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America Economy - Warning from Five Mainstream Economists

Tukang Warta 0 economy, financial crisis 11/30/2014 09:30:00 PM

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The Wall 
 Street Journal ran an article the likes of which I have never 
 seen. "<a href="http://online.wsj.com/article/SB10001424052702303561504577497442109193610.html#printMode">The 
 Magnitude of the Mess We're In</a>." It was written by five well-known 
 economists. It warns readers about a series of highly destructive 
 outcomes of the federal government's present fiscal policies. The 
 article says that these problems are close to being unmanageable. 
 The first 
 economist involved is George Shultz. He taught at the University 
 of Chicago and MIT. He served as the Secretary of the Treasury under 
 Nixon and Secretary of State under Reagan. He served as the Head 
 of the Office of Management and Budget under Nixon, and also Secretary 
 of Labor under Nixon. I can think of no other economist with comparable 
 experience at the highest level. He is an insider's insider. He 
 is 92 years old – a true elder statesman 
 The second 
 economist is Michael Boskin. He teaches at the Hoover Institution. 
 He used to teach at Stanford. He was the head of the Council of 
 Economic Advisers under the first Bush. Then there was John F. Cogan 
 of Hoover and Stanford. Then there was Allan Meltzer, who is the 
 most respected historian of the Federal Reserve System. Finally, 
 there was Stanford's John Taylor, of "Taylor rule" fame, one of 
 the most respected academic economists in the USA. 
 
 A NAÏVE 
 ARTICLE 
 The problem 
 with this article is it is naïve. It is Pollyanna to the core. 
 It begins with the on-budget deficit: a mere $1.2 trillion a year. 
 The on-budget deficit is peripheral to the real federal deficit, 
 which reflects the unfunded liabilities of the federal government, 
 primarily in Social Security, Medicare, and Medicaid. This deficit 
 dwarfs the on-budget deficit. <a href="http://teapartyeconomist.com/2012/08/10/11-trillion-increase-in-debt-in-one-year/">It 
 is rising at $11 trillion a year.</a> 
 This deficit 
 has a present value of $222 trillion. This means that the federal 
 government, today, must invest $222 trillion in market investments 
 that will return about 5% per year for the next 75 years. No such 
 investments exist, and the federal government does not have $222 
 trillion in reserve. The Federal Reserve system could print that, 
 of course, but then that would only lead to hyperinflation. 
 In other words, 
 by starting with the on-budget deficit, the five economists low-balled 
 the problem. This makes it look as though the problem can be dealt 
 with by Congress. It cannot, except by one technique, namely, default. 
 They mention unfunded liabilities only briefly, and they offer no 
 numbers. 
 Nevertheless, 
 in a na‹ve sort of way, the five economists do point out that present 
 politics makes it virtually impossible for the on-budget deficit 
 not to escalate, and if it does, it is going to lead to a series 
 of inevitable disasters. The five economists go into the details 
 about these disasters, and it is a good thing that somebody bothered 
 to do this. 
 The article 
 began with a good question: "Where are we now?" Answer: a lot worse 
 off than the article says. 
 It asks this 
 question: "Did you know that annual spending by the federal government 
 now exceeds the 2007 level by about $1 trillion?" I do. You do. 
 Who doesn't? 
 They list 
 the deficits: $1.4 trillion in 2009, $1.3 trillion in 2010, $1.3 
 trillion in 2011, and another $1.2 in 2012. "The four-year increase 
 in borrowing amounts to $55,000 per U.S. household." 
 Recall that 
 the unfunded liability's present value grew by $11 trillion over 
 the past 12 months. So, the article low-balls the magnitude of the 
 mess we are in. 
 The Treasury 
 must raise $4 trillion this year to pay the interest on the on-budget 
 debt. They warn: ". . . the debt burden will explode when interest 
 rates go up." Quite true. 
 The government 
 cannot tax upper-income people. The top 1% pay 37% of the income 
 taxes. (That is because they make most of the income, which the 
 authors do not mention.) 
<blockquote>
 Did you 
 know that, during the last fiscal year, around three-quarters 
 of the deficit was financed by the Federal Reserve? Foreign governments 
 accounted for most of the rest, as American citizens' and institutions' 
 purchases and sales netted to about zero. The Fed now owns one 
 in six dollars of the national debt, the largest percentage of 
 GDP in history, larger than even at the end of World War II.</blockquote>
 This is true. 
 But this means that the Treasury will get back most of the money 
 it pays to the FED it pays as interest. The FED repays most of this 
 at the end of the year. This is an accounting device. 
 Conclusion: 
 "By replacing large decentralized markets with centralized control 
 by a few government officials, the Fed is distorting incentives 
 and interfering with price discovery with unintended economic consequences." 
 This is true. It lies at the heart of the mess we are in. 
<blockquote>
The Fed's 
 policy of keeping interest rates so low for so long means that 
 the real rate (after accounting for inflation) is negative, thereby 
 cutting significantly the real income of those who have saved 
 for retirement over their lifetime.</blockquote>
 Bernanke's 
 FOMC says this will continue until at least 2015. 
 They say that 
 the FED is replacing the Treasury as the source of government debt 
 management. They are correct. 
 They warn 
 of price inflation. The reserves of QE3 could do this. But if the 
 FED unwinds too fast – sells assets, abandoning QE – "banks 
 may find it hard to adjust and pull back on loans. Unwinding would 
 be hard to manage now, but will become ever harder the more the 
 balance sheet rises." 
 The FED tried 
 to unwind over the last 12 months. They do not mention this. The 
 result: the FED's panic return to QE3. There will be no unwinding. 
 Then they 
 summarize some highlights, though peripheral. "Did you know that 
 the federal government had 46 separate job-training programs? Yet 
 a 47th for green jobs was added, and the success rate was so poor 
 that the Department of Labor inspector general said it should be 
 shut down. We need to get much better results from current programs, 
 serving a more carefully targeted set of people with more effective 
 programs that increase their opportunities." In short, blah, blah, 
 blah. If we have 46, one more program is marginal, and there will 
 not be the elimination of (say) 45 of them. 
 They go on 
 and on, telling us of boondoggles. This is just noise. Nothing is 
 going to change. 
 Then they 
 get to Obama's budget. That budget will "raise the federal debt-to-GDP 
 ratio to 80.4% in two years, about double its level at the end of 
 2008, and a larger percentage point increase than Greece from the 
 end of 2008 to the beginning of this year." Quite true. But this 
 budget was passed by Congress. All budgets are passed by Congress. 
 We are headed 
 toward $18.8 trillion in debt. That will take $743 billion in interest 
 payments. But, as they fail to mention, most of this will go to 
 the FED, and will be returned. The problem is this: there is no 
 negative feedback for Congress. Rates are close to zero. 
 Then they 
 get to the really tough nut to crack: the unfunded liabilities. 
 But they offer no specifics. 
<blockquote>
 Worse, the 
 unfunded long-run liabilities of Social Security, Medicare and 
 Medicaid add tens of trillions of dollars to the debt, mostly 
 due to rising real benefits per beneficiary. Before long, all 
 the government will be able to do is finance the debt and pay 
 pension and medical benefits. This spending will crowd out all 
 other necessary government functions.</blockquote>
 No, it won't. 
 Why not? Because there will be a default on these programs. Younger 
 voters will mandate this. Granny is going to get her checks cut 
 off. The following will not happen: "One result will be ever-higher 
 income and payroll taxes on all taxpayers that will reach over 80% 
 at the top and 70% for many middle-income working couples." 
 QE3 creates 
 uncertainty, they say. Quite true. "Traders speculate whether and 
 when the Fed will intervene next. The Fed can intervene without 
 limit in any credit market. . . ." Quite true. 
 Then they 
 mention what was never mentioned before Ron Paul's run in 2007: 
 "This raises questions about why an independent agency of government 
 should have this power." 
 Then they 
 ask: "What's at stake?" It's the right question. 
 Treasury debt 
 is not a safe haven forever, they say. Good point. 
"In short, 
 we risk passing an economic, fiscal and financial point of no return." 
 There. Someone said it. Of course, we are far beyond the point of 
 no return. The $222 trillion in the present value of the unfunded 
 liabilities guarantees this. 
 The USA could 
 lose its full faith and credit status. 
 They see this 
 as a great danger. I see it as liberation. They quote Alexander 
 Hamilton on the benefits of the federal debt. I much prefer Thomas 
 Jefferson's assessment. The full faith and credit of the U.S. government 
 allowed the government to finance the Civil War and World War II. 
 Quite true, and that is why its loss would be a great thing. 
 Then comes 
 the bottom line. 
<blockquote>
 The problems 
 are close to being unmanageable now. If we stay on the current 
 path, they will wind up being completely unmanageable, culminating 
 in an unwelcome explosion and crisis.</blockquote>
 We are going 
 to stay on the present path. The problems will become unmanageable. 
 The U.S. government 
 is going to default. The five do not use the D-word, but what they 
 say points to it. 
 Then they 
 push to full Polyanna mode. 
<blockquote>
 The fixes 
 are blindingly obvious. Economic theory, empirical studies and 
 historical experience teach that the solutions are the lowest 
 possible tax rates on the broadest base, sufficient to fund the 
 necessary functions of government on balance over the business 
 cycle; sound monetary policy; trade liberalization; spending control 
 and entitlement reform; and regulatory, litigation and education 
 reform. The need is clear. Why wait for disaster? The future is 
 now.</blockquote>
 They are correct. 
 The future is now. And it is not going to change. Politics guarantees 
 this. 
 
 CONCLUSION 
 I was happy 
 to see an article from mainstream economists on the mess we are 
 in. Of course, the mess is vastly worse than they indicate. The 
 on-budget debt of $15 trillion is peanuts compared to the $222 trillion 
 of present-value net unfunded liabilities. But the mess is bad enough 
 to warrant this article. 
 Nothing will 
 change Congress. Nothing will change the executive. There will be 
 no cutback in spending until the numbers force the Great Default. 
 Americans 
 will not be ready. State and local governments will not be ready. 
 Will you be 
 ready? 
 
September 
 26, 2012 by <a href="maito:garynorth@garynorth.com">Gary North</a>
<a href="http://teapartyeconomist.com/">Tea Party Economist </a>

America Economy - Warning from Five Mainstream Economists

The Wall Street Journal ran an article the likes of which I have never seen. " The Mag...

Cai Lun - Paper Inventor!

Tukang Warta 0 fact, history, people 11/28/2014 01:00:00 AM

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Cai Lun (courtesy name [zi] Jingzhong) was a Chinese court official who is traditionally credited with the invention of paper. 
Cai Lun was a eunuch who entered the service of the  imperial palace in 75 CE and was made chief eunuch under the emperor Hedi (reigned 88–105/106) of the Dong  (Eastern) Han dynasty in the year 89. 
 
About the year 105 Cai conceived the idea of forming sheets of paper from the macerated bark of trees, hemp waste, old rags, and fishnets. The paper thus obtained was found to be superior in writing quality to cloth made of pure silk (the principal writing surface of the time), as well as being much less expensive to produce and having more abundant sources. 
 
Cai reported his discovery to the emperor, who commended him for it. Important improvements were subsequently made to Cai’s papermaking process by his apprentice, Zuo Bo, and the process was rapidly adopted throughout China, from which it eventually spread to the rest of the world. Cai himself was named a marquess in 114.

Cai Lun - Paper Inventor!

Cai Lun (courtesy name [zi] Jingzhong) was a Chinese court official who is traditionally credited with the invention of paper. Cai Lun w...

Animal Camouflage - The Sneaky Secrets of the Most Amazing Animals you've never Seen 1

Tukang Warta 0 animal, fact 11/27/2014 01:00:00 AM

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Almost every animal has a good reason to hide. Going undetected makes it easier to catch food — and easier to avoid becoming someone else’s. In any species, the individuals that stand out the most will be the first to be eaten and the last to catch their own dinner, and so natural selection picks the ones with the best camouflage. 
 
There are several different kinds of camouflage. The most basic is to hide under a rock, or in sand or leaves. This is sometimes called ‘cry-psis’, and some animals will incorporate bits of their environment on their bodies to improve the effect. Three-toed sloths have algae growing in their fur, which gives them a dark green hue that helps them hide among the trees. Coral crabs deliberately attach young polyps to their shells so they resemble part of the reef. 
 
The next step is to change your own body coloration. Mammals have a color pallet restricted to white, black, brown and yellow, but fish, amphibians, reptiles and birds can all produce a vivid array of greens and bright reds. Red might not seem like a great color for camouflage, but lots of seaweed and corals are red, and in fact many sea creatures obtain the red pigment for their bodies by eating the corals and seaweed that they hide among. 
 
Camouflage is a show, performed for a few specific observers. Most mammals see in black and white, or only two colors. Primates see three primary colors, while birds see four. Insects can see well into the ultraviolet part of the spectrum and many snakes can sense infrared. Choosing the right camouflage is about exploiting the weaknesses in your target’s visual system. Even if your color is a very close match to your surroundings, your outline can still give you away. One of the earliest parts of the brain to evolve was concerned with recognizing the edges of things, and most animals still have a dedicated outline recognition brain region. Good camouflage uses contrasting patterns of light and dark, or different colors. These trick the outline recognition system so that it mentally carves up your shape into smaller, irregular blocks. In some environments, there is so little to hide behind that this ‘dazzle’ camouflage is all you have. 
 
The Royal Navy used this technique in World War I,to make it hard to judge the speed and heading of battleships on the featureless ocean. But the orca, or killer whale, beat them to it by several million years. The bright patches of white on a black body disrupt its outline so that it is not immediately recognized as a threat. Zebras use the same technique, but this time the entire herd merges into one huge zebra that is much more intimidating and confusing to lions and cheetahs. 
 
Sometimes, a purely visual camouflage isn’t enough. Procrypsis is the technique of camouflaging your movement. Predators are acutely sensitive to movement, but a typical forest is a whirl of activity and they must quickly tune out the background motions of wind, water and all the non-food animals if they are not to be overwhelmed. Chameleons, leaf insects and preying mantises can exploit this by moving with a rocking motion that mimics the swaying of branches in the wind. Some Pacific octopuses will curl up like a rock, but still manage to move along the seabed by synchronizing movement with the back-and-forth patterns of shadow cast by sunlight through the waves. 
 
<h2>
How the Cuttlefish Gets its Spots</h2>
<h2>
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</h2>
Cephalopods — particularly the octopus and the cuttlefish — are the undisputed masters ofthe quick change. Their skin is packed with specialised cells called ‘chromatophores’ that change the colour or reflectivity ofthe skin. Each chromatophore has its own activating muscle and nerve fibre, and these are connected to a part ofthe brain dedicated to coordinating the complex patterns. Although the chromatophores only contain red, yellow and brown pigments, cuttlefish can create almost any colour by combining different layers of coloured and reflecting cells. Green, for example, is achieved by using an iridescent layer deep in the skin to scatter light back through yellow pigments, which act as a filter. 
 
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All the layers are controlled independently and simultaneously, so a cuttlefish can change its entire skin color in less than a second. Chameleons use a similar arrangement of skin cells but the chromatography are controlled using hormones, rather than nerve impulses, so the change occurs more slowly. 
 
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What's Brown and Sticky? A Stick!<div class="separator" style="clear: both; text-align: center;">
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</h2>
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Camouflage is usually about blending anonymously into the background, but there are times when it is better to disguise yourself as something specific. Mimics copy the shape, colouring, movement and sometimes even the smell of another species to fool prey or predators. This is an evolutionary arms race; as predators evolve more and more acute senses to see through the subterfufe, so the mimics must constantly refine their disguise. 
 
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One of the most common forms of mimicry, known as "Batesian mimicry", is where a harmless species pretends to be a dangerous one, such as the many species of hoverfly that mimic stinging wasps. But poisonous species can mimic each other, too. Monarch and viceroy butterflies show this kind of ‘Müllerian mimicry’ - both are toxic, but they have evolved mimic each other so that bird predators only have to learn one wing pattern to avoid, rather than two. 
 
<a href="http://www.articlemostwanted.com/2013/07/animal-camouflage-sneaky-secrets-of_24.html">Click here to see the 2nd part!</a>

Animal Camouflage - The Sneaky Secrets of the Most Amazing Animals you've never Seen 1

Almost every animal has a good reason to hide. Going undetected makes it easier to catch food — and easier to avoid becoming someone else...