From The Street...
Sunday, November 24, 2002
More Gloom from The Daily Reckoning...
Cars lead the way, circling the drain....
===============
Auto sales have also behaved in a non-traditional way, and the Fed has had little to do with them this time. Normally, when the Fed raises interest rates to combat inflation, consumer durables go into the tank - and revive quickly when the Fed lowers interest rates to fight the recession they brought about. This time, auto sales have been in boom, perhaps even bubble mode by zero-interest rate financings offered by the manufacturers. Today's headline in The New York Times is: "Sales Drop 30% In October At Big Three Automakers," and subtitled "Big Incentives For Buyers Worry Analysts."
The overhang from high sales volume in previous months was one factor - but essentially the Big Three (really the Big 2« - one is German controlled) are buying sales from the future. They are also wrecking their credit ratings (Ford-[F-$8.43] most obviously) and drastically cutting prices by as much as $3,500 per car. That's the amount that analysts in The Times article estimate that it costs General Motors (GM-$34.02) per vehicle sold with zero-interest financing.
That's a rather severe price cut to move a car - but the incentives have had another side-effect, wrecking the used car market. Since almost all new vehicle sales involve a trade-in, the used car market is glutted, and prices are down significantly. When current new car buyers turn in those cars in the future, the trade-in value is likely to be well below levels that would have otherwise prevailed. That's another cost, and another story - including the cost in gasoline consumption - since the best-selling items are gas-guzzling sports utility vehicles (SUVs). The same question as above:
how long can auto sales remain above trendline?
The short answer, briefly, is based on incentives, but eventually sales over time will revert to trendline. Prior to the zero-rate financing gimmick, which costs GM $3,500 per vehicle, the auto makers, their finance companies and banks featured very attractive promotions for car leases, rather than sales. Both schemes moved the merchandise, but the leases are expiring rapidly and cars/vehicles are coming off-lease. Combined with a stagnant economy this has also contributed to used car prices plunging. But it gets worse. "Residual value" is the key in leasing, the educated guess of what the goods will be worth when the lease expires and the merchandise comes back into the market. In order to make the lease deals more attractive two to three years ago, the auto companies pumped up their assumptions on residual values, so that the car lessee would have to finance less, with consequently lower monthly payments.
Thus, the car makers will have 3.3 million cars coming off-lease this year, into a market already glutted with trade-ins from the zero-interest financing gimmick. The fall in used car prices (already down 4% this year - to the 1999 levels), combined with the overoptimistic residual value assumptions to facilitate lease deals - and the inability to find buyers, means that they are being forced to auction off these vehicles for much less than expected.
According to the November 11, 2002 'Boxed-In On The Car Lot,' issue of Business Week, "Art Spinella, President of CNW Marketing Research in Bandon, Oregon, an auto industry consulting firm, says that auto makers are losing an average of $2,400 on every off-lease vehicle that they sell." But the good news - they had moved the merchandise two to three years earlier. I consider the former leasing program and the current zero-interest promotions by the auto industry as the financial equivalent of slitting your wrists and sitting up to your neck in a bathtub of warm water.
Rereading Charles Kindleberger's book Manias, Panics and Crashes - A History of Financial Crises (Third Edition 1996), I was struck by another similarity with what is happening in many sectors of the present economy - deflationary pressures and the lack of pricing power. This has occurred in virtually every pre-1945 recession/recovery where the Fed has not strangled expansion in its attempts to control inflation. The $3,500 cost to GM in order to finance a zero-interest sale amounts to a back-door price cut.
The October 21, 2002 issue of Business Week documents this widespread price cutting in their article "Prices Just Keep Plunging" and subtitled "Fears of deflation are growing as a profits squeeze prompts more cuts." They cite year-over-year declines of 20.9% for personal computers (prices almost always decline-but never that much), -4.0% for telephone services, -3.8% for air fares - and a half dozen others in the accompanying illustration. There are also major articles about deflation in recent issues of The Economist and The Wall Street Journal.
The Consumer Price Index (CPI) for September 2002 showed an increase of 1.5% (CPI-U) from September 2001. The four largest gainers for the year, growing faster than that +1.5% CPI increase are, Housing (+2.3%), Medical Care (+4.6%), Education and Communication (+2.7%) and Other goods and services (+3.2%-tobacco, smoking products, personal care, miscellaneous personal services). These sectors comprise over half (56.8%) of the CPI. If these generally service areas were removed, the CPI would be around break-even year-over-year - perhaps slightly lower. During September, the Producer Price Index (PPI) was definitely in deflationary mode, with the PPI for finished goods declining 1.8% Y-O-Y.
The very significant and much-watched GDP chain- weighted price index, the broadest indicator of price levels has been trending lower, but is still in positive territory. For the third quarter 2002, it was up 0.8% down from the first half average of +1.3%. This third quarter reading is the lowest since 1950. However, the breakdown is not as reassuring - for goods, the third quarter 2002 showed a decline of 0.8%. It must be assumed now that deflation is no longer a theoretical risk - and could become a problem, as it did in the descriptions in Mr. Kindleberger's book of pre-1945 experiences.
Two other factors that were not around in time to be included in Mr. Kindleberger's book have also exerted significant downward pressure on prices: the Internet and globalization. Two of the significant advantages that retailers have had over consumers in the past would be consumer ignorance and lethargy.
The Internet can significantly lower these frictional costs - since a consumer can go online and get an array of prices for the merchandise desired. Used car prices for trade-ins are also available online now, for example. This forces the retailers to compete online for the best price. It reverses the "advantage- retailer" factor that existed previously. Lethargy existed when the consumer negotiated with the retailer, and when deciding whether or not to buy, considered that he would have to get everyone back in the car and drive 5-10 miles to another vendor - only to repeat the process. The tendency was to avoid the hassle and buy the merchandise. This is eliminated with Internet shopping.
The New York Times reported recently that consumers are increasingly haggling with retailers - even after the merchandise has been reduced in price, sometimes after two to three cuts. All these are significant deflationary pressures that did not exist when Mr. Kindleberger wrote his book. Globalization would be another significant deflationary pressure. In the early postwar period, the U.S. economy was essentially a closed-loop business, since imports were not a significant factor. I blamed the auto industry for wrecking this system after doing a book review of The Whiz Kids. It described how Mr. Robert McNamara used the cost-effective methods developed for the Army Air Corps in World War II to cut costs at Ford drastically and produce a generation of lemons.
Since the other producers (there were more than three then) were doing the same thing, the prevalent attitude was that they had a captive market and the consumer would have no choice but to take what they produced- shoddy merchandise. Shortly, the consumer discovered quality imports - particularly Japanese cars. That was the beginning of "globalization"...and the pressure has been intensifying ever since.
China, for example, must export for reasons of political tranquility. The cost structures of Chinese manufacturers are not divulged - but most state-run producers are either marginally profitable or operate at a loss. They must produce the goods to be exported and sold. The price is not the primary consideration - since the alternative is having 10, 20 or 30 million unemployed workers. That could be an unendurable political cost. So, they move the merchandise, and bring about strong deflationary pressures in this country.
This recession was the first of the post-postwar period and also the first of the "Information Age." Consumers are following the economy, not leading it - as was the case in the past. Instead of a consumer-led recession/recovery/slump business, investment has led this one - the way it was done prior to World War II - as described in Mr. Kindleberger's book. As he points out, strong deflationary pressures arise after the economic bubble has popped - and that is taking place now.
Regards,
Raymond F. DeVoe, Jr. For The Daily Reckoning
P.S. It is a rather eerie economic picture - and my way of looking at it is that the three-quarter recession of last year is incomplete. Traditionally, housing and consumer durables go negative - but they remained strong this time. Housing and autos never corrected - but are looking increasingly shaky now. Consumer spending never went negative. The trade deficit is soaring.
Stock market valuations never fell to median historic levels - much less the compressed values and higher yields seen at other bear market bottoms. And, significantly, consumer balance sheets never were cleaned up. If anything, they are far more leveraged than ever, unless refinanced mortgages, frequently for much larger loans, are considered "off-balance sheet."
I am not forecasting deflation, just citing the pressures existing in this eerie bust of the post- postwar period. The widespread lack of pricing power will make it a difficult period for profits, forcing further cost cutting and particularly layoffs. Because of the incomplete recession, I don't think there will be robust growth until the excesses of the past have been worked out of the system. And that is why the recessions described in Mr. Kindleberger's book have lasted longer than those in the 1945-2001 period, and why recoveries were slower and more labored than the traditional "V-shaped" ones of that postwar period.
Editor's Note: Raymond F. Devoe Jr. is the writer, editor and creative genius behind The Devoe Report, published by Legg Mason Wood Walker. Ray's financial analysis is a regular feature of the U.S. edition The Fleet Street Letter.
The Daily Reckoning
Friday, November 22, 2002
Kennedy Wisdom Endures....Iowa, the real terrorist battlefield....
Our Fatal Conceit
Pete Geddes, Program Director, Foundation for Research on Economics and the Environment:
"While a few environmental groups do engage in terrorism (e.g., the Earth Liberation Front), in general this claim is preposterous. It equals a statement by enviro gadfly Robert F. Kennedy Jr.:
"Large-scale hog producers are a greater threat to… U.S. democracy than Osama bin Laden.'”
Full Story: environ gadfly
Thursday, November 21, 2002
Thirty Years...
Thirty Years
Robert Bartley, editor of The Wall Street Journal, will become editor emeritus on Jan. 1. This is an excerpt from his valedictory address, delivered last week in New York.
VALEDICTORY
Thirty Years of Progress--Mostly
Leaving the helm of The Wall Street Journal, I'm optimistic about America's future.
BY ROBERT L. BARTLEY
Wednesday, November 20, 2002 12:01 a.m.
Since I'm shortly to become editor emeritus of The Wall Street Journal, this juncture is a time for reflection on the 30 years I've been running these editorial pages. These reflections bring a perspective to the times we're living through. Certainly these are troubled times. For the Journal, the terrorist conflict has been up close and nasty. We had nearly 3,000 people killed across the street from our headquarters, and were scattered in temporary locations for a year after. We were proud of putting out a newspaper, a magnificent one, on Sept. 12, 2001, and lucky that none of our colleagues died. But many of us did lose friends, and one of our reporters was kidnapped and brutally killed by terrorists in Pakistan. And terrorism is only the most prominent of a litany of troubles involving war, civil liberties, recession and a sagging stock market.
My message today, though, is that things could be worse; indeed, they have been worse. Let me take you back to January 1972, when I took the editorial helm. This wasn't merely a troubled society, but one in the process of coming unglued. Crime rates and out-of-wedlock births were rising, and we had experienced a "long hot summer" of riots. Abroad, America was mired in Vietnam and the Communist empire was on the march. Economically, we were on the cusp of a new and dispiriting era. Huge legal and constitutional controversy lurked ahead. My career has consisted of watching these dire trends unfold, and watching this remarkable society overcome them.
I was an onlooker, occasionally a participant and always a cheerleader in this transformation. In the position I've held, you have to have views and make comments on all aspects of the human condition. But my own preoccupation has centered on three of these issues in three phases. Roughly, the military balance and competition with the Soviet Union in the 1970s, the economic dilemma in the '80s, and in the '90s moral and ethical issues in government. In each of these areas the Republic has made real progress, and from a journalistic viewpoint, I like to think I've found a lot of news.
From a distance of 30 years, it grows hard to recall how passions over the war in Vietnam totally dominated both foreign policy and domestic politics. Nineteen seventy-two was the year Jane Fonda visited Hanoi, broadcasting antiwar propaganda, George McGovern called for "immediate and complete withdrawal" from Vietnam, and the Associated Press published Nick Ut's unforgettable photograph of a naked girl hit by napalm. The U.S. withdrew its last combat soldiers from the country that year, but every covering attack sparked protests on the home front.
These events on the battlefield ran in tandem with larger geopolitical developments. In 1972, the Soviet empire was approaching its apogee. Between 1966 and 1970, the Soviet Union expanded its strategic missile force, bypassing the U.S. In 1972 we saw the first Strategic Arms Limitation agreement, with the U.S. dropping its ABM system, and the Soviets codifying their lead in missile throw weight. Against Sen. McGovern's complete and immediate withdrawal from Vietnam, President Nixon offered arms control and détente with the Soviets. Aided by prosperity and the ineptness of the Democratic campaign, he won one of the greatest landslides in history, marred only by the "two-bit burglary" at the Watergate office complex.
In retrospect it seems that without Watergate we'd have had a far different outcome in Vietnam. In 1972, U.S. air and naval power had allowed the South Vietnamese to repel a major offensive, with the North suffering 100,000 causalities and relieving the legendary general Vo Nguyen Giap from command. Two years later, six weeks after the resignation of Haldeman and Ehrlichman, Congress passed the Case-Church amendment forbidding further U.S. military involvement in Southeast Asia. In March 1975 the North Vietnamese repeated their 1972 offensive against the demoralized South. On April 29, 1975, helicopters started an airlift from the U.S. Embassy to three aircraft carriers offshore; the next day the last American left Vietnam and the Communist flag flew over Saigon.
In the interactions of Vietnam, détente and Watergate lies the key to this juncture of our history. In the midst of 1972, one of our editorials said, "A look at the strategic arms pact signed in Moscow Friday at least clears up the mystery of why the Russians went through with the summit despite the mining of Haiphong." It was too good a deal for the Soviets, I complained. In the fullness of time, perhaps trading arms agreements for a way out of Vietnam was not so bad a bargain. The peace agreement with the North, at the very least, freed our airmen held in the Hanoi Hilton. And restoring domestic tranquility rent by Vietnam was essential.
Still, for the ultimate happy outcome, I think we arms-control skeptics can also claim a good slice of the credit. By 1972 I was immersed in the strategic-arms debate. I could never understand why defensive missiles were worse than offensive ones. Yet the expert view proposed to deter a missile exchange by negotiating a balance of terror ensuring that both societies would be destroyed. This was mutual assured destruction, or "MAD." Rebellion against MAD was the start of my long association with Albert Wohlstetter, Pentagon consultant and strategic fountainhead.
Many within the government, who felt the arms-control process was locking the U.S. into a position of inferiority, were happy to come to New York and talk to a friendly journalist. So I was able to produce a series of scoops. I sparked a Pentagon investigation by reporting the MX memcon, a memo of a conversation between the chairman of the Joint Chiefs and his Soviet counterpart, who rebuffed the American assumption that the MX missile enclosed in a bunker would not count as a "mobile missile" under the treaty. In February 1976, I had an exclusive dispatch on the negotiations in Moscow to confirm agreements ostensibly reached at the Vladivostok summit by President Ford and Leonid Brezhnev. It included the news that agreement had been blocked by revolt at a meeting of the National Security Council the previous Wednesday. That Wednesday night was when détente ended.
I soon found myself invited on a trip to China by James Schlesinger, who'd been fired as defense secretary for opposing that policy. By chance Mao Tse-tung died while we were there. I was the only newspaperman in China at the time, and was able to file a report of attending Mao's funeral, especially appreciated by The Asian Wall Street Journal, then in its first week.
In 1976, President Ford faced a brief challenge in the Republican presidential primaries from an untested candidate named Ronald Reagan. I have a letter from him that reads, "Dear Mr. Bartley: Opening last Friday's Wall Street Journal to find the article excerpting my speech on détente and foreign policy was a very nice surprise. I'm both flattered and grateful. Many thanks. Sincerely, Ronald Reagan."
We arms-control critics had always argued that despite the agony of Vietnam, America's people could be rallied to resist the Communists. This is what President Reagan understood, and proved. No fewer than four times, he predicted that communism was about to collapse. No one, including me, took the predictions seriously, and we were surprised when the Berlin Wall tumbled down in 1989. In the darkest days of the Cold War, shortly after losing Vietnam on the home front, it was easy enough to be pessimistic about the American people. But President Reagan's optimism proved wiser and more enduring.
Nineteen seventy-two was also a vintage year on economic policy. On Aug. 15, 1971, President Nixon declared an economic emergency, imposing wage and price controls, and closing the "gold window"--refusing to supply gold for dollars held by foreign central banks, and divorcing the value of the dollar from even a slim tether to anything real. But with Fed Chairman Arthur Burns pumping out money, and controls temporarily curbing inflation, Nixon put in place the "prosperity" plank in his re-election effort, though a temporary and artificial one. After the Aug. 15 shock, John Brooks, that elegant commentator, voiced "a suspicion that the president and his advisers, in making their Draconian move, did not understand what they were doing." What they were doing was unleashing a wave of inflation around the world. To be fair, not many understood this at the time. A few lonely voices did, such as de Gaulle adviser Jacques Rueff and Yale's Robert Triffin. They were the few who understood the international dimensions of economics.
The era of sustained American and world economic growth from 1950 to 1973 was also the era of Bretton Woods, of fixed exchange rates anchored to the dollar, which was anchored to gold, the historical center of monetary systems. In the death throes of Bretton Woods, sealed that Aug. 15, central banks were rapidly accumulating international reserves, mostly dollars. The surge in reserves forecast a surge in prices. One body understood this, the Organization of Petroleum Exporting Countries. Within five weeks of the closing of the gold window, its member countries resolved to renegotiate prices with oil companies "to offset any adverse effects on the per barrel real income of Member Countries" of Aug. 15, 1971. Here, the "energy crisis" was born.
The Watergate era, meanwhile, gave us the economic equivalent of Case-Church, the Congressional Budget Control and Impoundment Act of 1974. This sharply reduced executive sway over spending on the promise that Congress would assume responsibility for budgetary discipline. Inflation rose to 11% in 1974 and 9.1% in '75, while real GDP fell 0.3% in each of these years. We coined a word, stagflation, meaning simultaneous stagnation and inflation. Since this combination was considered impossible in the Keynesian economics of the time, our economy was lost at sea without a compass.
When Mr. Reagan took office in 1981, the focus was on restoring the economy, primarily by cutting taxes. The Journal made itself the mouthpiece of "supply-side economics," which became an intellectual justification for the Reagan tax cuts. But it was all pretty much presaged in the Reagan campaign document Policy Memorandum No. 1, written by Martin Anderson in August 1979. It excoriated the view that there's a trade-off between growth and inflation, and said that taxation was "stifling the incentive for individuals to earn, save, and invest." This was the essence of the supply-side idea, that to solve "stagflation" you could separate monetary and fiscal policy, using tight money to combat inflation and tax cuts to spur growth.
Now Arthur Laffer grabbed attention with the Laffer Curve--the argument that a tax cut can yield more revenues for the government. But the key notion, a "policy mix" separating monetary and fiscal policies, was the insight of Robert Mundell, who's been my economic guru ever since. His policy mix did resolve stagflation. Paul Volcker's tight money cured inflation, and Mr. Reagan's tax cuts sparked a boom starting in the first quarter of '83 and running to the 1990 recession. I wrote a book about it called "The Seven Fat Years." With the shallowness of the 1990 recession, Bob Mundell says I should now do "17 fat years." He also believes that the '82 recession resulted from a timing mismatch. Tight money came so much earlier than tax cuts; if they had come simultaneously the recession might have been avoided.
In the '80s, the economics profession respected Mr. Mundell for his contribution to international economics, but considered his broader views eccentric at best. But in 1980 the profession saw no answer to inflation except a protracted recession; Bob took the optimistic view: You can both curb inflation and spark expansion. Mr. Reagan was fond of saying that an economist is someone who watches a policy succeed in practice but wonders whether it will succeed in theory. But the profession is catching up with supply-side economics. I was in Stockholm in 1999 to watch Bob Mundell accept the Nobel Prize; in his banquet acceptance he sang a few bars from "My Way."
Over the decade just past, my editorial page made a mark as paper of record on President Clinton's swirling scandals. We've republished our views in six volumes on Whitewater. There's even a CD-ROM. Like everything else in my world, this started back in 1972. On June 17, to be precise, when D.C. police apprehended five burglars attempting to plant microphones at the Democratic National Committee offices in the Watergate. In Clinton's Whitewater we see Nixon's Watergate, history repeating itself as farce.
Watergate was a huge legal, political and constitutional crisis, and I was confronting it as a 30-something editor only a year on the job. My feeling was that Nixon's critics were probably right, but they should be forced to make the case. Our role was to mark the denouement.
I was also taking guidance from one of the most remarkable men I've ever met, Yale law professor Alexander Bickel, who was dying of cancer. When asked how he was doing, he'd answer cheerily, "The voice is still good." His preoccupation was the powers of the presidency. Nixon had the power to fire cabinet officers, even in the Saturday night massacre. "Nixon won't do the truly audacious thing, like burn the tapes," he told me. These trains of thought explain why the Journal opposed the independent counsel law that resulted from Watergate as an intrusion on executive powers. I'm glad to note that with Whitewater, Democrats and liberals have come to see the wisdom of our arguments.
Yet it's also true that if President Clinton accomplished nothing else, he proved that the executive remains a huge font of power. He succeeded in mounting a political offensive against the independent counsel, who had no way to respond. A House controlled by the opposition party voted a bill of impeachment, but the Senate never conducted a serious trial. President Clinton's sin was the same as President Nixon's: not the burglary but the lies, not the sex but the lies. In Watergate, I wrote that Nixon had lost the credibility necessary to govern; in the end he had the residual decency to resign.
The success of President Clinton in withstanding the assault that toppled Nixon is only partly a result of his charm, and only partly the result of a liberal tilt in the press. To bring the strands of my story together, Watergate was an artifact of Vietnam. Without the public passion aroused by the war, judges and journalists and opposition politicians would never have had the stomach to unseat a sitting president. In normal times, this is not something the electorate would allow. The electorate takes the optimistic view.
My experience leads me to doubt that private personality quirks are irrelevant to public office. Nixon wasn't sexually promiscuous, but his manipulative side led to his troubles. The fecklessness about sex that Mr. Clinton displayed repeated itself in foreign policy, and we're still paying the price. The more we learn about JFK, the more grounds we have to suspect that his martyrdom obscured the price we paid for his presidency. A failure of moral character opened our agony in Vietnam. When he sanctioned a coup against an ally and Ngo Dinh Diem was murdered, we could no longer walk away. As the depth of this mistake became apparent, the Kennedy coterie turned against the war and ultimately against American society. The Vietnam era was not wiped away until Sept. 11, 2001. When the attack produced no yellow ribbons but a spontaneous display of American flags, the Vietnam syndrome was extinguished.
In 1990, partly because I felt no one was listening to what I had to say, I decided to take a break from editorializing to write my book. But I came back to write three editorials. One was on legal issues, dissenting from the scapegoating of Michael Milken. Since neither Jack Welch nor Martha Stewart has yet been indicted, we may make it through the current recession without a legal assault on relatively innocent bystanders.
The second editorial concerned economics, and said, "The economic ideas expounded in these columns have shared the blame, and sometimes even the credit, for the economy of the 1980s." But with tax increases to curb the deficit, "the Bush administration has joined the Democrats in endorsing quite another set of ideas. It appears that the economy of the 1990s is likely to belong to someone else. Good luck." The second Bush administration hasn't fully digested this experience. I suspect it is about to.
The third editorial, in 1991, was entitled "An Elbe in the Desert," recalling Churchill's efforts to keep the Americans from stopping at the Elbe during World War II. I predicted that the ground offensive in Iraq would go smoothly, but worried that "as the likely battle develops, we would hope that the offensive would not stop at some Elbe in the desert simply because that fulfills the immediate military mission. The first political goal is to remove Saddam from military command and political power." This lesson has been digested. The current Bush administration has closed the era of arms control as the center of our foreign policy. With the new tag line of "regime change," it is intent on ousting Saddam. But its ambitions don't end there. For all its hesitancy about nation-building, it intends to build at least a proto-democratic regime. Nothing could do more to change the face of the Middle East. Watching this foreign-policy activism, I look forward to the U.S. constructing a new, and ultimately more serious, world order.
Don't wish for the good old days. In 1972, problems were worse. We did overcome communism, stagflation, Watergate and Vietnam. For all our momentary problems, at the turn of the century the Soviet empire had collapsed, democracy was spreading to unlikely places, and the American free-enterprise model was established as the route to development. Even with today's problems the U.S. has no serious rival. In the sweep of this history, today's problems loom as another set of momentary nuisances. What I think I've learned over 30 years is that in this society, rationality wins out, progress happens, and problems have solutions. This, I like to think, is what happens when a society incorporates the editorial credo of my newspaper, free markets and free people. In that kind of a society, optimism pays.
Wednesday, November 20, 2002
International Stereotypes
Cliches (memes?) survive because they are basically TRUE....
=================
On a chain of beautiful deserted islands in the middle of nowhere, the following people are stranded:
- Two Italian men and one Italian woman
- Two French men and one French woman
- Two German men and one German woman
- Two Greek men and one Greek woman
- Two English men and one English woman
- Two Bulgarian men and one Bulgarian woman
- Two Japanese men and one Japanese woman
- Two Chinese men and one Chinese woman
- Two Irish men and one Irish woman
- Two American men and one American woman
One month later, on these absolutely stunning deserted islands in the middle of nowhere, the following things have occurred:
One Italian man killed the other Italian man for the Italian woman.
The two French men and the French woman are living happily together in a ménage a trios.
The two German men have a strict weekly schedule of alternating visits with the German woman.
The two Greek men are sleeping with each other and the Greek woman is cleaning and cooking for them.
The two English men are waiting for someone to introduce them to the English woman.
The two Bulgarian men took one look at the Bulgarian woman and started swimming to another island.
The two Japanese have faxed Tokyo and are awaiting instructions.
The two Chinese men have set up a pharmacy/liquor store/restaurant/ laundry, and have gotten the woman pregnant in order to supply employees for their store.
The two Irish men divided the island into north and south and set up a distillery. They do not remember if sex is in the picture because it gets somewhat foggy after a few liters of coconut whiskey. However, they're satisfied because the English aren't having any fun.
The two American men are contemplating suicide, because the American woman will not shut up and complains relentlessly about her body, the true nature of feminism, what the sun is doing to her skin, how she can do anything they can do, the necessity of fulfillment, the equal division of household chores, how sand and palm trees make her look fat, how her last boy friend respected her opinion and treated her nicer than they do, and how her relationship with her mother is the root cause of all her problems, and why didn't they bring a goddamn cell phone so they could call 911 and get them all rescued off this godforsaken deserted island in the middle of nowhere so she can get her nails done and go shopping.
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==========
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Tuesday, November 12, 2002
Rural life from a French point of view....
From The Daily Reckoning - An American living in France tours a rural US state...
*** There is plenty of wild game here in (US State...guess which one. JMW). There are plenty of animals too. But it is the uncivilized, uncultured and unsophisticated humans that stick in your eye like a speck of sawdust..
Maria and I rubbed our eyes as we drove over the mountains. The scenery was breathtaking. But nearly as amazing was the appalling shiftlessness of the indigenous population.
There are so many rocks in this part of the (state) that they practically stack themselves into walls all by themselves. And lumber is everywhere; there is almost always a timber truck in front of you as you make your way around up and down the... roads.
In a few weeks' worth of work, with only a trowel and a shovel, and a few dollars for cement, you could build a beautiful stone house. But do the locals do that? Nope, they live in shacks and trailers, with the carcasses of rusted automobiles spread around the yard.
"And what do they eat," Maria wondered. For there were no gardens, neither ornamental nor vegetable. There is not a single blooming plant in the entire state, as near as we could determine. Even the nicest houses show little evidence of landscaping, architecture or gastronomy. Even this time of year, rural Europeans typically have leeks, cabbages, salads and various other cold-weather plants laid out in military order. We saw nothing of the sort in West Virginia. Even more astonishing, there were no woodpiles worthy of the name. Smoke emerged from a few chimneys, but they were rarely respectable ones. More often, they were nothing more than tin pipes stuck out of the side of ramshackle houses.
People are nice in this part of the world. But it is the niceness of the terminally relaxed. They set very low goals for themselves - and then fail to reach them. Nearly every other man, it seemed to us, dresses as though he were chopping wood, eats as though they at a backwoods' church supper, and lives in house that would be a disgrace to a pig.
Other than that, it is a wonderful place.
Sunday, November 10, 2002
Oops...Election Run Off...
Margaret will be in a runoff election, with the fellow in second place, since she did not get a 50% majority.
From the Baxter Bulletin -
Early voting for runoff elections will start
Tuesday- baxterbulletin.com
Saturday, November 09, 2002
Bull Shoals Election Results
Bull Shoals Mayoral Election
Robert Doolin 142 (17.55%)
Loren P. Thompson 286 (35.35%)
Margaret Hall 381 (47.10%)
So Margaret won. Of the 1200 or so registered voters, about 800 voted. Predictions that 400 votes would be a landslide were right.
Now the job is to go get some external money flowing into the town. Mebbe from the federal government? Good place to start.
Diner
Dinner in Felton, California last night at the Cowboy Diner. A tiny bump in the backroads of the Santa Cruz mountains, south of San Jose and about five miles north of the University of California at Santa Cruz.
Serious storms have drenched the area - rain for the first time in nine months or so, as "winter" in northern California begins. 20-30 foot swells off the coast have professional surfers from all over the world featured in local news spots, accompanied by warnings to civilians not only not to try this, but to stay away from the coast; from the Edge; as it is too dangerous ever to look at up close. Real surfer fans are advised to Drive Inland Thirty Miles Just to Be Sure, says the drenched standup guy at the beach from the Storm Central Coverage Team.
But I digress....
My recent Diner experience in Bull Shoals was highlighted by Specials From Connie's Blackboard. Like Meatloaf and Gravy - Wednesdays - $ 4.75. A scoop of mashed potatoes, coleslaw, some veggies, bread, butter and there you go.
Dinner at the Cowboy Diner in Felton is a different story. "Ollie's Famous Meatloaf" is a skillful blend of hand ground meats infused with garden herbs and spices....and draped by a jalapeno cheese/chile sauce with hints of smoke. Accompanied by Aztec Rice (a little pyramid of fleckled white), a herb spotted carrot/zucchini combo, and cornbread, french toasted, moist and spicy. Salad was coleslaw, same as Connie's. Well, less runny mebbe. The overall taste of everything was sweet and barbecue-y.
Then the hammer ; $16. Dinner for three was $61 total with only two draft beers. Arrgghh....!
For those more adventuresome diners, buffalo and ostrich concoctions are also offered.
Happy Silicon Valley diner, cowboy wannabes. Music started at 8pm as we were leaving, and they were lined up out the door and out into the rain drenched parking lot. Makes you wonder what the local version of Chinese might be. Will visit the "Chopstix" this weekend.
Europe ain't it...
Recently a Colleague was assigned to a management position in Germany. He'd done well in a small US manufacturing company that was acquired by a large Industrial Giant. Management there saw his results (use of cash, productivity, expense control, product deliveries, etc.) and thought something good form him might rub off on their struggling operations in Germany. The workers weren't struggling - EU rules see to that with vacations, and other benefits sppecified by Strict Rules. Rather, the financial and business performance was shameful compared to what was happening in the Cowboy American company.
Old story about President Lincoln, on hearing that the victorious General Ulysses Grant was drinking heavily, reportedly told an aide, "Send a case of what Grant was drinking to all my other generals..."From what we read about the decline of Europe, it might not be so easy.
The American Enterprise Magazine -- Online
Excerpts below.
Bird's Eye
by
Karl Zinsmeister
Old And In The Way?
This simple reality needs to be faced squarely by Americans: In a great variety of areas--foreign policy, demography, religion, economics--Americans and Europeans are growing apart. While the September 11 attacks deepened American sobriety, patriotic feeling, and national resolution, in Europe they merely created one more flashpoint for division. European elites, already worried they won't be able to keep up with America over the next generation, are now approaching panic as the U.S. coalesces, during its September 11 recovery, into an even steelier and more determined colossus.
..... Keep in mind that there are currently 32 million people living in the U.S. who were born abroad, and very few of these new Americans are from Europe. For two generations now, the new blood flowing into the U.S. has come primarily from Asia, Central and South America, the Near East, and the Caribbean. America is becoming a cosmic nation, comprised of all peoples, rather than just an offshoot of Europe.
Since the end of the Cold War Americans have felt much less intertwined with Europeans, and at least as interested in China, Mexico, India, and the Middle East as we are in Europe. We recognize that those are the relationships which will grow in importance, while Europe will slowly fade in the rear-view mirror, its greatest accomplishments behind it.
For everyday, non-political Americans, Europe is simply not a preoccupation one way or the other. It is Canada with castles, as one acquaintance puts it--a nice place, but hardly the furnace where our future will be forged. Given our fundamental belief that each person and nation should be free to solve their own problems, average Americans are perfectly content to have Europeans go their own way. If the Euros think welfare statism and E.U. regulation is their ticket to prosperity, they're welcome to try. If they believe they're safer without a ballistic missile shield than with one, we say Godspeed to them.
If enough of these divergences accumulate, however, Americans may eventually be forced to conclude that, as economist Irwin Stelzer has put it, many European nations "are ceasing, or may have already ceased, to be our friends."
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The philosophical differences between Europe and the U.S. are reflected and magnified in three critical structural breaks: 1) Europe has surrendered much of its economic dynamism. 2) Europe has lost its stomach for military action, substituting an exaggerated confidence in diplomacy. And, 3) Europe is on a path to population collapse.
First economics. We have conventionally thought of Europe as having about the same standard of living as Americans. This is less and less true. For the European Union as a whole, GDP per capita is presently less than two thirds of U.S. levels. America's poorest sub-groups, like African Americans, now have higher average income levels than the typical European.
What's behind this? For one thing, Americans work harder: 72 percent of the U.S. population is at work, compared to only 58 percent in the E.U. American workers also put in more hours. And U.S. workers are more productive--an E.U. worker currently produces 73 cents worth of output in the same period of time a U.S. worker creates a dollar's worth.
The locomotive of Europe is the German economy, which has been in a serious mess for more than a decade. Germany's annual growth rate over the past ten years has been a limp 1.4 percent. Among the major industrial nations, only Japan (a true basket case) has done worse. The German labor market has become one of the most inflexible and uncompetitive in the world, which is why unemployment has been stuck at 9-10 percent for years, even amid a global economic boom.
Germany is the European champion for subsidies to business, but that hasn't stopped the national capital of Berlin from losing 300,000 industrial jobs since 1990. Berlin now staggers, bankrupt, under a municipal debt of $60 billion. (The city's entire annual budget is $20 billion.) German welfare programs have grown so onerous that only 57 percent of worker pay now goes into worker pockets; the other 43 percent goes to taxes.
One stark indicator of Germany's declining global economic significance is this: The share of international exported goods bought by Germany fell from 10.7 percent in 1991 to just 7.7 percent in 2001. During that same period, the U.S. increased its share from 14.0 to 18.7 percent.
German sclerosis is one reason why the collective European economy is growing at 1 percent as this year comes to a close, while the U.S.--despite the blows it has absorbed over the last two years--is close to 3 percent. (If you think America's recent bear market in stocks has been ugly, check out Europe's. At the time when our Dow Jones Industrial Average was down 23 percent, indexes for the French, Dutch, and German stock markets were down 32 to 43 percent.)
Over the long haul, these sorts of disparities add up to crunching economic divergences. Since 1970, America has produced 57 million new jobs. The E.U. nations, with an even bigger population, have produced 5 million (most of them with the government). A startling 40 percent of the unemployed in Europe have been out of work for more than a year, compared to only 6 percent in the U.S.
Another telling indicator of economic stagnation in Europe is the fact that many or most immigrants to that continent end up on welfare. In the U.S., almost all immigrants grab entry-level jobs, frequently more than one, and work their way up the economic ladder. The easy availability of work--indeed, our economy's insatiable hunger for additional laborers--is the main force that attracts immigrants to the U.S. in the first place.
Even corners of Europe that have resisted excessive government manipulation of the economy are now being dragged toward the statist norm by E.U. rules. Recently the European Court of Justice ruled that British employers must give all part-time workers four weeks of paid vacation, to align their policies with the rest of the European Union. In an effort to guarantee the "good life" by government edict, French, German, Dutch, and other continental finaglers have mandated short work weeks, long vacations, and fat social services, which has driven all dynamism out of their economies.
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A final, crushing, structural divergence separating America and Europe is demography. Birth rates in Europe have been catastrophically low for two decades. Europe is thus getting old and starting to shrink. The U.S. remains a youthful and fast-growing nation.
It takes 2.1 lifetime births per woman just to keep a population stable over the long run. Today, German women are having less than 1.4 children each--only two thirds the level needed to maintain zero population growth. Italians and Spaniards are at
a shockingly low rate of 1.2 lifetime births per woman. The E.U. as a whole is far below the level needed simply to replace its current population.
The social, economic, and geopolitical ramifications are stark. At current fertility rates, Germany's total population will shrink from 82 million to 67 million over the next 50 years. Italy will tumble from 58 to 39 million people. Over that very same period, the population of the U.S. (where the birth rate is more than half-again as high) will go from 283 to 410 million.
And it isn't only the raw numbers that will change; the composition of the population will also shift dramatically. As births remain below the replacement level year after year, and old people live longer and longer, a geometric spiral forms, and a society becomes elderly. By the end of my expected lifespan in the 2030s, fully half of all Germans will be over 50. Italians will be even older--half over 54. (The U.S., by comparison, will have a median age in the upper 30s.) The European Union will be a very gray place, and within its boundaries every single employed individual will have his own elderly person 65 or older to provide for through the public pension system. This is not a recipe for an energetic society.
Europe's disinterest in childbearing is a crisis of confidence and optimism. It is a spiritual indicator, reflecting millions of individual decisions to pursue self interest and material well-being instead of participating in the human future. These individual decisions will have profound collective effects.
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The U.S. now produces 30 percent of global GDP; as recently as the late 1980s the figure was just 22 percent. Fully half of all Internet traffic takes place in America. Three quarters of all Nobel laureates in science, medicine, and economics have lived and worked in the U.S. in recent decades. Given the very different population trends on either side of the Atlantic, America's lead will only widen in the future.
To American eyes, the most striking aspect of the European Union is its undemocratic nature. The E.U. apparatus is exceedingly closed and secretive. Relatively few of the confederation's important decisions are currently made by democratically accountable officials. On front after front, bureaucratic mandarins are deciding how everyday Europeans will live.
Many Europeans, in a way Americans find impossible to understand, are willing to let their elites lead them by the nose. There is a kind of peasant mentality under which their "betters" are allowed to make the important national judgments for them. "Europe's leaders see themselves as wise parents, and their citizens as children," explains journalist and Briton Clive Crook. "In France, Germany, and the institutions of the European Union, elites take major political decisions and impose them on the voters without consulting them," summarizes John O'Sullivan. "Political elites feel that the people have no right to obstruct the realization of the European dream."
What happens to such a system of governance if things go wrong and popular unrest bubbles up is not clear. But the history of earlier multinational collectives in Europe, like the Hapsburg and Tsarist empires, Napoleonic France, the Third Reich, the Soviet Union, and the former Yugoslavia, is not soothing. And even if ethnic blow-ups could be avoided, a withered Europe would not be a good thing. Among other effects, "a weakened Europe is likely to grow more resentful toward America," warned British journalist Charles Moore in a lecture to the New Atlantic Initiative last year, "rather than blaming themselves."
Though a nasty flame-out is conceivable, I will close with a less alarmist yet blunt prediction about Europe's likely future. Fifty years hence, when my oldest children approach retirement, I expect that today's European dream of achieving economic and military superpower status will be a dim memory, and that some more realistic alternative will have replaced it.
At that point, under current trends, the largest Western European country--Germany--will rank about 23rd on the list of the world's biggest nations. Europe as a whole will contain in the neighborhood of 360 million people and falling. Americans will be at 550 million and rising. The U.S. economy will have grown to more than twice the size of Europe's.
I expect that Americans and Europeans will be reasonably amiable. We will vacation and attend college in each other's countries, and (one hopes) trade as easily as Canada and the U.S. do today. But it will be China, India, Mexico, Indonesia, Brazil, Vietnam, the Arab world, and Turkey that the U.S. will have to huddle with most earnestly at important international conclaves--not Europe.
That is, frankly, not the circumstance most Americans would prefer. By rights, Europe and America ought to remain close cousins. But Europe's current choices in politics, economics, social and family life, and moral reasoning unmistakably suggest that a less familial relationship is emerging.
That is a reality that America needs to prepare for.
