Investing in a Post-Fact Society (a/k/a, Were the Good Times a Mirage?)

One of the concerns we have expressed here over the years is that there was much more — and less — to the post 2001 recession recovery than met the eye.

Several years ago, this was a controversial position. We first suspected we were on to something, however, when the many critics of this view found it much easier to use epithets  (negative, naysayer, perma-bear) than to do the credible critiques of our positions, or any kind of critical  analysis.  It reminded me of an old lawyer’s joke: "When the facts go against you, stress the law; when the law is against you, emphasis the facts; when your case has both the law and the facts against it, call the other lawyer an asshole."

0470050101_2As of March 22, we are still in the early stages of any sort of
widespread understanding about this post-recession recovery cycle. Many
people are just starting to realize how much fertilizer has been spread
around.

Many of the stated economic gains have been a false ghost. Whether it was overstated job creation (NFP), understated inflation (CPI) or "inflated" growth (GDP), a shocking amount of the debate about the economic expansion has been primarily spin.

That’s what attracted me to this book by Farhad Manjoo: Learning to Live in a Post-Fact Society. That such a book is even necessary boggles the mind. Consider the myriads of benefits and standards of living  improvements we have seen from the reality-based community — and by that, I mean Scientists (Physicists, Biologists, Medical Doctors) and Engineers (Technology, materials and mechanical). Why so many people would turn their backs on this belief system leads me to Arthur C. Clarke’s 3rd law: "Any sufficiently advanced technology is indistinguishable from magic."

While a "Post-fact society" might being intellectually appealing for the slavish followers of a given political or religious order, the same philosophical approach invariably proves very costly for investors — if not financially fatal.

Consider these elements that are of interest to investors:

1) What objective reality is;

2) The variant perception: What the widespread belief system is versus this objective reality;

3) How far these two are out of alignment;

4) And most importantly to Traders, when the variant view recognizes its error and embraces either a more realistic, or an even more fantastic, view on reality.

For example, as weak as many of the traditional metrics have actually been, some sectors of the economy have enjoyed strong legitimate gains: Everything
energy related has been on fire for at least half a decade; the entire
agricultural explosion has been for real; all things China related have
enjoyed strong growth (tho it certainly became frothy this past year).
Metals and Miners have done well, and Transports have had a terrific run, be they rails or shipping. If the economy was truly strong and healthy, these sectors would be ones to avoid.   

Consider also the US
industrials — they boomed courtesy of a weak dollar (not healthy) and
improved production management (very healthy). What is being called Web 2.0 is seeing
genuine innovations, functional business models, and increasing
significance in the economy (also healthy).

If you correctly identified where things were healthy or not, the right themes before the crowd caught on, there was plenty of financial gains to be had.

Philosophically, I want to explore — beyond the legitimate gains mentioned above — a nagging question about the spin and artifice. Why have we as a nation been increasingly reluctant to confront objective reality? What is it about the present social mood, political leadership, and economic environment that has so totally led us to a world of denial? Up is down, black is white, good is bad — its all very Orwellian.

One of the world’s great cautionary lessons are the significant contributions made towards mathematics by the Islamic Arab Empire, circa 8th century to 15th century. While  European intellectual progress had ceased —  blame the rise of church extremism — enormous gains were being had elsewhere. Sometime around 18th or 19th centuries, the cultural roles seem to reverse. After the Age of Enlightenment, the Europeans rejected religious extremism, and prospered, while the Arab Empire embraced extremism, and suffered — at least until the discover of Crude Oil. There are societal lessons to be learned from this. 

I have long railed against superficial headline data that belied the
weakness underneath. There were a parade of syncophants and
cheerleaders who, despite knowing better, continued to
cheerlead punk data. These pundits, politicos and pinheads are now
confronting the ugly reality they can no longer ignore. Consider the progression the motley crew of fools and liars went through: First they denied what was happening, then we got the whole contained thingie, then they blamed da Bears.
Now, they have unwittingly embraced Marx, and have successfully pled for the
central planners to rescue them from their own stupidity.

~~~

Here’s my question: Are we stuck with these fantasists? Has Truthiness replaced Truth? Are we going to be saddled forever with these  damaging, hallucinatory hacks?

>

Source:
Worries That the Good Times Were a Mirage   
DAVID LEONHARDT 
NYT, January 23, 2008   
http://www.nytimes.com/2008/01/23/business/23leonhardt.html

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  1. cinefoz commented on Mar 22

    Never underestimate the absolute power of lazy and stupid. Animal house isn’t only a movie, it’s a role model and a metaphor.

    This is another book for my reading list.

    Can you recommend a book that describes modern day credit as it is actually applied, as opposed to college texts that describe the perfect world. I want to get a better feel for runaway credit, as opposed to money and banking.

  2. odograph commented on Mar 22

    We are social creatures, and we soak up or align our beliefs with our “group” much more than we admit.

    I think that means cultural norms can reinforce themselves in any direction. Sadly, growth through debt and consumption was the direction “found.”

    Part of it certainly is that debt and consumption are so well marketed. They were long before daytime financial television start pushing “trading” to the group.

    If you let the message wash over you, you will borrow, spend, and day-trade for profit (house-flipping is now off the list).

  3. Phil Smith commented on Mar 22

    Barry,

    Your observations about truth this morning are sobering. There really is only one truth, the one supported by facts.

    Thanks for the lifeline to reality,

    Phil Smith

  4. Ross commented on Mar 22

    “despite knowing better’. I’m assuming you are referring to certain parties in the main stream media who, for the sake of their wives and families, should remain nameless.

    How will these people regain credability or do they even need to? One person who comes to mind who I believe has successfully re-established his Street Creds so to speak is Joe Batapaglia.

    I recall his cheerleading the ‘new economy’ bubble of the late 90’s up to the seeming recovery from 03. He is a big guy and held BIG yet incorrect opinions. Whatever caused his conversion to reality remains a mystery but in recent years, his thought process and logic have returned to sobriety. I applaud him.

    It is said a smart man learns from his mistakes. Also that a really really really smart man learns from watching the mistakes of others.

    All in all, a thought provoking post for a lazy morning on the farm.

  5. MarkM commented on Mar 22

    When Bush called Greenspan to the WH in the days after 911 I knew for a fact that we were in for “something special”. Now true, the collapse of the travel industry, combined with the social mood, was going to have enormous effects but they were damned if they were going to let bin Laden accomplish in fact what he only set out to do symbolically: destroy our financial empire. Sadly, we seem set on doing it ourselves.

  6. Marcus Aurelius commented on Mar 22

    The unwillingness to go against “authority”, and the unwillingness to go against the crowd, coupled with the demonization of those who do (by both the authorities and the crowd), and crowned by the human propensity towards hubris (it’s what I believe, so it must be true, because my decisions are right, the facts must be wrong).

    The first part of the above statement have lead to the term “sheeple”. The second part – hubris – is why some people follow a losing stock all the way to the bottom.

    Hopefully, there’s a dollar left to be made off of this scenario or its collapse.

  7. Matt commented on Mar 22

    Agree with cinefoz. I would add that mediocrity is the religion of the day, from The Simpsons to Brittany to the argument of Oil dependence somehow being turned into a discussion about global warming….to the Prez’s adept language skills. It doesn’t matter where you look in this nation – excellence is dead!!! Get-r-done is vogue. I would also add that this current administration has taken laissez fair to be the French for a big Lazy Fair and has essentially reinvented the wild west in the 21st century for themselves.
    All of this mis-information is just a way of making it a feel better than it is, again to borrow The Simpsons – this is a chronic condition with that bunch. Everything is going to be OK. Its good enough. You did your best honey and that is all that matters.
    We are diseased by a hipness and coolness that has somehow infected our culture that says: Doing things really well, over-achieving, being great, aiming high ain’t kwel man!

  8. teraflop commented on Mar 22

    Denial of the rational doesn’t require an education but it does require fear and greed. I’ve had many confounding arguments with professionals over the years who have proposed solutions and opportunities who have failed to see their emperor has no clothes. It’s the “esoteric-ness” of the proof (the lawyer’s facts) that only few understand, or are willing to research, that make it hard for the priests of lies to comprehend. Intellectual laziness, fear of the “law”, and a desire to be beholden to or bedazzled by some new “law” (lie) are also impediments to rationality.

    I’ve seen this in the technical, quantitative, and financial fields for over 20 years. And when you kindly point out in detail the weakness of their opinions, it rapidly becomes strident. The bearer of the facts becomes da-bear and in corporate environments often becomes sequestered until called in for da-rescue.

    Advice: da-rescue is best served cold.

    Cheers

  9. VoiceFromTheWilderness commented on Mar 22

    It is my view that the issue you raise is the primary one facing this culture, most of our problems can be attributed to it. Whether it be presidents making up information and using that to launch wars of aggression *and not ever being held accountable for the act*, to ‘news’ that is deliberately fact free, indeed overtly manipulative of facts in order to support pre-established positions, to (worst of all) the large crowd that cheers this process on, the culture has clearly moved into a phase not unlike the novel 1984. Indeed it seems to this observer that our policies have long since ceased to be about anything other than creating power bases for politicians and maintaining the power of wealthy individuals (not actually corporations, interestingly enough, rather the individual who run them, and profit from them regardless of actual corporate performance).

    So your question is most relevent: will it continue? I don’t have fixed opinion. It seems likely. Cultural trends don’t turn on a dime. And consider this: in any system if leaders choose to seal themselves off from real knowledge the system will enable that. We have a tradition (or had) of regarding this as ‘bad leadership’, ‘killing the messenger’ etc. However, in a free market/democratic system the real leaders in a sense are the people at large, the public. But how many people have the kind of wisdom it takes to be a good leader, particularly if the crowd is running the other way? How do you sell more newspapers, telling the public that they are failing to be alert to the manipulations around them, or telling the public that they are lilly white and it’s always ‘someone’s fault’, the ‘bad guys’? Answer seems obvious. So, we have an endless parade of societal problems, and endless parade of ‘blame’ — the media, the politicians, big business, ‘bad apples’, ‘The evil doers’, ‘islamofascists’. It’s never us. It’s never 50 years of destabilizing foreign societies with military power instead of telling the little bushes that they can’t have anymore coke. It’s never our fault, always someone elses.

    Sounds like bad leaders to me. And bad leaders eventually fall. Is democracy going to last? How about ‘free markets’? hmmm.

    Well, maybe people will figure it out. But they’ll have to start shouldering some responsibility, instead of being so focused on getting power/money.

  10. The Financial Philosopher commented on Mar 22

    With the proliferation and crippling over-abundance of information sources, the “noise” is louder than ever and it is getting louder. The quality of information is lower because there are more ways to make money via cable news, blogs, and various internet mediums.

    I know Barry is familiar with these words:

    “… in an information-rich world, the wealth of information means a dearth of something else: a scarcity of whatever it is that information consumes. What information consumes is rather obvious: it consumes the attention of its recipients. Hence a wealth of information creates a poverty of attention and a need to allocate that attention efficiently among the overabundance of information sources that might consume it.” Herbert Simon

  11. Chief Tomahawk commented on Mar 22

    Man, I’ll give Kudlow a break on this one….

    “What is it about the present social mood, political leadership, and economic environment that has so totally led us to a world of denial? Up is down, black is white, good is bad — its all very Orwellian.”

    I recall being told, after 9/11, by “Shep” of Fox News to “fight terrorism by going to the mall and buying that suit ‘I’ wanted.” A lot of people went and bought things and it turns out they didn’t have the money to do it. We had one of the shallowist recessions because people loaded on the debt. Now what?

  12. Richard Wilson, Hedge Fund Consultant commented on Mar 22

    I agree, I think superficial data is cherry picked to get the message about that benefits the communicating group of government body best. When this can’t be done lesser known obscure statistics are used to reassure people that the sky is really not falling.

  13. Camille commented on Mar 22

    IMHO, our nation and largely the world has always been filled with people reluctant to confront reality and people willing to profit from that condition. Perhaps we’re recognizing the misalignment between reality and variant perception because in the internet age, an educated person can so easily and quickly identify this disconnect from reality. I actually have sincere hope for the future because I foresee a market evolving for accuracy in the information age as more and more people communicate worldwide. It’s a necessary evolution in the infoage.

  14. matt wilbert commented on Mar 22

    I think something additional is going on here–it is an expansion of campaigning to all aspects of public discussion. Most public discourse is completely predictable based upon which “team” the speaker is on, supporting facts are stressed, or overstressed, or fabricated and conflicting facts are spun or denied. Even people who should (and probably do) know better participate. There is a whole industry of think tanks devoted to confusing people on behalf of specific interests.

    Most people can’t spend enough time on this stuff to see through the “information fog”, so it is unsurprising people have no idea what is going on.

    Perhaps some kind of mediating institutions will evolve to help people deal with this, but the existing media mostly don’t.

  15. miller commented on Mar 22

    Thomas Friedman says “The World is Flat” his way of saying we will have to compete on a more and more level playing field as time goes on. We have had the playing field tilted toward us, economically, ever since WW1 and as it tilts back toward flat we are going into denial, the truth is we will have to be better than the competitor to win. If we lie to ourselves we will not even be good enough to be competent. Old values like hard work, delayed gratification and thrift will win the day. We better figure out how to encourage them here! Lying about the situation has not been helpful but those responsible for delivering the message are rightfully afraid of the crowd’s response if they tell the truth. I expect we will continue to be lied to until we actually want to know the truth!

  16. km4 commented on Mar 22

    Were the Good Times a Mirage?

    Yes for the USA but not for the Oasis Economies
    http://www.strategy-business.com/press/article/08105?gko=d6c06-1876-26698132
    by Joe Saddi, Karim Sabbagh, and Richard Shediac

    Surrounded by tension and unnoticed by many observers, the nations of the Middle East are building their own kind of sustainable prosperity.

    Five years ago, Dubai’s Palm Island didn’t exist. Where there are now three human-made land masses — the largest the size of a major city — arranged in the shape of a tree, five years ago there was merely the sparkling blue water of the Arabian Gulf. Then the government of Dubai decided to accelerate the diversification of its economy, from a purely oil- and trade-based system to a business and recreation hub designed to lure investors and tourists.

    A few miles south, Abu Dhabi, the capital of the United Arab Emirates (UAE) and the world’s wealthiest city, is experiencing an even more dizzying rate of growth. The US$3 billion, gold-domed Emirates Palace hotel was completed in 2005, ready to welcome visitors to the scores of world-class museums, universities, and hospitals that are slated for construction, at an esti­mated cost of $200 billion over the next 10 years. These fast-paced developments are part of the UAE’s reinvention of itself as the cosmopolitan crossroads of a sleek new Middle East.

    All this is one piece of a still broader story. In the past five years, the Middle East region has consistently been transforming into a hotbed of new private enterprise. The government-controlled monopolies of the past, such as the Saudi Telecommunications Company, are being deregulated and exposed to competition. Research and development in high technology is booming; enterprise zones have attracted the likes of Hewlett-Packard, Cisco Systems, and Microsoft. Local companies are investing in streaming video and other technological applications. Manufacturing, too, is on the rise. Driven in part by growing demand from China, the region’s petrochemical sector is exploding, with more than 190 projects currently operating across the Gulf; its $28 billion biotechnology and pharmaceutical manufacturing industry has enjoyed double-digit growth each year. Many consumer packaged goods companies are opening factories in the region, in part to serve its growing middle class and in part to export goods to Europe and the rest of Asia. In short, the region — once an end consumer in the world market — has begun to transform itself into a supplier. All of this translates into unprecedented opportunities for investment.

    ********************************

    Connect the dots folks… this is where Dick Cheney will be retiring.

    However, Bush will be off to his compound in Paraguay.

    And the US middle class ( what’s remaining of it ) will be holding the bag !

  17. Winston Munn commented on Mar 22

    Irving Kristol summed it up best:

    “There are different kinds of truths for different kinds of people. There are truths appropriate for children; truths that are appropriate for students; truths that are appropriate for educated adults; and truths that are appropriate for highly educated adults, and the notion that there should be one set of truths available to everyone is a modern democratic fallacy. It doesn’t work.”

    It is arrogance, pure and simple. Only a few are fully equipped to handle the truth, so a lesser truth should be made available to the unwashed masses.

    Orwellian, indeed.

    “Fascism is capitalism in decay.” – Vladimir Lenin

  18. RNL commented on Mar 22

    [Quoth Barry]:

    Are we going to be saddled forever with these damaging, hallucinatory hacks?

    ——-

    For the moment, yes. Perhaps at some point they’ll be replaced with better people (or more competent hacks), but as long as humans have their cognitive biases, succumb to logical fallacies, are enslaved to their broken ideologies and belief systems, then at some point a new set of damaging, hallucinatory hacks will come in to replace them.

    We can continue to build better and better systems (the American experiment looks wonderful on paper – Constitution, Bill of Rights, Separation of Powers, etc.), but as long as people are willing to find ways around it, and others are willing to go along with it, this will happen.

    “Fix” the human mind, and you won’t have these problems. Till then, we’re stuck.

  19. merrill commented on Mar 22

    Thanks, Barry. One of the things that keeps me coming back to your blog every day is that you ask the most interesting, thoughtful questions.

  20. Marcus Aurelius commented on Mar 22

    Post industrial revolutions have depended on the vilification and exile or murder of the intelligentsia. Germany, Russia, Cambodia – pick a revolution, and you’ll find heaps of dead intellectuals who, for very good reasons, warned against it.

    Anybody else noticed the swiftboating of science over the past decade?

    The earth is only 6,000 years old. Intelligent design is scientifically valid. The earth is too big to pollute to death. The oceans have an endless bounty of cheap nutrition. Teri Schiavo is only sleeping the sleep of sweet dreams.

    Oy.

  21. Will commented on Mar 22

    Isn’t this what happens in any bubble?

  22. Michael M commented on Mar 22

    As a European, I have been repeatedly told by Americans friends and media that the US is superior on all fronts. Officially, US GDP and GDP growth was stronger than Europe’s and has been for decades, which makes sense for anyone believing in free market economics. Therefore, I was surprised to see during my two years in the US (2000-2002) that Americans didn’t appear particularly rich. Yes, the houses and cars where big, but generally of poor design and quality. The clothing worn, the food eaten, the furniture bought, the design and quality of most things I encountered were poor compared to what I was used to in Scandinavia.

    My American MBA friends, most of whom had never been outside of the US, were so sure that the US was ahead on all accounts and always would be. At the same time, my European friends who earned less and paid more taxes had better clothes, better food, better drinks, better phones and electronics, better haircuts, better education, better most everything. And less debt.

    There are so many variables that go into comparing countries. I have no idea if the US on average is really richer than the richest countries in Europe or the other way around. Unfortunately, this discussion is hardly ever based on facts, but purely on nationalism and ideology.

    But I suspect too that America appeared richer than it really was by way of using steroids. The steroids being a strong dollar (at the time) which made the US look richer than it was, higher consumer leverage combined with falling interest rates, aggressive accounting, squeezing the poor and the middle class, windfalls (tax cuts, more aggressive offshoring) and incomparable employement and inflation statistics.

    However, it is beginning to dawn on Americans that leverage and steroid use have to be reduced. It is my clear impression that Europeans are still being too optimistic. Americans may have more cleaning up to do than Europeans, but at least they are slowly getting started. The politicians though are equally clueless on both side of the pond.

  23. JustinTheSkeptic commented on Mar 22

    Although we are the most developed nation on earth, the BRIC nations will eventually eat our lunch – they won’t surpass us, anymore than we have surpassed England, but IN REALATIVE TERMS, just by getting on par with us, gives them a financial feast. Therefore like any nervous and freightened animal we flee from our own logical thought processes, after all having our real-wages diminish while the BRIC nations increase, isn’t a soothing thought. This is why the FED lets the money supply increase by allowing extreme leveraging, knowing that it is the only way the average-Joe, can spend and will unknowingly support the process. And of course the financial psydo-gurus in the media, play with their archaic metrics, thinking that it is game-on as usual.

    Of course this massive asymetric build-up in real-wages, real-spending power, etc.,(ADVANTAGE BRIC), eventually creates a catasrophic financial earthquake, of which the Central Banks around the world think they can somehow stop. Fact is they are prolonging the process. I don’t know about you but I’d rather cleanse the system with one cathartic swoosh and pick up the pieces, (which would more than likely get every one thinking (seeing) with, “eyes wide open,” rather than having blinders on.) then practice “a death by a thousand cuts.” The whole globe is part of the economic system now, and the sooner the powers that be work-out how the process can work the better – one central bank, perhaps and one currency.

  24. edhopper commented on Mar 22

    As long as the media continues to report “both sides”, even though they know one side is without a factual basis, this will continue.
    As long as the media goes back to the same folks who were wrong all along and ask what to do now, rather than ask the folks who were right, this will continue.

  25. Mike commented on Mar 22

    That’s not Larry Niven you’re quoting about advanced tech and magic – it’s Arthur C Clarke (timely).

  26. Chuck F commented on Mar 22

    John Bogle hit it spot on when he paraphrased Upton Sinclair: “It’s amazing how difficult it is for a man to understand something if he’s paid a small fortune not to understand it.” Apply to any profession.

  27. Rob Dawg commented on Mar 22

    BR, Niven was playing off the original quote which is far more applicable;
    “Any sufficiently advanced technology is indistinguishable from magic.” – Clarke

    [AC Clarke died last Thursday to our greater loss.]

    ~~~

    BR: Yeah, I was playing with both versions, but in honor of his passing, I reverted to the Clark law.

  28. lurker commented on Mar 22

    Good posts all. Barry, you can’t date this to 2001, please!!!! Look at the Internet fable, the Biotech fable, the Enron fable, and going back through all recorded boobles. Greed destroys logic. What I wish is that the CEOs and upper management of these “reality in earnings” challenged companies had to return ALL the money they made when they were spinning the company line. Then integrity would have value in our society as well. We reward the liars too richly and protect their bonuses to strongly. Makes the smart guys work against the rest of us and society as a whole…maybe I am a tad dark this AM.
    Happy Easter!

  29. VennData commented on Mar 22

    There’s a lot to be said for the Behaviorist school of finance. The human mind – as evolved – does not have anything like the Gladwellian ‘Blink’ system for finance built in. Those skills are not intuitive and must be learned (over a great many trials.) I can’t tell you how many smart – operatively defined – individuals believed that since housing has always gone up, it will continue to go up. Inductive reasoning, which comes naturally to people, is fallacious and doesn’t prove anything, as we have seen.

    The emotional-based culture of advertising and rejection of traditional American values (e.g. modesty, diligence, frugality) has created an economic “backstop” to the house price boom, what Veblen described as Conspicuous Consumption. So, anything that allowed for the increasing consumption has been accepted as ‘true,’ anything denying ‘more and more’ as ‘false.’ This lack of deferred gratification feed the HELOC side of things: the unwarranted support of the Bull case, Bush’s get out there and shop post 9/11 spin, tax cuts get rid of deficits etc. American consumption patterns were based on a faulty assumption that they were told, over and over, and believed quite naturally.

    The American condition has separated from other nation’s in subtle and not-so-subtle ways. The 1984 rejection of the Fairness Doctrine midwifed a media culture that accepts an argument without looking at the subject in totality (a non-Socratic approach, aka dogma.) People’s opinions are hardened, re-enforced. Examples are the usual culprits all over TV and radio. Recently we’ve witnessed another media outlet in Jeremiah Wright’s weekly “marketing” to his flock is simply a grab bag of self-pitying woe-is-me un-provable inductions. But hey, he was able to fund Obama to the tune of $150,000 – since returned – with this business model.

    Change will occur only when a greater plurality realize that ‘buying’ every time Larry Kudlow says so nets you under performance; wealth destruction is a powerful incentive. Change will be coming quickly now: Who will be hearing David Malpass in the near future? Who will believe the “free market” dogma after the Wall Street ‘backstop?” Who will not question our dependence on foreign oil? …presumably only the very best realtors, mortgage originiators etc. will survive the upcoming real estate winter.

    A final thought, the comments section of blogs show a bias toward the blog owner’s views. The opposing views that pop up are the beginning of a natural reversion to the mean – back to the Fairness Doctrine imperfect as it was – which is what gives these comments section (theoretically for now, hopefully improving the future) their robustness and applicability to the times.

  30. John R. commented on Mar 22

    I agree with many of the insightful posts here. I’d stress a couple of things that echo other posts:

    1. The perpetual campaign, in which every piece of data is spun to advantage. This is what leads government agencies to bury, water down or ignore facts that don’t fit in with the ruling party’s agenda. Very dangerous and damaging.

    2. The media’s abdication of any role as referee or arbiter of truth. I’m a former newspaper reporter, and I think the “he said-she said” model that’s been developed in the name of objectivity is now doing more harm than good.

    A reporter thinks he’s done his job if he quotes one expert saying the world is flat, and another saying the world is round. Both sides are represented, so he’s been fair and objective.

    The mainstream media — what’s left of it — needs to push beyond he said-she said and try to determine the truth of a situation. Of course whether the sheeple would even pay attention is an open question.

    3. The glorification of the rulers and the demonization of dissent. Our Glorious Leaders are right, and anyone who opposes them deserves the worst vilification we can heap on them.

    When I was a kid (I’m 50), if someone disagreed with you, people would often shrug and say, “Hey — it’s a free country.” I don’t hear that phrase much anymore.

  31. blue commented on Mar 22

    Could it be that while the market was rising, you were crying bear and they were crying bull, and now that the market has had a ‘correction’ we can go back to the same old? you crying bear and them crying bull, while the market rises…

    Just because the market corrected doesn’t mean you were ‘right’. That’s the thing about this 85 day retreat from the top, in a logical world, one would expect that the ‘bears’ would say SEE, LOOK I WARNED YOU and get to the next order of business, sifting through the fallen and look for the recovery

    but no, it’s SEE I WARNED YOU and NOW YOU BETTER HOLD ON TIGHT BECAUSE ITS ONLY THE BEGINNING!!!! LISTEN TO ME NOW, YOU WEREN’T LISTENING BEFORE…

    examine from the logic synapse. -][

    ~~~

    BR: The 1st part of your question ignores the many, many bullish calls made by me over the years (starting in October 2002), but that only serves to identify your agenda and where you are coming from.

    Oh, and this 85 day correction has erased 18 months of gains in the major indices (keep spinning).

    Regardless, I will respond to your question anyway: While that is surely a possibility, in order for it to be true, then some combination of several other questionable things would also have to be true:

    -The 2003-08 period was a normal, healthy expansion;
    -The credit crunch is only a temporary aberration;
    -Inflation has been mild, job creation robust, growth strong;
    -The public complaints about the economy over the past two years is really just misplaced apprehension over the Iraq war;

    One last thing: You would be taken much more seriously if you identified yourself, and/or showed your returns/calls over the past 5 or 10 years.

  32. Tom O commented on Mar 22

    It’s all about the incentives. Our culture measures status and success in terms of products that can be packaged and sold. Social, economic, and political culture revolves around this fact. One aspect of this is that major media revolves around ratings, not accuracy or relevance. Another is that political leadership is determined by how well politicians financially reward supporters and organized economic groups, not by objective standards about how the country as a whole progresses. If objective reality stands in the way of achieving the goals the culture is designed to achieve, the culture will redefine reality.

  33. Nihilism commented on Mar 22

    I am sick and tired of you bloggers trying to show me a different reality all the time. [BR: Different from our fantasy construct? Try Reality!]

    What’s wrong with some optimism? That’s called true leadership. Here’s a latest one from presumptuous pied-pier Dr. Kudlow to FAs around the country…just ahead of the Easter weekend.

    Why Not Optimism?

    March 20, 2008
    Lawrence Kudlow

    What exactly is wrong with an optimistic president who has confidence in the long-run future of the American economy?

    President Bush took this stance in a recent interview with me and at the Economic Club of New York. He told me, “Like any free market, there are also downturns and we’re in one. But I am confident in the long-term strength of our economy.”

    Optimism, after all, is one of the few levers our chief executive can use every day…

    So I’m glad President Bush is taking an optimistic view. That’s called leadership.

    *snip!*

    ~~~
    BR: When we evaluate companies, or sectors over overall economic conditions, we are not looking for any coloring or bias or sin.

    New & Improved Reality! Now with more happy-happy joy-joy simply doesn’t fly in the investing world.

  34. ddrich commented on Mar 22

    The short answer to your final question is a resounding YES!!!!!

    It will continue to forever be thus until economy-of-scale consolidation of information outlets among the mass media (TV, Radio, Print, excluding the Internet bloggy things)accrues to fewer people wanting only to maintain the status quo of profit generation and similar mindset.

  35. Jdamon commented on Mar 22

    Yes, why is it we so conveniently forget that the period of time between 1994 – 2000 was every bit and more of a bubble than what we are experiencing in this “credit / housing” bubble?

    Oh, is it maybe because a Democrat was in the White House and not the Chimp?

    How this situation falls at the feet of one person or party is such a joke.

    Listen, greed is a human trait. What I am seeing in the current business environment is the unreal greed of the top 2 or 3 creeps in Senior Management are skimming such a hugely disproportionate amount of money from the Company, while making the minions who actually do care about the quality of their work, work harder and harder and harder. 40 hour weeks have turned into 60 in the last 5 years. Pay hasn’t increased in real terms and folks are struggling to stay at a standard of living they used to be able to afford. This only ends when the Dems gain control and pass laws to limit the amount of $$ these creeps can siphon from their Company’s. That is the only answer in the short run. Long term, we should fire all the business consultant, MBA types who these companies pay millions to in order to offshore even white collar jobs overseas where the quality of work is 1/10th of what we can do here in the States. Quality doesn’t really matter to Companies anymore, its all about the quick buck.

  36. odograph commented on Mar 22

    I think the small picture is what the market will or won’t do next. I appreciate that most commentators above looked at the big picture, how we manage information, and balance our lives.

    But I’ll come back to the fact that the media isn’t selling balance (I’m re-reading John Bogle now). There isn’t as much profit (or political leverage) in balance.

  37. p.a. commented on Mar 22

    A coincidental rise in fundamentalist religious sentiment with increasingly sophisticated political marketing. A small coterie of religious leaders who made common cause with a political party so long out of power it became willing to do and say anything, using marketing prowess to regain power, backed by millionaire-funded ‘think tanks’ pushing bogus policy solutions. A liberal elite in place at the time who had become too arrogant and/or lazy to explain and deepen public support for progressive policies, instead just issuing orders from on high and alienating their base support.
    Enter Reagan, and a generation was lost to objective reality. It really is a credit and sign of strength of the US economy that it took 30 years for Republican supply-side idiocy to choke the goose laying the golden eggs. (Well to choke it at least for the bottom what? 90%? 80%?

  38. lurker commented on Mar 22

    Until Murdoch controls it all????!!!!!
    and I thought I was having a dark morning!

  39. lurker commented on Mar 22

    yes the goose is still making fois gras for the top folks and when things get bad they will retire to gated communities in Dubai!
    Loyal Americans to the end…

  40. lurker commented on Mar 22

    Please don’t post anymore Kudblow stuff. That guy makes me sick. Really sick…as loony as a fundamentalist of any religion and as fantasy-based. Lap dog with a high IQ and proudly doing tricks for his Republican and Corporate masters. Barf is what he makes me feel like doing. If you must post his drivel, please warn me in the header so I can skim over it. What a dangerous loser he is. IMHO, of course!

  41. lurker commented on Mar 22

    Wow. I should not have had that second big mug of French roast!!!! Sorry for the ranting but I am seriously overcaffeinated right now. later. zoom!

  42. km4 commented on Mar 22

    Can the mirage continue e.g. massive market bubbles in stocks, real estate when the US economy

    1. needs $1B a day from China’s or the United States could not keep its economy stable or spare the dollar from collapse.

    2. already has close to $10 Trillion in national debt

    3. has a trade deficit of $800B/yr

    4. is the prime engine for derivatives ‘ticking bomb’ that grew into a massive bubble, from about $100 trillion in 2000 to $516 trillion by 2007 that is starting to go off in blowback stages

    5. when the the cost of Bush to America since 2000 is $32 Trillion dollars in total liabilities and unfunded commitments for future payments.

    I think not…

  43. Ross commented on Mar 22

    Jeez, it’s just a damned cycle. Recognize it for what it is, adjust and move on.

    But what I really want to know is do I need to buy carbon credits for my new spring calves?

  44. ChangJ commented on Mar 22

    You got the Arthur Clarke quote backwards.

    “Any sufficiently advanced magic is indistinguishable from technology” doesn’t make sense.

    Its “Any sufficiently advanced technology is indistinguishable from magic.”

    ~~~

    BR: Wow, totally weird! I just cut & paste-ed it from a Clarke page — never noticed the inversion. Good catch, I’ll fix above. (So freaky!)

  45. wunsacon commented on Mar 22

    >> bin Laden accomplish in fact what he only set out to do symbolically: destroy our financial empire. Sadly, we seem set on doing it ourselves.

    *I got yer fantasy right here…* I read Osama’s plan was to hit us hard enough to make us retaliate and fight “over there”, because his group can not project power over here reliably. (E.g., 8 years between attacks.) Not only did most of the country fall for it, how many times have you read “we’re fighting them over there so we don’t have to fight them here”? Falling into a trap became cause for a slogan.

    >> How this situation falls at the feet of one person or party is such a joke.

    Everyone who voted for a neocon must share blame for the past 7 years.

    Go ahead and blame other voters for other mistakes in other eras. But, you can’t take blame *away*. That’s not how blame and responsibility work. The “winners” must take personal responsibility for the consequences of their votes.

  46. Booyaaaa commented on Mar 22

    If we truly have a flushing of the market, and people lose a ton of money in the process, I think the masses will realize what a crock of crap we’ve been fed. That’s the point where things will turn.

    We are a society that has lost its way. The level of political corruption, whether it be bribery, cronyism, infidelity, etc- seems unmatched. I believe this goes hand in hand with the whole truthiness issue on Wall Street as well. Things go in cycles- and right now we’re in the low point of the truth cycle. If it doesn’t get better, we will continue to decline as a country.

    No Country for Truthiness

  47. thoma commented on Mar 22

    “While intellectual progress in Europe had ceased (blame the rise of the church”

    uuh, i do not know a lot of historians in europe who could sign this sentence….

    ~~~

    BR: Yeah, that’s reads wrong.
    (Clean up in aisle 2!)

  48. IdahoSpud commented on Mar 22

    I blame the media. They are the ones who take uneducated nut-balls and give them equal time with thoughtful intellectuals.

    Either that or they give the lunatic nutball his own TV show, and occasionally have intellectuals as guests to give him/her the air of legitimacy.

  49. thoma commented on Mar 22

    to be more specific, the was not enough rules in europe at these times of middle age. Time of the swords and reign of violence.

    and at the opposite, the church slowly add some laws ( moral and even real canon laws) to be respected even by chivalry and up to the kings, like “you not “give ” your daughter unless she does not like the man” or the Peace of God , which has been imposed on saturday and sunday, then plus friday, and still add thursday . Wars were only on monday , tuesday and wednesday , thanks to church…

  50. Keith Harrell commented on Mar 22

    Barry,

    I think the “truth” can be found, but you have to look for it. I have been reading Nouriel Roubini, Bill Cara, Jim Jubak, Bill Fleckenstein, and John Mauldin for a while now while sitting in cash. There are people that are widely read (including yourself) that are writing about the real problems of our economy. The truth is that we are going to have to consume less in the United States in the future. I personally don’t believe this is a bad thing, but it means our economy is going to have to be different in ways that most people are not prepared to deal with yet.

  51. km4 commented on Mar 22

    Debt-Gorged British Start to Worry That the Party Is Ending ( but I think America and Americans should be worrying more … )

    http://www.nytimes.com/2008/03/22/business/worldbusiness/22debt.html?ex=1363924800&en=9d830e516ddb302d&ei=5090&partner=rssuserland&emc=rss

    As the United States economy weakens, many Americans are being overwhelmed by personal debt, but Britons are even more profligate. For most of the last decade, consumers here went on a debt-financed spending spree that made them the most indebted rich nation in the world, racking up a record £1.4 trillion in debt ($2.8 trillion) — more than the country’s gross domestic product.

    By comparison, personal debt in the United States is $13.8 trillion, including mortgage debt, slightly less than the country’s $14 trillion G.D.P.

    Britons are spending more than they earn, racking up a household debt-to-income ratio of 1.62 compared with 1.42 in the United States and 1.09 in Germany.

    The Fed needs to continue lower interest rates and Bush admin says spend spend spend because they don’t want the party over 2009 when Cheney bolts to Dubai ( Halliburton’s new HQ), Bush is off to his compound in Paraguay, and middle class America ( what’s left of it ) is left holding the bag !

  52. Kuds commented on Mar 22

    Did Greenspan kept interest rates low for so long after the 2001 recession because he really didn’t believe in the recovery? Or was he just creating a housing bubble? Or both?

    Don’t ask him, because he will not tell the truth.

  53. Ross commented on Mar 22

    Thoma,
    You make some excellent points.

    Western ‘money thought’ began on the checkered (exchequer) money counting table of Robert the Devil.

    The good Fathers were blessed with learning. Think Cistercian Monks. The Teutonic Knights of the East. Robert Bacon.

    Ah, and the first Capitalist, Frederick II (Hohenstauffen). I long for the good old days.

    Someone should seriously write about the evolution of Western Money thought and how it so very much differs from the other civilizations of world history.

  54. RW commented on Mar 22

    What edhopper said: When we see those who were right being preferentially quoted rather than those who were wrong we’ll know at least some of the information overflow has been appropriately piped.

    Part of that piping includes calling shenanigans on those who try to claim that those who were right were just being “bears” and were therefore actually wrong before.

    In brief, part of the problem involves the corruption of language and abuse of informal logic. This includes conflation of formerly distinguishable terms, such that the difference between bullishness and cheer-leading becomes as mashed-up as the difference between bearishness and normal prudence. As BR points out this is often coupled with ad hominem references so that someone expressing normal caution or skepticism is called a “perma-bear” as if that label had any bearing on the argument at hand.

    Let’s be clear here, exercising prudence is the normal behavior of the sane investor; opportunities must be sought but anyone who unreflectively purchased shares in an S&P index fund in 1998 to hold until now would have done no better than the return on T-bills. No trivial counter arguments that they should have learned to be more nimble please; the stealth bear of ’98 was the hint that the great shift from productive to financial assets was not going to be smooth and, as events are amply demonstrating, the path has proven darker and more twisted than even putative professionals could readily discern.

    Returning to BR’s somewhat rhetorical point, in some cases the casual corruption of language and logic appears to be a function of stupidity or ignorance, the person simply doesn’t realize they are using words and argument inappropriately, but in other cases it is rather clearly intended to distract, the act of a tout or promoter or apologist.

    And increasingly these days it seems that the person guilty of this kind of corrupted discourse doesn’t really care whether what they say is true or not: If it is consistent with a particular world view, social class or purpose then that is all that is required.

    Harry Frankfurt’s* (2005) book, On Bullshit, discusses this latter trend rather amusingly and his (2006) book, On Truth, gets to the serious meat of the matter and its danger to society but this quote from the former book captures the sense of the phenomenon: “[the bullshitter] does not reject the authority of the truth, as the liar does, and oppose himself to it. He pays no attention to it at all. By virtue of this, bullshit is a greater enemy of the truth than lies are.”

    There has been enough bullshit from both high places and low the past decade, time for a little truth IMHO even if it proves painful or, perhaps even more to the point, fatally wounds a sacred cow.

    *Both of Frankfurt’s books are rather short, more like extended essays really, and strongly recommended if you haven’t read them yet: It’s not ‘deep’ philosophy but it is important IMHO.

    Ross: speaking of books and your question above, I recommend: Crosby, Alfred W. (1996). The measure of reality: Quantification and western society, 1250-1600. Cambridge University Press. The rise of town clocks (shared scheduling) and double-entry bookkeeping (spread of math) figure prominently in this excellent account.

  55. russell120 commented on Mar 22

    The problem is that we take very complex systems and simplify them so that we can “understand” them. That we are going to simplify them in a way that we would find most palatable is not surprising.

    Your comment on the Islamic “turning away from knowledge” is a case in point. If you really look at the details of what was going on, it is actually very hard to find this “turning away” in any systemic fashion. But we like the idea that the Western Europeans came to dominate the globe for a period of time because they were smarter by design, rather then haphazardly stumbling onto a winning formula through a series of rather haphazard events.

    The current market isn’t much different. We are stumbling around from event to event. It is true that some of the events have been “predicted”, but if you have a whole laundry list of problems that have been discussed, it is not a complete shock that some would arise in the denouement. About the only item in this list that seems to have been pretty straightforward was the excess construction-pricing in the housing market: the bubble. But the fallout has taken a path that was not particularly well predicted. And if your outcomes (or at least their interrelations) are not well understood, than arguably, neither are your inputs. So if we don’t have a particularly good understanding of either our inputs, or outputs in the holistic sense, what is it that we think we understand.

  56. Al Czervic commented on Mar 22

    It’s the beauty of the modern corporate fascist takeover. You don’t need to use violence (at least domestically). You don’t need to be overtly oppressive or practice overt censorship. Let the comics and bloggers rail against the leaders. What difference does it make? Who would the people normally turn to when the status quo began to hurt? Their politicians of course. But when virtually all politicians are bought and paid for, then there’s really nowhere left to turn. Except, perhaps, to the extreme of violent uprising. But we haven’t done that for well over 200 years so we’re probably pretty rusty.

  57. Michael Evers, Chicago commented on Mar 22

    About two months ago, Sidney Blumenthal wrote a series of essays for Salon about the denigration of objectivity and degradation of analysis in politics, economics and science. His conclusion was that the freedoms granted to the press by our constitution imposed a reciprocal duty on the journalist community to identify and explain the facts. He sang the praises especially of Walter Lippman, holding him up as a journalist icon. Lippman, according to Blumenthal (and according to me) was obligated by the contours his own intellectual honesty to pursue “objective” truth wherever it led him.

    Blumenthal concluded that the corruption of the free press’s mission (state the facts) resulted from increasingly centralized ownerhip of media industries.

    After the assasination of the Fairness Doctrine, the press’s hunt for reliable facts was successfully subordinated to the propogation of “factoids” and “memes” aligned with the cartel’s proprietary interests. In other words, the primary engine of informed political and economic citizenship was hijacked by profiteers.

    Translation: Rupert Murdoch and his fellow travelers ain’t interested in elevating the public discourse.

  58. Taylor commented on Mar 22

    At the risk of stoking more controversy than I really intend to…

    I see the phenomenon of the Obama candidacy, along with the jaded reaction of voters to Clinton and McCain, to be another manifestation of this desire to live in a fantasy of baseless optimism. I mean, how many people about to lose their shirts are chanting “Yes We Can” in hopes it will stave off the inevitable?

    I really don’t want to be so cynical, Obama’s recent speeches on race and national security have been very impressive, but when you look at the breadth of his support from people who neither know nor care what his political positions are…. I don’t know if he’s ready to face the challenges ahead, but I’m pretty sure his supporters are not.

    When the inevitable backlach comes, I predict Ron Paul will be the beneficiary (not this election cycle, obviously). I say that as someone who has very deep reservations about Paul….

  59. john commented on Mar 22

    BR:interesting strand of thought. I was walking around my local Borders this morning and interestingly amongst all the socio political crap by shills of various sorts (mainly conservative it must be said) there were several books on exactly this theme. Namely the US willingness to delude itself on all manner of issues. This tendency has always been around let’s face it but there is no doubt it’s accelerated over the past ten years. The unwillingness to accept empirical evidence and scientifically established facts if it doesn’t happen to coincide with your prejudices has entered the realms of the bizarre. What are we to make of a situation where the current Republican president and the Republican presidential candidate don’t accept the theory of evolution while the two Democrats do accept it but don’t want to talk about the issue. It’s hard to avoid politics when discussing this issue because this flight from reason does seem to have been led by the right and particularly the current administration and their shills most of whom are not particularly interested in reality but in either furthering a political agenda or in many more cases turning a buck pandering to the fantasies of a substantial minority of the population who seem to have no problem with incompetence and mendacity. This has created a sort of Gresham’s Law of information where bad info has driven out good. There are some signs that the business community who have funded a lot of this process are starting to get uncomfortable with what they have wrought. Not many of the media barons but the leaderships of global corporations who are starting to recognize where this national naivete and wilful blindness may lead in the longer term. Let’s hope so because one of the more depressing aspects of American society over the past ten years has been this erosion of objectivity which is going to be fatal to our society in the long run when we have to deal with a world order that is inevitably going to mean some relative decline in our global position. Denying reality is going to lead to all sort of costly misjudgements of the sort we have seen made over the past eight years. Some have no problem with this but it behooves the rest of us to point out this inanity at every available opportunity.

  60. Ross commented on Mar 22

    RW,
    Thanks. I’ll read it forthwith.

    I was really talking about comparing the different mathmatics of each civilization and why their economic systems unfolded the way they did. For instance, Egyptian money system was very much like ours. When the Egyptian’s were under the influence of Greco Roman coin money thought, they would beat the coin into a ball and trade it as a ware. One lame example.

    Maybe we could work backwards from the various maths.

    Euclidian Geometry: Greco/Roman

    Algebra: Babylonian/Arabic

    Trig: Indian

    Infintesimal force-mass, counterpoint, calculus: Western

    Maybe all math is an illusion yet necessary to a particular civilization. I eagerly await the the research on Mayan/Aztec math and money.

  61. ac commented on Mar 22

    You don’t want to see Commercial RE by the 4th quarter of this year. The decline has already been confirmed but the mortgage side of it will not to later this year MUCH like RRE. Didn’t you learn your lessen?

    Rule 1: When the entire RE field goes into recession at the same time, recession ensues
    Rule 2: If credit is still to available, then it hasn’t tightened up NEAR enough. That is the problem Krudlow can’t figure out. It means the recession will be worse than normal because they will bleed longer than normal.

  62. scorpio commented on Mar 22

    the “fog of war” becomes handy notion when considering the “fog of a well-functioning economy”. most of the problems u cite (CPI, GDP, war, PE, etc) serve the function of obscuring reality for the great unwashed, the 80% of Amurricans w no liquid net worth yet who are marketed into believing that laizzez-faire capitalism benefits THEM, not the true beneficiaries top 1%. and so it goes…

  63. RW commented on Mar 22

    Ross,
    Ah, I see where you were going, but with the possible exception of the Mayan/Aztec system I suspect the other approaches you cite were hybrids; that is, numerical systems developed in part by borrowing concepts from other cultures to help tackle current problems. That was almost certainly the case with Western maths I think, at least until the stunning invention of the calculus (demanded as much by increased precision of measurement as the novelty of the problems I suspect). And of course we should not forget statistics and statistical thinking.

    I remember reading a Thomas Nickles book years ago, titled “Good Science as Bad History” I think, that recounted a story from his student days where another student commented in class that the calculus made Zeno’s paradox trivial. Nickles uses this as an illustration of the “Whig fallacy,” the past (fallaciously) interpreted in terms of the present, but I recall thinking at the time that, barring a couple thousand years of history and completely different cultural milieus, the student’s comment was as correct as it was irrelevant.

    Back to BR’s post I recalled another book I read some years ago that I think addresses his question from a somewhat different angle and managed to find it. Basically it suggests another reason the economic numbers may just not be adding up and that is, quite simply, a vain attempt to be overly precise (I personally believe that the well-known “reversion to the mean” phenomenon is in fact exactly what would be expected in system described by imprecise measurements and has no other ‘deeper’ meaning than that).

    In any case, the book is: Porter, Theodore M. (1995). Trust in Numbers: The Pursuit of Objectivity in Science and Public Life. Princeton University Press.

    It’s a meticulously researched work IMO and basically concludes that, desire for precision aside, the urge to quantification in public decision making grows from attempts to develop a strategy of impersonality in response to pressures from outside [the applied sciences]. That is, objectivity derives its impetus from cultural contexts, quantification becoming most important where elites are weak, where private negotiation is suspect, and where trust is in short supply.

    A point that Porter makes again and again is that this impetus is not really coming from the physical sciences, that in fact the trappings of science are most conspicuously on display in fields with insecure borders, in disciplinary communities with persistent boundary problems. As Porter comments, in fields dominated by a relatively secure community, much of “what we normally associate with the scientific mentality — such as insistence on objectivity, on the written word, on rigorous quantification — is to a surprising degree missing.” The experience of physicists at the Santa Fe Institute at the astonishing (in their view) amount of high powered mathematical theory used by economic theorists, and the shock on the part of economists visiting the Santa Fe Institute at the loose and rough way in which mathematics and quantitative argument are used by theoretical physicists, serves as a case in point.

  64. ipodius commented on Mar 22

    I read the comments to posts like these and can’t help buy think that…well, some of you think too much. Or are too willing to see some design where there isn’t one.

    If anyone here has spent time on the executive team of a company, I think you’ll catch on to what I mean. Mediocrity is the order of the day. Anyone who tells the truth, or who is contrary to what the leadership says is simply ignored or jettisoned. When I was in bschool, you could read these cases where you can see the train coming and the guy that points it out is the first one to get fired. Smart people are scary. So one must surround oneself with the most non-threatening individuals.

    And the result of all of this is that, well, there is NO grand plan. Just “conservatism” in the sense of sclerotic non-change. And that is really the base here. What is seen are SYMPTOMS of this self-interest and protection in the current political regime, business environment, and return to religious fundamentalism. Change is scary. Technology is scary. And lord only knows those foreigners are scary.

    But all you have to do is wait and the world will intrude. Like it did to the Bear, to those that bought into the Republican recovery and bought houses they couldn’t afford, and like it will now to a bunch of banks. I was always amazed at how the current regime got the common folks to competely vote against their self-interest for so long. Wait until everyone finds out that these tax breaks were also illusory. You have to pay the bills somehow.

    I assume at least the Fed has woken up already, and is probably the one part of the government where change will be most manifest. But in the end, change comes. And with it opportunity. So we’re all bad if we waste it and settle again for mediocrity or just a good speech with no substance.

  65. Ross commented on Mar 22

    RW,
    You Sir, get the biscuit. Well said.

    To your point regarding borrowing concepts from other civilizations, I agree. Yet it is fascinating to me how the concept of zero was handled by each ie. Greco/Roman no negative numbers.

    I’ll swear that the beginning concepts of western math originated with Fafnir and the concept of Valhalla. Infinity as in fractional banking.

    Someone once said “we look at the stars and what we see is a reflection of ourselves”.

  66. Steven commented on Mar 22

    When, if ever, will disbelief and disillusionment whack folks upside the head to see the true reality?

    If you want to get an idea of how many people want to fuck with your mind and your perception of reality, just go to Google Video and look up the BBC documentaries by Adam Curtis. I think there’s at least nine hours of programs from the titles “The Self”, “The Trap” and “The Power of Nightmares”.

    By the time you finish watching those programs you will wonder if Adam Curtis is also fucking with your mind.

  67. VJ commented on Mar 22

    Jdamon,

    why is it we so conveniently forget that the period of time between 1994 – 2000 was every bit and more of a bubble than what we are experiencing in this “credit / housing” bubble?

    By what evidence ?
    .

  68. VJ commented on Mar 22

    Many of the stated economic gains have been a false ghost. Whether it was overstated job creation (NFP), understated inflation (CPI) or ‘inflated’ growth (GDP), a shocking amount of the debate about the economic expansion has been primarily spin.

    Add in that without counting the spending on the Military Industrial Complex for operations in Afghanistan and counter-terrorism efforts, GDP would have still been negative in the 4th QTR of 2001 when the NBER claimed the national economy withdrew from recession. This was followed by the illegal invasion of Iraq, which Stiglitz suggests has cost three trillion dollars, and one has to wonder if the private sector ever actually exited recession.
    .

  69. JustinTheSkeptic commented on Mar 22

    The real problem is you can barely tell the difference between, “Supply-side Economics, and Keynesian Economics, both are pump and dump schemes…

  70. Emmett commented on Mar 22

    Ross,

    I like your stuff.

    Your notes on math+money imply a one-to-one mapping of each mathematical era to each civilization’s perspective on money. But your list is chronological and cumulative… we use it all as a blend today. The mathematics are not philosophies, but complimentary discoveries.

    Certainly one result of the above is a communication technology providing secure, instantaneous, credible information (feedback)… enabling day trading, automated rules based trading, electronic packaging of debt as financial instruments, databased bank & investment accounts.

    Could it be that the increasing frequency and amplitude of economic bubbles is a kind of “ringing” effect of this undamped feedback system? Even so, reversion to the mean (Bogle’s balance) still rules.

    As you said:
    “Jeez, it’s just a damned cycle. Recognize it for what it is, adjust and move on.”

    I’m noticing we’re still in the blame game, but it’s getting silly and off topic… we’ve got evolution/creation, generation wars, conspiracy theory, global warming, etc. put forth as rational explanations of “how did this happen”. Truly fear has replaced greed.

    Is it time to buy?

  71. Ross commented on Mar 22

    Emmett,
    I blame it all on Heisenberg. The bloody bastard destroyed our old exacting measures. Now we get probability and uncertainty theory and quants so certain in their models that fine old reputable firms would lever up 30 or 50 to 1. IT’S ALL HIS FAULT.

    On the other hand, it was GAUSS. Stupid theory of multiple geometries. He hid his theories for years because he feared ‘the clamour of the Boeotians’.

  72. dissent commented on Mar 22

    Terrific post. One of my all time favorites.

    My take is that as we have gone from a worker/citizen society to a consumer society, we’ve given up seriousness and reasoned argument. We live in a world of advertising and spin. Appetite is all important. Why stick to the truth when you can photoshop? Politics has also degenerated to that level. To deal with the Iraq war, we were told to keep shopping.

    Radical thought: Maybe you DON’T deserve a break today.

    Maybe you should treat your life and prospects with the seriousness it deserves. That includes political choices and voting.

    Not that the Dems are god’s gift, but I think this began in earnest with Reagan. He was extremely slippery with the facts. He replaced substance with avuncular style. The media loved it. Republican’s learned how to seduce the white middle and working class: Dubya (2 terms!) is the result.

  73. jagmohan swain commented on Mar 22

    Recessions are as much part of capitalism as is economic expansion.So a recession is no big deal.One thing is for sure that 15 years hence the standard of living in united states and so in the rest of the world will be higher than what it is now.I can see that myself.Explosion of productivity due to IT usage can be felt by almost everyone these days.Yes we can have bear markets in stocks but new innovation, new products will make life better not worse.

    But yes it’s going to be very very competetive world.You have billion Indian and chinese aquiring the knowhow that they were deprived of during years of colonization.So that may be bad news for somebody who hates competetion that’s fantastic news for mankind for sure as the world will see a surge of invention and discovery the likes of which have not been seen for a long long time.

  74. D. commented on Mar 22

    Michael M:

    I’m Canadian and have noticed the exact same thing. And every non-American person I speak to makes the same observations.

    America is so incredibly blind, it’s sad.

    Although, in the last few years, I have to say that many Canadians have been brain washed into the neo-con way of thinking.

  75. Dave commented on Mar 22

    Barry, I used to share your world-is-going-to-hell perspective, but not anymore. Let me present a variant perception.

    World-going-to-hell has an implicit assumption that sometime in the past, things worked better: voters/politicians weren’t as stupdid, people worked harder and asked for no more than an honest wage, people and business had more integrity, the government was efficient and didn’t throw away trillions of dollars on unnecessary wars, etc. And now things are worse. As I’ve learned more about history, I’ve come to reject that assumption and conclude that things have always been this screwed up. Occasionally, a Statesman ( or other leader ) appears and moves us in a rational direction for a time. [ BTW, that’s leadership. Being optimistic is important but it is an incidental. Simply saying things are swell is not leadership. ]

    An alternate theory might be that at the birth of empire, people have to have a better grasp of reality or the empire never happens. Later, their descendents (that would be us) have the luxury of coasting for a while and living in a fantasy of ideology, at least until competition that has a better grasp of reality kicks in.

    Implicit in my attitude is a rejection of Jeffersonian democracy. The wisdom of the comman man is a myth. In this country, at least at this time, the average person is a dolt. Remember all those kids in school who got C’s? They get to have mortgages and vote too and they approach that task with same intellectual rigor they used to flunk algebra.

    I urge you to come to my side! Actually, this is more optimistic than it may appear. Instead of feeling that things are going downhill, I just feel things are continuing to be about the same and the slow grind of progress, due mostly to technology continues, perhaps is even accelerating.

    ~~~

    BR Dave, I don’t think the world is going to hell.

    I think we had a huge stock bubble that popped in 2,000. Rather than confront that directly, the Greenspan Fed created an enormous liquidity driven credit bubble — a hair of the dog that bit us. Now, we are dealing with the 2nd hangover.

    For the most part, these things are cyclical and repair themselves over time. Much of our excessive intervention only makes things worse.

  76. Roger Bigod commented on Mar 22

    The orthodox view was once summed up by the Western Civ courses popular in liberal arts colleges (especially Ivy ones) after WW II. The story boiled down to Greek rationalism being revived in the Renaissance and leading inevitably to high science and political freedoms. This has come under academic attack for an emphasis on dead white European males. The critics have a point, but they are irrelevant to the degeneration of rationality we’re talking about. I think Brinton was the one I came across in a bout of childhood reading.

    There’s a variation on this by Parkinson (of The Law) called “Meeting of East and West”. It may be out of print. He thinks the societies are deeply different, with rationalism and political democracy being a feature of ours. But he points out that in the big sweep of history the East has been up and the West down more often than not, and it could happen again. He doesn’t think we’re innately superior.

    Jared Diamond’s “Guns, Germs and Steel” deals with some of the same issues. He thinks that Europeans colonized so much of the planet because of basic logistical stuff like productive animals and crops which produced enough surplus that societies could invest in science and technology. No points for Greek philosophy. Major points for domesticating wheat.

    He has a later book I haven’t read on how societies decline. Lack of contact with basic realities is one point. Elites who feel they can ignore the masses is another. We see that as a loss of our tradition of rationality, but maybe his statement is more accurate.

    Whatever the analysis, something does seem to be going on.

  77. Salmon commented on Mar 22

    Truth will return as soon as something comes that smacks the average American strongly across the forehead.

    This has happened with the bust of the New Economy bull market.

    It happened when most felt like the terrorists would not attack on US soil (despite the fact that they had done so already) until the horror of 9-11.

    Now we wait until something comes to spur action on global warming, out of control spending (with tax breaks – LOL), Iraq, incredible debt with no savings, benefit programs, etc. And when it happens, even the bears will not be happy about it because it will be so significant and it will be too late to prevent the damage that will impact all of us.

    I think this has happened all through history but has accelerated recently with the behavior that has been reinforced in politics and in corporate America where no one really wants someone who will objectively recognize and solve problems and no one has the long-term view necessary to sacrifice in the short-term for long-term benefits.

    Barry for President 2012.

  78. brennan commented on Mar 22

    I really appreciated the Financial Philsophers quote. A large part of the issue seems to be much more that everyone seems entitled to their own version of facts, and we exist in a sort of information paralysis.

    For instance, why is their any attention paid to the Dow–the DJIA is perhaps representative of the global economy, but it is a useless indicator–but it seems that a huge proportion of data (even on this blog!) comes from the Dow. The S&P is much more representative–and if we just switched financial media to ignoring the Dow, we would have much more consistent information and understanding. Likewise–why not always report income and employment rate in palce of unemployment, or normalize GDP to GDP/person.

    Coming from the sciences, it always puzzles me how information poor financial discussions are, combined with the incredible mathematical and analytic sophisttication. That seems to lead to information overload–and like all hard problems, the issue isn;t so much having data or experiments, it is having the right one, and the right model. People (and I mean all people) are not well suited to modeling and understanding vast arrays of inconsistent data. This is a modern problem, and is unlikely to change.

    If it does change, it will be because we are better able to utilize the best parts of our brains (vision) in new ways to understand the world around us.

    regards,

  79. ef commented on Mar 22

    I think your answer is in how we handle “extremism”. As long as we embrace it
    (in any flavor, here or there) and stoke it for votes and ratings, we’ll have these problems. This is a hard one not to mention politics ;-)

    Reading the back of the cover, it is one thing to have beliefs that color our perceptions, but totally another to be closed minded, incurious, or belligerent. Seeing things differently and coming together to develop the best is the human experience.

    The last paragraph may be answered by the Repeal of the Public Interest Standard, the Equal Time Provision, and the Fairness Doctrine in 1987, which is when partisan
    Limbaugh was birthed. It can change.

    Market Place of Ideas – Note: Repeal of the Public Interest Standard, the Equal Time Provision, and the Fairness Doctrine in 1987.


    How’d we get here:
    – “…over a period of 30 years, had managed to build a ”message machine” that today spends more than $300 million annually to promote its agenda….”

    So much for telling your kids, “It isn’t whether you win or lose, but how you
    play the game.” Does anyone tell their kids that anymore?

  80. wunsacon commented on Mar 22

    This statement:

    >> Or are too willing to see some design where there isn’t one.

    seems undercut by the paragraph immediately after it:

    >> If anyone here has spent time on the executive team of a company, I think you’ll catch on to what I mean. Mediocrity is the order of the day. Anyone who tells the truth, or who is contrary to what the leadership says is simply ignored or jettisoned. When I was in bschool, you could read these cases where you can see the train coming and the guy that points it out is the first one to get fired. Smart people are scary. So one must surround oneself with the most non-threatening individuals.

    That’s not by design? Design by the people doing the ignoring or the jettisoning?

    Lobbying and repealing certain Depression-era laws was not “by design”?

    Sure, the fallout/bust wasn’t “the goal”. The goal was the bubble that preceded it. *Sustainability* is not a concern for public company execs who are measured/motivated by quarterly/annual results.

    For many, the stock option NPV of (a) “a few good bubble years followed by a disgraceful exit” exceeds (b) slow and steady.

    “You get what you measure.” We need better ways to incentivize so-called leaders.

  81. wunsacon commented on Mar 22

    This statement:

    >> Or are too willing to see some design where there isn’t one.

    seems undercut by the paragraph immediately after it:

    >> If anyone here has spent time on the executive team of a company, I think you’ll catch on to what I mean. Mediocrity is the order of the day. Anyone who tells the truth, or who is contrary to what the leadership says is simply ignored or jettisoned. When I was in bschool, you could read these cases where you can see the train coming and the guy that points it out is the first one to get fired. Smart people are scary. So one must surround oneself with the most non-threatening individuals.

    That’s not by design? Design by the people doing the ignoring or the jettisoning?

    Lobbying and repealing certain Depression-era laws was not “by design”?

    Sure, the fallout/bust wasn’t “the goal”. The goal was the bubble that preceded it. *Sustainability* is not a concern for public company execs who are measured/motivated by quarterly/annual results.

    For many, the stock option NPV of (a) “a few good bubble years followed by a disgraceful exit” exceeds (b) slow and steady.

    “You get what you measure.” We need better ways to incentivize so-called leaders.

  82. wunsacon commented on Mar 22

    >> I eagerly await the the research on Mayan/Aztec math and money.

    All in favor of base-20 say “aye”!

    (Must’ve been counting their fingers and toes…)

  83. Ross commented on Mar 22

    After the Mayan High Priest saw the Chief lick his fingers and toes after dipping them in the chocolate fondue he said “That’s base. Did he lick all twenty?”

    Coulda happen’d.

  84. Random commented on Mar 22

    The basic reality that has been continually overlooked by the pundits is that from a real income standpoint, something like two-thirds of the country has been in a recession since 1999. The bottom third has been in a recession since the early 1970s.

    A lot of this has been papered over Potemkin style with asset bubbles in 401ks and real estate. The increase in consumption (and debt) resulting from this “wealth effect” allowed the government, the Fed, and individuals to pretend that times were good.

    It is not only true that the market can stay irrational longer than you can stay solvent. An entire country can stay irrational for decades.

  85. pft commented on Mar 22

    All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident.
    — Arthur Schopenhauer

    The illusive aspects of our world are not limited to economics. Our reality has been altered by the powers that be through an elaborate psy-ops program enabled by corporate media perception reality control, and goverment/tax free foundation control of our educational system. Our history and economics have become a work of art that we admire, much as those who admire the Emperors new clothes. A paradigm shift is needed, but those who profit by the paridigm conceal it with disinformation, conflicting information, making most people content to accept the mainstream view since it is easier to do so and they are struggling to survive in an increasing hostile environment.

    Jermiah Wrights view of our history, albeit clouded by his racial anger, is much closer to reality than most realize.

    Back to economics and why we need to be deceived. This is the history and present for “eyes only”. A bit too lengthy, so feel free to delete BR.

    As most know, financial services, otherwise known as the non-productive economy, now accounts for over 20% of GDP. Manufacturing is now only 12% of GDP down from 27% in the 50’s. It is essentially a cartel now with financial holding companies that hold banks, security firms and insurance under one umbrella, and all banks controlled by the Fed. Soon they will control the security firms and will be buying stocks.
    If they can buy 200 billion of crap from brokers, why not 200 billion in stock. Don’t laugh.

    Since 1984, the credit market debt bubble has grown from 150% as a share of GDP to levels never seen outside of the Great Depression (350% vs 176% in 1929 and 287% in 1933). It has increased 50% since 1999. A great bubble yet to be popped, and only mildly deflated.

    There are many similarities between today and the 1920’s. They also had a housing bubble (8 billion in mortgages in 1921 tripled by 1929 to 27 billion), a stock bubble which is common knowledge, and even a consumer credit bubble where 10% of consumers spending was on durable goods, much of it paid on an installment plan through finance companies.

    The key difference between 1929 and today, is that the working class was relatively healthy then, taxes were low (1.5% then vs 10-25% in the lower brackets today, 25% then vs 35% now for upper brackets today), and government finances and manufacturing were strong. We were a creditor nation and not a debtor nation. Our government debt that accrued during the war dropped from 24 billion early in the 20’s to 16 billion in 1930. We were on the gold standard. Inflation was low. Between 1922 and 1928 prices rose 1%. Not per year, 1% over 6 years!.

    So what happened then? The Fed raised interest rates and created a credit crunch to pop what we call bubbles today. The big bankers who owned the Fed called in their loans at the same time. They then kept credit tight for 4 years which created the great depression. Why would they do this? They created the depression. Helicoptor Ben admits it, but called it an accident due to ignorance. It was no accident. Our banking spiders are smart.

    It was in part due to the Republicans in power in those years paying off the debt, and also the Fed was loyal to their London masters just like today. The London banking spiders needed a way to get back the gold that they ended up losing to us in the previous War, to pay for the weapons we sent them. The depression stopped government from paying off the debt. Banks hate it when you pay the principal off, they really hate it, this destroys money that has been created through our fractional reserve system (pay off 1 dolar, 10 dollars get destroyed).

    When FDR went off the gold standard, a lot of that gold ended up back in London, sent to them illegally by our bankers since the government called in all the gold and made it a crime not to exchange it for dollars. After they turned in the gold, FDR increased the value of gold by 40%, by devaluing the dollar 40%. (sounds familiar). Good for the bankers gold that was sent to London, it went up in value 40%. In addition, it allowed the Fed to create unlimited money since it was not constrained by a gold standard. This allowed FDR to spend whatever money he needed for the New Deal by borrowing it from the Fed (thats how money is created, with debt). He could have just issued his own debt free money and not paid interest, but then he would have ended up like Lincoln. The last thing the Fed wanted was government paying down the debt like the Republicans were doing in the 20’s, since they make money off the debt. They get even more angry when people talk about government issuing it’s own money.

    There was one more important reason for the depression, also related to going off the gold standard. We needed to get off the gold standard in order to fight the coming WW II which was being planned. This was going to be expensive, and would require a great deal of money being created than the gold standard would allow. WW II was just a continuation of WW I, which failed to create the New World Order that was to bring us One World Government. Hitler was financed by the British and their agents in the US, as was Stalin. Without our aid and Londons, neither Hitler nor Stalin could possibly have been in a position to fight a war big or long enough to be profitable. Funny how FDR and Hitler came to power at the same time (1933). Coincidence. Hmmm.

    Back to today. Sir Bubbles creates a stock bubble, pops it in 2000 by raising interest rates at a time when the government has finally balanced the budget (well, almost, they were still stealing from the SS trust funds cookie jar to the tune of 200 billion per year). History repeats. You do not balance budgets or pay down the debt and not be punished.

    But here is where history diverges a bit from 1929. The Fed immediately drops interest rates after the dot.com crash, 9/11 gives us a GWOT and Iraq, and allows for unrestrained government spending (debt which creates money) on defense and security, tax cuts are provided for the rich that also helps create money with increasing government debt, a big bonus to Big Pharma with Medicare Part D that increases debt, and all kinds of money is around to loan out, and since the consumers real wages are being reduced, they have much demand for loans. A much different situation than the 1929-1932 period.

    If they kept money tight, we would have had another Depression 7 years ago instead of what has probably been a mild recession of 7 years masked by false economic indicators, and broken up by a 2 year phony recovery created from the tax cuts and war spending. The so called jobless recovery was a hoax. Most new jobs created in this period involved handling bed pans and serving fries, or selling sub-primes.
    So Bush kind of did a New New Deal, but the working class was not invited to the party.

    But they did give us another bubble (s), this time a housing bubble, and a commodities bubble. The housing bubble was tough to inflate, because unlike the 1920’s, the working class is in tough shape, not very credit worthy, and most not legible for prime loans. So they changed the criteria for a loan, so long as you were breathing and would lie about your income, you get to live in a nice house real cheap (except for the property tax and insurance which were inflating, rapidly), until you got foreclosed when they reset the interest rates. You didn’t even have to be here legally, if you were picking strawberries in California and made 15 k per year but said you made 40K, and had a taxpayer ID number, you got a loan. Some illegals pay income tax or file returns and get a taxpayer id number. They will be eligible for the social security payments Bush promised Mexico if they worked at least 18 months and can prove it (Americans have to work 40 quarters). This helps set the stage for the North American Union (officially called SPP).

    Anyways, the housing bubble as basically a “profit by foreclosure” Ponzi scheme, not unlike the housing bubble and crash in 1925 in Florida, helped by Mr Ponzi himself.

    The commodity bubble OTOH needed some help to inflate, the Fed could not do that one. So we had Big Oil and NYMEX run up the price of Oil (the remaining 4 sisters are still in control, OPEC is just the bad cop handy to blame), and explained it as a supply issue (peak oil), another hoax along with global warming, and Big Oil was happy to do so. NYMEX did well also, and set up the Dubai Mercantile Exchange (DME) last year (it opened in June when oil was 65 dollars a barrel).

    This commodity bubble had the effect of devaluing the dollar as other countries had to appreciate their currency to hold back imported inflation. This then led other commodities to inflate as their value is relative to one another if there are no other market factors in play. It also caused us to import inflation that was hidden behind the lie that is CPI.

    So the commodity bubble took away with one hand (inflating food and energy) what the housing bubble gave with the other hand (inflating credit and asset price).

    A lot of the tools needed for the 21st century bubbles were developed in the Clinton years, like repeal of Glass Steagull, adopting Gramms Enron “Financial Modernization Act”, and changing the way CPI was calculated to reduce COLAS and suppress wage inflation.

    Anyways, the housing bubble was popped with interest rate increases initiated by Sir Bubbles in 2005 before he jumped off the bubble boat. His reason for raising interest rates was the inflation CPI said we did not have, but which we all knew was there. Didn’t matter that inflation would not be affected by an interest rate increase, since it was imported as a result of high oil prices that were high due to speculation, and also the result of the cartel pricing practices of the financial service industry, energy, health insurance, pharma, and agribusiness sectors who no longer fear the government they control. They are now price makers and consumers are price takers with no choices other than to go uninsured or hungry.

    Capitalism in a world without competition is a fine thing for capitalists and investors.

    So why did Sir Bubbles pop a bubble that was not really hurting anyone, people were making money from asset inflation which they then spent, his boys in the financial industry were doing well. Why did Helicopter Ben continue throwing the darts at the bubble, him being the expert on the last Great Depression?. Is Ben here to get us in a Depression or keep us out of one?.

    That history has yet to be written. Obviously, the powers that be want some change out of this crisis that will benefit their agenda. They may want to trigger a Great Depression, and perhaps use this to change the currency. As you remember, they got us off the gold standard in 1933, maybe they want to get us back on gold or a commodity standard. Perhaps they want a Global currency to replace the dollar and Global Central bank to control it, Volcker though this a good idea, and this fits in with the One World Government Globalization scheme.

    It could also explain why they want to pop the commodity bubble, which might have been started last week (eg drive down the price of gold, confiscate it low, and then raise the price as in 1933).

    If commodities are popped, we do have one last bubble, thats the credit market debt bubble. Like in 1929, credit is tight as banks are not lending, despite the low interest rates, and some are having their loans called in like BSC and Carlyle capital. If that bubble gets popped, we will certainly have another Great Depression. My bet is they wait until after the elections to pop it, so I am calling a New Bubble Formation alert. I know where I am looking.

    So you see, if people knew the truth and accepted it as such, there would be 300 million Americans marching on Washington and Wall Street. The market is rigged, the cards are marked, their pockets are being picked by fraud, market manipulation, inflatiuon, interest and taxes. And the sheep go baaah, WTF is going on.

    The illusion must be maintained. Truth will hurt our financial services industry and government, and it must be controlled.
    They are doing a fine job.

  86. Johnnyvee commented on Mar 22

    It is a culture of something for nothing… It is the reality that baby boomers have created–Entitlement without deserve; Pay without work. It is all going to be a mess in 4-5 years, when there will absolutely be no more bailouts of any kind remotely possible.

  87. Francois commented on Mar 23

    John R wrote:
    “The media’s abdication of any role as referee or arbiter of truth. I’m a former newspaper reporter, and I think the “he said-she said” model that’s been developed in the name of objectivity is now doing more harm than good.”

    That is some understatement.

    Take global warming for instance. (*evil grin* How many nutcases will show up to disparage this post, hereby proving Barry is right on the money, as usual? Hmmm? Come on nutcases! Make my day…punks!)

    http://www.washingtonpost.com/wp-dyn/articles/A26065-2004Dec25.html

    Many people have the impression that there is significant scientific disagreement about global climate change. It’s time to lay that misapprehension to rest. There is a scientific consensus on the fact that Earth’s climate is heating up and human activities are part of the reason. We need to stop repeating nonsense about the uncertainty of global warming and start talking seriously about the right approach to address it.

    The scientific consensus is clearly expressed in the reports of the Intergovernmental Panel on Climate Change (IPCC). Created in 1988 by the World Meteorological Organization and the United Nations Environmental Program, the IPCC is charged with evaluating the state of climate science as a basis for informed policy action. In its most recent assessment, the IPCC states unequivocally that the consensus of scientific opinion is that Earth’s climate is being affected by human activities: “Human activities . . . are modifying the concentration of atmospheric constituents . . . that absorb or scatter radiant energy. . . . [M]ost of the observed warming over the last 50 years is likely to have been due to the increase in greenhouse gas concentrations.”

    The IPCC is not alone in its conclusions. In recent years all major scientific bodies in the United States whose members’ expertise bears directly on the matter have issued similar statements. A National Academy of Sciences report begins unequivocally: “Greenhouse gases are accumulating in Earth’s atmosphere as a result of human activities, causing surface air temperatures and subsurface ocean temperatures to rise.” The report explicitly asks whether the IPCC assessment is a fair summary of professional scientific thinking, and it answers yes. Others agree. The American Meteorological Society, the American Geophysical Union and the American Association for the Advancement of Science have all issued statements concluding that the evidence for human modification of climate is compelling.

    Despite recent allegations to the contrary, these statements from the leadership of scientific societies and the IPCC accurately reflect the state of the art in climate science research.

    This article was written December 26, 2004 by Naomi Oreskes. Since then, the consensus AND THE FACTS have become much stronger and obvious for anyone with a) functioning brain cells and b) honesty.

    Needless to say that condition “b” is much rarer than “a”. But I digress; let’s keep on reading, for those who have the courage to do so:

    The Institute for Scientific Information keeps a database on published scientific articles, which my research assistants and I used to answer that question with respect to global climate change. We read 928 abstracts published in scientific journals between 1993 and 2003 and listed in the database with the keywords “global climate change.” Seventy-five percent of the papers either explicitly or implicitly accepted the consensus view. The remaining 25 percent dealt with other facets of the subject, taking no position on whether current climate change is caused by human activity. None of the papers disagreed with the consensus position. There have been arguments to the contrary, but they are not to be found in scientific literature, which is where scientific debates are properly adjudicated. There, the message is clear and unambiguous.

    Result? The “he-said” “she-said” model of today’s mass media makes a mockery of the facts, convert journalists into arbiters of OPINION instead of facts. This model was also aptly exploited by interests groups (Exxon comes to mind…) who had a stake in denying the truth.

    Oh! And we lost at least a precious decade we could have used to deal with the problem instead of being ensnared into a false debate between true scientists and spinmeisters.

    Should the worst predictions about global warming become reality, our children will have every right to spit on our graves for cowardice and dishonesty.

  88. Billy Shears commented on Mar 23

    As long as the media continues to report “both sides”, even though they know one side is without a factual basis, this will continue.
    As long as the media goes back to the same folks who were wrong all along and ask what to do now, rather than ask the folks who were right, this will continue.

    Posted by: edhopper | Mar 22, 2008 11:06:35 AM

    ________________________

    Absolutely correct! This same media would have given equal time to the ‘earth is flat’ believers. And yes, the media still gives air time to the experts that were wrong about the war, sub-prime, and recession. There is no such thing as accountability, and that’s due to poor journalism. As Krugman said, if George Bush said the sky was red, the media would report that “some disagree.”

  89. John commented on Mar 23

    Outstanding article. Reading the responses to the article, however, shows that there are actually a number of reality-based people still lurking about. I was a bit less depressed at the end of the comments than when I finished the article!

    For those interested, the south island of New Zealand (NOT the north island) is still a wonderful place to escape too. They’ve got a western functional government, little poverty, clear air, good food, outstanding wine (which, of course, always means decent weather), a point-system of immigration, and – AND, most important – .5 million people in an area about 75% of California’s (so: the Ah/km**2 factor is very low). The society is roughly how I recall “the 50’s” here, without the racism, anti-semitism, and all the rest that made America “so wonderful back then”. I’d be in NZ now except for my parents (and in-laws) being alive. It’s not paradise, but if you understand the universe ends when YOU die, and you don’t get extra points for being “a patriot”, NZ – as is – should last at least until then (for me, the universe ends in ~25 years). Check it out.

  90. blue commented on Mar 23

    BR: The 1st part of your question ignores the many, many bullish calls made by me over the years (starting in October 2002), but that only serves to identify your agenda and where you are coming from.

    [while i certainly agree that i don’t bring up your other ‘correct’ calls in the past, i hardly think that not mentioning them can ‘only’ serve a certain end result, which you allude to but don’t identify. by not identifying that agenda, i find myself wondering perhaps with the other comments readers, what exactly is that agenda?]

    Oh, and this 85 day correction has erased 18 months of gains in the major indices (keep spinning).

    [are the two mutually exclusive? we are within the quarter of our discontent, are we not? and measuring horizontally, we are in many charts pretty far back, certainly further back than the other measurement, which is peak to valley]

    Regardless, I will respond to your question anyway: While that is surely a possibility, in order for it to be true, then some combination of several other questionable things would also have to be true:

    [are you sure? can’t it be true without this new list of caveats… you seem to be constructing a position that is infallible due to self penned rules]

    -The 2003-08 period was a normal, healthy expansion

    [is there really such a thing as ‘normal’ in the markets? interest rates and currency levels are tweaked by government. the fact that they were, big time, isn’t abnormal, is it? is it the duration or the extremes that make it abnormal? have we seen higher rates or tweaks in the past? if so, does that make them ‘normal’ due to prior art? if it was ‘normal’ then need i go further?]

    -The credit crunch is only a temporary aberration;

    [i would think that ‘this too shall pass’ or is your stance that the credit crunch is now a permanent fixture of the economy of the united states? again, it doesn’t seem like i need to go further. it was all or nothing?]

    -Inflation has been mild, job creation robust, growth strong;

    [inflation is tricky. yes, i get the whole CPI adjustment to keep the SS payments down and to manage ‘expectations’ going forward. but i also know that i’ve been paying $5.75 for a super burrito for 10 years. the inflation has been in the devaluing of the dollar, not the inflating of the goods and services, even counting gas…]

    -The public complaints about the economy over the past two years is really just misplaced apprehension over the Iraq war;

    [huh? don’t know what you mean]

    One last thing: You would be taken much more seriously if you identified yourself, and/or showed your returns/calls over the past 5 or 10 years.

    [i’m not sure that i agree. how do you mean ‘identified myself’, by writing ‘blue’ in the name category, i thought i did. do you want something more? why? so that you can take me more seriously?
    and returns/calls? if i say that i called the 1000% return on AAPL after the crash and blogged my options trades the whole way up, would you suddenly sit up and take notice? how would you express that seriousness that would be bestowed for that economic bit of foresight. would you seek proof? if you found it to be true, then what? i would be taken seriously, and how would that be any different?

    my point is many people were ‘early’ in calling this particular bit of market turmoil, you included. now that it’s occurred, with the themes we all felt were inevitable (gold, real estate, home builders, foreclosure)… now that that’s happened and BofA is buying Countrywide and Thornburg is on life support and BearStearns just got bought for a soda and a bag of chips, i would EXPECT the market ‘seers’ to be looking for the way out. the other side of the trade, and i don’t.

    for me to take those that called the themes right seriously, today, i need to see less back patting. because what i see is a lot of people saying “see, i told you it would fall” and then drawing a straight line to the floor. pretty much the same problem the permabulls had when they drew the straight line to the sky.

    reasoned individuals would say, but you cannot draw a straight line to the sky, because what about the rising price of oil, the falling dollar, the topping real estate market?

    and the bull said “details details, i have no response… except that you were wrong last week and last month and last year, so not on the merits of your concern, but on the facts of the performance of the prices, i’m right. and as a right person, i have the most credibility to predict the future, and the future as i see it is roses and straight lines to the sky.”

    so should i not be surprised to see those that are the nouveau right, drawing straight lines from their previous predictions?

    so, does housing have another 20% to go?

    Posted by: blue | Mar 22, 2008 11:27:38 AM

  91. Darkness commented on Mar 23

    John, without the racism? Let me guess… you’re white?

    I traveled all around New Zealand with a half-Asian partner and didn’t see anything but uneasy hosts, but traveling a month later with my blonde sister and her very blonde son instead… I couldn’t believe the rants people thought we wanted to hear about Maori. Yikes. The 50s was my thought, I’ll agree.

    The food isn’t much to speak of outside Auckland, I’m afraid, but the scenery is nice. And the horrendous swarms of biting sand flies sure keep the south island beaches clear of people, and development, true.

  92. VJ commented on Mar 23

    Random,

    The basic reality that has been continually overlooked by the pundits is that from a real income standpoint, something like two-thirds of the country has been in a recession since 1999. The bottom third has been in a recession since the early 1970s.

    * The latter ’90s saw the largest six-year decline in the national Poverty rate since the ’60s. The African-American Poverty rate dropped to the lowest level on record.

    * The latter ’90s saw the longest consecutive yearly increases in real wages since the ’60s. Sure, they were bookended on one end by the earlier twelve years of declining real wages during Reagan/Poppy Bush, and on the other end by the subsequent eight years of declining real wages during Chimpy Bush, but you live with the results of your vote.
    .

  93. DavidB commented on Mar 23

    Why did Helicopter Ben continue throwing the darts at the bubble, him being the expert on the last Great Depression?. Is Ben here to get us in a Depression or keep us out of one?.

    Posted by: pft | Mar 22, 2008 10:18:09 PM

    Fantastic post pft. I pretty much agree with most of it.

    As for the reasons and outcomes, considering that Uncle Ben is feverishly working as hard as he can to keep the ship from crashing into the dock now tells me that they fully intend to have half the ship perfectly wedged into it sometime around November. That tells me that the entire aim of this little action is centered around some obscure little event happening in the US around that time. Unfortunate also is the rumbling of Ron Paul wanting to do the Ross Perot/Nader/Roosevelt trick of running independently so that his act will only siphon off votes from the camp he is most closely associated with. This all tells me that the whole drama is geared toward regime change. They’ve already flushed the house. Now all they need is for everyone to lean to the same side so they can start pounding through legislation. I assume the last regime that had everybody leaning the same way on the other side didn’t quite follow orders well enough.

  94. DavidB commented on Mar 23

    P.S.

    I wonder if some of the legislation will involve how we uppity commoners speak about our betters? Better get your shots in while you still can folks. In the future you might have to do time in ‘the box’ for the things we so freely spout these days

  95. MICHAEL M. PHILLIPS commented on Mar 23

    Speaking of living in a post-fact society:

    Bush’s Top Economic Adviser Says He Doesn’t See a Downward Spiral
    March 22, 2008; Page A4

    Edward P. Lazear is chairman of the White House Council of Economic Advisers. A labor economist by training, Mr. Lazear taught at Stanford University prior to joining the CEA in 2006. Excerpts from an interview this week with The Wall Street Journal:

    Q: About 70% of the economists that The Wall Street Journal has surveyed say that we are already in a recession. Citigroup said today, “The U.S. recession is likely to be deeper than previously expected with growth staying below trend until late 2009.” Are we in a recession?

    A: We will not know whether we are in a recession as it is technically declared for probably, I don’t know, six to nine months. … What I will say — and I think this is just accepting the reality — is that this is a weak quarter. … I think the forecasts for this quarter are somewhere around flat economic growth. Some people have it slightly negative, some people have it slightly positive.

    Is the economy spiraling downward? I would say no. … Most forecasters are not predicting that. In fact, most forecasters are predicting the opposite. They’re predicting a stronger second half of the year rather than a weaker second half of the year. Much of this, by the way, is a result of responses by the economy to the Fed rate cuts coupled with the economic stimulus [package] that will take effect really in large part at the end of the second quarter and in the third quarter. Some of it has already taken effect because you’ve got a business side to that.

    I don’t think it’s particularly useful to say whether there’s a recession or not. What I am mostly concerned about is how the economy is doing and not so much the labels that we attach to it.

    Q: The administration has consistently opposed Democratic efforts to extend unemployment benefits. But jobless claims are on the rise. At what point do you think that an extension of benefits would be justified?

    A: I don’t exactly know when that would be, but I what I can tell you is that it is typical for extended unemployment benefits to be granted when the unemployment rate is about 7%. It has been done with unemployment rates that are as low as slightly under 6%, I believe, but that was a one-time event. So at 4.8% right now, we’re at an unemployment rate that’s very far away from where people would be thinking about extending unemployment benefits. … Right now, the job market is still quite tight.

    Q: Should Americans get used to the idea that gas is not going to be going below $3 a gallon again?

    A: Unfortunately for us, we are now in a world where we are competing with rapidly growing other countries that have demands for oil and we’re finding that, as a result of that, the demand is increasing more rapidly than the supply has been increasing in recent years. And that is a reality, and I think that’s a long-run reality. So what that means is constant upward pressure on oil prices.

    Now, can it be alleviated? I think it can. There are a variety of ways to do that. One is to increase the supply of oil in the short run. As you know, the president was disappointed that OPEC did not increase its production. That would have reduced pressure on prices in a short run, and we think that would have been useful for that to happen. It didn’t happen. I don’t know whether it will happen in the future.

    But over the longer haul, you have to think in terms of alternatives and those alternatives take the form of alternative fuels, ethanol being the obvious one in the relatively near future, and reductions in demand for oil, not only outside the United States but also inside the United States. … I wish we had undertaken those policies 10, 15 years ago. They would be helping right now. We didn’t but it’s not too late to start.

    Q: Given the response of OPEC and your description of a long-term alternatives program, should Americans get used to the idea that gas is going to be above $3 a gallon?

    A: Well, again, I don’t know what you mean by get used to. They should get used to the idea that we are going to be competing for a long time with other demanders for a scarce resource, and that’s just a reality.

    Q: How significant is the inflation problem in the U.S. right now?

    A: I would say inflation is still relatively under control. … This last year obviously we had higher inflation than we would have liked, numbers like 4.3% over the past 12 months or so. Our numbers are well above our average for the past couple of years. Most of that, as you know, was driven by energy and food prices. The reason I say that I think the inflation problem is not out of hand right now is that core inflation remains low. … The headline inflation that we saw last year is probably idiosyncratic, that the rise in energy prices … and the rise in food prices are probably specific to last year. … Futures markets are not predicting the same kind of rise in the future, and so I would bet on the people who have their money in that game.

  96. km4 commented on Mar 23

    > Bush’s Top Economic Adviser Says He Doesn’t See a Downward Spiral

    More pablum from the Bushbot idiots.

    However, the reality of the matter is the continued financial engineered driven bullshit US economy with massive market bubbles ( e.g. stocks, real estate ) is unsustainable when the US economy

    1. needs $1B a day from China’s or the United States could not keep its economy stable or spare the dollar from collapse.

    2. already has close to $10 Trillion in national debt

    3. has a trade deficit of $800B/yr

    4. is the prime engine for derivatives ‘ticking bomb’ that grew into a massive bubble, from about $100 trillion in 2000 to $516 trillion by 2007 that is starting to go off in blowback stages.

    5. way too many Americans are already overwhelmed by personal debt racking up a household debt-to-income ratio of 1.42 ( for total of $13.8 trillion in debt including mortgages ) that already matches the country’s $14 trillion G.D.P.

    6. when the the cost of Bush to America since 2000 is $32 Trillion dollars in total liabilities and unfunded commitments for future payments.

    Hope that helps sober you up !

  97. VJ commented on Mar 23

    With further evidence they have Purple Kool-Aid on tap at the White House; out of the mouths of chimps:

    I think when people take a look back at this moment in our economic history, they’ll recognize tax cuts work
    .

  98. Texas commented on Mar 23

    Or, another version is: When the law is against you, bang on the facts. When the facts are against you, bang on the law. When the law and the facts are against you, bang on the table.

    The stakes are high for truthiness…in our information society, a big part of success is the appearance of success. Everyone wants to make like Karl Rove and create reality for those in the “reality-based community” and become a (rich) god-one in control of their surrounding environment. Once started successfully (how?), with influence and control comes knowledge, which in the information society imparts even more power in a reinforcing cycle. Until something (what?) comes along to widen and/or expose the truthiness deficit (or create a perceived one), then the cycle works, probably much faster (as in the case of Bear Stearns), in the opposite direction.

    Assuming that is an approximation of the dynamic, the question is: what do those of us who know this and see it from the meta-level do about it? Mr. Ritholz has built himself a platform and is speaking out. What about the rest of us?

  99. Amos Newcombe commented on Mar 23

    On Clarke’s quote, I like the contrapositive better: any technology that is distinguishable from magic is insufficiently advanced.

  100. John commented on Mar 23

    Re post of “blue | Mar 23, 2008” and NZ

    Yes, I’m white. And, yes, you are right about the whiteness of the place. The Maori are of official minority group to hate. All societies need one, you can’t get away from the fact that 60+% of all societies are made of the stupid dumb-asses that make life so wonderful for everybody else. Without them, we just wouldn’t have all our glorious wars, blind worshipping of nobility, and other fun “group activities” that make the word “history” what it meaning.

    Note, I didn’t say that Ah/km**2 = zero, just lower than here. Plus, the Maori aren’t sitting on the back of the bus, like our officially hated minority group was (is). And, to many of the white dumb-asses here, still should be; which IS, btw, THE primary reason WHY this country is in the state its in. A big percent of the white dumb-asses haven’t “gotten over” the civil right “thing” and the “concept” that “those people” should be treated like whites. Without the dumb-ass white people here voting to “get even with those people” for what “those liberals did to them” for the last 40+ years – basically cut-off-their-noses-to-spite-their-faces – we wouldn’t now have a burgeoning semi-fascist police state in the US. Don’t forget, the average Faux News watcher’s BIGGEST complaint is that the media is “too damn liberal”, and “liberal” means: “too much questioning of authority (nobility)”, and “socialists giving their (white) hard earned tax money to those welfare queens”. The readers of this site can’t expect “the financial media people” – who aren’t necessarily the sharpest tools in the shed (no media person IS) – to stand up to a powerful financial authority figure IF their own society is constantly beating them over the head for doing so. And, most of the white dumb-asses just want “the liberal media” to SIMPLY ADMIT they were wrong about “those people” and especially the “whole civil rights thing (I mean, yeah, some of “them” are nice, but… we just don’t want to live with “THEM”. How often, I heard THAT is Chicago. Btw, in California, it’s the Mexicans, just do a search-replace on the stupidity rants).

    But, anywho… If you JUST want a normal place to live (NOT on the beach, that’s not “normal”) where you can be reasonably sure you’ll die in peace, NZ is probable the place – but yeah, you’d be better off with more whiteness.

    Regarding food. I’m talking real food, NOT yuppie trendy restaurant food. If you want simple – fresh – grass fed lamb and beef, good produce, and good wine – AND you want it prepared simply – it IS available in NZ. There’s actually good food in England, not everybody there is eating Spam, ya-know!.

    The south island is THE last place on the planet with good weather, and no population pressure. But, there’s probably only about 70 years left before it looks like California.

  101. K3 commented on Mar 24

    Barry,
    This article remind me why I like to read tBP: You think further ahead than most. That FOX is the #1 news outlet should answer the question as to whether we live in a “post-fact” society. To paraphrase Abe Lincoln, most of the people can be fooled indefinately.

    To think, all I’m trying to figure out is where the economy is headed the next ~12 months. Your though provoking articles, like the one above, help to put an edge on a pretty dull knife.

    In that regard, life is not all bad out here in the heartland. Prices for farmland in SC Indiana have more than doubled over the past 12-18 months: 2.5k-3.0k to 6.0-6.5k. Grain farmers are making money hand over fist. There is a lot of farmland in the U.S.A…

    Of course, we eat a lot of bread and meat too…

    While in Manhatten last week, I heard no whining from investors who had flocked to a conference looking for a place to park money. Bankers were falling over themselves to lend money to the credit worthy and the investors I spent time with did not seem overly overly nervous.

    Is it bad? Yep. Is it worse than most everyone thinks? Undoubltably. Will it last forever? Not a chance.

    Trust in rust and the mindset altering effects of $4/gal. gasoline.

    Best regards,
    K3

  102. K3 commented on Mar 24

    Barry,
    This article remind me why I like to read tBP: You think further ahead than most. That FOX is the #1 news outlet should answer the question as to whether we live in a “post-fact” society. To paraphrase Abe Lincoln, most of the people can be fooled indefinately.

    To think, all I’m trying to figure out is where the economy is headed the next ~12 months. Your though provoking articles, like the one above, help to put an edge on a pretty dull knife.

    In that regard, life is not all bad out here in the heartland. Prices for farmland in SC Indiana have more than doubled over the past 12-18 months: 2.5k-3.0k to 6.0-6.5k. Grain farmers are making money hand over fist. There is a lot of farmland in the U.S.A…

    Of course, we eat a lot of bread and meat too…

    While in Manhatten last week, I heard no whining from investors who had flocked to a conference looking for a place to park money. Bankers were falling over themselves to lend money to the credit worthy and the investors I spent time with did not seem overly overly nervous.

    Is it bad? Yep. Is it worse than most everyone thinks? Undoubltably. Will it last forever? Not a chance.

    Trust in rust and the mindset altering effects of $4/gal. gasoline.

    Best regards,
    K3

  103. BustaMove commented on Mar 24

    Great thread – Many great comments.

    Since so much has already been said, I can only offer one more reason for the lack of reality in society – Edward Bernays:

    “Bernays was one of the first to attempt to manipulate public opinion using the psychology of the subconscious.

    He felt this manipulation was necessary in society, which he regarded as irrational and dangerous as a result of the ‘herd instinct’ that Wilfred Trotter had described.”

  104. David commented on Mar 24

    I suggest you review your history as to what the “Islamic Empire” actually invented versus transmitted from India/China.

    I’d also suggest you change your dates for the beginning of the “re-discovery” of the discovery process in Europe. Hint: Columbus didn’t sail to America because the Europeans were still muddling along in the Dark Ages.

  105. Kevin commented on Mar 25

    Re Islamic soceity, they didn’t just lose it. It was the mongol horde that hit them just after the first Crusades. As for the previous comment re Islamic science. Algebra, Agol and a hundred other words are from the period and the work of the Greeks comes to us from Islamic copies. I think Post-modernism has a lot to do with it. I think science is reality and the departure from the Western cannon, which traces the history of philosophy shows that staying reality based is hard work. the US distust of elites also has something to do with it.
    What if all you had was a series of lucky breaks.

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