Boy, Does This Ever Sound Like Canada! (Guess Which Side)

April 22, 2010

Political Fatal Conceit

By Monty Pelerin

Economists and lawyers think differently. Economists believe that incentives are more effective to alter behavior; lawyers believe that coercion via laws is the way to affect behavior.

The parable of the Sun and the Wind is illustrative. They are both intent on getting a man to remove his overcoat. The Wind tries to blow the coat off, an action which only produces behavior that makes retention of the coat more valuable. The Sun heats up, making removal of the coat more comfortable than retention. In the latter case, the man willingly removes his coat.

In the parable, the Sun behaved like an economist providing incentives to alter behavior, while the Wind behaved like a lawyer trying to coerce behavior.

In Washington, most elected politicians are lawyers. Too many believe that they can achieve desired behavior via coercion. They distrust incentives and markets. All problems are seen as having legislative solutions -- i.e., coercions or controls. Our current financial mess is being approached in such a fashion.

There is no real reform underway for the banking system. If real reform were intended, the following bank expansion, as reported on from the NY Times, would not have been permitted and encouraged:

In the last year and a half, the largest financial institutions have only grown bigger, mainly as a result of government-brokered mergers. They now enjoy borrowing at significantly lower rates than their smaller competitors, a result of the bond markets' implicit assumption that the giant banks are "too big to fail."

Instead of worrying about the real problem, the administration and Congress took the populist route of demagogy, attacking the executives and their pay levels. While many believe that those attacks were not unwarranted, they were political diversions and not constructive to producing any solution.

Size matters! The moral hazard associated with too-big-to-fail enables large banks to engage in more risky behavior than prudent. Because of the implied government "put" to save them, investors and depositors provide funds in excess of what they otherwise would. The normal corrective forces of the free market are negated by such a "put," enabling big banks to engage in bad behavior. 

When George Schultz was Treasury Secretary and was approached with the "too-big-to-fail" issue, he is reputed to have responded, "Well, then, make them smaller." That was the right advice then and now. However, according to the Times,

... there is no attempt to break up big banks as a means of creating a less risky financial system. Treasury Department and Federal Reserve officials have rejected calls for doing so, saying bank size alone is not the most important threat.

Gary H. Stern, former president of the Minneapolis Federal Reserve Bank and co-author of Too Big to Fail: The Hazards of Bank Bailouts, described the current bill as follows: "It tries to address the problem but it's half a loaf at best. It doesn't address the incentives that gave rise to the problems in the first place."

The belief that Washington is able to design any legislation for any purpose would be laughable if it were not so harmful. Can anyone point to a single government program that has been successful in terms of its original intent and costs? Is there anything that has ever been "regulated" properly?

Any bill that passes without breaking up the large banks is doomed to failure. It will ensure a repeat of this crisis, except on a larger scale. Past interventions created the conditions for this banking crisis. The impossibility of effective regulation enabled it to fester and grow.

Congress now proposes more of the same. Apparently, they don't understand the definition of insanity as attributed to Einstein: "doing the same thing over and over again and expecting different results." Or perhaps they do and are arrogant enough to believe that they can legislate anything, including legislating away the law of unintended consequences.

The issue is not bad regulations, bad regulators, or bad bankers. The issue is complexity. No one person or group is capable of writing effective legislation for complex markets. No legislation can replace market monitoring and discipline. That would be true even if regulators were not influenced by politicians (the "public choice" argument).

To believe otherwise is to engage in what Friedrich Hayek termed the "fatal conceit." According to Greg Ransom, who made this observation almost a year ago:

The interpretation of Barack Obama and his government as an instantiation of what Friedrich Hayek examined in his classic book The Fatal Conceit has become one of the dominant narratives of today. In May John Stossel wrote a widely circulated pieceon the topic. This week, Thomas Sowell weighs in. So does Sheldon Richman. And also Ralph Reiland. I'm guessing we'll be hearing more about this over the next month and year.

The only way to solve the financial crisis is to allow markets to discipline bad banks. Effective reform of the banking system can be achieved in only two ways:

• 1. Break up the too-big-to-fail banks and preclude their attaining the size where that adjective would ever apply again.
• 2. Revisit the entire concept of banking to move it closer to free-market banking.

Both solutions would be amenable to bank failures without bailouts. The threat of real failure reintroduces market discipline to banking. It provides an incentive for bankers not to take the additional risks that increase the probability of failure. Nothing being talked about in Washington today achieves that goal.

A financial bill will pass. It will be accompanied by all the celebratory hoopla that infects Washington. It will not break up the big banks. It will be another Washington charade designed for the rubes that are expected to vote in the next election. This kick-the-can behavior is what got us into the mess, and it guarantees an even bigger crisis in the future.

Eventually, the crisis will repeat itself. It is probable that the next crisis will produce a worldwide collapse of the banking system. At that point, item number 2 above, the real solution, will be addressed. 

When that point is reached, we will have come full circle back to the old Jefferson-Hamilton debates about banking. Hopefully, Jefferson will then be seen as correct, and the world can get a banking system that serves the people rather than the bankers. Properly designed, banking will no longer be the cause of periodic business and financial crises.

Monty Pelerin maintains a website at economicnoise.com. Contact him at montypelerin@gmail.com.

Page Printed from: http://www.americanthinker.com/2010/04/political_fatal_conceit.html at April 22, 2010 - 07:01:49 AM CDT

Real Sex Education (The American College of Pediatricians)

Attention: School Superintendents

Out of concern for the health and well-being of all youth, the American College of Pediatricians mailed a letter to all public school superintendents in the United States on April 1, 2010. The purpose of this letter was to inform school policy makers of a new Web resource, www.FactsAboutYouth.com, created by the College and other professional health organizations to clarify the proper approaches to youth with non-heterosexual attractions.

The mission of the Facts About Youth project is to advance a school environment in which all students will experience the opportunity to achieve optimal health and safety.

Read the Letter, the Fact Sheet, and the Press Release on the subject.

Should Schools Identify and Affirm Students as “Gay” or “Transgender?”

Are there Health Risks Associated with Affirming Students Who Question Their Gender and/or Sexuality?

How Can School Officials Properly Assist a Student and Family Dealing with Same-Sex Attractions?

Rebuttals to Just the Facts About Sexual Orientation and Youth

Death-Spiral Intercept (Karl Denninger)

Posted by Karl Denninger in Monetary at 08:15

Well well well....

In essence, White was saying: "it’s the debt, stupid."  When aggregate debt levels build up across business cycles, economists focused on managing within business cycles miss the key ingredient that leads to systemic crisis. It should be expected that politicians or private sector participants worried about the day-to-day exhibit short-termism. But White says it is particularly troubling that economists and their models exhibit the same tendency because it means there is no long-term oriented systemic counterweight guiding the economy.

This short-termism that White refers to is what I call the asset-based economic model. And, quite frankly, it works – especially when interest rates are declining as they have over the past quarter century. The problem, however, is that you reach a critical state when the accumulation of debt and the misallocation of resources is so large that the same old policies just don’t work anymore. And that’s when the next crisis occurs.

It seems that Mr. Harrison has it figured out.  He goes on to spend a lot of digital ink on the periphery of the bottom line, which is that we continue to think of debt in terms of service costs (indeed, you'll hear Bernanke talk about it, but never about the actual gross financial system debt outstanding.)

When you boil all this down, however, you get to the following chart (trendline added by moi):

You can see what's going on here - each "crisis" leads to lower lows and lower highs.

This presents two problems:

• Lower lows have run into the zero boundary.  That wasn't sufficient this time, which of course is why we got "Quantitative Easing" and other similar abortions intended to distort market rates - like guarantees on bank debt, for example.  Ultimately this devolves into The Fed or The Government (as if there's a real difference) guaranteeing everything to prevent spreads from blowing out.

• Far more sinister, however, is what happens to the top line.  The top line - that is, the maximum rate between crises, declines because it becomes impossible to normalize rates - nobody can afford to pay "normal" rates with the amount of leverage they have.

This is where the ultimate failure in policy arrives, and it leads to at best a Japan-style scenario where the economy fails to come out of recession or, at worst, monetary and political system failure.

We had a bubble at the S&L crisis, ultimately culminating in the Tech Wreck, because we refused to force the bad debt to clear.  This was obvious even in the 1990s, but nobody wanted to hear it.  The few businesses that ran without leverage did ok, but those who ran lots of leverage had spectacular success - right up until they detonated, and most of them did.

The 2000s were marked by even more leverage.  Why?  Because it was the only way to get return left.  The Government, having stepped in to support the economy with $500+ billion annually in deficit spending, was unable to pull back without instantaneously crashing the economy:

They thought they were smart. 

In point of fact, they were criminally insane, and proof of it is found in what we're doing now.

We now have both driven the low end of the rate curve to zero and taken on more than $3 trillion in new Federal debt.  To put this in perspective the total outstanding accumulated Federal Debt at the end of 1992 - from the founding of the US to January 1st of 1993 - was just $4.2 trillion.

We added more Federal debt than had been accumulated in 217 years in just a little over THREE years - from 2007 to the third month 2010.

The ugly is that this debt load (currently $12.8 trillion, more or less) presents interest expense.  If the Fed Funds Target was to reach just five percent, and every bit of the Treasury debt was to be refinanced into overnight obligations at that same 5%, the interest expense alone of the current debt would be $640 billion a year.

If the Treasury was to have to pay a roughly 6% average coupon (reasonably aggressive with a 5% Fed Funds Target) the interest expense would be $768 billion annually.

To put this in perspective that is an amount roughly equivalent to that spent on defense, and is higher than Social Security, Medicare, or all other "mandatory" program spending combined.

It would consume nearly all of Social Security and Medicare tax receipts ($891 billion) or the personal income tax ($915 billion)  (ed. All 2009 federal budget numbers)

It is also four times what we spent last year on interest.

There is not a snowball's chance in Hades that the Federal Government can afford that.

This will inexorably lead to political pressure to hold down rates, which will in turn lead to more malinvestment - and bubbles.  Like, for instance, an 80% increase in stock prices in one year, or more than a doubling in the price of oil over the same time.

It will also lead to silly things like allowing banks to hold "assets" at dramatically above their true value in order to keep them from having to hold sufficient capital against real losses, in a futile attempt to keep them from going boom.

But you can't fix debt intoxication with another bottle of whiskey.

What we're doing now will inevitably lead to another crisis, this one much worse than the last.  Burdened with the bad paper they refused to unload, the banks will get into cash flow trouble as their attempt to extract ever-larger amounts of money from everyone else in society to paper over their own insolvency will ultimately fail.

The Federal Government will see the market back up rates irrespective of what they try to do, just as Greece has.  This will force borrowing costs higher, and ultimately make destruction of the "mandatory" on-budget programs necessary.

What comes with that is anyone's guess - in particular, whether civil order survives in a world where half of Medicare and Social Security are gone, all other "mandatory" programs are erased, and taxes are running at roughly double the rates we have today.

Timing?  Best case, a few years.  Worst case, anything could set it off.  Defaults in other nations, a loss of confidence in The Fed or Government, war.

But what's not in question is the outcome if we do not change course.  If we do not take serious, even radical steps.  If we do not stop the deficit spending, accounting fraud, bailouts and punitive view of the tax system toward capital formation.

All of those things must happen, and happen soon, but there is no political will to do any of them.  The banks have the government in their pocket - witness the statements made in the WaMu hearings Tuesday, when a literal 500-page tome of reference documents on the witness table laid forth one of the most-voluminous list of alleged felonies I have ever seen in a Congressional Hearing.  Or Kanjorski's joke of a hearing last year in which FASB effectively had a gun shoved up their nose and was told to legalize balance-sheet fraud.  Or Paulson and Bernanke's "dead of night tanks in the street" game of fear run on Congress in 2008 - after they created the conditions for that fear by willfully and intentionally ignoring the fact that Lehman had been insolvent literally for months.

No folks, we're not going to get out of this cleanly.  Enjoy trading the market which ever way it goes.  The "pumpfest" is on full-bore now, with CNBC and everyone else crooning about how "retail" (that's you!) has missed it and needs to "get in the game." 

They don't ring a bell at the top, but they sure do herd the sheep into the pen to be shorn, and you can bet that those who placed bets against Armageddon last time need someone - you - to sell to.

Maybe you're fast enough, maybe you're not.  But just as the last time around, when the banksters knew for three months that Lehman was bankrupt before you did (and you can bet they placed their chips on the table!), you won't be told in advance before the floor disappears - but they both will be told and they'll be the ones to pull the pin.

It isn't different this time folks, and the math is never, ever wrong.

I believe the results in Canada would Be the Same

April 15, 2010

The Battleground Poll and the Hiding Elites

By Bruce Walker

The April 2010 Battleground Poll results have just been released. The poll contains the usual list of topical questions, which ask respondents about which political party they support, what issues are most important to them, what they think of certain political personalities, etc. The answers to these questions matter in the short run, and political junkies pay close attention to these polling results.

There is, however, an old familiar story in the Battleground Poll. This question goes directly to the core beliefs of the respondent, not how politicians, parties, and pundits are spinning the politics of the day. Question D (3) in the Battleground Poll asks what ought to be the most important question about America -- what are the political values of Americans? This is a question almost never asked by polling organizations. 

Here is what Question D (3) asks of respondents: "When thinking about politics and government, do you consider yourself to be ... ?" Then the poll gives respondents six possible answers: very conservative, somewhat conservative, moderate, somewhat liberal, very liberal, and unsure/refused. Battleground is a bipartisan poll which prides itself on rigorous and open methodology. It has proven to be one of the most accurate of all polls in predicting the exact percentage of the vote candidates receive in general elections. Battleground lets us see the questions asked, unlike many other polls.

Since June 2002, the Battleground Poll has asked this same question in its demographics section, and in fifteen consecutive polls, the answer has always been the same. Americans overwhelmingly describe themselves as conservative. What does "overwhelming" mean in this context? The percentage of Americans who call themselves conservative in these polls has never been less than 58% (conservative strength was that at its lowest point through these years in December 2007, when "only" 58% of Americans described themselves as conservative.) There has been a remarkable consistency in the responses to this question. Over the course of these polls, 60.2% of Americans, on average, call themselves conservative. 

The results of the April 2010 Battleground Poll show that nothing has changed. Fifty-nine percent of Americans in the latest Battleground Poll call themselves conservative; two percent of Americans call themselves; thirty-four percent call themselves liberal; and five percent were either unsure or refused to answer. Remove the "Unsure/Refused," and sixty-two percent of Americans are conservative. Stories from the establishment media, like USA Today and the L.A. Times, conveniently miss the underlying story about the April 2010 Battleground Poll.

The story of conservative predominance is not new; it precedes the Battleground Poll. The Gallup Poll, on February 25, 1973, asked Americans about their ideology. Forty-one percent of Americans were conservative, and only twenty-three percent liberal, and conservatives were easily the largest ideological group. Last year, when Gallup polled ideological identification of every state in the nation, the results were published with the curious title "Conservative Label Prevails in South." Only a careful perusal of the state by state data reveals that conservatives outnumbered liberals in each state in America. Surely "Conservatives Outnumber Liberals in Every State" would have been a more interesting title -- if the mainstream media wanted this story to gain attention.

So why does the media hide this critically important story? It might help conservatives to grasp just how thoroughly a cadre of leftists has captured out institutions. In 2005, a study revealed that seventy-two percent of professors in American universities described themselves as liberal, while only thirteen percent described themselves as conservative. Fred Barnes has noted that journalists overwhelmingly defined themselves as liberal in eleven different surveys on the subject taken since 1962. The media and academia reject what Americans believe. The purpose of those institutions is not to inform or to educate, but to indoctrinate. Those who champion "diversity" most have less intellectual and philosophical diversity in their own hives than any other part of America. The newsroom and the classroom do not look anything like America, which is something the left does not want us to know.  

What percentage of America would call itself "liberal" if leftist opinion was not propped up by a near-monopoly in college faculties and in corporate newsrooms? Sixty percent of Americans call themselves conservative despite the fact that conservative opinion and thought are regularly mocked and demonized by news organizations and by Marxist faculties. How many more Americans would call themselves conservatives if it was chic to be conservative -- or at least if being conservative did not automatically also mean being a racist, a homophobe, uneducated, and despicable? That must be the scary part of the left: the sixty percent of Americans who bravely accept the title "conservative" hides a greater conservative majority, including those timid souls who are afraid to say what they believe. 

The new Battleground Poll reveals tantalizing questions and answers about how Americans view their servants in the press and education (really, their hiding elites.)  Question 36 reveals that 65% of Americans feel that journalism in America is headed in the wrong direction -- 47% of Americans feel this strongly. Question 38 informs us that 73% of Americans feel strongly that journalism is important to democracy. Past Battleground Poll responses have shown the overwhelming conservative majority in America, something ignored by the mainstream media. The April Battleground Poll suggests that Americans are to seriously question this mainstream (and liberal) media. Perhaps the conservative giant in America, so long intimidated and misled, is finally grasping the harm caused to our government with a media utterly subservient to a minority ideology. If this is the case, then news of our hiding elites surely the new biggest hidden story in politics.

Bruce Walker is the author of two books: Sinisterism: Secular Religion of the Lie, and his recently published book, The Swastika against the Cross: The Nazi War on Christianity.

Page Printed from: http://www.americanthinker.com/2010/04/the_battleground_poll_and_the_1.html at April 15, 2010 - 07:08:05 AM CDT

What have the socialists (Liberals) done to us?

What have the socialists (Liberals) done to us?

Back in 1970 I lived in Montreal.  I was a commission sales specialist.  I had a company car and earned around 30,000 per year (not guaranteed).  My first son was delivered in a great hospital (Catherine Booth).  The entire cost including all doctor visits and 7 days private hospital room was $350 - no medicare, no insurance.  We didn't qualify for company insurance because my wife was pregnant when I was hired.  Medicare was established in Quebec later that year.

We bought our first house in Beaconsfield.  It was a custom built multi level split with 4 bedrooms, a nice yard beautiful trees etc.  It was close to 2 and 20 for commuting.  It cost 24,250.  My aggregate tax rate then was 14% ($4200) so the house cost less than one year's take home pay.

After our second child, I decided that my wife needed a car.  We bought a Datsun 510 station wagon for $2820 or about 10% of my take home pay.

THOSE WERE THE DAYS MY FRIEND.  What have the socialists (Liberals) done to us?  Today (Post Trudeau) a house costs 6 times take home pay; a car costs 2/3.

Canada’s Dilemma

It seems to me that in the absence of fraud, coercion and theft, the accumulation of wealth is accomplished by consensual trading of goods or services or the proxy of money between willing partners.  In all such pure transactions both parties receive net benefit or the trade would not take place.  It is this mutually beneficial trading that creates growth in wealth of a society or a nation.  The growth is measured by the increase in overall satisfaction of both trading partners.

On the other hand, a society that permits fraud, coercion or theft will suffer a decline in national worth.  That is because the sum of satisfaction will be neutral or net negative.  Taxes that are not perceived as a good trade are THEFT.  Forcing companies or governments to negotiate with labour cartels is COERCION.  Promises of future benefits (medicare, CPP etc) that will not provide the anticipated services constitute FRAUD.

It is my opinion that Canada in its current form fails on the basis of all three tests.  

Canadian Housing Boom-Boom Around The Corner (Karl Denninger)

 

The Canucks are nuts:

Are you're going to tell me that:

• The average Canadian household income is $121,000?
• The average income in Vancouver is $329,000?
• The average income in Toronto is $187,000?
• The average income in Montreal is $118,000?

In a word, bullshit.

The latest median household income I can find for Canada is closer to $53,000 - or about half of what it should be.  That is, homes in Canada - on the whole - are selling for double reasonable "fair values."

I'm willing to bet that in Vancouver they're overvalued by a factor of five - or more.

I can't tell you when it will blow up, but I can tell you with absolute certainty that it will.

If you have a nice big fat profit in your house up there in Canuckistan, you better sell now while you still have it.

Ignore this warning at your own peril.

Parting Company (by Walter E. Williams)

Town Hall ^ | Walter E. Williams

Posted on Wednesday, April 07, 2010 12:09:26 PM by GregoTX

Here's the question asked in my September 2000 column titled "It's Time To Part Company": "If one group of people prefers government control and management of people's lives and another prefers liberty and a desire to be left alone, should they be required to fight, antagonize one another, risk bloodshed and loss of life in order to impose their preferences or should they be able to peaceably part company and go their separate ways?"

The problem that our nation faces is very much like a marriage where one partner has broken, and has no intention of keeping, the marital vows. Of course, the marriage can remain intact and one party tries to impose his will on the other and engage in the deviousness of one-upsmanship. Rather than submission by one party or domestic violence, a more peaceable alternative is separation. I believe we are nearing a point where there are enough irreconcilable differences between those Americans who want to control other Americans and those Americans who want to be left alone that separation is the only peaceable alternative. Just as in a marriage, where vows are broken, our human rights protections guaranteed by the U.S. Constitution have been grossly violated by a government instituted to protect them. The Democrat-controlled Washington is simply an escalation of a process that has been in full stride for at least two decades. There is no evidence that Americans who are responsible for and support constitutional abrogation have any intention of mending their ways.

You say, "Williams, what do you mean by constitutional abrogation?" Let's look at just some of the magnitude of the violations. Article I, Section 8 of our Constitution lists the activities for which Congress is authorized to tax and spend. Nowhere on that list is authority for Congress to tax and spend for: prescription drugs, Social Security, public education, farm subsidies, bank and business bailouts, food stamps and other activities that represent roughly two-thirds of the federal budget. Neither is there authority for congressional mandates to the states and people about how they may use their land, the speed at which they can drive, whether a library has wheelchair ramps and the gallons of water used per toilet flush. The list of congressional violations of both the letter and spirit of the Constitution is virtually without end. Our derelict Supreme Court has given Congress sanction to do anything upon which they can muster a majority vote.

James Madison, the acknowledged father of the Constitution, explained in Federalist Paper No. 45: "The powers delegated by the proposed Constitution to the federal government are few and defined. Those which are to remain in the State governments are numerous and indefinite. The former will be exercised principally on external objects, as war, peace, negotiation, and foreign commerce. ... The powers reserved to the several States will extend to all the objects which in the ordinary course of affairs, concern the lives and liberties, and properties of the people, and the internal order, improvement and prosperity of the State."

Americans who wish to live free have several options. We can submit to those who have constitutional contempt and want to run our lives. We can resist, fight and risk bloodshed and death in an attempt to force America's tyrants to respect our liberties and human rights. We can seek a peaceful resolution of our irreconcilable differences by separating. Some independence movements, such as our 1776 war with England and our 1861 War Between the States, have been violent, but they need not be. In 1905, Norway seceded from Sweden; Panama seceded from Columbia (1903), and West Virginia from Virginia (1863). Nonetheless, violent secession can lead to great friendships. England is probably our greatest ally.

The bottom-line question for all of us is: Should we part company or continue trying to forcibly impose our wills on one another? My preference is a restoration of the constitutional values of limited government that made us a great nation.

Was the Arctic Ice Cap 'Adjusted'? (American Thinker)

April 06, 2010

 

By Randall Hoven

There is an entity called the National Snow and Ice Data Center.  If you go to its web site, you can find data and plots of sea ice extent.  In particular, you can find the size of the Arctic ice cap, or what the NSIDC calls Northern Hemisphere sea ice.  The graph shown on April 2, 2010 is reproduced below.

The data points in this chart reflect the extent of northern hemisphere sea ice in March of each year.  The chart indicates that the arctic ice cap is melting - at a rate of 2.6% per decade (about 0.41 million square kilometers).  At that rate, the polar ice cap would be gone in 385 years.

Such data have a lot of folks dismissing the CRUgate shenanigans as not all that relevant.  Who cares about temperature data when you have the Arctic ice cap staring you in the face?  For example, Katie Couric said, "A picture is worth a thousand emails and pictures of the polar ice caps show a 20% decrease since 1979."

First off, the above graph shows only an 8% decrease over the last 31 years, not a 20% decrease.  So Katie would seem to have exaggerated.

But things get really interesting if you look at NSIDC's raw data, which come from the National Ocean and Atmospheric Administration (NOAA).  You will notice that the above chart is of sea ice "extent."  The data actually come in two versions: "extent" and "area," which are not quite the same.  Here is how the NSIDC explains it.

"Important Note: The ‘extent' column includes the area near the pole not 
imaged by the sensor. It is assumed to be entirely ice covered with at least 
15% concentration. However, the ‘area' column excludes the area not imaged 
by the sensor. This area is 1.19 million square kilometers for SMMR (from 
the beginning of the series through June 1987) and 0.31 million square 
kilometers for SSM/I (from July 1987 to present). Therefore, there is a 
discontinuity in the ‘area' data values in this file at the June/July 1987 boundary."

My reading of those "important" words is that the only thing really measured by satellites was "area."  Yet the plot showed "extent," something more than was measured.  And the difference is something they "assumed."  (If you have a better explanation of that "Important Note," please enlighten me.)

What were the differences?  From the above words from NSIDC, you would think the differences would be constant offsets (1.19 million sq km from 1979 through June of 1987, and 0.31 million since).  But the actual differences in the data file were not constant at all; they varied between 1.93 and 3.42 million sq km.

Why is the area of an assumed region included in the NSIDC's graph?  More importantly, why does that assumed, non-measured, area vary from year to year and month to month in no apparent pattern?

The NSIDC does not provide a plot of the one thing that is measured: area.  But I do, below, all based on the raw data provided at NSIDC's web site.

Using the raw data from NSIDC, I was able to reproduce its results for "extent."  My calculations using the raw data showed a decline of 2.6% per decade, just as NSIDC said.  So far, so good.  (Or bad, depending on your point of view.)

However, the "area" is a different story.  Just by eyeball, no trend is apparent.  In fact, calculations say it is growing 0.3% per decade!

That is simply astounding.  The Arctic sea ice that is actually measured by imaging sensors is growing, not shrinking at all.  Shout it from the rooftops: we are saved!

Actually, the rate of growth is statistically insignificant, meaning a statistician would say it is neither growing nor shrinking; it just bobs up and down randomly.  More good news: no coming ice age either.

All the above data was only for the month of March.  What about other months?  I tabulate below the growth rates (% per decade) for each of the months of the year.

Northern Hemisphere Sea Ice Growth 1978-2010, by Month

As a Percentage of the 1979-2000 Average

Month	Growth of "Extent"	Growth of "Area"
January	-3.2%/decade	-0.3%/decade
February	-2.8	+0.1
March	-2.6	+0.3
April	-2.8	-0.1
May	-2.5	-0.2
June	-3.3	-2.1
July	-6.1	-4.5
August	-8.7	-4.2
September	-11.2	-8.2
October	-5.9	-5.7
November	-4.5	-1.3
December	-3.3	-0.8

You see that "extent" always shows more shrinkage than "area."  In the months of maximum sea ice, February and March, the area trend is upward.  And for winter months generally, December through May, any trend in area is statistically insignificant.  For summer months, July through October, the trend is downward and statistically significant.

Katie Couric should have used the month of September as her example.  In three decades, the Arctic sea ice "extent" shrank by 34%.  She could make such claims while stating, truthfully, that the data come from NSIDC/NOAA and the trend is statistically significant.  It's science.

If she had wanted to stretch the truth even further, she could have compared September of 1980 (extent of 7.85 million sq km) to September of 2007 (extent of 4.3 million sq km).  That's a decline of 45%, almost half!  (Katie needs a better cherry picker.)

Let's look more closely at those summer months.  Below is the graph for September, the month showing the most shrinkage.

Again, the red line represents "area," the only thing actually measured.  A downward trend is evident to the eyeball.  But look closely and that downward trend is fairly recent, say since 2000.  Indeed, the calculated trend was slightly upward through 2001.  That is, the entire decline is explained by measurements since 2002, a time span of just eight years.

We are told by climate scientists themselves to ignore short-term anomalies.  If we do, then even the more alarming ice cap shrinkage numbers, which were only for the summer months in the first place, disappear as well; they are short-term blips.  In fact, September's sea ice area has gone up in the most recent two years of data.

Moreover, the verb "measured" is overly simplistic.  The numbers result from computer algorithms working with satellite images.  NSDIC has a section of its documentation called "Error Sources."

"There are a number of algorithms in use that convert channel brightness temperatures to sea ice concentration. All perform slightly differently under varying weather and ice conditions. Relatively few papers were published that compare algorithms or compare results with validation data...  In summer, passive microwave overestimates open water by a larger amount, as the instrument cannot distinguish open water between ice floes with melt ponds on the floes, and other factors such as the ice-snow interface come into play (Comiso and Kwok 1996) and (Fetterer and Untersteiner 1998). This makes it difficult to interpret trends and anomalies for the summer months."

Well how about that?  The very months where we found the most apparent shrinkage were the months that are the most "difficult to interpret trends and anomalies" and where the error would tend to underestimate ice.

This little Northern Hemisphere sea ice example captures so much of the climate change tempest in microcosm.

• When presenting data, the "scientists" include an unexplained adjustment to the measured data.  In this case, the adjustments explain the entire evidence for Arctic ice cap shrinkage in winter months.



• Measurement processes depend on computer algorithms with scant validation -- "few papers were published that compare algorithms or compare results with validation data."



• Using only measured data, and all the data, there are no alarming trends.  Winter months show no ice cap shrinkage at all.  While there is shrinkage in summer months, that shrinkage is only evident in the last eight years, a time span too short to make a long-term conclusion, and in the months of least confidence in measurement techniques.



• The data allow cherry-picking.  A Katie Couric, if she were cleverer, could say the Arctic ice cap shrank almost in half in the last three decades.  On the other hand, I could say it grew 6% in that time period.  We would both be telling the truth, by comparing cherry-picked months and years.

And all this was only for the north polar ice cap.  The south one was more obviously growing over the last three decades.  The Katie Courics of the world completely ignore that one.

And remember, even if we could clearly show that the planet is getting warmer, we would still need to show that such warming is bad, that it is caused by man and that the best cure is drastic cuts in fossil fuel usage.  We are not even through step one of such an analysis.

By the way, I have not received a penny from Big Oil.  But Big Oil can contact me at randall.hoven@gmail.com.

Randall Hoven can be contacted at randall.hoven@gmail.com or via his web site, randallhoven.com.

Page Printed from: http://www.americanthinker.com/2010/04/was_the_arctic_ice_cap_adjuste_1.html at April 06, 2010 - 07:19:06 AM CDT

A Sobering View Of Macro Economic Reality (Karl Denninger)

The Market Ticker

Sunday, April 4. 2010

Posted by Karl Denninger in Macro Economics at 14:01

A Sobering View Of Macro Economic Reality

In 2001, we had a recession, right?

We recovered, right?

Are you sure?

Are you curious as to why manufacturing has continued to shift to China, why the only "good jobs" in this country seemed to be centered on ripping someone off in some way (e.g. subprime or "liar loan" mortgage brokers, stock brokers, guys selling bogus CDS against money they didn't have, etc) and why employment never really recovered - with the employment rate of the population failing to move materially higher after the 2000 recession, you might want to read the rest of this missive.

And by the way, the employment trend of the previous month?  Revisions made that worse - here's the previous month's graph:

If you remember last month I said that changes in this data were "encouraging."  This month however the revisions caused some negative impact on the previous month's data; this is what that same chart looks like now:

Oops.  That's still below zero, isn't it?  So despite all the cheerleading in the media about the positive report in point of fact we are, on balance, below where we were last month as that big positive spike got revised away!

Now let's not be too negative - the situation has improved - from the bottom.  For example, the "not in labor force" chart now looks like this:

But last month it looked like this:

You wouldn't know this from the orgasmic response on CNBS Friday.  But the data is what it is, and despite actual improvement this last month the improvement in the situation last month not only revised away all the improvement from this month, it revised away even more!

Leave it to government to report a number that's "good", then is revised away the next month beyond the improvement in the next month in the series, meaning that in point of fact you've moved backward, not forward.

But that's not the reason for this missive.  Oh no.  This Ticker is dedicated to exposing what we did in the 2000-2009 decade at a macro economic level, and why those who are calling "end of recession" need to go drink a bottle of arsenic-laced gin before they wind up really hurting people making real decisions in the economy - that is, you, I, and every business person in America.

If you remember in 2001 we had a recession.  I put forward the following (rather confusing) base graph of federal debt expressed as month-over-month change, going way back to the 1990s.  Click for a big copy, and have a big monitor:

The reason I'm going to confuse you with the above is that I am shortly to bring light to this matter.  That is, I'm going to reduce this raw squiggle to something understandable - that is, the annual rate of change of federal debt (all-in, including on-sheet transfer payments) since the early 1990s.

Notice something: Federal debt additions through the 1990s actually shrunk - that is, the "rate of change" was negative.  But look what happened when we went into the recession in 2001 - The Federal Government began spending a lot more money (on balance sheet) and despite the putative recovery beginning in 2002 they never stopped doing so.  That is, the "Keynesian" stimulus that is allegedly necessary to lift the economy from recession was never retracted from the economy. And, as you can see, in the last two years this "stimulus" has gone nearly-vertical.

How much of the economy did this amount to?  That's easy:

Note that post-recession in 2001 federal spending exceeded the Euro-zone target of 3% continually, hovering between 4-6%.  This is in stark contrast to the years prior to 2001, when it was in fact falling - that is, private industry was supporting the economy.

Also note what has happened during the last two years - Federal Deficit spending was 9.65% and 12.11% of GDP, respectively.

Here's the problem - deficit spending like this produces false final demand, in that it implies the ability to do so forever.  We of course know this not to be true - witness Iceland and Greece, neither of which were able to continue the charade ad-infinitum.  Nor will we be able to; we have survived thus far without "feeling the consequences" because others are willing to loan us ever-increasing amounts of capital at ever-lower rates of interest. 

So what does this look like overlaid?  That's pretty simple too:

Your green line is nominal (as reported) GDP.  Deficits are in blue, and actual private economic GDP - that is, the total output generated by private business activity, is in red.

1990s economic growth was real.  The 2000s economic growth was not - it never exceeded 2% in real terms.  And now?  We're in full-on economic Depression territory - whether you hear it admitted on ToutTV or not.

If you're wondering why your neighbor (and perhaps yourself) managed to go bankrupt playing the Home Equity Withdrawal game, why that new Escalade and boat in your driveway have turned into a noose around your neck, and why despite claims of "recovery!" on ToutTV and in the print media you can't seem to find a good-paying job, now you (should) understand. 

Simply put: You were lied to for ten years and you're still being lied to by all of these clowns, and listening to them now, as it did in 2003, will only lead you to personal financial ruin.

Remember when I said "we will have a Depression" - that given what the government did in 2001-03 timeframe it was inevitable?

We're in one now.

So why has the market rallied so strongly?  For the same reason it did in 2003 - the Federal Government has stepped in to replace final demand by consumers and private enterprise.  That "stabilization" is neither permanent or healthy - indeed, it always causes malinvestment, where capital is put not into productive enterprise but rather tries to "chase" some sort of speculative return because that is the only game left in town.

In the 1990s there was plenty of speculative froth and lies, but at least people were trying to speculate on something that was real - The Internet and the rise of the personal computer in American Business as more than a tool for word processing in lawyers' offices.

But in the 2000s Government interference in what should have been a 10% drop in GDP prevented it - and resulted in massive malinvestment in the speculative froth in housing.  Fact is that the actual economic value of a home does not rise or fall - it is a place to sleep, hang your hat, take a shower and cook dinner.  The "multiplier" beyond that - that is, all alleged "value" beyond shelter, is pure malinvestment.  Government and The Fed encouraged and stoked it with a "free money machine" - not from The Federal Reserve but from the fiscal side of the table - that is, from Treasury and Congress.

Now we're doing it again, writ large.

Consider this - we're spending nearly 12% of GDP in borrowed money that we don't have.  Last month we borrowed and spent $333 billion - that is 28% of GDP!

Got that yet?  Government borrowing was nearly one third of the economy last month!

Now I'm quite sure that next month will show marked improvement - for one month anyway.  It always does, being April (tax day) and all.  But marked improvement for one month doesn't change what's going on here, nor the actual GDP of the economy - not what the BEA reports, but what private supply and demand produces.

If you believe that we can continue to hold GDP at a positive "reported rate" while spending 12% of it via deficits, or even half of that, you're welcome to believe that.  But history says that the crash that comes as a consequence when the imbalances build to the point that something breaks takes the market and economy lower that it would have gone had the intervention not been applied.

What we're doing now is unprecedented, other than during a global war (e.g. WWII) when it was literally "buttholes and elbows" together with the entire nation laboring for one purpose - to avoid obliteration.

To apply such extraordinary "stimulus" via borrowing other people's capital simply to avoid having those who made malinvestments being forced to declare bankruptcy, thereby resetting valuations of all items in the economy to sustainable levels, is both outrageous and doomed to fail.

We can argue time frames, but what can't be argued is the outcome.  We must stop this insanity, as we are building up even greater distortions than we had in 2006 and 2007 - indeed, we have managed to take five years of insanity (2003-2007) and compress it into two!

Does this mean we're due for it all to blow up now?  Not necessarily, although it might.  But it does mean that the damage when it does come apart will be at least as bad as it was in 2008 - and this assumes we stop today.

We will not, of course, which is why one needs to be prepared for what is inevitably to follow when the government's ability to continue this charade is interrupted, whether by forces within or without.