended. An appeal to authority is bad enough, but an appeal to average statistical advantage is insane.

Second, this appears to be confirmation of something I described in TIA. Atheists are going to be more intelligent than the average by literal self-definition. The ability to understand and identify with an abstract concept that departs from the norm requires some basic level of intelligence, which excludes many less intelligent and non-religious individuals who are by every meaningful definition atheists but do not self-identify as atheists. Libertarians, for example, would benefit from the same self-selecting mechanism. It is possible that the Kanagawa study corrected for this identification bias, but that is unlikely as I am unaware of any study of atheism and religion that has done so.

To me, the most interesting and counterintuitive discovery is the reported link between sexual exclusivity and male atheism. That surprised me, although I suppose it shouldn't have if I had thought about it more. Now, one can't read too much into this yet, since we don't know what exactly what "sexual exclusivity" means, but it does tend to contradict what one would expect given the male atheist obsession with religious sexual restrictions. The hint is the divergence between male and female atheists, so my suspicion - and at this point it is nothing more than that - is that the Kanagawa report will provide some evidence of the link between atheism and social autism. The dichotomy between the theoretical sexual freedom of the male atheist provided by his belief system and his actual sexual limitations caused by his sub-standard attractiveness to women suggests that male atheists, on average, are more inclined to be gamma/omega males whose sexual options are more restricted than the norm. This hypothesis is supported by observing the consistently gamma behavior of male atheists on this site and around the Internet in general.

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Mailvox: broken windows and the stimulus of WWII

CH asks about a common economic misconception:

I follow your columns so I thought you'd be able to answer this question for me, if you would. As you have stated, the Democrats are Keynesians and believe they can spend their way out of recession. Benanke cites the Great Depression as evidence of this. I know that FDR's policies of spending didn't lift us out of the Great Depression (they made it worse), but it is often noted that WWII did lift us out of said Depression. How can this be? How did that work? It seems to me that the militarization of our industries were funded by the Government. This put people to work and sent many to war equipped with the products of our industries and therefore operated as a large Government "stimulus". I am trying to see Bernanke's logic, if I am correct, that the spending the Government did to fund the war was what it took to get the economy going. This in effect is what the Dems are trying to reproduce by simply dumping money in the economy, putting people to work and creating a false demand, to bring us out of this recession. The war was true demand, sure, but wasn't the war really a big fat stimulus? Government gave money to industries who put people to work, who paid taxes and spent money, allowing industry to produce more product, etc. I'm very confused how all this worked. Please set me straight!

First, let me note that it's not only the Democrats who are Neo-Keynesians. Most Republican politicians are too; the monetarism of the Chicago School is little more than a Keynesian heresy that focuses on monetary policy and leaves fiscal policy out of the equation. Now, it is true that WWII helped lift the USA out of the Great Depression, but not for the reasons that the economically illiterate, historically clueless, and logically challenged usually cite. The stimulus involved in producing hundreds of thousands of ships, tanks, and airplanes and employing millions of men did not bring about the post-war economic recovery, it was the effective use of those men and materials in destroying the industrial infrastructure of Italy, Germany and Japan that did. While economists such as Henry Hazlitt and Thomas Sowell rightly cite Frederic Bastiat's Broken Window fallacy and point out that there is nothing productive or wealth-generating about turning steel into a rusting hulk on the bottom of the ocean, they forget that destroying an economic competitor's industrial infrastructure at no cost to your own, then providing consumer goods and the means of rebuilding that infrastructure is very productive and wealth-generating indeed.

Let us call it Vox's Addendum to Bastiat's Broken Window Fallacy. Or, if you prefer, the Broken Window Martial Motive. Bastiat's parable goes thusly:

Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son happened to break a pane of glass? If you have been present at such a scene, you will most assuredly bear witness to the fact, that every one of the spectators, were there even thirty of them, by common consent apparently, offered the unfortunate owner this invariable consolation—"It is an ill wind that blows nobody good. Everybody must live, and what would become of the glaziers if panes of glass were never broken?"

Now, this form of condolence contains an entire theory, which it will be well to show up in this simple case, seeing that it is precisely the same as that which, unhappily, regulates the greater part of our economical institutions.

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier's trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, "Stop there! Your theory is confined to that which is seen; it takes no account of that which is not seen."

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

If, however, the shopkeeper happens to live in the next town over, his window is broken, and the house belonging to his neighbor the second glazier is burned down with the second glazier inside it due to the vagaries of violent inter-village relations, the six francs the shopkeeper will spend on repairing his broken window will be six francs that did not previously circulate within the first town's economy, and which the shopkeeper, living in the second town, was never going to spend on shoes or books produced in the first town. Therefore, it is a good thing to break windows, so long as the windows are broken in the neighboring town at a cost that is exceeded by the benefit to be gained from fixing them.

"In short, he would have employed his six francs in some way, which this accident has prevented, [unless the accident happens to take place in the neighboring town. - VD]"

This means that while most wars are economically destructive, wars that offer the likely prospect of destroying the industrial base of one or more advanced economies without putting the nation's own industrial base at risk are economically beneficial. By way of statistical evidence in support of this conclusion, note how the annual rate of commercial bank loan growth was much higher immediately after WWII - 25% in 1947 and 21.5% in 1950 - than it ever has been since.

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In fairness, science bloggers are rather stupid

At least, the sort of science blogger I've encountered over the years, such as Myers, Brayton, and Orac, are. They have reliably proven to be narrowly educated, logic-challenged, emotionally incontinent individuals with reading comprehension problems and an astonishing ignorance of recorded history. They don't seem to grasp that their paranoid "defense" of science against the hordes of creationists slavering to, well, put stickers on textbooks for fifth-graders who can barely manage to read or count to fiver doesn't pass for science or its defense in the eyes of any rational observer. You'd think science bloggers would worry a lot more about the economy than stickers and school boards, but then, they're economic illiterates too. But let the science journalists speak for themselves:

Today who is treated with the most skepticism by the general public? Science journalists and climate scientists. Even Big Pharmacy marketing departments who have found a golden egg in the vaccine industry have more trust among the public.

Ghosh went on to say something that I know resonated with everyone in the room. Journalists, he said, "do not defend science. Ask the awkward questions."

So Ghosh does not blame bloggers for the demise of science journalism, he seeks to get them back on the right path and once again become the "trusted guides" they once were regarding complex climate issues. With him on the panel was Mariette DiChristina of "Scientific American", who nodded at all the right places while he spoke, yet does not seem to realize that her magazine is a culprit along with the rest of them. "Scientific American" is not a trusted guide, it is more like a tour guide in Istanbul who takes you on a tour that will always end at his brother's carpet store. And with that decrease in credibility has come a decrease in readership and jobs while a magazine like "The Scientist" still has high regard among scientists and casual science readers alike.

Kennedy had the most vitriol. He did not dislike all blogs, he said, he read blogs on environmental policy and politics - in other words, he was willing to settle for opinion and lack of expertise on matters outside the science field - he just couldn't find a single one in science worth a darn. Only large newspapers and high end journals deserve to survive.

Of course, most of this is simply Old Professional Media bitching about the Uncontrollable Amateur Media. It's still pretty funny, though, to see the editor-in-chief of Science ripping to shreds the very individuals who flatter themselves as being the brave guardians of science and secularism against the threat of a new religion-inspired Dark Ages.* "Not worth a darn" is a bit more generous than I would grant, but it's certainly an apt description.

*I know. And you know. But they don't, which tends to underline my point.


UPDATE - Ed Brayton underlines my point about science bloggers and their relative lack of intelligence in both his failure to understand the logical irrelevance of the question he wanted to ask Washington as well as his amusing inability to keep his story straight.

"As for your challenge to debate, I will consider it - if you can give a coherent answer to the following question"
- Ed Brayton, February 26

"Ellis Washington did not challenge me to a debate."
- Ed Brayton, March 1

Yeah, I'm sure Ed is one FEARSOME debater. He's probably doing the right thing by evading Washington, because even if Washington is a scientifically illiterate fool, that doesn't mean that Brayton won't shoot down his own argument without any help from Washington. And Ed, perhaps your own readers needed it spelled out for them, but everyone else understood that you didn't believe anyone could answer your irrelevant question. That was kind of the point about how you're using it avoid the risk of embarrassing yourself.

Which you've now managed to do anyhow. No wonder the real science journalists have almost as much contempt for your kind as I do.

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I kind of want one

So, Markku, would you mind popping over and grabbing a pair?

"There are tanks all over the forest, abandoned," an unnamed reporter on the video says. "If you need one, come and get it." Locals in a nearby village said the tanks had been sitting there for almost four months covered in snow. The armoured vehicles were identified as a mixture of T-80 and T-72 battle tanks, the workhorses of the Russian army.

It's a tough choice. But I'd have to go for the T-80 due to its superior mobility. It doesn't get great gas mileage, but then, do you really care what gasoline costs when you've got a 125mm main armament in lieu of a credit card?

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Return of the Great Depression blog

One of the things I have wanted to do since the release of the book is to turn the RGD book site into a bona fide economic resource. However, I simply have not had the bandwidth. A number of people responded to my inquiry last month, and I selected two of them to act as my associate bloggers there.

Sam will be focused on Europe, Asia, and the Middle East. He has a great initial post on why the current economic crisis has not hit Israel as hard as might be expected. He'll be paying particularly close attention to the Greek situation and to the Irish and Spanish reports since it's looking like one of those three nations will be the flashpoint in the next round of European debt-deflation. But don't count out China either....

Carlton will be focused on the USA and keeping abreast of the economic release schedule, particularly as it relates to significant indicators such as debt, New Orders, housing prices, and sales tax revenues. His introductory post is on the FDIC. The goal is to have daily updates on various economic statistics, but focused on those measures that I believe to be more significant and less susceptible to manipulation for political purposes. In keeping with this goal, I've added my own post showing annual GDP growth charted against total commercial bank loan growth from 1947 to 2010.

Any comments or suggestions for further improvements would be welcome.

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Interview with John Williams

Vox Day interviewed John Williams of Shadowstats on April 26, 2009. As of February 2010, his alternate statistics reported -4.5% GDP, 9.8% CPI-U, 21.2% unemployment, and -2.5% M3 for the U.S. economy.

What is your basis for believing the official statistics underestimate unemployment and inflation?

I've been a consulting economist for more than 25 years. What I have found over time is that public perceptions as to what's happening in the economy have tended to vary increasingly from the official reporting, generally moving away from the common experience. It appears to be moving towards generally weaker economic growth and stronger inflation than the government is reporting. I've used econometric models over time for forecasting a variety of economic variables and I've found the ability of the official numbers to predict what was happening to be also weakening over time. Some of the series are simply nonsense, they're effectively political propaganda. I'll state that very specifically in terms of the GDP.

But the reason you've seen this shifting sentiment of the quality of the government statistics is that there have been methodological changes over time that have built in upside biases to the economic reporting and downside biases to the inflation reporting. The changes that have been made often have had some academic basis for them. I would contend that most of the changes have been primarily academic and have very little relationship to the real world.

Your GDP chart appears to show that the USA has been in recession since 2000, with only one quarter of positive growth in 2001. That would make it twice is long as the Great Depression. Do you think that is really the case?

I think you'll find that we've had longer and deeper recessions than have been officially reported by the government. What you see in terms of the year-to-year change is not necessarily the quarter to-quarter change. You'll see this on some of the better series that are more relevant to the GDP, payroll employment, industrial production, and such, used for timing recessions. What is the official short-lived 2001 recession that has now disappeared from the GDP reporting probably began in late 1999 and dragged on into 2003. And again, you can see those patterns in industrial production and payrolls, we did not have recovery when they called the end of the recession. What we're seeing now, in terms of the indicators I look at, is that the current recession probably started in the fourth quarter of 2006, that's a year earlier than the National Bureau of Economic Research had it happening. With that short a span between what can be distinguished as two recessions, it's really just one double-dip recession similar to what we saw in the early 1980s. The Great Depression was a double-dip recession too.

So yes, this is dragging out and this will likely be a longer downturn than any in the last century. I think there may have been one or two that were longer in the 1800s, but what we're seeing is a structural change. It's one that Alan Greenspan recognized and I think it's one that's generally recognized in Washington, but nothing that has been done in terms of stimulus will address it. This is going to be a particularly protracted downturn, particularly deep and generally unresponsive to most of the stimulus thrown at it.

Are European economic statistics more accurate? Because I've been reading in the German statistics, the British statistics, and the Japanese statistics, and all appear to be showing deeper recessions than the U.S. GDP statistics do.

I think they generally are. There have been a lot of efforts to standardize and institutionalize what the U.S. has done, some countries have gone along with it, some have not, but there is a lot of variation between the statistics in different countries. But I would say yes, not only are the European statistics more accurate, they're also a little bit more open about their financial and banking problems. I think they also have a more realistic outlook as to what is happening in the United States because they have a pretty good sense as to how the system gets politically manipulated here.

Wouldn't underestimating inflation also have a significant effect on real economic growth, and does your GDP chart take the effects of your CPI calculations into account or not?

Yes, it does. Real GDP growth, which is an inflation-adjusted GDP growth the way it is popularly followed, is an annualized quarter-to-quarter rate. I think is a silly way to look at it only because the error in the reporting is so large that when you raise the growth rate to the 4th power you exaggerate what is a very poor quality number. It's not just CPI and it's not just inflation. If you use artificially low inflation, that will give you artificially strong GDP growth once it's adjusted for inflation. The CPI is not the same thing as the GDP price deflator; CPI is generally related to consumer spending, the deflator covers the industrial sector of the economy, imports and exports, etcetera. It's not a one-to-one relationship, but I would say that CPI is the major modifier in the adjustments that are made there.

Which of the three unemployment measures, U3, U6, or SGS Alternate, most closely track the economic statistics that are presently reported for the Great Depression?

The unemployment rates reported for the Great Depression were the creation of the academic community and the Social Security adminstration after the fact. There was no unemployment reporting during the Great Depression, that started in 1940. The Federal annual census did some measurements, but even there it wasn't measuring unemployment, it was measuring what your general trade was versus whether or not you were actually employed. So it's a best guess that was generated by political entities. I'll contend that if you talk to an average individual and ask them whether or not they're employed, they won't hesitate to give you an answer. It's the type of thing that they can tell you right away whether or not it happens to match the government's definition of employment and unemployment. That gets to the crux of what I'm doing here with my numbers because I'm trying to look at them from a standpoint that has a basis in historical government surveying and yet at the same time reflect the common experience.

One thing that I've done is take the employment numbers from the old censuses and compare them to the total population figures. Then you just have a straight-up percentage of how many people are nominally employed. There are demographic issues that don't factor in, but if you add the military, it gives you a much better picture. In 1944, the military made up eight percent of the population! How do you even begin to talk about unemployment when you're ignoring eight percent of the population, all of which is of prime employment age?

That's often why the WWII period is excluded from normal business cycle analysis. It's outside the norm of what you would see with a standard business cycle. But to quickly answer your question on the unemployment measure, I would view that what came out of the estimates for 1933, taken as the peak of the Great Depression, where they had 25% broad unemployment and 34% unemployment estimated for the non-farm population, would generally be along the lines of asking people whether they were employed or unemployed. The closest to this would be the SGS Alternate. In terms of the unemployment rate in 1933, remember that something like 27 or 28 percent of the population was agricultural at the point. Today it's less than 2 percent. If you're trying to compare it to today, you have to compare it to the 34% non-farm rate. In terms of the unemployment series that the government publishes from U1 to U6, U3 being the most popularly followed at 8.5 percent, U6 is around 15.6 percent, and my SGS Alternate is around 19.8 percent. (NB: this interview took place ten months ago. U3 is presently 9.7 percent and SGS Alternate is 21.5 percent.)

That's still a long way from the 34% non-farm in 1933.

It is. The only difference between my number and U6 is that I include marginal discouraged workers that the government defined away in 1994. But these are people, if you asked them if they're employed or unemployed, they'd say they're unemployed. A “discouraged” worker meets all the attributes of being unemployed, except they're not actively looking for work because there are no jobs to be had. The definitional change that was made in 1994 simply put a time limit on that; if you were discouraged for more than a year you were no longer counted as part of the labor force. That removed several million out of the equation. I estimate a number that is still generally proportionate; I think something around 20 percent is probably pretty close. To put it in perspective, going back over the time between now and WWII, in the best of times you are down in the eight-to-nine percent range, which unsurprisingly matches the European experience. In terms of how bad is it now versus how it was... this is the worst since 1975, it's not worse than the Great Depression yet.

If I understand correctly, your methodology typically involves adding a fudge factor as a correction to the official statistics. Is that correct? Is it possible to recompute the statistics using the formulas that were previously used or is the data simply unavailable?

It's not available. And even if it were, it would be extremely expensive and time-consuming. My measures are not perfect, they are estimates to give you an idea of what things would look like under different reporting circumstances. In terms of the CPI, if you look at how things were calculated in 1980 you're looking at a seven percent differential, versus the 1990 methodology where it's a three percent differential. But if you look at that seven percent, five percent comes directly from the BLS's estimates as to the impact each different methodological change had on the reported annual rate of inflation. Two percent comes from my estimates of factors that since 1990 such as the substitution effect, the weighting of the CPI index, as well as the shifting of retail prices and such. If you read my answer to the government's paper on misperceptions about the CPI, you will see my arguments. The gist of it is that the way the CPI was originally used, the way most people believe that it is still used, is that it measures the change in the cost of living needed to maintain a constant standard of living, is not how it is being used now when it attempts to take into account presumed quality of life changes.

What, in your opinion, is the least accurate series and which is the most accurate?

The big three, CPI, GDP, and unemployment series that are so closely followed and are so important politically do tend to get the bulk of the manipulation. Of those three, the GDP is the least accurate, followed by CPI, and then unemployment. The CPI is probably the worst in terms of its negative real-world impact being misrepresented because people rely on it for financial decisions, the others are more informational. I generally prefer private series, such as the Purchasing Managers survey, the Conference Board's Help Wanted advertising measure, although their newspaper index has taken some hits due to the Internet. Even allowing for that, it still telling you a very negative story on the employment picture. The interesting thing is that if you look at the current year-over-year changes in that index in the nascent online industry, Conference Board and Monster.com, you're seeing parallel declines. That's a series in transition, but the Help Wanted advertising is a good one. The Purchasing Managers survey, in particular the New Orders component, is a very good leading indicator. In terms of the government's data, although you can have some monthly aberrations, the Retail Sales and the Industrial Production are reasonably clean. I look at them as being pretty good indicators of what's happening and what lies ahead. Even the non-farm payrolls, once you get all the revisions in there, is pretty good. New claims for unemployment is another one, but you can't use the week-to-week change, you have to use the year-to-year smoothed over 17 weeks because the government does not seasonally adjust well. They try, but they've never been successful at it.

There's been a lot of talk of economic recovery beginning in late 2009 or 2010. What do you see?

I don't see that. Even if there's a change that would affect the economy, let's say for example that the stimulus package was really effective, the economy does not turn on a dime. If the stimulus package were effective, you might expect to see something towards the end of the year, but the stimulus itself is really minimal in the first year and does not address the structural problems. I will contend that the recession is so deep that it's going to absorb the stimulus package without the economy breaking the surface of the water. We had a circumstance now where there is a real problem for the consumer tied to his income growth falling short of the rate of inflation. If you look at the household income that was reported in the last poverty survey, both median and mean income growth, adjusted for the government's own inflation numbers, has not recovered, they are still at pre-2001 recession levels. If you look at real average weekly earnings, they still have not recovered from the levels preceding the 1973-1975 levels. Average real weekly earnings are down 15 percent from where they were back in the early 1970s. This has been an ongoing, developing problem as higher-paying jobs in production have been shifted off-shore. As a result, we normally will see more than one breadwinner in a family while back the 1970s it would have been more common to only have one. The average family is not making ends meet, the average individual is not making ends meet, and there is the big problem for the economy. Unless you have a sustained growth in income that exceeds the rate of inflation, you're not going to have sustained economic growth. You're not going to have sustained GDP growth unless you engage in temporary measures such as debt growth.

Greenspan saw this. He was aware. It was obvious for many years. But particularly coming in in 1987, before the crash and the financial crisis that he would not let run its course, he took very deliberate action to encourage debt expansion over time which has been the primary fuel of economic growth over the last two decades. Now we're seeing the debt collapse and without people making adequate income over inflation and without being able to borrow, there is no way to get the economy growing by 2010.

It sounds to me as if you're saying that there's not much choice except to accept this structural change and deal with it.

Over time the system will be self-righting. The ways of quickly addressing it would not be considered politically correct, such as to become more protectionist or rebuild the U.S. manufacturing base. And there's nothing in the works that's going to turn this quickly. Even if you started to do things like that, you'd probably be looking at a decade before you started to see results. What we have ahead of us, what we're in now, will be classified as a depression. A decade or so back, I talked with the Bureau of Economic Analysis National Bureau of Economic Research about how they would define a depression in terms of how we look at things today, and came up with a consensus of sorts – it's nothing official – of a peak-to-trough, inflation-adjusted contraction in GDP or broad economic activity in excess of 10 percent. A great depression would be in excess of 25 percent. If you look at series such as retail sales and industrial production, we're seeing numbers that year-to-year are in the depression camp, durable goods orders and housing are in the great depression category. Even in terms of GDP, there's a chance of seeing a 10 percent decline if they don't fudge it too heavily. That would count as a depression. In terms of a great depression, I think we're going to have one but that is going to be in conjunction with hyperinflation. You're writing a book about the Great Depression, right?

It's called The Return of the Great Depression, it will be out on the 80th anniversary of Black Tuesday.

That's an interesting title because I'll contend that what Roosevelt did in abandoning the gold standard, which freed him up to introduce the debt standard, really set us up for what we're going through now. The debt standard is now collapsing and you don't have anything supporting it beyond the printing of the money which is now looming. One of the other government statistics that I write about is the budget deficit based on GAAP accounting. And although they argue about whether or not they should include the unfunded liabilities for Social Security and Medicare, they do at least footnote them and there have been times when they've included them. If you look at that, last year you had a deficit of about $5 trillion. It's averaged $4 trillion since they began publishing the combined numbers back in 2000 or 2001. That's beyond containment. You cannot raise taxes enough to cover that even if you take all of everyone's income. They're still adding new unfunded programs, so there is just no way that the system survives. We're facing a GAAP-based deficit this year of around $8 trillion and net present value of unfunded Federal liabilities of around $65 trillion. That's bigger than the global GDP and even without the banking crisis, the country is effectively bankrupt and headed for debt-default, which I can't see the U.S. doing. I think it's more likely that they'll go with the traditional solution which is revving up the printing presses and paying off the debts with a debased currency.

What's happened with the current crisis is that the process has been accelerated. The key here is the dollar. You'll start to see heavy dumping of the dollar, you'll start to see very rapid inflation beginning with oil prices. If I'm right in terms of hyperinflation, which could start anytime between the end of this year and 2014, that would throw you into a great depression. If you look what happened in Zimbabwe, the hyperinflation there developed over a number of years but things still continued to function because they had a working black market in the U.S. dollar. We don't have a black market backup. When it comes here, it's going to be extremely disruptive and will probably bring normal commerce to a halt.

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