So what is the true rate of inflation?

There is no one true rate of inflation, since to estimate inflation, one has to compare apples and oranges, and there is no one valid way of doing this.

But if inflation is substantially less than ten percent a year, we are consuming substantially more goods this year than last year.  Do you think we are consuming substantially more goods this year than last year?

But whatever the true rate of inflation might be, it is increasing.  It is not increasing fast as I expected, not increasing very fast at all.  It is increasing at about two percent a year, so if this year inflation was not ten percent, but eight percent, next year it will be ten percent a year, and the year after that, twelve percent a year.  The rate at which prices increase, is itself increasing.

This does not sound all that terrifying, but recall that hyperinflation begins as the collapse of a paper bubble.  Everyone wakes up one morning realizing that inflation is a lot higher than they thought and will only get worse, so they all try to unload their paper at the same time for tangibles:  Land in productive use, gold, ammo, guns, non perishable food items, alcohol,  and suchlike, also overseas non tangible assets, paper assets regulated by solvent governments.

Only to discover that they cannot all unload their paper money at the same time.

If the rate of inflation is high and increasing, sooner or later, it suddenly starts to increase a lot faster.  Suppose inflation this year was seven percent, then next year it will nine percent, which is not imminent doom.  If people are not panicking today, they are unlikely to panic tomorrow. The end is not nigh.  But the end, nonetheless, is in sight.

Consensus leads to the madness of crowds, not the wisdom of crowds.  As we move to a government ruled by consensus, and intrusively pervading every aspect of society with its power, madness and evil prevails.

The wisdom of crowds happens when you collect people’s guesses or estimates for some fact, without them consulting each other, without them forming consensus first.

The opening anecdote of the book “The wisdom of crowds” relates Francis Galton’s surprise that the crowd at a county fair accurately guessed the weight of an ox when their individual guesses were averaged (the average was closer to the ox’s true butchered weight than the estimates of most crowd members, and also closer than any of the separate estimates made by cattle experts)

But the book also has many examples of the madness of crowds. The book tells us, when members of the crowd consult each other first, when they influence each other’s opinions, when they update their Bayesian priors from the priors of those around them, the crowd becomes markedly less wise, often becomes insane.

The crowd, he tells us, goes mad when the members of the crowd are too conscious of the opinions of others and began to emulate each other and conform rather than think differently.

In other words, consensus is apt to be madness.

And now I depart from the book, and tell you my own observations on my own authority, not that of James Surowiecki.

Our communications skills were evolved for the hunt and for war, where groups were small and feedback from the environment was strong, immediate, and impossible to ignore.  Ignore it, you would soon get hurt.

Humans are not well adapted to the mental life of large groups, to “the life of the mind”, meaning life without forceful feedback from the senses, feedback that is frequently accompanied by physical pain to force us to pay attention.

With larger groups, more feedback from people and less feedback from the environment, consensus building is apt to go into positive feedback loops, even without deliberate manipulation by the insane and the evil.

A bubble is a manifestation of a spontaneous positive feedback loop by the sane.

Add the evil and insane to the mix, and consensus will reliably go wrong.  The sane update their views from the consensus, the insane do not update so the consensus moves towards the insane, the evil lie and manipulate the Overton window, so the consensus moves towards what the evil purport to believe.

Linguistics theory, Chomsky’s universal grammar, is best understood as grantsmanship (the evil), an effort by academics who did not know or care much about foreign languages to take control of a juicy chunk of academia from  polylingual language geeks.  The lies about language continually and radically changed, reflecting not the pressure from the sane, nor updates on the basis of information, but, like the abruptly changing Soviet line, moves in a struggle over grants and power.  Global Warming is similarly a combination of grantsmanship (the evil) with the death-to-humankind greenies (evil and insane).

Anti dietary fat science is primarily the insane dominating the consensus (greenies and animal rights activists who are entirely unmoved by either evidence or the opinions of the sane).

The financial crisis is a combination of bubble (the sane are apt to spontaneously go off the rails by paying too much attention to each other and not enough to external reality) with evil (political loan allocation) and with the evil and insane (affirmative action going ever lefter than thou.)

The destruction of fatherhood, the financial crisis, and lots of others, including global warming, are all manifestations of the left singularity.  Lefter than thou is the way to power, so whatever direction the consensus tends to move, whether spontaneously as in a bubble or through madness, becomes a path for the evil to gain power,  (“Hey, we are all agreed on X, so we need to enforce X”) so whatever the direction that the consensus happens to be moving defines leftism, whereupon the evil push it ever further in that direction.  (“We need to enforce X even more than it is already being enforced.  Grant all power to us, and we will take care of X”)

Thus in the left singularity evil and madness invariably ally, to pursue ever escalating heights of madness.

The scientific method, (short form: “take no ones word for it”) was a conscious effort to be mindful of this flaw in our natures, and socially enforce behavior that protects the group from it. The scientific method is replication. He who invokes “consensus” preaches not science, but authority and faith.

The twinkle up, twinkle down consensus building behavior of OWS, on the contrary, is an effort to socially and coercively enforce this flaw in our nature, from which the evil and the insane benefit.

The corporate form is also an effort to protect us from this flaw in our nature.  The board appoints the CEO, and monitors him, but is not supposed to second guess him and direct him.  Consensus is socially prohibited.  The board chooses one guy, and goes with what he thinks. If they don’t like it, they choose another, but they are not supposed to switch too often, and not supposed to meddle.  When the board meddles, people in the investor class tend to view this as improper and corrupt.  They are supposed to look over his shoulder and keep an eye on what he is doing, but are not supposed to second guess him, short of firing him.

The reason that rentacops were so effective in dealing with OWS is the corporate form:

The shareholders theoretically appoint the board (though more commonly it appoints itself, and subsequently perpetuates itself).  The board appoints the CEO, and delegates to him full power over the assets of the firm.  He is not supposed to suffer any interference from the board, short of being suddenly fired, and mostly he does not.

He in turn delegates the full power of the property owner down the line (or at least he is supposed to), and in the case of security, delegates to the guys in each building.  Thus, when OWS attempted to occupy, the security guards did not need to consult with a bunch of suits, who would in turn consult with a bunch of lawyers, who would consult with … instead the security guards had all necessary authority to act ex tempore without consulting anyone, to exercise the sort of power over trespassers that a private owner would.   When dealing with outside intrusion, some poorly paid guy was able to speak with the full authority of the owners, the shareholders, since the shareholders had granted full authority to the board, the board to the CEO, and the CEO … all the way down to some poorly paid guy who has a stungun and pepper spray in his desk.  When the security guys decide to throw out some unwanted visitors, that is usually morally and legally the same as if they personally owned the building, for those who actually do own the building fully delegated that moral and legal authority to them.

Of course, just as it all too frequently happens that board does meddle, it also all too frequently happens that corporate decisions are made by committees, but it is not supposed to happen.  Committee management and matrix management is a manifestation of the mid level management hugging power to themselves.  One is likely to  see a meeting of twenty high status people, and one lower status person who does not speak much, the lower status person being the one who actually knows the matter being discussed, the one who is actually responsible for giving effect to the supposed consensus of the meeting.  But corporations are not supposed to make decisions by meetings and consensus, and mostly they do not.  To the extent that they do, they deservedly suffer ridicule.

The OWS model would have the shareholders gather in  a crowd, and twinkle up and twinkle down at each other.  In the corporate model, the poorly paid guy with a stungun in his desk is the avatar for the shareholders.  He is the property owner, in their place, exercising their full authority to deal with unwanted visitors.  He does not file a report to the shareholders proposing courses of action and wait for them to twinkle the various courses of action up or down.

Regulation, however, interferes with the corporate model.  To do something that is regulated, the corporation finds it has to get buy in from dozens, perhaps hundreds,  sometimes thousands, of meddlesome people.

In regulation, the evil and insane, which is to say the consensus, prohibit the sane (the corporate form) from acting, and even from sanity.  In the banking crisis, they demanded conformity not only in action, but in thought.

Markets are also a way of avoiding consensus, since each participant in the market is expected to outsmart all the others, thus as in science, replicate the research of each of the others.  The laws against “insider trading” attempt to prohibit this, but do not have the effect of enforcing consensus.  Price control and rationing does have the effect, but we are not getting that problem.

The corporate form is mostly sane because consensus is socially discouraged, replaced by delegating concentrated power freely, and concentrating power as much as practical.  The scientific method is sane, if actually followed, though markedly slower and less efficient than the corporate form, because consensus is discouraged for replication (“take no one’s word for it”).  The market is mostly sane, because market participants are supposed to strive to each be smarter than the rest, rather than to conform. Corporations exist because markets require more decision making by more smart people, because markets replicate decision making. Corporations economize on decision making, by telling people what to do.

Since committee decision making is expensive, as well as tending to madness, a corporation that finds itself holding meetings to make decisions should consider outsourcing the activities that are causing this problem to the market.

Peer review enforces consensus in science, as regulation enforces it against corporations.  And so the the insane take over the asylum.

Why has science stopped progressing?

Peer review came into broad application around 1942 or so, and that is pretty much when science stopped progressing.  Technology continued to progress until 1972, and some areas of technology continue to progress today, but large areas stopped progressing in 1972, and many additional areas of have very recently stopped progressing, at least in the West.

Because of peer review, Einstein’s special relativity paper would not be publishable today.  Any paper that is publishable today has lots and lots of citations to prove it is in line with the consensus.  Einstein’s paper conspicuously lacked citations, because it was not in line with the consensus.  Einstein was not an academic, and not a PhD, his paper had few or no citations, and radically up ended existing physics.

When I was taught special relativity, they did not tell us Einstein was right because the holy consensus tells us so, they had us replicate the calculations and review the evidence that Einstein presented in “On the Electrodynamics of Moving Bodies” just as if Einstein was some patent clerk with neither PhD nor academic position.

Einstein attempted to present special relativity as his dissertation, and it was rejected.  If rejected as his dissertation, would surely have been rejected had it ever been submitted to peer review.  So instead he submitted for his dissertation a don’t-rock-the-boat paper that contained nothing very new or interesting.

Each person replicating the research of each of the others can be costly.  A corporation reduces the cost of this, enabling the employment of people who are not bright, by telling them what to do. Externally a corporation is market oriented, each corporation replicating the research of all the other corporations in the market, but though externally a corporation is market oriented, internally, a corporation is socialism, but what people fail to notice is that internally it is socialism on the pattern of the Nazis, the socialism of the Führerprinzip, not the socialism of the modern left whose massive dysfunction we see on display at Occupy Wall Street.

This sounds like corporations are oppressive, and they are, but in practice it means that a low pay low IQ security guy does not need to hold a meeting, nor wire the board for instructions, when a bunch of bad guys attempt to occupy the office. Full concentration of power to the CEO is supposed to be accompanied by full delegation of power from the CEO, and usually it is.

The Führerprinzip is that you don’t have committees and you don’t have votes and you don’t have consensus.  Each leader (Führer in German) is delegated full authority in his own area by his leader.

According to allied propaganda, the Führerprinzip is that the Führer is above the law and incarnates the German people, but rather, the Führerprinzip is more the common sense observation that committees are dreadfully bad at making decisions, and you should appoint a smart guy with full authority to deal with X, and hold him fully responsible for any foul ups in X.

This maximizes the capability of hierarchical organizations to get lots of stupid people to perform functions that would require smart people, were they a multitude of independent operators in the market, and lowers the high cost of figuring out what to do.

In contrast, organizations that have lots of committees tend to be horribly Dilbertesque.  In practice, the socialism intended by the modern left is markedly worse than the socialism practiced by Hitler, in roughly the same proportion as the socialism practiced by the communists murdered more people than the socialism practiced by Hitler.  Rather than people being empowered by participation, they are oppressed  by meetings that they do not want to go to, and strangled by red tape.

Leftists want to slice power into lots and lots of tiny little slices, and share that power out between lots and lots of people, but this in practice is horribly disfunctional.  What it does is not empower people but instead ensure that decisions are evil and insane, in other words, ensure that decisions are left wing.  It also increases the cost of decision making.  If a decision is sufficiently important that it is worth spending the time of a lot of important people on it, then it should be made by the market, or by the scientific method, not by consensus.

Because the socialism of the Nazis was inherently saner than the socialism of the modern left, it was inherently less left wing, hence its markedly lower murder rate.  And thus the modern left, which is to say the modern state, reaches into science, markets, and corporations to remake them all into its own image, which is to say, make them all inherently evil and insane.

I hesitated in writing this, but I have two choices at this point: 1) open political activism including this blog, 2) my career. I don’t want to get into too many details here, but I was given this choice…. I want to thank everyone from the bottom of my heart for reading, commenting and encouraging me to continue. Thank you all for your messages of support of my efforts, which will now be at the grass roots level only. I want to make it clear that in no way am I burned out (almost 3 years now I have kept a consistent pace). In fact, I am more energized than ever. I also do not blame my employer. They are doing what they see is in the best interest of the institution.

Which was promptly revised to:

 Due to yet anther media inquiry by a lefty ‘journalist’ pretending to be middle-of-the-road, let me just be clear that I work for the best employer there is, and this will help me do my job better. I made this decision on my own. And that’s all there is to it.

“I was given a choice” disappeared from the blog.

This is theocracy: In theocracy, the state enforces the rule of the priests, that no one can disagree with the priests, and the priests endorse the state, the high priesthood being Harvard and the federal bureaucracy, such as the secret science manufactured by the EPA.

If the theocracy is diffuse, rather than having all power concentrated in a single high priest, pope, or holy King, an unintended side effect of theocracy is that in the course of coercing the rest of society the theocracy coerces itself to become ever more extreme.

Over time, a theocracy tends to become ever more extreme, and the more extreme it becomes, the faster it becomes extreme, forming a political singularity until anti theocratic reaction ends it, as with Pinochet or the Thermidorian reaction, or until a single leader takes total power in the theocracy, as with Stalin, who can unilaterally set the orthodoxy of the theocracy without himself being coerced.

Stalin is often interpreted as the originator of the great terror, but that is not how Russian history looks to me. Rather, my interpretation of events is that the state under the Czars started leaning moderate left, which led to the state leaning immoderate left, which led to the overthrow of the Czars by social democracy, which continued to lean ever further left leading to communist coup against social democracy, and the state continuing to lean ever further left, until it started to look like the state would wind up murdering every single Soviet subject for failure to be sufficiently left, and at this point Stalin seized despotic power in order to halt the terror. We don’t see Stalin urging the party to commit terror. Instead, we see him publishing papers such as “giddy with success” intended to persuade the party to calm down and ease up. It looks to me that the Soviet terror was the spontaneous outcome of the natural dynamics of theocracy, and despotism was needed to break the cycle of extremism leading to ever greater extremism. Stalin saved the party from murdering everyone in the Soviet Union including party members, or rather saved the party from murdering everyone in the Soviet Union especially party members

The French revolution shows all these tendencies. Under the monarchy, rightism was repressed, for example the doctrine that the races of man were separate species became dangerous to one’s career. The suppression of rightism and the encouragement of leftism lead to the collapse of the monarchy, and eventually to the terror, which led to the red terror, which was ended by the Thermidorian reaction.

The first amendment was intended to prevent this kind of problem, but the first amendment is now being worked around in various ways:  For example speech gets defined as money, making campaign finance laws applicable as happened to Kirk Shelmerdine.  Admission to better universities requires the plausible appearance of left wing views, and students are from time catechized, and need to give politically correct answers in those catechisms.  Businesses are subject to discrimination lawsuits if they employ people who disapprove of affirmative action – it is not sufficient that a business practice affirmative action, it must do so sincerely believing in the rightness off affirmative action.

And, as with the commerce cause, the more grounds that have been discovered to set aside the first amendment, the more grounds that will be discovered – a problem that cannot be remedied until both sides have had their turn being suppressed.  There will never again be support for the first amendment until the left has experienced a Sulla or a Pinochet.

… the government’s policy of diverting capital into housing creates a short-term boom in housing. Like all artificially created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have been had government policy not actively encouraged over-investment in housing.

…

The connection between the GSEs and the government helps isolate the GSEs’ managements from market discipline. This isolation from market discipline is the root cause of the mismanagement occurring at Fannie and Freddie …

I hope my colleagues join me in protecting taxpayers from having to bail out Fannie Mae and Freddie Mac when the housing bubble bursts.

… The flip side of regulatory capture is that mangers and owners of highly subsidized and regulated industries are more concerned with pleasing the regulators than with pleasing consumers or investors, since the industries know that investors will believe all is well if the regulator is happy. Thus, the regulator and the regulated industry may form a symbiosis where each looks out for the other’s interests while ignoring the concerns of investors. …

… the government increases the likelihood of a painful crash in the housing market. …

Needless to say, there was only one vote for addressing the looming financial crisis.  Looking at the tea party candidates, I think if the Tea party did a clean sweep, if every single congressman had belonged to the tea party, I think there would have been two or three votes for addressing the looming financial crisis.

All the conservative criticism of her seems to be disappearing off the web, but what the hell, she stank, critics pointed out she stank, so someone killed her.   It might have been a leftist who did not think she was left enough, but chances are, was a conservative. Yes, chances are that unkind remarks by conservatives got her killed.  Pity it was not someone who mattered more.  Her platform was to create lots of high paying jobs in government and quasi governmental activities – in other words, to transfer wealth from productive people who mostly voted against her, to unproductive people who mostly voted for her, thus moving the nation generally leftwards.

As the nation plunges into bankruptcy, as the Cloward–Piven crisis approaches, we might kill enough similar wrongdoers to eventually get out of the crisis.  I don’t really see any other path to resolving the crisis other than watering the tree of liberty in the usual fashion.

the purest and most uncompromising of which are the anarchists.

In fact, left anarchists are astroturf. They are the government threatening those that would restrain its growth.

Repeating my previous post on the Greek riots:

Observe the recent firebombings in the Greek riots, where the “rioters” murdered three people.

Here are a couple of videos of the “rioters” firebombing police.

The “rioters” charge the police, and bang on their shields with light sticks, making no attempt to jab through the gaps at the actual bodies of the cops, nor using sticks heavy enough to even shake the shields.    No axe handles or baseball bats.

Hey guys, if you want to bang on armored cops, I have a sledgehammer that would make a pretty good mace. It goes through concrete mighty fast.

They then fall back, and hurl firebombs – but they do not not hurl firebombs at the police, but at the ground in front of the police.  One cop gets one of his boots splashed with burning petrol.  He rolls around, and a couple of other cops put him out.  In the second video, same scene shot from a different angle, we observe that the cops make not the slightest attempt to arrest the firebombers for attempted murder, and the rest of the mob for assault and as accessories to attempted murder.  It is all theater.  When they see that one of the firebombs has actually hit, the theater pauses.

When right wing militia listens politely to an FBI provocateur provocateur at a meeting proposing that they bomb someone, they all go to jail for plotting crimes.  The “rioters” firebomb a cop, and everyone acts like it is an unfortunate accident – which of course is exactly what it is.

The “rioters” in the Greek riots are government employees put on the streets by government sponsored unions that are themselves as much part of the government as the police were.

The tallest building in the united states was finished in 1974.

Cars are becoming humbler.

US electricity production was growing exponentially until 1972.  After 1972 it grew more slowly.  Per capita electricity consumption  seems likely to have peaked around 2007 or so.

Supposedly GDP is still growing rapidly, just as supposedly inflation is zero, but it seems improbable that GDP is growing when per capita electricity consumption is not.

One could present all sorts of rationalizations for the decline in manned space exploration – for example that manned space exploration was a polite way of demonstrating superior capability to nuke the other side, and supposedly we are so much more civilized and mature now that the need for such chest beating has diminished.

However, by 2000, we have more compelling evidence of decline.  The buildings damaged or destroyed in 9/11 have not been repaired or replaced.

The west is the past. America sinks into Eurosocialism, while Europe becomes the western satrapies of the new Persian empire. Every rising civilization was a lender, innovator, and investor, every declining civilization a borrower.  California used to be the place where the future was invented, but no longer.

The west’s lead was California’s lead.  And California is no more.

Where, for example, was the netbook commercialized?  Who invented and built the “Amazon” Kindle?  Who is today creating the blue light lasers that are the core of every DVD reader and writer?

The Kindle was developed in Taiwan, by Eink.   It is some standard computing parts wrapped around a new display technology invented, developed and manufactured by Eink.

Indians looking to study abroad rate Melior in Singapore higher than Stanford in the USA.

Today, our universities turn out people trained in political correctness and “diversity”.  Every male CS graduate can parse a boolean expression, but most female CS graduates cannot, indicating that a male needs to be able to parse a boolean expression to get a CS degree, and a female does not. The end stage of this process is that no one needs to be able to parse a boolean expression, but everyone needs to be able to hate dead white males.

China leads the world in coal to liquids technology.

China leads the world in internet based transactions.

The simplest explanation for the fact that western research seems to have fallen off a cliff is that we are now reaching the point where hating dead white males is a more important academic qualification than anything else.  Doubtless it is in reality more complicated than that, but the simplest explanation works quite well:  Consider, for example, the recent demonization of Chagnon.  The most striking factor was the ignorance and stupidity of the academic associations condemning him.  They just did not know stuff.  It was as if they don’t read books by dead white males, as if they feared that reading such stuff might contaminate their minds with dangerous thoughts.

What we have had for some time in academia is theocracy, not meritocracy, and theocracy tends to promote those whose faith is most zealous and reliable.  It is easier to have zealous and reliable faith if you are dumb as two planks glued together.

Who is at the top of Academia:  I suppose the tip top crust are the people who condemned Chagnon, and people like the leading scientists of global warming, Mann and Phil Jones, who are demonstrably not nearly as smart as I am.  Mann, for example, keeps making ludicrous and amateurish mistakes in his statistics, and any time Phil Jones wants something scientific done, he summons a post grad, and tells the postgrad to produce a chart that proves such and such, suggesting that Phil Jones cannot produce such charts, nor tell if the chart actually does prove such and such.

Mann’s work demonstrates he is simply stupid.  Mann’s power over other scientists demonstrates that simply stupid people are on top.  Stupid people on top provide a simple explanation of why science does not get done.

How did Mann get to the top?  By telling the state what it wants to hear, by political correctness.

Demonstrably, the people in charge of science and research are not the tip top crust.  They got where they are by hating dead white males more than anyone.

The fact that undergraduates are marked on the basis of race, gender, and political correctness is fairly harmless.  That academics get power over other academics on the basis of political correctness has not been so harmless, and we are today paying the price, in that western research is failing.

Singapore has sustained its rate of growth.  Taiwan has sustained its rate of growth.  Therefore China is likely to sustain its rate of growth.

Assuming China grows like Singapore from now on, and the US grows like Europe (counting European growth as real, even though such growth as occurs is government employees, whose product is valued at cost, which cost grows at astonishing rate) then China should surpass the US in total GDP by 2019 or so.

China should surpass the US in GDP per head, as Singapore already has, by around 2045 or so.  Taiwan should surpass the US in GDP per head in 2018 or so.

The financial system of the west is collapsing because the fed and its bureaucrats have the mission to replace financial panics with wise regulatory authority – which might work if wise regulatory authority had the will to punish elite wrongdoing the way financial panics did, and resist the desire of politicians to use the financial system as a piggy bank for vote buying the way bankers threatened by financial panics did.  Since brave regulators are not to be found, the replacement is not working.

The last time the west stalled, it stalled for four hundred years under intellectual stagnation induced by theocracy, from 1277 to 1648.

We are seeing multiple simultaneous crises.  Academia is a thousand loudspeakers controlled by one microphone, and that microphone in the hands of an idiot.

All the massive financial crime that the financial crisis exposed <http://blog.jim.com/economics/mortgage-fraud-predatory-borrowing.html> continues unpunished and unabated, foreshadowing another, even bigger financial crisis coming up fast.

The graffiti on the buildings that are now owned by the Federal Reserve foretells our future.

We are also seeing an explosive gold rush in government as rent seeking monopolies multiply.  Thus it used to be, for example, that the local council gave itself a monopoly of water and sewage, though there is in practice no rationale for the sewage monopoly – septic tanks and highly localized sewage farms are more economical.  Large centralized sewage facilities beloved of councils and council unions suffer severe diseconomies of scale due to the high cost of  piping sludge any reasonable distance. Seeing the lucrative flow of money, every other level of government gets into the act.  Just as to get anything done, a private individual needs multiple permits from the council, each requiring him to hire numerous “consultants” at $400 per hour, the council needs multiple permits from state and federal governments, requiring the council to hire numerous “consultants” at $100 000 per hour.  The tip is emitting methane!  Oh the horror.  Someone official comes to officially look at the methane, charges  $100,000 for looking, and issues an enforceable “recommendation” for an open ended and indefinite series of remediation measures, each of which will require another look.

Oh what did we do before there were people to officially and highly scientifically investigate the fact that tips are apt to pong?  What would we do without government to supervise government?  And surely any problems that might occur can be easily remedied by providing yet another layer of regulatory authority to regulate the regulators that are regulating the regulators that are regulating the local council.

This, like the housing boom is unsustainable.  A single monopoly will charge inefficiently high prices and produce inefficiently low product, which is indefinitely sustainable. Multiple layered monopolies suffer a coordination problem that results in them charging infinite prices and producing zero product, as each attempts to get the majority of the squeeze.

This problem is remediable only through collapse or foreign conquest.  As I have remarked several times, the reason that Dubai can build high towers and we no longer can, is that in Dubai, you only need the approval of one theocrat and one holy religion.

I hope for collapse, since foreign conquest is likely to be unpleasant.  Last time around, however we had stagnation for four hundred years.   Collapse would be preferable.

Democracy is self destructing, as it inexorably moves further and further to the left – the fate of the past democracies of Athens and Rome.

When the universal franchise was introduced a hundred years ago, people said the system would go to hell.  Now it is going to hell.

Obviously a government cannot go on forever spending much more than it collects.  For a while printing money and borrowing money will work, but eventually, it is bound to lead to trouble, and big trouble is approaching fast.

Government inexorably and rapidly gets more expensive and more intrusive.  No doubt more taxes could be collected if they went after the politically well connected, but overall taxes are close to the Laffer maximum – if they raise taxes on those whom it is easy to raise taxes on, for example a tax on luxury yachts, they will get less money, not more money.

A tax on gas, beer, and cigarettes would work, but be unpopular with the electorate.  A tax on bankers, educationists, and lawyers would work, but would be unpopular with the well connected – and even such taxes would merely postpone the day of reckoning.  Government’s existing commitments are unsustainable with any politically realistic, or even politically unrealistic, tax rise.

The welfare state is simply running out of money.

There are two related problems:  Theocracy and democracy.  The masses are stupid, the elite is theocratic.

Because the elite is theocratic, they compete for power by each being holier than the other, that is to say, more politically correct than the other – but because their religion is this-worldly, they are required to have religious beliefs about this word rather than the next, thus each member of the elite competes to be further out of contact with reality than the other.

Because the masses are stupid, they succumb to politicians promising that the voters can vote themselves rich.

A hundred years ago, progressivism was a sect of Christianity with ambitions for theocracy and world conquest.  To better pursue these goals, it discarded theism, becoming theologically indistinguishable from universalist Unitarianism, thus evading the restraints imposed by the first amendment.

Consider, for example, the doctrine that men and women are equal – therefore the same and interchangeable:  Women, supposedly, can be firemen and soldiers.  Men, supposedly, can marry other men.

The modern progressive theory of equality is in fact a variant of Christianity.

Equality of men and women, and of the races, makes no common sense or biological sense. Men and women, for example, are biologically so different, that pretty much however you decide to measure them, chances are slim that they will prove to be equal.

When I discuss the matter with leftists, the main argument is some kind of skepticism with regard to efforts to measure people (which always end up demonstrating sexual and racial differences). For example, Gould is skeptical about IQ and race.

Roissy wonders why the elites are so stuck on the obviously false idea of literal equality.  Understood as a species of Christian belief, it makes sense, because the Christians believe that the most important part of the self is immaterial. If it’s immaterial, then material differences have nothing to do with it. So Christians are free to believe pretty much anything they want about this most important part of the self, unconstrained by material evidence of any sort. They are free to believe that deep inside everyone, there is a core, an essence, that is not the slightest diminished by bodily infirmity etc. etc. I.e., the soul.

The progressives jettison God, replacing God with, presumably, Nature. So “equality before God” becomes “equality before Nature”. That is, natural equality (of some unspecified sort). And this could be how the progressives manage to believe in some unspecified “natural” (biological or whatever) equality even though no evidence backs them up. Their belief is derived, not from evidence, but from the Christian heritage of progressivism. Their belief looks superficially like a scientific hypothesis because all the terms in it could be interpreted as referring to natural things, but it doesn’t really have any empirical content, because “equality”, while it could refer to something measurable, does not actually refer to anything measurable. Any attempt to measure something to test the claim of “equality” is attacked by progressives.

Progressives are using naturalistic-sounding words to talk about equality, but they are behaving as though it didn’t make any sense to try to measure it, which is how Christians would behave with respect to attempts to rigorously test equality before God. Their reaction would range from skepticism that it could be done, to the sense that it doesn’t even make sense to try, and finally to the certainty that it is heresy to even suggest such a thing and the person suggesting it is evil and possibly a sorcerer and should be burnt at the stake.

The progressive reaction to naturalistic attempts to assess equality is exactly the same as the Christian reaction would be.

The Christian view of equality is entirely impervious to empirical evidence, and so is the progressive view. It makes sense, then, to interpret progressives, when they talk about male and female equality, and about black and white equality, as really talking about the Christian soul, even though they themselves do not realize this is what they are doing because they have forgotten why they are going through these mental motions.

If anyone is allowed to disagree with the orthodoxy taught at Yale and Harvard, or even doubt it, this endangers the free speech of people from Harvard and Yale, and similarly if any enterprise run by people from Harvard or Yale could go bust, this endangers the free enterprise of people from Harvard and Yale.

Basel II is tens of thousands of pages of regulations, no one knows how vast it is, because not all the regulations can be found in any one place, but it could all be replaced by two simple rules:  Politically correct victim groups shall always find it easy to borrow money, regardless of their ability or intention to pay it back, and politically well connected businesses shall always make money, regardless  of whether they are competently run or not.

The seeds of the crisis were the CRA and the ratings agencies.  I have discussed the CRA at length, but the CRA would have been resisted had it not been for other changes in the system that insulated the players against the consequences of making bad loans.  These changes, guaranteeing that badly run businesses would succeed, started with the bailout of the ratings agencies in the seventies, forty years ago.

Back then, the ratings agencies were in trouble, because they had made a lot of bad calls.  It seemed that whenever an institution was going under, the guys at the credit rating agencies were the last to know about it.  Back then, they sold their assessments of credit risk to subscribers. So no one wanted to subscribe.

So in the seventies, the regulators stepped in to make people use the credit rating services. In 1975 the SEC created the Nationally Recognized Statistical Rating Organization (NRSRO) designation. Credit rating agencies so designated received what was in effect a grant of governmental power. The SEC then relied on the NRSRO’s credit risk assessment in establishing capital requirements on SEC-regulated financial institutions – which meant that for SEC-regulated financial institutions to borrow and lend, they had to get rated.  A cascade of regulatory decisions followed over the years, each decision forcing more and more reliance on the risk assessments issued by these demonstrably incompetent institutions – and less and less reliance on other people’s risk assessment.  For more and more organizations, it became illegal for them to make their own judgments about risk.

By the 1990s, as Levine and Partnoy tell us, the NRSROs were not selling assessments of credit risks, but licenses to issue securities.  The rating agencies did not genuinely assess risk, nor did anyone really expect them to.  Nor could repeatedly demonstrated incompetence reduce demand for their services, so the ratings agencies had no incentive to provide correct credit ratings.  Since their income was entirely dependent on the state granting them power, they did, however, have an incentive to make politically correct credit ratings.  If you lend to the poor, the oppressed, etc, and you are run by good old boys from Yale and Harvard, and you make donations to the right politicians, the NRSROs have a very powerful incentive to give you a good credit rating.  And if you have a good credit rating, you can borrow as much as you like – and if you go bust, the government will bail you out.

Badly run companies that had been empowered to borrow as much as they pleased got in trouble – and were bailed out for the same reasons as they had been empowered to borrow as much as they pleased.

In addition to corruptly favorably rating the politically correct, the NRSROs corruptly favorably rated those who simply gave them money, which is perhaps what those who complain about “deregulation” have in mind.  The banks creating structured financial products would first pay the rating agencies for “guidance” on how to package the securities to get high ratings and then pay the rating agencies to rate the resultant products – a glaring conflict of interest, though one less apt to lead to bailouts when the proverbial hits the fan.

Now since all this dirty dealing has cost the taxpayer trillions, you may well ask what measures have been taken to punish the NRSROs for bad conduct, or give them incentives for better conduct in future, or indeed restrain them from continuing to do this stuff?

All the strengthened regulation is regulation to make people continue to treat NRSRO ratings as true, even though it has become horrifyingly apparent that the ratings are generally false.  All the strengthened regulation is more of what caused this mess in the first place.  Any real reform would necessarily start by abolishing the legal privilege of NRSROs, would have to start by rolling back regulations to what they were in 1974.  Instead, compulsion and bailouts are being applied to make NRSRO ratings true, or to enable people to continue pretend that they are true.  Their power has been increased, their misconduct unpunished, and their incentives have become even worse.

That is not too alarming in itself. It is a bit less than GDP, and for most countries, trouble ensue when debt is around twice GDP. The liberty papers are not too worried.

Total American indebtedness (public and “private”) is sixty trillion, which is much larger than federal debt, and has been rising very rapidly. The primary cause of this rise has been implicit and explicit governmental and quasi governmental guarantees – FHA guarantees, debt of too-big-to-fail corporations, guarantees by too-big-to-fail corporations, state debt, for example California, and so on and so forth.

Some substantial part of this sixty trillion is secured by real assets such as houses and the income stream of hard working people, and some substantial part is not.

Thus the excess “private” debt is not private.  The normal level of public and “private” debt is about twice GDP, say twenty six trillion, so we are about thirty trillion or so in the hole and getting deeper fast – well past the danger level of twice GDP.