Reasoning 101 not taught in Venezuela, and other places too

May 24th, 2016


Venezuelans on Tuesday woke up to discover that the government-controlled price of corn flour — used to make corn patty arepas, a staple of local cuisine — has risen 900 percent.

The government of President Nicolas Maduro had kept the price of corn flour frozen for 15 months at 19 bolivares a kilogram. But late Monday the government’s Superintendent of Fair Prices increased the price to 190 bolivares a kilo, or $19 at the government rate used for imports such as medicine and scarce food.

The Superintendent also said that the price of chicken would rise, up 13 times from 65 bolivares a kilo to 850 bolivares. The price of chicken had also been frozen since February 2015.

Venezuela is enduring the world’s highest inflation rate: 180 percent in 2015, and a projected 700 percent for 2016.

A “Law of Just Prices” sets a maximum profit margin of 30 percent for all goods and services. But in the case of food and medicine, a senior official said that profits are “compressed” to between 14 and 20 percent.

Venezuela: no beer, no Coke, no tires.

Price controls are among the stupidest things in the world. They do not control prices. They control supply: always creating shortages and black markets. We can’t blame the Venezuelans too much however. Nixon tried price controls. So did Carter. They were advocated by McCain. Hawaii tried them 10 years ago. Failure, Failure, Failure, Failure. Why can’t people learn the obvious?

He’s not Romney

May 24th, 2016


Demographics of the Austrian election

May 24th, 2016

Keep an eye on this. It’s only going to change one way, unless suicide is the preferred outcome.

Venezuela writ small

May 23rd, 2016

From BI.

Addendum: the further you move away from de Tocqueville, the stupider people become.

6.5% growth is achievable?

May 22nd, 2016

WSJ reports on this:

A 6.5% average growth rate without creating a bubble is eminently achievable if China makes its economy more efficient. Promising areas include: opening markets for domestic private and foreign firms to high value-added services, especially health care, education and finance; making it easier for companies to tap domestic and international financing; strengthening competition rules; eliminating the household registration system; improving access to information and ideas; developing a true land market and further ramping up social welfare spending. These would help both restructure the economy and generate sustained growth despite severe demographic and debt challenges. But the 13th Five-Year Plan offers few bold steps on these fronts, so achieving 6.5% growth will probably require further expanding investment and debt.

China has 7 empty Manhattans, and half of its GDP is because of construction projects. The CSIS guys are clearly not investors like George Soros or Jim Chanos. (On the lighter side, read about the time Miles Davis complimented Burt Bacharach.)


May 21st, 2016


We are now in month 83 of this so-called recovery. Yet there are still 45 million people on food stamps——one out of every seven Americans. The median real household income is still 5% below its level in the fall of 2007. There are still only 71 million full-time, full-pay “breadwinner” jobs in the nation—–nearly 2 million fewer than when Bill Clinton was packing his bags to vacate the White House. At the same time, we have had monetary stimulus like never before. There has been 90 straight months of virtually zero interest rates. The balance sheet of the Fed has been expanded by $3.5 trillion. For point of reference, that is 4X more than all the bond-buying during the entire first 94 years of the Fed’s history. domestic production of consumer goods is still 9.1% below its pre-crisis peak, and at a level first reached in early 1999!

Conclusion: let’s talk about bathrooms.

Sensible analysis

May 20th, 2016

From David Gelernter, who you may recall encountered some real nastiness a couple of decades ago. Here’s a commonsensical piece; unfortunately, common sense may be soon illegal in the USA.

More metastasizing bureaucracy

May 19th, 2016

We talked a little about metastasizing bureaucracy the other day. Here’s a bit from NYC: “Examples of Violations: d. Permitting female but not male residents at a drug treatment facility to wear wigs and high heels.” The regulations run on for 5300 words, and fines can be as much as $250,000. And here’s this, just in case you didn’t know how smart and commonsensical journalists are.

Stay Puft was a Guy

May 19th, 2016

A guy. So you can imagine what happens to him. What ever happened to comedy? HHT: PL

Who won WWII?

May 19th, 2016

Not us and our allies.


May 18th, 2016

We think watching The World at War and a selection of Essentials from TCM should be a requirement for a college degree, and maybe even high school. We have a lost generation or two, which is a disaster, and they’ve got to get connected to the past somehow or we’re doomed. The 19th century? Forget about it. Also, Hillary ought to get with the Trump program and start calling her current opponent Bernie Venezuela. That’s it for now!

Seven empty Manhattans

May 17th, 2016


Overcapacity has grown unfathomably large. By some estimates, the amount of unsold residential real estate is the equivalent of seven Manhattan islands — and the latest credit binge means another property bonanza is under way.

Barry Eichengreen, a specialist on the Chinese economy at the University of California, Berkeley, writes that financial authorities face a series of unpalatable options to head off mounting threats to the banking system. The least bad is probably to issue bonds to recapitalize the banks, essentially placing the burden on future taxpayers. There are no assurances this will happen, but if it doesn’t, Mr. Eichengreen says, “the consequences could be dire.”

In 3 recent years China used more cement than the US did in the entire 20th century. Think about that. It uses the cement and the steel to manufacture both empty cities and phony GDP growth. Its debt is 3-4x GDP, and much higher than that compared to real GDP, since as much as half of reported GDP growth comes from these construction activities. Be short industrial commodities and hang on.

Your government at work

May 17th, 2016


At some airports, lines during peak hours have topped 90 minutes


The best way for travelers to help ensure a quick trip through the security screening process is to prepare, prepare, prepare. Passenger preparedness can have a significant impact on wait times at security checkpoints nationwide. To facilitate the security screening process, travelers should arrive at the airport 2 hours in advance of a domestic flight and 3 hours prior to an international flight

In related news, the government also announced that you should arrive at hospital Emergency Rooms 2-3 hours before your actual emergency.

More business and foolishness

May 16th, 2016


Boeing’S factory at Everett, near Seattle, is the largest building in the world, as befits the world’s biggest planemaker. From within its cavernous halls a new passenger jet emerges every working day. After an empty fuselage enters at one end of the factory, it can take as little as a month for some models to emerge as a working aircraft at the other end. Still, Boeing’s lead in the field of commercial airliners, which looked almost unassailable a decade ago, is under threat from Airbus.

Since 2012 the European firm has won more orders than Boeing, and may eventually outpace it in annual deliveries. For Boeing, which celebrates its centenary this year, staying ahead of a competitor which has been in business for less than half that time is a matter of pride as much as it is a commercial imperative.

One option under consideration at Boeing is to build a new plane for the “middle of the market”, to replace its ageing 757. An aircraft that would carry between 220 and 280 passengers on routes up to 5,000 miles would plug a gap in its fleet, between short-haul narrow-body jets and wide-bodied planes for long-haul travel. But Boeing should be wary of the risks involved. Airbus has outclimbed its American counterpart largely because Boeing made such a mess of developing another new plane, the 787 Dreamliner, a long-haul jet that entered service in 2011.

The Dreamliner programme, announced in 2003, was supposed to cost $6 billion and see the plane take to the air in 2008. The final bill was closer to $32 billion; and the 787 arrived three years late, the result of a combination of technical failures and supply-chain snafus. With engineers, designers and other resources diverted into getting the Dreamliner aloft, plans for the rest of its fleet were delayed.

That gave Airbus an opportunity to take a lead in narrow-bodied jets. Boeing’s 737 and Airbus’s A320 family of planes typically carry 120-200 passengers on shorter hops of up to 3,000 miles. These planes are the biggest sellers at both firms. Two-thirds of the planes delivered by Boeing last year and nearly four-fifths of Airbus’s were narrow-bodies.

In 2010 Airbus took Boeing by surprise with the announcement that it would update its A320 with new engines and tweaks to its design, making it 20% more fuel-efficient than previous models. Preoccupied with the 787, Boeing was slow to respond with its own revamp, the 737MAX. Airbus now has 5,479 orders for its family of A320 planes; the first of the A320neos entered service this year. Boeing has just over 3,000 orders for its new plane, the 737MAX, which is not destined for first delivery until next year.

Boeing’s troubles with the 787 also helped Airbus in the market for wide-bodied jets. Boeing remains ahead of Airbus, with 1,357 orders for its fleet compared with 1,267 for Airbus’s range. Although the pair sell far fewer of them, wide-bodied planes bring handsome rewards. Some 80% of Boeing’s revenues came from wide-bodies in 2014, though they account for just a third of production by number of planes. The delays and cost overruns of the Dreamliner programme mean that, although it is selling well, it is not profitable and a write-down is likely. There have been knock-on effects: a new variant of Boeing’s 777, the 777X, is not due until 2020, giving Airbus’s A350 time to win orders.

Foolishness, Rot, and a brief scene from the War Between PC and non-PC.

China Numbers #5

May 15th, 2016

Gordon Chang:

Although debt does not work the same way in China’s state-directed economy as it does in freer ones, eventually rapid credit creation must produce a disaster. Already, the country’s debt-to-GDP ratio is well north of 300%, as Barron’s, referring to Victor Shih’s calculations, notes. Soros in January said the ratio could be as high as 350%, and Orient Capital Research in Hong Kong suggests 400%. Whatever it is, China is just about at the limits of the debt it can bear

China Numbers #4

May 15th, 2016

Gordon Chang:

The official Purchasing Managers’ Index came in at 50.1, down from March’s 50.2, barely above the 50.0 that divides expansion from contraction. The widely followed Caixin survey registered at 49.4, down from March’s 49.7. April was the fourteenth straight month of contraction in this more representative—and far more reliable—survey.

China Numbers #3

May 15th, 2016


The Bank for International Settlements warned late last year of an increased risk of a banking crisis in China in coming years. On Friday, brokerage CLSA Ltd. sounded an alarm, saying that the nation’s true level of nonperforming loans may be at least 9x higher than the official numbers, suggesting potential losses of at least $1 trillion. Fitch said official data showing a 1.7% NPL ratio was understated — a common view among analysts.

“A tree cannot grow up to the sky — high leverage will definitely lead to high risks,” the person was cited as saying. “Any mishandling will lead to systemic financial risks, negative economic growth, or even have households’ savings evaporate. That’s deadly.” China’s accumulation of debt has been the fastest of Group of 20 members over the past decade, according to Tom Orlik, an economist for Bloomberg Intelligence. Debt has climbed to 247% of GDP

China Numbers #2

May 15th, 2016

Gordon Chang:

Credit growth in Q1 was more than twice that in the previous quarter. China created almost $1 trillion in new credit during the quarter, the largest quarterly increase in history. Of course, Chinese banks tend to splurge in Q1 when they get new annual quotas, but this year’s lending exceeded all expectations. The Ministry of Finance also did its part to refloat the economy. Its figures show that in March, the central government’s revenue increased 7.1% while spending soared 20.1%.

China Numbers #1

May 15th, 2016

Gordon Chang:

China’s statisticians appear to be just making the numbers up. For the first time since 2010, when it began providing quarter-on-quarter data, NBS did not release a quarter-on-quarter figure alongside the year-on-year one. And when NBS got around to releasing the quarter-on-quarter number, it did not match the year-on-year figure it had previously reported.

NBS’s 1.1% quarter-on-quarter figure for Q1, when annualized, produces only 4.5% growth for the year. That’s a long distance from the 6.7% year-on-year growth that NBS reported for the quarter.

Even China’s own technocrats do not believe their own numbers. Fraser Howie, the coauthor of the acclaimed Red Capitalism, notes that the chief of a large European insurance company, who had just been in meetings with the People’s Bank of China, said that even the Chinese officials were joking and laughing in derision when they talked about official reports showing 6% growth.

Of CO2 and Gender Dysphoria

May 15th, 2016

The amount of CO2 in the air is vanishingly small, 0.04%, as we have noted on many occasions. Yet the government is hysterical about cutting back on CO2, since it empowers the greatest threat to the planet.

By contrast, in the most generous reading of the 2010 census, 0.03% of those surveyed suffered from gender dysphoria. And the same government that wants CO2 banned now wants every bathroom in the country changed to accommodate — almost nobody.

This is nuts of course, and very harmful. To wit: we’d be better off with more CO2, and certainly a group 41% of whose members attempt suicide could use psychological counseling a lot more than new bathroom signs.