Denninger on Keiser's On The Edge

The more I read Karl Denninger, the less I like him. Maybe watching him will be better.

"Babylon" Will Fail

Today I decided to send you to the New York Times. They have an interesting chart well worth a little study. Be sure to hover your mouse over each country to give you the details of the various loans.

The Corporatist economic system of today has all the big banks and countries linked together. A relatively minor problem in one country could quickly impact a lot of other countries in a unstoppable cascade. 

The main thing I want you to take away from the chart is the large amount that the US Government owes. 

The irony is that formerly communistic countries like Russia and China are net creditors on the international scene. 

Habakkuk 2 has an interesting passage about "Babylon":

⁶ “Will not all of them taunt him with ridicule and scorn, saying,

   “‘Woe to him who piles up stolen goods 
   and makes himself wealthy by extortion! 
   How long must this go on?’ 
⁷ Will not your creditors suddenly arise? 
   Will they not wake up and make you tremble? 
   Then you will become their prey. 
⁸ Because you have plundered many nations, 
   the peoples who are left will plunder you. 
For you have shed human blood; 
   you have destroyed lands and cities and everyone in them.

 ⁹ “Woe to him who builds his house by unjust gain, 
   setting his nest on high 
   to escape the clutches of ruin! 
¹⁰ You have plotted the ruin of many peoples, 
   shaming your own house and forfeiting your life. 
¹¹ The stones of the wall will cry out, 
   and the beams of the woodwork will echo it.

¹² “Woe to him who builds a city with bloodshed 
   and establishes a town by injustice! 
¹³ Has not the LORD Almighty determined 
   that the people’s labor is only fuel for the fire, 
   that the nations exhaust themselves for nothing? 
¹⁴ For the earth will be filled with the knowledge of the glory of the LORD 
   as the waters cover the sea.

 ¹⁵ “Woe to him who gives drink to his neighbors,
   pouring it from the wineskin till they are drunk,
   so that he can gaze on their naked bodies! 
¹⁶ You will be filled with shame instead of glory. 
   Now it is your turn! Drink and let your nakedness be exposed! 
The cup from the LORD’s right hand is coming around to you, 
   and disgrace will cover your glory. 
¹⁷ The violence you have done to Lebanon will overwhelm you, 
   and your destruction of animals will terrify you.
For you have shed human blood; 
   you have destroyed lands and cities and everyone in them.

The whole system is corrupt, and it is destined to fail. 

ReVolted

When I first read about GM's Volt, I was actually excited and wanted to buy one. The way it was described as a multi-wheel drive (my term) with a reasonable price tag made it sound very interesting. Then reality set in. The price to buy one was a lot higher than the earliest estimates. They have a tendency to explode and burn. Finally we have the ultimate absurdity. 

Michigan Capitol Confidential has this estimate: 

Each Chevy Volt sold thus far may have as much as $250,000 in state and federal dollars in incentives behind it – a total of $3 billion altogether, according to an analysis by James Hohman, assistant director of fiscal policy at the Mackinac Center for Public Policy.

 What? A $250,000 subsidy for each car! How was this done?

The Volt subsidies flow through multiple companies involved in production. The analysis includes adding up the amount of government subsidies via tax credits and direct funding for not only General Motors, but other companies supplying parts for the vehicle. For example, the Department of Energy awarded a  $105.9 million grant to the GM Brownstown plant that assembles the batteries. The company was also awarded approximately $106 million for its Hamtramck assembly plant in state credits to retain jobs. The company that supplies the Volt’s batteries, Compact Power, was awarded up to $100 million in refundable battery credits (combination tax breaks and cash subsidies). These are among many of the subsidies and tax credits for the vehicle.

Of course with the very low sales (6,000 so far, many of them government fleet sales), many of these subsidies will not be paid because the various subsidies are based on employment. But the minimum estimated subsidy is $50,000. This is for a car that retails at about $40,000. 

Does the Volt make any sense at all? The president of Audi, Johan de Nysschen, does not think so:

No one is going to pay a $15,000 premium for a car that competes with a (Toyota) Corolla...They’re for the intellectual elite who want to show what enlightened souls they are...so there are not enough idiots who will buy it.

Of course he was later forced to restate his view.  

De Nysschen notes that since most electricity is generated by coal that the end result will be greater pollution than if a diesel engine was chosen. 

This inevitably happens when government attempts to mandate products by subsidy. Favored products get produced, but other, better alternatives are ignored. Electric is sexy, diesel is not. 

If CO2 is indeed a problem, a far better approach would be to tax CO2. This would allow the market to decide how best to achieve the desired goal. Al Gore, in a rare fit of sanity, actually proposed this. He wanted to phase out the employment tax (Social Security) and replace it with a carbon tax. I favor this approach. This is the second time in a week that hell has frozen over—last week I agreed with the ACLU, and this week with Al Gore.  

If energy independence and less pollution are desired, then make the tax structure support these goals. 

A Debt Jubilee?

This proposal is something that occurred to me as well as a form of a modified debt Jubilee. 

I have been wanting for some time to talk about Lev 25 and the Year of the Jubilee. Here is  sample from Lev 25:

³⁹ “‘If any of your fellow Israelites become poor and sell themselves to you, do not make them work as slaves. ⁴⁰ They are to be treated as hired workers or temporary residents among you; they are to work for you until the Year of Jubilee. ⁴¹ Then they and their children are to be released, and they will go back to their own clans and to the property of their ancestors. ⁴² Because the Israelites are my servants, whom I brought out of Egypt, they must not be sold as slaves. ⁴³ Do not rule over them ruthlessly, but fear your God.

The broad picture is clear, one who is successful is not to exploit the poor. This is not the American Way. 

Even Game Show Hosts Can Cut The Budget!

While I do not agree with the end of the EPA, I found this video amusing. Note that I am advocating cuts 10 times this large-at the minimim.