Flashman Letters

Survey: Obama better if aliens invade - Americans are inconsistent - if 79% believe government keeps UFo's secret from the public, how can only 36% believe that UFO's exist. More worryingly 55% believe in "Men in Black". We are so screwed.

Americans may be split on which presidential candidate can fix the economy, but President Barack Obama trounces Mitt Romney in one out-of-this-world scenario — an alien invasion.

The majority of Americans, nearly 65 percent, say Obama is better suited than Romney to handle an alien invasion, according to a new National Geographic Channel poll, USA Today reports.

The survey, conducted to promote “Chasing UFOs,” a TV series premiering Friday, also found that almost eight in 10 people, 79 percent, believe the government has kept information about UFOs a secret from the public. In addition, 55 percent believe agents similar to those played by Will Smith and Tommy Lee Jones in the film “Men in Black” — their mission is to hide information about extraterrestrial beings — actually exist.

Meanwhile, more than a third of Americans, 36 percent, believe UFOs exist.

via dyn.politico.com

The Looting of China by the Kleptokapitalist Bourgeoisie Roaders | Steve Keen's Debtwatch

The current political leadership of China represents the greatest looting of a country by the political class ever seen in history. In the Hurun Report released in March 2012—the richest 70 members of the government have a net worth of $89.8 billion, an average of over $1B each. This compares to $7.5 billion for the 660 for the US government, an average of  $11M each. China’s Billionaire People’s Congress Makes Capitol Hill Look Like Paupers. In a country so indoctrinated in the works of Marx, it seems only a matter of time before the current Chinese proletariat, suffering under extreme wealth distribution, will rise up. One only has to look at the geographic distribution of wealth to see where the problems might begin.

Furthermore, this does not take into account the wealth held by the families of these politicians. Nor is this corruption limited to politicians. The military, according to John Garnaut’s report, has become one of the most corrupt state enterprises of all.  China’s wealth distribution is becoming completely one sided  The success of 300m Chinese who live in western level prosperity depends on the continued exploitation and good nature of one billion people who live on an average of $5000 per annum. This week Chinese military leaders have been ordered to report assets under the following CCP directive – The General Political Department, Discipline Inspection Commission: Leaders Must Report Income, Real Estate Holdings and Investments. This is likely to be met with extraordinary resistance. This could result in a standoff between the CCP and the PLA , where both bodies equally riddled with corruption struggle for the upper hand. The great

via www.debtdeflation.com

Dr. Michael J. Burry at UCLA Economics Commencement 2012

via www.youtube.com

España casi acumula en cinco meses el déficit previsto para todo el año

El déficit de la Administración Central en los cinco primeros meses del año es del 3,41%, sólo un 0,09% por debajo de lo pactado para todo el año 2012 con Bruselas, que contempla un 3,5% (y un 5,3% si se tienen también en cuenta las autonomías). La cifra entre enero y mayo supone además un aumento del 30,6% en comparación con la cifra del mismo periodo del año anterior

via economia.elpais.com

Maybe it is different: The world awash with oil...

…oil supply capacity is growing worldwide at such an unprecedented level that it might outpace consumption. From a purely physical point of view, there are huge volumes of conventional and unconventional oils still to be developed, with no “peak-oil” in sight. The full deployment of the world’s oil potential depends only on price, technology, and political factors. More than 80 percent of the additional production under development globally appears to be profitable with a price of oil higher than $70 per barrel.

2)

The shale/tight oil boom in the United States is not a temporary bubble, but the most important revolution in the oil sector in decades. It will probably trigger worldwide emulation, especially in China.

3)

In the aggregate, conventional oil production is also growing throughout the world, although some areas (e.g. the North Sea), face an apparently irreversible decline of the production capacity.

4)

Over the next decades, the growing role of unconventional oils will make the Western hemisphere the new center of gravity of oil exploration and production.

5)

Based on original, bottom-up, field-by-field analysis of most oil exploration and development projects in the world, this paper suggests that an unrestricted, additional production of more than 49 million barrels per day (mbd) of oil is targeted for 2020, the equivalent of more than half the current world production capacity of 93 mbd.

6)

…the net additional production capacity by 2020 could be 17.6 mbd, yielding a world oil production capacity of 110.6 mbd by that date – as shown in Figure 1 above. This would represent the most significant increase in any decade since the 1980s.

via ftalphaville.ft.com

The Spanish bank buy-back riddle - Good grief....

This brings us to the second issue concerning Popular’s capital base. In essence, the bank is paying scrip dividends to regular shareholders out of Treasury stock, which handily removes this problematic paper from its books.

Ordinarily, a scrip dividend involves the issuance of new shares, thus diluting existing shareholders and expanding a bank’s capital base. Here though the bank is able to recycle bought-back shares, reducing its Treasury holdings substantially. Indeed, a source close to Popular says that the latest scrip payout should reduce its holding of Treasury stock close to zero.

To some Anglo Saxon bank followers this is just all too cute. Hedge funds who have been shorting Spanish banks say they are hugely encouraged by such capital management.

Most sector analysts contacted by FT Alphaville seem perplexed by the whole matter. As one remarked: “If you pay a scrip dividend with treasury shares, what is the benefit? You are not having the benefit of liquidity or of capital improvement.”

- – - – - – -

It’s important to note that Popular is by no means alone here.  It’s the fashionable thing to do if you are a Spanish bank. But when your government has had to go cap-in-hand to Europe, asking for a bank bailout, actively shrinking your capital base feels like a very strange thing to do…

via ftalphaville.ft.com

First scenes of Idiocracy

First scenes of Idiocracy

by Gerardo Ochoa-Vargas 8 months 4 days ago

First (and only good) scenes of the very dumb movie Idiocracy. The central message is really neat.

via vimeo.com

Yanis Varoufakis: Greece is Finished

LEIGH SALES: So what then happens to Greece?

YANIS VAROUFAKIS: It depends on what happens in the eurozone. Just like what happened in Ohio depended of the rise of President Roosevelt and the New Deal, unless we have a new deal for Europe, Greece is not going to get a chance. Now it doesn’t mean that if Europe fix itself, Greece will fix itself. It’s a necessary condition that the eurozone finds a rational plan for itself. It’s not a sufficient condition. Europe may fix itself and Greece, being so flimsy and malignant, may still have huge problems and never recover. But until and unless the eurozone finds a rational plan for stopping this train wreck throughout the European Union, throughout the eurozone, Greece has no chance at all.

LEIGH SALES: I read some statistics today that seven out of 10 Greeks want to emigrate. How would you describe the national mood there?

YANIS VAROUFAKIS: This is a our Great Depression. Not only in an economic sense, but also in a psychological sense. Greeks are in a catatonic state. One moment, in a state of rage, another, this is a typical case of manic depression. There are no prospects. There is no light at the end of the tunnel. There are sacrifices, but nobody gets a feeling that these are sacrifices that take the form of some kind of investment in turning the corner. This is the problem when you are stuck in a eurozone which is really badly designed, which is collapsing and which does not give opportunities to its flimsier parts to escape through some kind of redemptive crisis.

via www.nakedcapitalism.com

Reading the Writing on the Japanese Wall

But, as I argued in e-mail communication with Krugman at the time, if Japan is going to see a decline in working population over the next several decades (and possibly much longer, since so long as fertility remains below replacement rate each generation will be smaller than the previous one) and if this lies at the heart of the problem, then it means the problem is a deep structural one which won’t be resolved by any kind of “kick start”, however large. It isn’t a question of a planet which has slipped off its orbit, and just needs a nudge to get it back on, it is a planet which has veered off onto a whole new trajectory, which leads who knows where. As I say, this situation was never contemplated by the founders of neoclassical theory, and yet, having started in Japan, the phenomenon  is now extending itself steadily across all developed economies in one measure or another. Curiously, while you will find these kind of reflections spread out all through my work, it has been many years since I have seen Krugman come back to the issue.

I think that Krugman’s work at the time was truly innovative. He identified a problem, a country with an ageing and declining workforce, and he looked for a solution to that problem. This put him head and shoulders above the majority of his contemporaries. But he stopped short of digging deeper, and allowed his spade to be turned too soon. He could see that the problem was one of demand deficiency due to the changing balance between saving and borrowing, but he didn’t follow this through and see that the problem was not simply temporary (even if decades long) but more or less permanent, and he didn’t see that this demand deficiency results in export dependency (leveraging the global rather than the local economy in the search for customers), and that the only consequence of having permanent fiscal injections would be not to give stimulus, but rather an accumulation of debt that will be increasingly harder for those smaller and poorer (deflation) workforces to pay down in the future.

In similar fashion, those who urge a solution to Europe’s imbalances via an increase in German fiscal deficits to stimulate consumption miss the point: arguably what people in these societies need to do is save more, not less, and certainly when it comes to the public sector. Which brings us back to Fitch Ratings and the Japanese downgrade. The core issue of the moment is the attempt by Japanese Prime Minister Yoshihiko Noda to raise the country’s consumption tax from 5% to 10%. As Paul Krugman would tell you, such a move would bring in revenue, but would weaken internal demand even further. Effectively it amounts to austerity in a country which is “growth challenged” and just as in Portugal and Italy, austerity is not popular with voters. In a recent poll only 40% of those questioned were in favour of the measure, while 50% were opposed. As a result, and attempt to push through the increase could split the governing Democratic Party and bring down the government.

Meantime Former Japanese Finance Minister Hirohisa Fujii has warned that failure to pass the legislation will inevitably spark ratings agencies to implement further downgrades and yet more downgrades of the kind  which might eventually force banks to sell off their government bond holdings, making one of the IMFs nightmare scenarios come true. However, as Bloomberg’s Isabel Reynolds points out:

Fujii’s warning is at odds with previous credit rating downgrades that have f

via www.economonitor.com

Debating Growth in China

Times have certainly changed. It used to be that the incredibly low interest rates set by the central bank all but guaranteed infinite demand for credit. After all if you are paying almost nothing for capital (perhaps even a negative real rate), and your risks are guaranteed, it almost always makes sense to borrow and invest in anything that offers even the most meager or evanescent of returns.

In those days Beijing could pretty much set the pace of growth simply by capping the maximum level of loan growth permitted to the banks (actually not so simple because for the past decade Chinese banks have expended all their ingenuity in figuring out how to cheat the loan caps). Borrowers had infinite demand and banks would lend right up to (and sometimes even over) the cap because their profits were guaranteed and their risks socialized.

Where will demand come from?

Now, it seems, the expected returns to investment are so low that even cheap capital and socialized credit risk is not enough to tempt privileged borrowers into borrowing and investing. This fact alone should worry those of us who are still not yet convinced that China has a serious investment problem. Over at The Economist there is a long section on the Chinese economy in the current issue, which is well worth reading because it puts the bull case very intelligently, but it does so in part by making a distinction between “over-investment” and “mal-investment” which I think is irrelevant.

via www.economonitor.com