Stoner Econ 101

Belmont Club » Eve of Destruction 2

The financial systems reached the limits of its information span last year by walking off a cliff they didn’t see. And the trick is to see the next cliff. What steps will create more information out of the data instead of more walls, more partitions, more black boxes?

Applying the basic tenets of Stoner Economics might help us understand the financial crisis, and our response to it.

a) In stoner economics, lenders owe borrowers.

For instance, you are in a bar and a friend borrows twenty dollars. No sooner does he borrow the bucks than he acts like you owed him the money. Let's say you put in the effort to get the twenty back. Now he’s shown he’s “good for it,” so you owe him forty — the twenty you always owed him and the twenty he just gave you. So later on you “lend” him the forty. Only now you are short on cash, so naturally you borrow twenty from another friend so you can have someone who owes you. But he was a little short so he borrowed twenty from the guy you just lent the forty to. Meanwhile, you’ve opened up a tab at the bar and bought everyone drinks. In the end, only the bar actually gets paid. By you, of course.

In the case of money market funds, you should add seven or eight zeros to the above amounts.

When you are asked to pay your neighbor's mortgage or to help finance the next bailout, remember: Lenders owe borrowers.

b) In stoner economics the sum of all transactions is always less than zero.

Say you have some dope, and you have some money, and you want to get high. So you smoke the dope and you get high. Later, you want to get high, you don’t have any dope but you do have some money. So you buy some dope and you get high. Later, you want to get high but you don’t have any dope and you don’t have any money. So you borrow some money, you buy some dope, and you get high. Later, you want to get high, but you don’t have dope, you don’t have money and you are in debt. So you don’t pay your rent and you buy some dope and you get high. Later, you want to get high. But you don’t have dope, you don’t have money, you owe money, and you haven’t paid your rent. So you hit up your grandmother, who is a little forgetful but can still sign a check.

We have now reached the final stage, but we cannot hit up our grandma for her past thrift (we kinda maybe already spent that) but we can hit up our grandkids — trade on their future labor, you might say.

But why were the sums in the example less than zero? After all, the dope was always bought. But the stoner is not doing what the squares used to call “useful work.” He is hustling to get high. And the money goes into the drug market, where maybe it hires mules and stuff but is generally not productive for the entire economy. So it all adds up to less than Zero. Not only is the money misspent, but so is a lot of the time and effort connected to it.

An economic bubble also encourages a lot of wasted time and effort. When the bubble deflates, it all goes up in smoke.

Basically, an investment should produce a return and in a bubble the returns are imaginary.

c) One of my pet peeves about President Obama is his use of the word “investing” to replace “spending.” So we invest in giving his voters raises and whatnot.

But I now realize he is using basic Stoner Economics. In Stoner Economics:

-Spending that makes you feel good is an investment.
-That in which you invest, you quickly consume.
-The bigger the investment, the quicker the consumption.
-The “Investors” who provide the “Capital to feel good” were often unwilling providers of funds (they was robbed).
-Those involved in the investment can take a hit (share the joy).
-Everyone is responsible for their own bad trip (so don't worry about unintended consequences).

I’m looking for the mathematical model I developed for Stoner Economics. I got it around here somewhere. I hope I find it. I couldn't repeat the intellectual exercise (hell, I might not even survive it).

Someone tell him Bush is no longer President.

Europe Snubs US Calls for Further Spending - Economy * Europe * News * Story - CNBC.com

Jean-Claude Juncker, chairman of a meeting of euro zone finance ministers, rejected the notion that European governments' fiscal policy was not aggressive enough.

"The 16 finance ministers agreed that recent American appeals insisting Europeans make an added budgetary effort were not to our liking, given that we are not prepared to go further in the recovery packages we have put forward," he told reporters in Brussels after ministers held regular talks.

Not to their liking indeed!

Is Syria Involved?

BBC NEWS | Middle East | 'Dozens dead' in Baghdad bombing

At least 33 people, including a local army chief, have died and 46 have been injured in a suicide attack on the western edge of Baghdad, officials say.

Syria sponsors many a car bomb in Lebanon. Keeping Iraq in turmoil could serve them well. Plus, they would want to take out the competition to their own guys.

"Talking" to Syria is like giving them a license to do no good. It wouldn't surprise me if they reverted to form.

What you missed was everything before the election.

FT.com / Columnists / Clive Crook - Why Obama’s left leaning is no tactical feint

If Mr Obama were a centrist he would be positioning himself to the right of the congressional Democrats, with a plan to be walked back in their direction. In fact, his budget has delighted the left of his party. Far from pulling him to the centre, most Democrats will resist that move if he tries. Or am I missing something?

That's how Mr. Cook ended the article. He began it with this:

On this page last week I argued that Barack Obama’s first budget showed him to be more of a left-leaning liberal than I and many others – sceptics and admirers alike – had previously supposed.

Everything we knew about President Obama before the election told us that he was quite liberal and perhaps a Marxist as well. It was his policy to lose the Iraq war, for Pete's sake. Come on Clive, pay attention. Everything he's doing now he said he would do. Oh, there were some obvious lies (see everything about clean coal and oil drilling). But Clive, are you delusional? Well, you say you welcome "cap and trade" so I guess you are.

Hope Preserved

I originally posted this story one year ago, when our current President was first making a big splash. I think it holds up rather well.

First, for those unfamiliar with the Great Depression, I will explain some of the references in the story:

• The "New Deal" refers to a collection of Federal Programs enacted during the Administration of Franklin D. Roosevelt (FDR) in response to the Great Depression of the 1930's. Before the New Deal the Federal Government was in charge of National Security and coining the money. After the New Deal the Feds are basically in charge of whatever they want to be in charge of.
• Harold Ickes was one of the chief architects of the New Deal. His son worked for the Clintons and George Soros financed 547 political groups.
• The New Deal created a "Alphabet Soup" of new agencies. The WPA (Works Progress Administration), the NRA (National Recovery Administration), and the CCC (Civilian Conservation Corps) -- to name but a few.
• The TVA (Tennessee Valley Authority) built dams and power generators over a multi state region. In 1964 Barry Goldwater, the Republican candidate, called for its privatization and lost 44 states.
• Shangri-la is the magical Himalayan Utopia in the novel "Lost Horizons." It is not a real place so do not mount an anthropological expedition to go study the residents. FDR cited it as the secret base from which the Doolittle bombing raid on Tokyo was launched. He lied.
• Rod Axle is based on a real person but not the one you're thinking of. No, not him (her?) either.

A BEDTIME STORY FOR THE AMERICAN ECONOMY

Boys and girls, once upon a time there was a celebrated political hack and manipulative genius by the name of Rod Axle. Despite what you may have heard, a professional political hack is not necessarily a bad person. Narrow minded people use to believe this, but we now recognize the many great and varied contributions Political Hacks have made to our society: the current state of our politics comes readily to mind.

One day Rod Axle meets a handsome, well spoken fellow that he thinks will make a wonderful "canned" Candidate for President. He is a newly elected Senator by the name of Audacious Hope: known nationally as "Otto" Hope, the man for whom hope is both "Otto-matic" and "Otto-magic." He is the son of disgruntled immigrants. His parents moved here from Shangri-la and were always a bit disappointed in their new home -- it rains at inconvenient times, for instance, and people grow old and die. But they concealed their dissatisfaction from their son, who grew up well adjusted, considering.

Rod Axle loves his new candidate because when Otto fronts the crowd he doesn't get his lines tangled. When he calls for a "yes we can, A-Merry-Can, Revolution!" the crowds go wild. Grown men faint, often onto the grown women who fainted just before them (this is not a new form of sex, by the way, just an old position).

Senator Hope is not confused by the many levers Axle must employ on the voters. That is because Otto is no dummy. And he certainly has no desire to be a puppet on a string.

Otto Hope wonders where Rod Axle is getting all this premium canned cant that Otto daily feeds the crowds. At the same time, he does not want to be too dependent on any one manipulative political hack, no matter how genius that hack is or how much the nation owes him -- another form of national debt.

So one night he follows Rod Axle in an attempt to find the source of his cant. Rod Axle drives a heavy duty truck to a secret complex of subterranean tunnels that date from the mystic days of FDR -- The New Deal Bunkers where The New Deal Bunk is stored. At the loading dock, crates of well aged Bunkum are loaded onto Rod Axle's truck.

While they are so occupied, Audacious Hope sneaks into the complex. Fortunately for him, it is guarded by the Department of Homeland Security. Inside, he finds a huge warehouse with many large crates stacked to the ceiling. He follows footprints through the dust. The path leads to The Harold Ickes Memorial Bureaucratic Maze. Above the entrance is written this admonition "Abandon All Hope, You Who Enter Here!" Otto assumes this does not apply to him, since he brings hope with him wherever he goes. In fact, this would be the perfect place to spread hope around. So he enters without reading the rhyming couplet on the bronze plaque: "Oh what a tangled web we create!" the gold plated letters read, "When e'er we seek to regulate!"

The halls of the maze are clean but devoid of life -- 5:00 PM has come and gone. The mauve walls have the same landscape painting hung at each five meter interval: horse country shrouded in mist. The floor is carpeted and padded. Still, you must tread the halls carefully, for if you make a wrong turn in this labyrinth you might be lost permanent. You'll need a posse of lobbyist and hordes of special interest pleaders to come find you. Step into one of the many traps or slip into a cubicle of horrors and you might be forced to take a position, in fact the very position you most fear. Or you could step through a tax loophole and have it close behind you. But all Audacious Hope need do is follow a trail of crumbs that charts a course down the many corridors.

Occasionally he would pass a waiting room where periodicals from previous centuries were spread on the benches. In one such room a skeleton slumps in the corner. In its left hand it grasps a "Saturday Evening Post" in its bony fingers. In the right it holds a "wait your turn" card with a twelve digit number. Otto sees there are now only 345,682 to go for "dried bones." The skeleton is covered in cobwebs but the other surfaces have recently been dusted. Obviously, the cleaning crew is considerate and does not disturb "he who waits his turn," even to dust him.

The crumb trail leads down the corridor of power, where the steam pipes and electric cables run. Behind him Otto hears the sound of a dozen vacuum cleaners switch on. He checks his watch. It is 9 PM and the cleaners have arrived. Since they are undocumented workers, they have easy access to every part of the complex. Senator Hope realizes with a shock the workers will "suck it up" as they always do -- the crumb trail that leads out. Now there's no turning back.

At the end of the corridor he sees a large, mechanical monstrosity. The sight of it fills him with dread. He approaches it slowly. It hisses hot steam and gives an occasional chug, like a worn out "massive engine that could." Yes, it is at rest; asleep. But it is not to be wakened and played with. It is the Democratic Machine, with its many levers and fly wheels and clashing special interest and balancing gyroscopes which can point the machine in every direction at once while it pins down every position. And it also has fingers -- a finger to put in every pie. And it has a pry for every prize. Yes, he could easily turn the machine on. But then he'd have to feed the slot with money and favors and keep on feeding forever. Otherwise the machine will turn on him. And the fingers for the pies will poke him in the eyes. So Senator Hope tip-toes by.

As he tip-toes, movement in the shadows startles him. With relief he realizes it is the harmless, undocumented workers. They move about with so much stealth they are all but invisible. He hopes to cure that -- to bring them into the sunlight. But he realizes a Senator does not belong in the bureaucratic maze and he must reach his destination before he can help them. Until then, they can help themselves.

He looks for a way out. He sees a door with a hand print on it -- Rod Axle's hand print. That, he feels, is the way to go. It leads into "The Fair Trade Hall of Mirrors."

He steps through the door and enters a room that instantly fills with Audacious Hope, the way he imagines rooms do when he enters. Here thousands of the Audacious stare back at him. They reflect on him. They move as he moves. They act as one with him. As he reaches out to them, they reach out to him -- and to each other. And he knows they think as he thinks and feel as he feels. Otto realizes he is on top of himself. He sees he is beside himself. But suddenly he feels he is by himself, even as he crowds about himself.

He's anxious, desperate -- until he notices a slight imperfection -- a smudge on one of the mirrors; a faint finger print. He faces himself and pushes the mirror. It opens and he steps into another room that instantly overflows with Hope. He sees another smudge. He pushes the mirror and steps through it. Again it is the same -- he repeats -- again it is the same -- he repeats -- again it is the same -- he repeats -- again it is the same. On through the rooms of mirrors he moves, dragging a crowd of Hope with him. And then he stops. He notices something new: The slight whiff of glass cleaner.

In a panic he realizes the cleaning crew removes the smudges on the mirrors, the smudges that guide him! He could be trapped forever, surrounded by nothing but Audacious Hope, wandering amidst confusion and illusion. Quickly he pushes on, following the smudges, ignoring hope and seeking exit.

Oh, the relief when he pushes through the final mirror and steps into the bleak, subbasement lobby with the artificial palm trees and flickering neon light. There he finds the "Taxes and Trade Barriers Up" elevator -- a direct way out but with a catch, of course. He spots it immediately. To get taxes and trade barriers up, you must press the big red "economy down" button -- press it deep into the depression that goes below even the subbasement. He is relieved. If his situation turns desperate, he now knows a way out -- but only if he is forced to take it, of course.

He looks about and sees the entrance to The Chamber of New Deal Left Overs -- the very place he seeks. Surely it is an Aladdin's cave of hope and wonder. And a new way out. He enters.

The room is unimpressive -- plain and disappointing, in truth. Otto sees a shelf where the stock is drawn down. It is labeled "Civilian Conservation Corps/Youth Work Camps." He says to himself, "Rod Axle has reached for these cans of cant often." He picks up one of the remainders, which resembles a container of shaving foam. He shakes it. He pushes the button. He is impressed by what squirts out. "Still dispenses good, sweet smelling, meaningless lather -- and at not too great a cost!"

He sees the shelf of "Price Freeze" has recently emptied -- apparently all campaigns have drawn that one down. He notices a container the size of a dusty old can of institutional shredded salt pork. He picks it up. He likes the heft. "The contents seem substantial," he says. He brushes the dust off. "Why, it's Socialized Medicine!"

He reads the side of the can. "To open, complain incessantly about the high price of Alka-Seltzer. Demand that everyone with a Sexually Transmitted Disease have access to treatment with Mercury." He pauses. "Mercury?" He reads on, "Lower the price of Sulfur drugs, and ration!" Otto shakes his head. He puts the can back on the shelf. "Good thing we didn't socialize medicine in 1930's."

He spots an item on another shelf. "Ah, here we are! Rhetoric!" He picks up a can. It's incredibly light. He shakes it. All that issues forth is the sound of a few dried peas knocking about. "I hope no one trades his pig for this can. I think the Rhetoric is empty. Devoid of content. There is even less here than meets the ear."

What he next sees fills him with excitement. "Ah, there it is!" He approaches a large door that says "New Deal Cheese." He brushes away some cobwebs. He opens it. He barely looks in when he shouts "Oh my God!" and slams it shut. What he saw nearly gave him a heart attack. He quickly bars the door, muttering "the horror, the horror" as he does.

He steps away, hoping whatever happens in there stays in there, and bumps into a barrel. It looks like a huge wine cast with a cork stopper sticking out of it. The cast is labeled: Vintage Alphabet Stew. Below it a caution reads: "Significant Cant! Do not Decant until Prepared."

"Hmm," says Otto. "Alphabet stew. To feed the homeless? Must be piping hot stew, perfect for our children on a cold winter's day. Nutritious, I'll bet. I wonder what it tastes like? Delicious, I'm sure! But the sign says not to open until prepared. Well, it's been here so long it most be prepared by now. " He picks up a mallet that's by the barrel. "Should I," he says to himself, as he feels the weight of the mallet, "Should I decant the Alphabet stew?" He prepares to swing. But he stops. He thinks. He says, "But what if it refers to the candidate 'being prepared.' What if it means: Do not Decant if the Candidate can't!"

He considers this for a moment. "But I am prepared. I tell the crowds every day. And they believe. They believe that Senator Audacious Hope can. They believe I can Decant. Yes I can. I can Decant the canned cant! I can! I can! I can!" He works himself into a frenzy as he chants the magic words "I can!" And he swings the mallet and whacks off the cork stopper. And the stopper pops off the top.

And nothing happens. Except for a few bubbles that come out. And a little liquid. But the liquid seems to thicken and stiffen in the air. Audacious Hope examines it. He sticks three fingers into it. He twirls his fingers about a bit. And as he does he hears a low deep rumble from within, which grows louder and begins to vibrate the barrel. He pulls his finger away but Lo! The liquid clings to his hand like rubber cement. He pulls and it stretches. He pulls some more and it pulls back. The harder he pulls, the harder it pulls. And the barrel spits out the liquid, and the liquid stiffens. The barrel rumbles. And the barrel vibrates. And the barrel rocks back and forth.

And Otto Hope pulls himself toward the door. With all his might and all his energy and all his being he pulls himself away. Suddenly, the rubber-like strand snaps, and Otto tumbles into the doorway. He jumps to his feet just as the barrel explodes! He turns to flee into the Hall of Mirrors and into the Harold Ickes Amazing Maze that lies beyond but behold! Strands of red tape explode from the barrel and grab his legs and pull them out from under him. But still, yes he can! He can crawl toward the big red "Economy Down" button to turn on the "Taxes and Trade Barriers Up" Elevator. He can escape. He reaches for it. He smacks the floor just short of it. He rolls a potted plant over it. He struggles with all his strengthen to depress the economy down button -- to shove it into the depression. If only the red tape allows and surely it will! One more determined push it takes! One more he struggles to make!

The tape pulls him back. He uses his pocket knife to cut it, to free himself. But faster than he can cut, the tape ensnarls! He tries to deal with the Alphabet Stew. Hope screams, "Slash the DoD! Increase the H.U.D! Cut the N.S.A. Raise the F.I.C.A! Broaden the F.I.S.A. Sell the TVA!" He thought he was bargaining with fate. But when he mentioned selling the TVA, a thick strand of tape lashed around his neck like a bull whip and squeezed his throat.

"No, no," Otto croaks, "invest in the TVA! Invest in the TVA! Fully fund W.I.C! Fully fund, you fools! Fully Fund!" The tape pulls his body in, back toward the coagulating lard he loosed from the barrel. In his desperation Audacious Hope called out, "Subsidize mohair! Build bridges to nowhere!" He whimpers and struggles. "Nurse every child. Preserve every wild. Close every prison. Save every pigeon." But still the tentacles of tape drew him in. And his legs were sucked into the lard. "Milk every cow!" he crowed. But still it drew him in. Up to his waist! "Milk the rich!" he screamed. But still it sucked him in -- up to his shoulders. Then he shouted, "Milk every taxpayer!" But up to his chinny-chin-chin, he's in! And his last words are, "Every person. Milk every person!" But by then he was -- and is and ever shall be -- one with the lard.

He had come to that point too late. For the alphabet stew knew there are other candidates to be had. Even more willing, they would be, when they saw Audacious Hope consumed and canned in amber. They will come and look. Call it art and label it "Hope Sprung Eternal." They will see him frozen, looking as if he were about to laugh or maybe cry. But do not put it on public display! Once a month clean and polish the amber, to provide a clear view: for the elect and for the appointed and for the anointed -- but by appointment only.

Let us spare a moment to wonder: did Audacious Hope get to depress the big red Economy Down Button? Depress it into the subbasement floor's deep depression? Is the "Taxes and Trade Barriers Up" elevator headed for the highest floors? We must yet wonder: What did audacity come to in the end? What was its purpose and purchase?

The moral of this story, boys and girls: The government can indeed preserve Hope -- in amber. And there Hope will never grow old. And Hope will never die, though it will certainly never live. And Hope will never experience the rain. This, boys and girls, can be arranged.

THE END

They Like His Face

Peter Daou: Why on Earth Are Democrats Legitimizing and Empowering Rush Limbaugh?

I don't buy into this 'brilliant' strategy of elevating Rush Limbaugh in the hopes that it will tarnish Republicans.

Focus relentlessly on the disastrous Bush presidency to tarnish Republicans, yes.

Overturn every single illegal and unconstitutional Bush-era policy and show the country and the world that we're reclaiming the moral high ground, yes.

Implement bold strategies and use soaring rhetoric to inspire Americans, yes.

Hew fiercely to Democratic principles, reassert the greatness of our American identity, demonstrate the true meaning of liberalism, of progressivism, providing opportunity, seeking justice and fairness, helping those in need, yes.

Spend our resources healing the sick, feeding the hungry, lifting the poor, cleaning the planet, rather than on war and more war, yes.

But expand Rush Limbaugh's profile and platform? No.

Whose resources are they spending again? Oh. Right. Our resources.

The White House politicos want their electorate to think of Republicans as "well-to-do old white guys that don't give a rat's ass what happens to you" -- which is their view of Rush Limbaugh. Of course they would like to do this while getting Rush off the air before he gets, and keeps, another five million listeners.

Another problem: the image of old white guys might improve considerably in the near future. And Democrats not only care what happens to you, they'll tax the good stuff and cause a lot of the bad.

Irony becomes Ironic

Belmont Club » “A crisis of globalization”

It is supremely ironical that the response of some liberal ideologues is to simply to take the axe to what others regard as the safest tree in the forest.

I'm convinced that Irony is dead. It was taken out by the bullet meant for God. Instead, irony got plugged right between the "I" and the "Y". Oh, Irony is still allowed to operate in small and discrete matters -- it's the free ride when you've already paid, they say. But that future "free ride" for which you pay and pay and pay, but in the end ain't free and ain't even a ride? Where the whole outing turns into a long hike to a labor camp? That's an unintended consequence.

There is an Irony at the center of the Free Enterprise system: that people peacefully seeking a better life for themselves help produce a better life for everyone in society. There is an Irony at the center of Socialism: That smart, talented people who acquire power to use for the betterment of Society end up spreading misery. Now both these outcomes should be commonplace observations by now -- like the sun rising in the east and setting in the west. The only reason the results are ironic is we have to forget the last time it happened -- because the knowledge must be suppressed to allow the Social Welfare state to expand. So instead of being a literary construct, Irony, seemingly safely entombed in its mausoleum, has become a world historical force. I mean, ain't it ironic?