Global Warming's (or should we say Climate Change's) Fatal Conceit

Please don’t shoot the messenger (or burn me at the stake for trying to speak truth to power).  facts are facts…. consider this quote from article copied below.

The United Kingdom’s Met Office has been a major source of global temperature data in recent decades, and has been heavily relied upon by global-warming proponents. On March 12, a report written by David Whitehouse and published by the Global Warming Policy Foundation concluded that “there has been no statistically significant increase in annual global temperatures since 1997.”

After reading this article is occurs me to ask the question:  What else are the so called experts wrong about?  the way I see it science has no business forecasting complex systems like the economy or earth climate.  Like I’ve said before, far from equilibrium (natural) complex systems like the economy and climate are analytically unresolveable.   That means we can’t model these systems without making bogus simplifying assumptions that lead to flawed model forecasts. There are certain systems that we now know are beyond our capability to model.  Climate and economy are two examples.  This is a “fact” that we now know thanks to the latest developments in the science of complex systems.  As the article below explains FA Hayek understood this intuitively and explained it in his “fatal conceit” idea related to the folly of central planning in the economy.  It is ironic that science itself tells us that the sciences of climate and economic forecasting is really pseudo science, more like a religious belief than a “hard” scientific discipline.

Just because a vast majority of so called “climate scientists” agree that their models are correct doesn’t mean the models are correct or even relevant.  We have other math and science experts outside of the field of climate and economic sciences who can tell us that the very idea of forecasting the earth climate or economy is futile and potentially very dangerous because it gives the impression we know what we are talking about.  Bogus forecast results have hugely important policy implications as we saw as late as the 2H of 2008 when the economic models of the IMF and Fed and World Bank and most mainstream economists forecast no recession coming let alone a global credit shock with the potential to trigger a Great Depression II. 

The author of this article copied below points out that it “is hard for believers to admit they are wrong.”  of course, we all know how hard it is for religious fundamentalists to believe in anything that challenges their religious orthodoxy.  But now we have the new modern religion of modern climate science (high priest Al Gore) and modern economics (high priest Paul Krugman) where true believers have a hard time admitting they are wrong.    like I’ve said before, global warming science (now expediently called climate change science because the warming trend is dubious) is a new excuse for believing in something that we are told is true because it is “science.”    Politicians have hijacked climate science and turned it into a bogus fundamentalist religious belief system that gets its validation from the so called experts who slice and dice the facts the way it suits them, just like religious leaders sliced and diced religious ideas to suit their purposes for 2000 years and still do it today. 

I don’t say we should now throw science or religion over board because neither can give us the so called Truth and leaders in both manipulate the institutions for their own self interest and power.  We need science and religion to make sense of the world, but we should be more modest in what we expect from either.  The best we can do is use science and religion and art and literature and movies and whatever else there is in the world to help make sense of the fundamentally mysterious world we live in.    if we use religion or science to answer fundamental mysteries that are beyond our power to understand, we risk turning them into fundamentalist belief systems that can be exploited by elites for their own selfish interests.    Al Gore flies around in his jet and lives in the biggest house in Tennessee.  Why do we listen to this self serving hypocritical a-hole any more than we should listen to Jerry Fallwell or George Bush or Obama or Clint Eastwood or fox new anchors or Bill O’Reilly, fat ass rush limbaugh, or Bill Maher, jon stewart or anyone writing in Rolling Stone or for Huffington post, or any politician, sport or movie star, climate scientist or economist who claims to know what is good for me or you let alone the whole earth.

Ethanol has been a disaster, but it is impossible to undo the damage let alone undo the policy because special interest groups hijack all public policy.  We are supposed to believe the next great government idea for green energy will work.  we’ve learned our lesson.  We know more… blah blah blah.  That is the same thing people say about socialism in any form it is tried or called. 

Sam

Global Warming’s ‘Fatal Conceit’

By

Richard W. Rahn

This article appeared in The Washington Times on April 2, 2013.

Much of Northern Europe, including Britain, is suffering under the coldest winter and spring of the last 30 to 100 years. The Northeastern part of the United States has had a record cold March. The record cold in Europe has killed thousands and cost billions. It was not supposed to be this way.

Back in 1998, scientist Michael Mann published a paper with the famous “hockey stick” showing a sharp rise in global temperatures. Mr. Mann and others argued that if global action was not taken immediately, then the temperature rise would be rapid and uncontrollable. Much of Mr. Mann’s work was the basis for Al Gore’s famous film An Inconvenient Truth. What has turned out to be an inconvenient truth is that Mr. Mann and his allies were sloppy in their research and engaged in a campaign to disparage their critics.

“

It’s hard for believers to admit they’re wrong.”

The United Kingdom’s Met Office has been a major source of global temperature data in recent decades, and has been heavily relied upon by global-warming proponents. On March 12, a report written by David Whitehouse and published by the Global Warming Policy Foundation concluded that “there has been no statistically significant increase in annual global temperatures since 1997.” In the accompanying chart, using the same official data from the Met Office that the United Nations Intergovernmental Panel on Climate Change uses, it can be easily seen that global temperatures have not been rising as predicted by the best-known climate models.

According to the Global Warming Policy Foundation, “The report shows that the temperature standstill has been a much discussed topic in peer-reviewed scientific literature for years, but that this scientific debate has neither been followed by most of the media, nor acknowledged by climate campaigners, scientific societies and prominent scientists.” Lord Turnbull, former Cabinet secretary and head of the Home Civil Service, commented: “Dr. Whitehouse is a man who deserves to be listened to. He has consistently followed an approach of examining observations rather than projections of large-scale computer models, which are too often cited as ‘evidence.’ He looks dispassionately at the data, trying to establish what message it tells us, rather than using it to confirm a pre-held view. “Those of us who have studied “public choice theory” are not particularly surprised that many scientists and their media followers are in denial about what is increasingly obvious — that is, most of the climate projections were just plain wrong. If a person has a strong vested interest in a particular point of view and obtains government grants to show what politicians want to hear, or if he has been very public in his beliefs based on faulty data or information, it is hard to say, “I was wrong.” Politicians embrace any theory that justifies more taxing, spending and regulating because their power increases along with the accompanying financial opportunities.

Nobel laureate, economist and philosopher F.A. Hayek explained how there are limits to the knowledge that any one individual can possess, yet many have the “fatal conceit” that they know more than they do, and thus, they think they can plan and predict in ways they cannot. It is no surprise that climate models were wrong. For them to have been right, the model builders would have had to know all of the significant variables that affect climate, and the magnitude and interaction of each of those variables. There is virtually no single variable on which scientists are in total agreement about the magnitude of its effect. Carbon dioxide (CO2), for example, is considered to be very bad by most global-warming alarmists, including many officials in governments. We know that some level of CO2 is necessary for life, but we do not know the optimum level. The higher the level, the more rapidly plants grow, and the cheaper food becomes. It is just as plausible to say that there is too little CO2 in the atmosphere as that there is too much to maximize human well-being.

One of the world’s foremost experts on climate change, professor Roger Pielke Jr. of the University of Colorado at Boulder, recently wrote: “Flooding has not increased over the past century, nor have landfalling hurricanes. Remarkably, the U.S. is currently experiencing the longest-ever recorded period with no strikes of a Category 3 or stronger hurricane.” These anecdotes, along with a cold March, prove nothing one way or the other except that human beings know very little about what drives the climate.

Germany has spent more than 100 billion euros ($130 billion) on subsidizing the solar industry; yet, as Der Spiegel reported, “the 1.1 million solar systems have generated almost no power” this winter, and Germany is forced to import power from elsewhere. They are paying three or four times the U.S. rate for electricity, making many of their industries noncompetitive. The U.S. has been equally stupid. Even The New York Times has acknowledged that the U.S. ethanol experiment has been a disaster. It has actually increased carbon emissions and the price of fuel and world food, which really whacks the poor — all because of a “fatal conceit.”

The Great Deformation by David Stockman

I bring all of your attention to op/ed in this weekend ny times by david stockman.  Full article copied below.  I agree with most of his assessment of what ails the US economy although I don’t fully agree with the prescriptions he offers for fixing things or his complete confidence that the US economy did not face a Great Depression 2.   

Here is my 2 cents related to the assessment part of Stockman’s article. 

The US macro numbers are looking up, the housing sector and broader economy is recovering, stocks are at all time highs, and yet underlying fundamentals are weak and unsupportive of sustainable growth and wealth gains.  The music is likely to stop when everyone is convinced the worst is passed and the future is looking rosy, an idea which seems to be gaining traction.

I saw David Stockman speak at Mises.org event in NYC last fall and he was captivating notwithstanding his sobering message.  We need to get back to the idea that a free economy underpinned by a limited government protecting private property rights is the only way to sustainable economic growth and wealth gains.  The government does not create wealth, it taxes wealth and redistributes it.   our founding fathers considered government to be a necessary evil – and they developed a constitutional system designed  to prevent an aggregation of power and control at the center.  the last 200 years we’ve seen a gradual weakening of two key pillars of limited government designed into the US system.  First is the Federal system of state’s rights.  The second is the separation of powers in the Federal government.  Over the years we’ve seen a gradual and inexorable weakening of both states rights and the separation of powers in Washington DC.  the result has been a dangerous consolidation of power in the executive branch, underpinned especially by the establishment of the Federal Reserve in 1906, which has become a tool of the executive branc.

Obama has facilitated the final chapter in the expansion of Federal executive power through 4 key initiatives:  1. and 2. by passing Obamacare and Frank Dodd, 3. by using unelected executive agencies like the EPA to push national policy from the White House, and 4. by tacitly or directly encouraging QE1,2,3. 

The disaster scenario outlined by David Stockman below will likely (I’d say inevitably) be blamed by the left leaning chattering classes as a symptom of a fundamentally flawed free-market system.  These folks will complain that Obama didn’t go far enough to manage the economy from Washington DC.  Those on the right will have virtually nothing to say about the crash just as they had virtually nothing to say in the post 2008 world – except to first throw the kitchen sink of government interventions at economy in 2008 when GW held White house and then to say whatever the Dems proposed when Obama took over was bad.

The GOP can’t promote a positive agenda except to play a charade aimed at reducing government spending for social safety net meanwhile guaranteeing crony spoils for politically connected special interest groups.  the GOP loves big government and the power and wealth it delivers.  Of course they can’t admit it was the central bank in general and a duo of Republican central bank governors in particular who have conspired to mortally maim the US economy by flooding it with cheap money since 1998.   republicans need the Fed just as much as the Dems do to pay for our bloated warfare and welfare economy, which creates and massive funding required to power the self reinforcing cycle of special interest politics and policy.  The Fed indirectly provides funding for special interest groups beholden to one or the other side of the aisle and sometimes both, who in turn provide campaign finance for duopoly politicians.  We are in an “arms race” of GOP vs Dem special interest groups – all funded through access to cheap money.

How can we possibly believe that the Fed will deliver a sustainable economic recovery by printing unprecedented amounts of new money?  Sure, the money printing has found its way into financial markets specifically in US equity and housing prices and into global bond prices, but all of these are false signals promoted by the printing press.  Entrepreneurs are using government dictated (or at least heavily influenced) prices of stocks, bonds and property to pursue business plans that are dependent on all of these centrally planned signals, which means they are investing in projects that will prove to be uneconomic when the government loses control of price signals, which we will see happen when the Fed tries to drain liquidity from the system.  when that will play out is hard to say but I suggest not being surprised when things start to unravel. 

March 30, 2013

State-Wrecked: The Corruption of Capitalism in America

By DAVID A. STOCKMAN

GREENWICH, Conn.

The Dow Jones and Standard & Poor’s 500 indexes reached record highs on Thursday, having completely erased the losses since the stock market’s last peak, in 2007. But instead of cheering, we should be very afraid.

Over the last 13 years, the stock market has twice crashed and touched off a recession: American households lost $5 trillion in the 2000 dot-com bust and more than $7 trillion in the 2007 housing crash. Sooner or later — within a few years, I predict — this latest Wall Street bubble, inflated by an egregious flood of phony money from the Federal Reserve rather than real economic gains, will explode, too.

Since the S.&P. 500 first reached its current level, in March 2000, the mad money printers at the Federal Reserve have expanded their balance sheet sixfold (to $3.2 trillion from $500 billion). Yet during that stretch, economic output has grown by an average of 1.7 percent a year (the slowest since the Civil War); real business investment has crawled forward at only 0.8 percent per year; and the payroll job count has crept up at a negligible 0.1 percent annually. Real median family income growth has dropped 8 percent, and the number of full-time middle class jobs, 6 percent. The real net worth of the “bottom” 90 percent has dropped by one-fourth. The number of food stamp and disability aid recipients has more than doubled, to 59 million, about one in five Americans.

So the Main Street economy is failing while Washington is piling a soaring debt burden on our descendants, unable to rein in either the warfare state or the welfare state or raise the taxes needed to pay the nation’s bills. By default, the Fed has resorted to a radical, uncharted spree of money printing. But the flood of liquidity, instead of spurring banks to lend and corporations to spend, has stayed trapped in the canyons of Wall Street, where it is inflating yet another unsustainable bubble.

When it bursts, there will be no new round of bailouts like the ones the banks got in 2008. Instead, America will descend into an era of zero-sum austerity and virulent political conflict, extinguishing even today’s feeble remnants of economic growth.

THIS dyspeptic prospect results from the fact that we are now state-wrecked. With only brief interruptions, we’ve had eight decades of increasingly frenetic fiscal and monetary policy activism intended to counter the cyclical bumps and grinds of the free market and its purported tendency to underproduce jobs and economic output. The toll has been heavy.

As the federal government and its central-bank sidekick, the Fed, have groped for one goal after another — smoothing out the business cycle, minimizing inflation and unemployment at the same time, rolling out a giant social insurance blanket, promoting homeownership, subsidizing medical care, propping up old industries (agriculture, automobiles) and fostering new ones (“clean” energy, biotechnology) and, above all, bailing out Wall Street — they have now succumbed to overload, overreach and outside capture by powerful interests. The modern Keynesian state is broke, paralyzed and mired in empty ritual incantations about stimulating “demand,” even as it fosters a mutant crony capitalism that periodically lavishes the top 1 percent with speculative windfalls.

The culprits are bipartisan, though you’d never guess that from the blather that passes for political discourse these days. The state-wreck originated in 1933, when Franklin D. Roosevelt opted for fiat money (currency not fundamentally backed by gold), economic nationalism and capitalist cartels in agriculture and industry.

Under the exigencies of World War II (which did far more to end the Depression than the New Deal did), the state got hugely bloated, but remarkably, the bloat was put into brief remission during a midcentury golden era of sound money and fiscal rectitude with Dwight D. Eisenhower in the White House and William McChesney Martin Jr. at the Fed.

Then came Lyndon B. Johnson’s “guns and butter” excesses, which were intensified over one perfidious weekend at Camp David, Md., in 1971, when Richard M. Nixon essentially defaulted on the nation’s debt obligations by finally ending the convertibility of gold to the dollar. That one act — arguably a sin graver than Watergate — meant the end of national financial discipline and the start of a four-decade spree during which we have lived high on the hog, running a cumulative $8 trillion current-account deficit. In effect, America underwent an internal leveraged buyout, raising our ratio of total debt (public and private) to economic output to about 3.6 from its historic level of about 1.6. Hence the $30 trillion in excess debt (more than half the total debt, $56 trillion) that hangs over the American economy today.

This explosion of borrowing was the stepchild of the floating-money contraption deposited in the Nixon White House by Milton Friedman, the supposed hero of free-market economics who in fact sowed the seed for a never-ending expansion of the money supply. The Fed, which celebrates its centenary this year, fueled a roaring inflation in goods and commodities during the 1970s that was brought under control only by the iron resolve of Paul A. Volcker, its chairman from 1979 to 1987.

Under his successor, the lapsed hero Alan Greenspan, the Fed dropped Friedman’s penurious rules for monetary expansion, keeping interest rates too low for too long and flooding Wall Street with freshly minted cash. What became known as the “Greenspan put” — the implicit assumption that the Fed would step in if asset prices dropped, as they did after the 1987 stock-market crash — was reinforced by the Fed’s unforgivable 1998 bailout of the hedge fund Long-Term Capital Management.

That Mr. Greenspan’s loose monetary policies didn’t set off inflation was only because domestic prices for goods and labor were crushed by the huge flow of imports from the factories of Asia. By offshoring America’s tradable-goods sector, the Fed kept the Consumer Price Index contained, but also permitted the excess liquidity to foster a roaring inflation in financial assets. Mr. Greenspan’s pandering incited the greatest equity boom in history, with the stock market rising fivefold between the 1987 crash and the 2000 dot-com bust.

Soon Americans stopped saving and consumed everything they earned and all they could borrow. The Asians, burned by their own 1997 financial crisis, were happy to oblige us. They — China and Japan above all — accumulated huge dollar reserves, transforming their central banks into a string of monetary roach motels where sovereign debt goes in but never comes out. We’ve been living on borrowed time — and spending Asians’ borrowed dimes.

This dynamic reinforced the Reaganite shibboleth that “deficits don’t matter” and the fact that nearly $5 trillion of the nation’s $12 trillion in “publicly held” debt is actually sequestered in the vaults of central banks. The destruction of fiscal rectitude under Ronald Reagan — one reason I resigned as his budget chief in 1985 — was the greatest of his many dramatic acts. It created a template for the Republicans’ utter abandonment of the balanced-budget policies of Calvin Coolidge and allowed George W. Bush to dive into the deep end, bankrupting the nation through two misbegotten and unfinanced wars, a giant expansion of Medicare and a tax-cutting spree for the wealthy that turned K Street lobbyists into the de facto office of national tax policy. In effect, the G.O.P. embraced Keynesianism — for the wealthy.

The explosion of the housing market, abetted by phony credit ratings, securitization shenanigans and willful malpractice by mortgage lenders, originators and brokers, has been well documented. Less known is the balance-sheet explosion among the top 10 Wall Street banks during the eight years ending in 2008. Though their tiny sliver of equity capital hardly grew, their dependence on unstable “hot money” soared as the regulatory harness the Glass-Steagall Act had wisely imposed during the Depression was totally dismantled.

Within weeks of the Lehman Brothers bankruptcy in September 2008, Washington, with Wall Street’s gun to its head, propped up the remnants of this financial mess in a panic-stricken melee of bailouts and money-printing that is the single most shameful chapter in American financial history.

There was never a remote threat of a Great Depression 2.0 or of a financial nuclear winter, contrary to the dire warnings of Ben S. Bernanke, the Fed chairman since 2006. The Great Fear — manifested by the stock market plunge when the House voted down the TARP bailout before caving and passing it — was purely another Wall Street concoction. Had President Bush and his Goldman Sachs adviser (a k a Treasury Secretary) Henry M. Paulson Jr. stood firm, the crisis would have burned out on its own and meted out to speculators the losses they so richly deserved. The Main Street banking system was never in serious jeopardy, ATMs were not going dark and the money market industry was not imploding.

Instead, the White House, Congress and the Fed, under Mr. Bush and then President Obama, made a series of desperate, reckless maneuvers that were not only unnecessary but ruinous. The auto bailouts, for example, simply shifted jobs around — particularly to the aging, electorally vital Rust Belt — rather than saving them. The “green energy” component of Mr. Obama’s stimulus was mainly a nearly $1 billion giveaway to crony capitalists, like the venture capitalist John Doerr and the self-proclaimed outer-space visionary Elon Musk, to make new toys for the affluent.

Less than 5 percent of the $800 billion Obama stimulus went to the truly needy for food stamps, earned-income tax credits and other forms of poverty relief. The preponderant share ended up in money dumps to state and local governments, pork-barrel infrastructure projects, business tax loopholes and indiscriminate middle-class tax cuts. The Democratic Keynesians, as intellectually bankrupt as their Republican counterparts (though less hypocritical), had no solution beyond handing out borrowed money to consumers, hoping they would buy a lawn mower, a flat-screen TV or, at least, dinner at Red Lobster.

But even Mr. Obama’s hopelessly glib policies could not match the audacity of the Fed, which dropped interest rates to zero and then digitally printed new money at the astounding rate of $600 million per hour. Fast-money speculators have been “purchasing” giant piles of Treasury debt and mortgage-backed securities, almost entirely by using short-term overnight money borrowed at essentially zero cost, thanks to the Fed. Uncle Ben has lined their pockets.

If and when the Fed — which now promises to get unemployment below 6.5 percent as long as inflation doesn’t exceed 2.5 percent — even hints at shrinking its balance sheet, it will elicit a tidal wave of sell orders, because even a modest drop in bond prices would destroy the arbitrageurs’ profits. Notwithstanding Mr. Bernanke’s assurances about eventually, gradually making a smooth exit, the Fed is domiciled in a monetary prison of its own making.

While the Fed fiddles, Congress burns. Self-titled fiscal hawks like Paul D. Ryan, the chairman of the House Budget Committee, are terrified of telling the truth: that the 10-year deficit is actually $15 trillion to $20 trillion, far larger than the Congressional Budget Office’s estimate of $7 trillion. Its latest forecast, which imagines 16.4 million new jobs in the next decade, compared with only 2.5 million in the last 10 years, is only one of the more extreme examples of Washington’s delusions.

Even a supposedly “bold” measure — linking the cost-of-living adjustment for Social Security payments to a different kind of inflation index — would save just $200 billion over a decade, amounting to hardly 1 percent of the problem. Mr. Ryan’s latest budget shamelessly gives Social Security and Medicare a 10-year pass, notwithstanding that a fair portion of their nearly $19 trillion cost over that decade would go to the affluent elderly. At the same time, his proposal for draconian 30 percent cuts over a decade on the $7 trillion safety net — Medicaid, food stamps and the earned-income tax credit — is another front in the G.O.P.’s war against the 99 percent.

Without any changes, over the next decade or so, the gross federal debt, now nearly $17 trillion, will hurtle toward $30 trillion and soar to 150 percent of gross domestic product from around 105 percent today. Since our constitutional stasis rules out any prospect of a “grand bargain,” the nation’s fiscal collapse will play out incrementally, like a Greek/Cypriot tragedy, in carefully choreographed crises over debt ceilings, continuing resolutions and temporary budgetary patches.

The future is bleak. The greatest construction boom in recorded history — China’s money dump on infrastructure over the last 15 years — is slowing. Brazil, India, Russia, Turkey, South Africa and all the other growing middle-income nations cannot make up for the shortfall in demand. The American machinery of monetary and fiscal stimulus has reached its limits. Japan is sinking into old-age bankruptcy and Europe into welfare-state senescence. The new rulers enthroned in Beijing last year know that after two decades of wild lending, speculation and building, even they will face a day of reckoning, too.

THE state-wreck ahead is a far cry from the “Great Moderation” proclaimed in 2004 by Mr. Bernanke, who predicted that prosperity would be everlasting because the Fed had tamed the business cycle and, as late as March 2007, testified that the impact of the subprime meltdown “seems likely to be contained.” Instead of moderation, what’s at hand is a Great Deformation, arising from a rogue central bank that has abetted the Wall Street casino, crucified savers on a cross of zero interest rates and fueled a global commodity bubble that erodes Main Street living standards through rising food and energy prices — a form of inflation that the Fed fecklessly disregards in calculating inflation.

These policies have brought America to an end-stage metastasis. The way out would be so radical it can’t happen. It would necessitate a sweeping divorce of the state and the market economy. It would require a renunciation of crony capitalism and its first cousin: Keynesian economics in all its forms. The state would need to get out of the business of imperial hubris, economic uplift and social insurance and shift its focus to managing and financing an effective, affordable, means-tested safety net.

All this would require drastic deflation of the realm of politics and the abolition of incumbency itself, because the machinery of the state and the machinery of re-election have become conterminous. Prying them apart would entail sweeping constitutional surgery: amendments to give the president and members of Congress a single six-year term, with no re-election; providing 100 percent public financing for candidates; strictly limiting the duration of campaigns (say, to eight weeks); and prohibiting, for life, lobbying by anyone who has been on a legislative or executive payroll. It would also require overturning Citizens United and mandating that Congress pass a balanced budget, or face an automatic sequester of spending.

It would also require purging the corrosive financialization that has turned the economy into a giant casino since the 1970s. This would mean putting the great Wall Street banks out in the cold to compete as at-risk free enterprises, without access to cheap Fed loans or deposit insurance. Banks would be able to take deposits and make commercial loans, but be banned from trading, underwriting and money management in all its forms.

It would require, finally, benching the Fed’s central planners, and restoring the central bank’s original mission: to provide liquidity in times of crisis but never to buy government debt or try to micromanage the economy. Getting the Fed out of the financial markets is the only way to put free markets and genuine wealth creation back into capitalism.

That, of course, will never happen because there are trillions of dollars of assets, from Shanghai skyscrapers to Fortune 1000 stocks to the latest housing market “recovery,” artificially propped up by the Fed’s interest-rate repression. The United States is broke — fiscally, morally, intellectually — and the Fed has incited a global currency war (Japan just signed up, the Brazilians and Chinese are angry, and the German-dominated euro zone is crumbling) that will soon overwhelm it. When the latest bubble pops, there will be nothing to stop the collapse. If this sounds like advice to get out of the markets and hide out in cash, it is.

David A. Stockman is a former Republican congressman from Michigan, President Ronald Reagan’s budget director from 1981 to 1985 and the author, most recently, of “The Great Deformation: The Corruption of Capitalism in America.”

Dear John Letter #11 Why Obama is Out to Lunch

Obama’s inauguration speech is a travesty.  Progressives of course (and faux conservatives like David Brooks) are calling it a masterpiece. 
Obama makes ridiculous assertions all over the place.  he takes the classical liberal ideas that underpin our constitution and turns them inside out and upside down to fit his modern liberal / progressive world view.    He claims his project is “to bridge the meaning of those words [i.e. the words in the preamble] with the realities of our time.”  What he means is that those words mean whatever we say they mean.  rubbish.
Thanks to the American liberal movement we now have to distinguish between classical liberals and modern liberals or just plain liberals if we are in America.   Modern liberals literally hijacked the name “liberal” because they liked the connotation it held in the general public’s consciousness.  Liberal originally meant someone who espoused universal concepts including such new and innovative ideas (up to that point in human history) as freedom, liberty and equality. 
The insane thing about modern liberals is that their definition of these universal ideas is radically opposed to the underlying assumptions of the classical liberals.  And to make things even crazier, modern liberals believed in using any means to deliver the newly defined ends they just made up out of whole cloth to justify their utopian interventionist agenda. 
Classical liberals believed in concepts that are completely and utterly ridiculed by modern liberals.  take for instance a concept like Adam Smith’s invisible hand, which is the idea that self interest (NOT SELFISHNESS!) leads naturally to socially desirable ends.  It is not from the benevolence of the baker, butcher or brewer that we get our bread, meat and beer!  Markets deliver amazing results DESPITE the fact no one is micro managing them with arbitrary rules and despite the fact there is no common purpose required by society nor any thoughts of the good of society by individuals.  Or consider other related classical liberal ideas like spontaneous order and the law of unintended consequences.  Adam Ferguson (contemporary of Adam Smith) noticed that institutions like markets and money were the result of human action but NOT the result of human design.  This insight is a precursor to more modern ideas of spontaneous order developed by F. Hayek in 1960s and 70s.   
Modern liberals have turned the meaning of freedom, liberty and equality upside down and inside out.  reading Obama’s speech reminds me what George Orwell warned about in his novel 1984 about how government uses language to manipulate the public and accumulate power.    

“But if thought corrupts language, language can also corrupt thought.”
― George Orwell, 1984

Equality to classical liberals meant equality under the law and the impartial rule of law.  Equality didn’t mean equal outcomes – and where it did mean this, for example in the French Revolution, the result was Robespierre and his reign of terror which resulted in mass murder of tens of thousands of bourgiose elites.  Equality was the goal and if it took murder to accomplish this, so be it.  The ends justify the means is the mantra of progressives.  As long as the ends are desirable, then any means are justified.  Classical liberals believe that basic concepts like equality under the law and private property and liberty can’t be compromised without compromising results.  The means are the way to positive ends for classical liberals.  Free exchange and free speech and private property and other negative rights (ensured by government – yes we need governemtn to ensure negative rights BUT NOT positive rights).   government can’t inject positive outcomes into society.  whenever it tries to do so, it must compromise one value for another.  More equality in incomes requires coercion or public acquiescence to government knows best.  either way it means direct or indirect coercion by government, which is the opposite of individual liberty.  
Classical liberals believe that certain principles are inviolate and should not be conveniently ignored based on the expedience of end goals assumed by government (or public) to take social priority.  No matter who sets the goals, it is tyranny.
Obama argues in so many words that the welfare and entitlement state doesn’t drain individual motivation; in fact he argues it makes us all stronger.  This is just one more example where Obama pulls utopian claims out of his ass with no basis in reality. 
Obama makes similar bogus claims about things like equality.  He says equality makes an economy stronger.  He wants equal or at least more equal outcomes – and he is determined to use government to deliver the results.  While it is true that excessive wealth inequality leads to bad economic outcomes, it is also true that the most unequal societies are also the least “free.”  The market doesn’t lead naturally to counter productive inequality.  Of course all markets by definition must lead to inequality.  How could it be otherwise.  But it is just plain wrong and a lie to claim that free markets lead to the big always getting bigger.   The way the big get bigger is by influencing government to pass favorable laws and rules that prevent competition.
Well intended (or more often arbitrary or self serving) government policies lead to inequality.  Look at Latin America.  The countries there are among the most unequal in the world thanks to heavy handed governments and unequal treatment under the law for the population.   the same goes for Africa and China and increasingly the United States. The attempt to deliver Equal outcomes or a level playing field in society a utopian dream.    Europe has lower income inequality, but they also have higher structural unemployment and unaffordable entitlement systems that are leading to financial ruin. 
Obama claims everyone who works hard should have a chance to go to college.  Why?  who says life is ever fair?  life isn’t fair.  the sooner we learn that painful lesson the better.  life might be fair in Obama’s bureaucratic utopia, but it will also be stagnant and unproductive.   
Liberty originally meant freedom FROM government coercion.    Rights entailed personal responsibility.  Obama pays lip service to concepts like personal responsibility and hard work and american exceptionalism and rights and free markets, but he uses these concepts in ways (like I already said) that are diametrically opposed to the original intention of our founding fathers.  Rights to obama are positive rights to health care and a decent house and decent wage and education and entitlement cradle to grave safety net.  This notion of rights is a positive notion of rights, exactly upside down from the meaning of rights considered by the founding fathers.  The founding fathers had negative rights in mind when they talked about rights.  Like the right to free speech and to private property for example. These rights were rights to freedom from governmetn infringement.  The notion of positive rights guaranteed by government is radically at odds with the Constitution.  Obama has created his own reality by redefining words in a way that serves his revised  narrative that he conveniently plugs into our founding history.   
Up to now, I’ve noticed that most progressives argue like you argue John in the case of the second amendment:  that (in so many words) the constitution doesn’t matter because it is an old story made up by a bunch of racist white guys who owned slaves and wanted to rig the game for themselves  by denying suffrage to women.  Obama’s genius is that he doesn’t cede the constitution to the Tea Party.  Instead he just completely re-writes the history of the constitution and brazenly plugs it into his utopian progressive world view. 
In the process he turns the classical liberal ideas underpinning the Constitution totally upside down.  Progressives now claim that freedom is something that only government can offer to citizens.  Obama says that “preserving our individual freedoms ultimately requires collective action.”  That is complete and utter rubbish.  This nonsense could have come right out of George Orwells 1984.  You can’t make this shit up except that Orwell actually did and now we are seeing how prescient he was with what we are witnessing today in modern politics.

 “War is peace.
Freedom is slavery.
Ignorance is strength.”
― George Orwell, 1984

Like I mentioned above, Obama claims that freedom requires collective action.  IF that isn’t an Orwellian turn of phrase, I don’t know what is.

The sign entering Auschwitz says “Work Makes you Free.”  We are increasingly in government designed and micro managed “work camps” (aka “the US economy”) and we are told this makes us free.  John do you really believe we are free?   we are free as long as we all agree to come together in common purpose according to the marching orders of government.  that is Obama’s dystopian vision for society.  NO THANKS.

Here is full text of Obama’s “historic” inauguration speech.
Vice President Biden, Mr. Chief Justice, Members of the United States Congress, distinguished guests, and fellow citizens:
Each time we gather to inaugurate a president, we bear witness to the enduring strength of our Constitution. We affirm the promise of our democracy. We recall that what binds this nation together is not the colors of our skin or the tenets of our faith or the origins of our names. What makes us exceptional – what makes us American – is our allegiance to an idea, articulated in a declaration made more than two centuries ago:
“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, that among these are Life, Liberty, and the pursuit of Happiness.”
Today we continue a never-ending journey, to bridge the meaning of those words with the realities of our time. For history tells us that while these truths may be self-evident, they have never been self-executing; that while freedom is a gift from God, it must be secured by His people here on Earth. The patriots of 1776 did not fight to replace the tyranny of a king with the privileges of a few or the rule of a mob. They gave to us a Republic, a government of, and by, and for the people, entrusting each generation to keep safe our founding creed.
For more than two hundred years, we have.
Through blood drawn by lash and blood drawn by sword, we learned that no union founded on the principles of liberty and equality could survive half-slave and half-free. We made ourselves anew, and vowed to move forward together.
Together, we determined that a modern economy requires railroads and highways to speed travel and commerce; schools and colleges to train our workers.
Together, we discovered that a free market only thrives when there are rules to ensure competition and fair play.
Together, we resolved that a great nation must care for the vulnerable, and protect its people from life’s worst hazards and misfortune.
Through it all, we have never relinquished our skepticism of central authority, nor have we succumbed to the fiction that all society’s ills can be cured through government alone. Our celebration of initiative and enterprise; our insistence on hard work and personal responsibility, are constants in our character.
But we have always understood that when times change, so must we; that fidelity to our founding principles requires new responses to new challenges; that preserving our individual freedoms ultimately requires collective action. For the American people can no more meet the demands of today’s world by acting alone than American soldiers could have met the forces of fascism or communism with muskets and militias. No single person can train all the math and science teachers we’ll need to equip our children for the future, or build the roads and networks and research labs that will bring new jobs and businesses to our shores. Now, more than ever, we must do these things together, as one nation, and one people.
This generation of Americans has been tested by crises that steeled our resolve and proved our resilience. A decade of war is now ending. An economic recovery has begun. America’s possibilities are limitless, for we possess all the qualities that this world without boundaries demands: youth and drive; diversity and openness; an endless capacity for risk and a gift for reinvention. My fellow Americans, we are made for this moment, and we will seize it – so long as we seize it together.
For we, the people, understand that our country cannot succeed when a shrinking few do very well and a growing many barely make it. We believe that America’s prosperity must rest upon the broad shoulders of a rising middle class. We know that America thrives when every person can find independence and pride in their work; when the wages of honest labor liberate families from the brink of hardship. We are true to our creed when a little girl born into the bleakest poverty knows that she has the same chance to succeed as anybody else, because she is an American, she is free, and she is equal, not just in the eyes of God but also in our own.
We understand that outworn programs are inadequate to the needs of our time. We must harness new ideas and technology to remake our government, revamp our tax code, reform our schools, and empower our citizens with the skills they need to work harder, learn more, and reach higher. But while the means will change, our purpose endures: a nation that rewards the effort and determination of every single American. That is what this moment requires. That is what will give real meaning to our creed.
We, the people, still believe that every citizen deserves a basic measure of security and dignity. We must make the hard choices to reduce the cost of health care and the size of our deficit. But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future. For we remember the lessons of our past, when twilight years were spent in poverty, and parents of a child with a disability had nowhere to turn. We do not believe that in this country, freedom is reserved for the lucky, or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us, at any time, may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.
We, the people, still believe that our obligations as Americans are not just to ourselves, but to all posterity. We will respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations. Some may still deny the overwhelming judgment of science, but none can avoid the devastating impact of raging fires, and crippling drought, and more powerful storms. The path towards sustainable energy sources will be long and sometimes difficult. But America cannot resist this transition; we must lead it. We cannot cede to other nations the technology that will power new jobs and new industries – we must claim its promise. That is how we will maintain our economic vitality and our national treasure – our forests and waterways; our croplands and snowcapped peaks. That is how we will preserve our planet, commanded to our care by God. That’s what will lend meaning to the creed our fathers once declared.
We, the people, still believe that enduring security and lasting peace do not require perpetual war. Our brave men and women in uniform, tempered by the flames of battle, are unmatched in skill and courage. Our citizens, seared by the memory of those we have lost, know too well the price that is paid for liberty. The knowledge of their sacrifice will keep us forever vigilant against those who would do us harm. But we are also heirs to those who won the peace and not just the war, who turned sworn enemies into the surest of friends, and we must carry those lessons into this time as well.
We will defend our people and uphold our values through strength of arms and rule of law. We will show the courage to try and resolve our differences with other nations peacefully – not because we are naïve about the dangers we face, but because engagement can more durably lift suspicion and fear. America will remain the anchor of strong alliances in every corner of the globe; and we will renew those institutions that extend our capacity to manage crisis abroad, for no one has a greater stake in a peaceful world than its most powerful nation. We will support democracy from Asia to Africa; from the Americas to the Middle East, because our interests and our conscience compel us to act on behalf of those who long for freedom. And we must be a source of hope to the poor, the sick, the marginalized, the victims of prejudice – not out of mere charity, but because peace in our time requires the constant advance of those principles that our common creed describes: tolerance and opportunity; human dignity and justice.
We, the people, declare today that the most evident of truths – that all of us are created equal – is the star that guides us still; just as it guided our forebears through Seneca Falls, and Selma, and Stonewall; just as it guided all those men and women, sung and unsung, who left footprints along this great Mall, to hear a preacher say that we cannot walk alone; to hear a King proclaim that our individual freedom is inextricably bound to the freedom of every soul on Earth.
It is now our generation’s task to carry on what those pioneers began. For our journey is not complete until our wives, our mothers, and daughters can earn a living equal to their efforts. Our journey is not complete until our gay brothers and sisters are treated like anyone else under the law – for if we are truly created equal, then surely the love we commit to one another must be equal as well. Our journey is not complete until no citizen is forced to wait for hours to exercise the right to vote. Our journey is not complete until we find a better way to welcome the striving, hopeful immigrants who still see America as a land of opportunity; until bright young students and engineers are enlisted in our workforce rather than expelled from our country. Our journey is not complete until all our children, from the streets of Detroit to the hills of Appalachia to the quiet lanes of Newtown, know that they are cared for, and cherished, and always safe from harm.
That is our generation’s task – to make these words, these rights, these values – of Life, and Liberty, and the Pursuit of Happiness – real for every American. Being true to our founding documents does not require us to agree on every contour of life; it does not mean we will all define liberty in exactly the same way, or follow the same precise path to happiness. Progress does not compel us to settle centuries-long debates about the role of government for all time – but it does require us to act in our time.
For now decisions are upon us, and we cannot afford delay. We cannot mistake absolutism for principle, or substitute spectacle for politics, or treat name-calling as reasoned debate. We must act, knowing that our work will be imperfect. We must act, knowing that today’s victories will be only partial, and that it will be up to those who stand here in four years, and forty years, and four hundred years hence to advance the timeless spirit once conferred to us in a spare Philadelphia hall.
My fellow Americans, the oath I have sworn before you today, like the one recited by others who serve in this Capitol, was an oath to God and country, not party or faction – and we must faithfully execute that pledge during the duration of our service. But the words I spoke today are not so different from the oath that is taken each time a soldier signs up for duty, or an immigrant realizes her dream. My oath is not so different from the pledge we all make to the flag that waves above and that fills our hearts with pride.
They are the words of citizens, and they represent our greatest hope.
You and I, as citizens, have the power to set this country’s course.
You and I, as citizens, have the obligation to shape the debates of our time – not only with the votes we cast, but with the voices we lift in defense of our most ancient values and enduring ideals.
Let each of us now embrace, with solemn duty and awesome joy, what is our lasting birthright. With common effort and common purpose, with passion and dedication, let us answer the call of history, and carry into an uncertain future that precious light of freedom.
Thank you, God Bless you, and may He forever bless these United States of America.