Author: George Noga

MLLG Collection of Ultra-Short Posts

George Noga
Education spending before and after the lottery – Hate crimes really are political crime. Thirty reasons why Hillary lost – Participation trophies –  Americans’ New Way of Life
MLLG Collection of Ultra-Short Posts
By: George Noga – May 27, 2018

       From time to time we bale together a short stack of pithy topics that, although blog-worthy, cannot justify an entire 500-word posting; this is one of those times.

Lottery and Education: MLLG compared Florida’s per pupil spending on education before and after the lottery. The year before voters approved the lottery (1985), Florida spent $4,060 per pupil – equivalent to $8,000 in 2017.  Actual 2016-17 spending was $7,500 on a comparable basis – $500 less per student than before the lottery. This is unsurprising; anyone with a modicum of walking-around sense knew lottery money would supplant other money over time. What’s truly pitiable is that clueless teachers, who fervently bought in to this three-card monte, are still teaching our kids.

Why Hillary Lost: Hillary has proffered myriad reasons why she lost; following are a few she omitted: Marc Rich pardon, sniper fire in Bosnia, trashing Jennifer Flowers, Paula Jones, Kathleen Willey, Monica Lewinsky, calling half of America deplorable, cheating Bernie Sanders, Vince Foster, travelgate, Whitewater, cattlegate, troopergate, $15 million Chelsea condo with campaign funds, Loretta Lynch interference, accepting stolen debate questions, secret server, deleting 30,000 subpoenaed emails, destroying phones and hard drives, Benghazi, Haitian thefts, Russian uranium deal, Wikileaks, Anthony Weiner, compromising top secret data, Clinton Foundation pay for play, avoiding Michigan and Wisconsin and just being an all-around horrid person.

Self Esteem and Participation Trophys: Self esteem is unearned confidence and hence a lie. American students fed self esteem rate themselves high even though they score below average. Such students will feel good about themselves as they flip burgers while their foreign counterparts own the place. I once supported a charter school in a tough neighborhood. The students were indoctrinated in self esteem and bought into the hype as did their parents. Unfortunately, they learned nothing else; the school’s test scores tanked; the school failed and the students were even worse off than before but they had their participation trophies. Self esteem must be earned through achievement.

New American way of life: A guy with a girlfriend and 2 children receives $90,000 per year as follows. Buy a house, live with your girlfriend, don’t get married and continue to use your parents’ address. Rent to your girlfriend for $900/month paid by Section 8. Your girlfriend receives Obamacare, cell phone and utilities, $600/month food stamps and free college tuition. You each claim one child on your tax return and both claim head of household for credits of $1,800. Your girlfriend claims disability (easy) for another $1,800/month. Married couples get none of these benefits but by following this plan, as many now do, they receive $90,000/year. Is this a great country or what?

Airbnb and Uber Under Attack: Deep blue cities and states continue attacking Airbnb and Uber at the behest of their unionist paymasters. Progressives insist any two people can share a marriage but are adamantly opposed to two people sharing a ride or an apartment. Liberals likewise believe in a woman’s right to choose provided her choice is not about where to school her children, owning a gun, joining a union, buying health insurance and obviously not about sharing a ride or apartment. While Uber and Airbnb were investing in transformative technology, taxi owners were investing in politicians and morphed into powerful, politically connected, state-sponsored cartels.

Hate Crimes are Political Crimes: Millennia of conflict and confrontation were needed to purge the world of the notion that a crime against one person should be treated differently than the same crime against another person. Hate crime laws diminish the actual crime and contain different standards of justice for different victims. Whether or not a crime is a hate crime is purely a political decision which ultimately depends on whether charging a hate crime advances a certain political narrative. Hate crimes, thought crimes and hate speech are throwbacks to the middle ages and the inquisition.

Next: The second anniversary of the Pulse nightclub tragedy. Do not miss this one!

American Birthright Accounts

George Noga
American Birthright Accounts can make every child born in America a millionaire!
American Birthright Accounts
By: George Noga – May 20, 2018

         Browsing The Wall Street Journal one day, I saw a piece by David Smick about federal baby bonds. The article mentioned a decade-old piece of legislation that would have given every baby born in the USA a $500 bond. It failed to pass Congress despite bipartisan support. I couldn’t get baby bonds out of my mind. As a college math major and a CPA, I am good with numbers. This post presents my realistic and affordable plan to make every child born in the USA a millionaire and in today’s’ dollars.

        During my career in what now is called wealth management, I advised clients who owned businesses to set up Roth IRA accounts for their children as young as age 6. This is legal provided you pay them for actual work around the office. If my clients contributed the maximum amount each year until the children finished college and if the money continued to grow until their retirement, the sum could approach $1 million tax free – even if not another penny ever was contributed after the kids left college.

       Thus, I already was familiar with the power of money to grow over long time periods. People, like my business owning clients, could afford IRAs for their kids who likely would be well off no matter what. Those on the lower rungs of the economic ladder however are mostly wage earners who cannot legally make (nor afford) Roth contributions for kids and who never benefit from stock ownership over time. These folks need a user-friendly way to participate in future global wealth generation.

        My plan is simple. The federal government creates a tax-free American Birthright Account (“ABA”) for each child born in the USA and funds it for $5,000. Each year until the recipient retires, another $500 is added. The ABA is professionally invested in a diversified portfolio of global index funds. Since 1930, markets have increased 7% per year net of inflation despite depressions, bubbles and meltdowns. Since the 2009 market bottom, stocks quadrupled but working class families have not participated. When the ABA beneficiary is 65 years old, the account exceeds $1 million and generates over $6,000 per month of income – all tax free and in today’s dollars.

         My plan is affordable. There were 3,945,000 US live births in 2017. Taking into account infant mortality and premature deaths, there will be about 3.5 million new ABA beneficiaries every year. This equates to an annual cost of $17.5 billion for the initial $5,000 and $1.75 billion for the additional $500 per year. The average cost for the first 10 years is $25 billion. In year 11 the cost is $35 billion and increases $1.75 billion each year thereafter. This is only one-half of one percent of the federal budget.

          Every person born in America is a millionaire and receives tax-free over $6,000 per month in retirement income. A retired couple, both with ABAs, receives $150,000 per year tax free, equivalent to $200,000 taxable income in the 25% bracket. Unlike Social Security, ABA beneficiaries own their accounts and a couple would have $2 million to bequeath to heirs. ABAs would reduce inequality and give working class families the same advantages enjoyed by affluent Americans. Moreover, ABAs would give all Americans a stake in our economic system by making them stockholders.

        There are no tricks or legerdemain involved; American Birthright Accounts would transform America. It would be the most significant economic legislation ever enacted and would rival the Homestead Act of 1868 as the greatest legislation in American history. Just as the Homestead Act made landowners out of working class Americans, American Birthright Accounts would make them stakeholders in America and would affix an entirely new and profound meaning to “Born in the USA“!

Next up is our MLLG collection of blog-worthy but short topics.

China’s Currency Manipulation and Dumping

George Noga
Are Americans helped or harmed if China sells us stuff far below cost?
China’s Currency Manipulation and Dumping
By: George Noga – May 13, 2018

        This post about currency manipulation and dumping by China concludes our pivot to China. Whether or not and to what extent China manipulates (undervalues) the yuan is the subject of intense debate. The yuan renminbi (“CNY”) trades at 6.27 to the US dollar (“USD”). For this posting, I assume the value of CNY should be 7.50; this is at the high end of estimates and equates to an undervaluation versus the USD of 20%. The effect of China’s dumping of exports below cost also is open to much debate.

     Let’s assume, a arguendo, China subsidizes exports, uses artificially cheap labor and thereby dumps goods below cost and that these practices result in China gaining an additional 13% unfair trade advantage vis-a-vis the USA. When this 13% is added to the 20% from its undervalued currency, China’s total unfair advantage becomes 33%.

        Now, let’s say you shop online for a good pair of athletic shoes made in the USA and find ones you really like for $100. Miraculously, the very next day an overnight package arrives at your door with a pair of identical shoes made in China for $67 along with a note from Xi Jinping stating that the money you saved is a gift from the Chinese people. Do you accept the Chinese shoes and the $33 savings and consider yourself lucky; or do you question the donor’s motives and refuse the shoes and the money?

       Such acts of beneficence from the Chinese people to the American people occur not just for shoes but for apparel, appliances and consumer electronics. China exports $525 billion a year to the US; if China is exporting goods 33% below its cost, the benefit to American consumers is $260 billion per year. Note: If the nominal value of exports is $525 billion, the undiscounted value is $785 billion, or $525 billion divided by .67 (1-.33 ). When subtracting $785 from $525, we derive the $260 billion. 

       Pause to consider this for a moment. Under the assumptions used herein, China’s currency manipulation and dumping of goods result in a gift of $260,000,000,000 each and every year to ordinary Americans – this is equivalent to $2,200 for each of the 120 million households in America. Even if my assumptions are off somewhat, the benefit to American families still is stupendous. The Chinese people are sacrificing to shower us with goods at far below the cost of their components and labor.

       There is a temptation to overthink this; don’t do it! If anyone tries to complicate this or tells you not to accept gifts from China, don’t listen to them. If anyone domestic, foreign or extraterrestrial sells you something below cost, it is an unalloyed blessing. A gift is a gift is a gift and should be accepted everywhere and always without question. The recipient always is better off accepting a gift even if the motives of the donor might be nefarious. There is no need to beware of Chinese bearing gifts.

 

        China’s currency manipulation and dumping is a gift that just keeps on giving. After pocketing the $260 billion a year munificence from China, Americans now have that same amount of cash savings that they can spend (mostly in the USA) on other goods and services they would not have been able to afford absent China’s largess.

        Although economics can be complex, this is straightforward. There is absolutely no downside. It is a no-strings-attached gift from Chinese to Americans; think of it as foreign aid. If China manipulates its currency, uses cheap labor and subsidizes exports, it is an unleavened blessing for American families to the tune of $2,200 each and every year. Take the shoes and run and it isn’t even necessary for you to say thank you.

Next: Our plan to make every new baby born in America a millionaire.

Trump Tariffs and Trade War With China

George Noga
Imports are what make us well off; exports are merely the cost of obtaining imports.
Trump Tariffs and Trade War With China
By: George Noga – May 6, 2018

          US trade with China is patently unfair. They have higher tariffs, use cheap labor, subsidize exports and steal intellectual property. They also manipulate their currency, but that is our topic for next week. Our 2017 trade deficit with China was $340 billion. Americans’ fierce belief in fair play accounts for the popularity of Trump’s tariffs on the Middle Kingdom. Whether or not such tariffs are wise is the topic of this post.

       Economists are in lockstep that expanding markets to their maximum potential size (global) optimizes specialization, economies of scale and comparative advantage thereby generating more wealth for everyone than tariffs or trade barriers. Imports are the things we want to eat, wear or use like bananas, athletic shoes and iPhones; they make us better off. Exports are merely the price we pay to obtain imports; they do not make us better off because they are eaten, worn or consumed in other nations.

        As first conceived by Adam Smith and later espoused by Milton Friedman, the objective for any nation is to get the most possible imports with the least possible exports. Trade occurs between people, not countries; it is voluntary and non-coercive. Living Americans eat the bananas, wear the shoes and use the phones, not government. Our households, just as our nation, are better off getting more in and sending less out. Grasping that imports are desirable is the key to understanding international trade.

       Trump’s rationale for tariffs is that because America imports $525 billion from China while they import only $185 billion from us, they have more to lose in a trade war. Once it is understood that imports are what is truly desirable, living, breathing Americans would lose $525 billion in imports versus only $185 billion for the Chinese. Humans in both countries lose, but American humans lose more. Moreover, the Trump tariffs ultimately are paid by Americans as higher prices for imported goods.

        Looking beyond China, 138 countries run trade deficits with the US; in half those countries the deficit is 500%. Don’t each of those nations have the same brief against us as we have against China? What if all those countries imposed tariffs on American goods? It is normal for a country to have both trade surpluses and deficits. Similarly, your family runs trade deficits with your grocer and power company but enjoys countervailing surpluses with your employer and your investment company.

        When China sells us goods, we pay with dollars. They use $185 billion to buy things from us. They also buy goods from other countries – in many cases from the 138 countries that run trade deficits with us. Many of the dollars we send to China thus find their way back to the US. Finally, China uses some of its trade surplus to purchase US assets and to buy Treasury securities ($1.2 trillion) to finance our national debt.

       What if we imposed huge tariffs on bananas such that it would be profitable to build massive hothouses to grow them in Minnesota? It certainly would create jobs and capital investment. The price of bananas would skyrocket and American consumers would suffer immensely. Would anyone argue that banana tariffs are a wise move?

        The rise of humanity began and blossomed due to trade and it remains so today. Milton Friedman believed Americans would be better off if we unilaterally abolished all tariffs and trade barriers – even if no other country reciprocated. The United States has run 42 consecutive years with a trade deficit. Where is the harm?

        In times of war, countries blockade their enemies to prevent them from trading. Tariffs restrict a nation’s own citizens from trading; hence, countries imposing tariffs harm their own people in the same way they punish enemies in time of war.

Next: The final part of our pivot to China – currency manipulation (horrors)

China: Economics, Demographics and Politics

George Noga
Is China an economic tiger or a pussycat doomed by its demographics and politics? Given enough cavemen, it is possible caveman GDP could surpass that of the USA.
China: Economics, Demographics and Politics
By: George Noga – April 29, 2018

      To hijack popular parlance, we are pivoting to China. This post presents MLLG’s inimitable perspective about China’s economy, demography and politics and it isn’t what you read in the popular media. Upcoming posts will address the Trump tariffs, China’s balance of trade with the US and whether or not the yuan is undervalued.

       Americans have been swamped with hype about China’s economy overtaking ours. Let’s look at the numbers. US GDP is $19.8 trillion or $61,700 per capita, 5.5 times the world average, 8th best in the world and highest of any major nation. China’s GDP is $12 trillion or $9,400 per capita, 17% below the world average and 74th in the world behind Mexico and Equatorial Guinea and similar to Botswana and Gabon. Also remember that China’s reported economic data are widely regarded with skepticism.

       China’s economy is 61% of ours but, as the hype goes, they soon will blow by us. Let’s test this assertion. Assume the US economy grows at 2.3%, a full percentage point below its historic average. Further assume China’s GDP grows at 4% until 2030 and then 3% thereafter. Under that scenario, China would require 55 years to pass the US in nominal GDP. Even then, its GDP per capita would be only 25%-30% that of America’s. If there were a trillion cavemen, each producing $20 a year, caveman GDP of $20 trillion would surpass America’s; however, they still would be living in caves!

       Another reason China won’t overtake the USA is demographics. Gender selection due to China’s one-child policy resulted in 140 million more men than women. Their 1.16 fertility rate is lowest in the world and will decimate the population in the next generation. The shortage of women creates social and political unrest. China’s ageing demographic already has resulted in a shortage of workers and an army of the elderly.

      Politics is another source of China’s woes. All empires throughout human history have broken up. China is an empire; therefore, it too will break apart. China doesn’t even have a common language; Cantonese and Mandarin are as different as Portuguese and German; people from different parts of China use broken English to communicate. Over 150 million people in China are not Chinese; there is Tibet, Manchuria, Inner Mongolia and the Uighurs. There is a significant and growing Muslim population in China’s outer western provinces, which is ruthlessly suppressed. Communists still govern with an iron fist; the internet is censored; and there is no political freedom.

     China is not nearly as formidable economically as the chattering classes and the mainstream media would have you believe. Its GDP will never catch the US and some time, in the not too distant future, it will begin to lose ground. Its demographic imbalance is a ticking time bomb and inevitably will result in chaos and social unrest. China will be the only country in history to grow old before it grows rich. Communism won’t survive as economic freedom inevitably leads to political freedom.

     China will experience increasing entropy economically, demographically, politically and socially. Its decline is ineluctable. America is a great nation because its people chose to be part of it. China is an empire of unwilling people of different ethnicities and languages held together by brute force. As a consequence, the Chinese empire, like all others throughout the history of mankind, will shatter amidst ethnic strife.

Our next post continues our pivot to China as we address the Trump tariffs.

The Climate Industrial Complex

George Noga
Climate change is not about warming, carbon or even renewables; at root, it is a ruse to confuse and to beguile people into enacting the radical green agenda.
The Climate Industrial Complex
By: George Noga – April 22, 2018
          Few Americans know what you are about to read. I became aware of parts of this saga only during the past year despite writing about climate change for 10 years. It is an incredible but 100% true story. Buckle your seat belts and hang on for a wild ride.

        Once upon a time, an existential climate crisis threatened Earth. Scientists were certain they had found the cause and that it was man-made. Alarmed environmentalists and credulous politicians quickly fell into line. International conferences produced a United Nations convention, followed later by a protocol. Lakes, rivers and forests were dying and a war on coal was declared. Public alarm was intense; in Germany, hysteria reached fever pitch. The media sensationally asserted that the planet was dying.

       The National Academy of Sciences and the EPA said the evidence of its cause was “overwhelming”. The president created a blue ribbon scientific working group to study the problem and signed international agreements. When the next president expressed skepticism, 3,000 scientists protested. Cap and trade legislation was in Congress.

       Then came a huge surprise! The blue ribbon scientific working group found that the science was all wrong. The true cause of the problem was identified, the problem fixed and the planet saved. The EPA never admitted it was wrong; they suppressed the evidence and used dirty tricks to discredit the scientist who proved them wrong. EPA still clings to the discredited story and still spends money on the disproven cause.

       To end your suspense, the above story is about acid rain, which was but one part of a long train of junk climate science beginning with the nuclear winter panic in the 1950-60s. Then came acid rain in the 1970s, followed by global cooling and the ice age. Next came global warming which morphed into today’s climate change paranoia.

         All these episodes share a common playbook. An existential threat to the planet is conjured; scientists are certain they know the cause; international organizations jump on the bandwagon; the media sensationalize with apocalyptic hype; the public panics; politicians demand more money and power; and anyone skeptical is branded a heretic. They have one other significant thing in common: they have been proven wrong about everything. My study of global warming leads to two unshakable conclusions.

    Man’s role is somewhere between non-existent and inconsequential. A peer reviewed study (Fyfe, Gillett, Zwiers) of 15-year rolling average temperatures shows Earth returning to its long-term secular warming pattern of .7 degrees Celsius per century; i.e. the warming is not man-made. The evidence against human causation is strong and includes warming throughout the solar system, no warming for 20 years, failure of all climate models, most warming occurring before 1945 and much more.

       There is something much bigger going on. Climate change is misdirection having little to do with CO2, warming or renewables. It is maskirovka by radical leftists and environmentalists and their fellow travelers in science, media and politics to beguile and to scare people into enacting their agenda. They have used the same playbook for everything from nuclear winter to climate change. In his book Green Tyranny Darwall (see source note) labels all these groups the climate industrial complex.

       This Earth Day take a moment to ponder nuclear winter, acid rain, global cooling and the coming ice age. The same people and organizations in media, science and politics, i.e. the climate industrial complex, were certain about all these crises and they were dead wrong every time. They are just as wrong now about man-made warming!

Source Note: Some of the data used in this post were taken from “Green Tyranny” by Rupert Darwall. If you are interested in this issue, I wholeheartedly recommend you read this book.

Beginning next week MLLG pivots to China and the Trump tariffs

It’s Getting Better All the Time

George Noga
The environment is the best it has been in at least 75 years and is getting better all the time.   
It’s Getting Better All the Time
By: George Noga – April 15, 2018

       We will celebrate Earth Day 2018 on April 22 with a special posting; today’s posting is a prequel. Since Earth Day began in 1970, Americans have been bombarded with ersatz horror stories even though every significant measure of environmental well being is the best it has been and is getting better as well documented in numerous publications including: It’s Better than it Looks, It’s Getting Better All the Time, Enlightenment Now, Progress, Abundance, Rational Optimist and The Moral Arc.

        Following are but a few of the metrics that are doing great: deaths from extreme weather, ambient air quality, emissions per GDP unit, streams suitable for swimming and fishing, oil spills, wastewater treatment, energy use by GDP unit, auto fuel economy, food production, commodity prices, timber growth and use, environmental quality and natural resource abundance. And the list goes on and on.

        Malnutrition in the US (and globally) is at its lowest level in history. Virtually all hunger that remains is due to distribution failures and government corruption – not to lack of food. Obesity in the US, and increasingly worldwide, has supplanted hunger as the more significant problem. Not only do we now feed an astounding 7.6 billion people, we accomplish the feat with a much smaller environmental footprint due mainly to GMOs. This doesn’t stop environmental alarmists from incantations and screeds warning of population growth and demonizing GMOs. Note: The population growth rate already is falling globally and will turn negative by end of the century.

        Despite the epic proliferation of people and the concomitant improvements in their standard of living and consumption, the earth’s minerals and resources are more abundant than ever before – and are getting more abundant all the time. The price of virtually all resources is falling, signalling that we are finding and replacing them faster than we are using them. Remember peak oil? On past Earth Days, scaremongers in science, media and politics warned we would run out of oil by 2000; instead, energy is in worldwide oversupply (really, there is a glut) and prices have plunged.

        Brace yourself for the soporific palaver you will be force fed during the coming week by the Chicken Little triad of media, progressives and environmental wackos. They will regurgitate their imperious, dog-eared shibboleths about greedy corporations spewing carbon, polluting and despoiling the environment. They will rant about frankenfoods, population growth and, of course, their favorite whipping boy (or should it be whipping person?), climate change. But you know the truth, i.e. every metric of environmental well being is the best it has been and is getting better all the time!

      As for us at MLLG, we have written an uber-special Earth Day post to be distributed on Earth Day 2018, which is next Sunday, April 22. Its topic is an environmental issue we never before have written about since these posts began in 2009. It should be a real eye opener; please be sure to read it on Earth Day!

On Earth Day (April 22) we will have something truly provocative for you.

Business Ethics and Social Responsibility

George Noga
Profit is the appropriate measure of a corporation’s value to society.
Business Ethics and Social Responsibility
By: George Noga – April 8, 2018

      A professor I know teaches corporate ethics and social responsibility at a local university. She asked me to provide a video for her class, knowing my presentation would be provocative and in sharp contrast with videos provided by other business leaders; I did not disappoint. Following is a lightly edited transcript of my video.

Question from professor:  You have done considerable service for the community; does this mean business leaders have a responsibility to give back to the community?

I did community service because I wanted, not due to some wrong-headed cliche. The responsibility of business is to earn profit; by doing so it serves the community. Apple makes a billion people more productive and enriched; they do more good going about their business than they ever could through community service. The term giving back implies something has been taken. People who should give back are those who have taken; that’s why criminals are assigned to perform community service.

Question from professor:  Should companies do nothing in way of community service?

Companies should act in their self interest. Their mission is to provide the best possible products and services to consumers and value to shareholders; by accomplishing this they enrich the community. If businesses choose to sponsor community projects, they should do it for the right reason – not because of some platitude from a can.

Question from professor:  Should companies have a written code of ethics?

Restaurant washrooms have signs “Employees are required to wash their hands.” Such signs are posted to make customers comfortable, not to remind employees. So it is for codes of ethics. A written code of ethics probably can’t cause harm but it is mainly for window dressing. Enron had a 64-page code of ethics distributed to all employees.

Question from professor:  What about sustainability and green initiatives?

I never met one businessman who was against the environment, social responsibility, sustainability or other similar catch phrases. Recognize however that such argot is virtue signalling and a dog whistle for political correctness. Greenwashing and green preening is ubiquitous and serves the same purpose as the restaurant washroom signs.

Question from professor:  Is there a role for socially responsible investing?

The people that P.T. Barnum said are born every minute believe in socially responsible investment. I fail to see the social value in throwing money away. Profits are the best metric of a corporation’s value to society. If it makes you feel virtuous, go ahead; you are helping people but just not in the way you believe; you are helping me and other value investors. What is socially responsible anyway? Is blacklisting defense stocks responsible; or, is it more virtuous to have a strong defense to maintain the peace?

Question from professor:  In closing, what is your advice to students?

Single-mindedly focus on truth; do not unquestioningly accept conventional wisdom or political correctness. Businesses must operate in the real world; perforce, focus laser-like on your customers’ needs and wants and the rest will take care of itself.

Next up: Americans are not as divided as their political parties.

Startling Climate Change Perspective

George Noga
Ominous pronouncements from science, government and media about climate change 
Startling Climate Change Perspective
By: George Noga – April 1, 2018

       The following excerpts from respected sources in science, government and media just might change your outlook about climate change and global warming.

        Newsweek: “There are ominous signs earth’s weather patterns have begun to change dramatically; these changes may portend a drastic decline in food production. The evidence has begun to accumulate so massively that meteorologists are hard pressed to keep up. . . If the climate change is as profound as the pessimists fear, the resulting famine could be catastrophic. . . . The longer we delay, the more difficult it will be to cope with climate change once the results become grim reality.”

       New York Times: “Some experts believe mankind is on the threshold of a new pattern of adverse global climate change for which it is ill prepared. . . this climate change poses a threat to the people of the world.”  Time Magazine: “The scientists at the National Oceanic and Atmospheric Administration are confidently predicting the current weather will continue.” New York Times: “The US and Russia are exploring why Arctic climate and sea ice is changing so rapidly and so ominously.“

       Science Digest: “World’s climatologists are agreed we must prepare for the next climate epoch.” Professor Hubert Lamb: “We are on a definite course for the next two centuries. There may be a few fluctuations but these are more than offset by the general trend.” New York Times: “An international team of specialists has concluded there is no end in sight to the trend of the past 30 years.” CIA: “Climate leaders agree climate change has caused major economic problems throughout the world.“

       Professor James Hays: “A trend has already begun. . . and it should continue for the next 20,000 years.” National Center for Atmospheric Research: “There are strong signs that recent climate disasters were not random deviations from the usual weather, but instead signal the emergence of a new normal for world climate.”  Reuters: “The threat of climate change must now stand alongside nuclear war as a likely source of wholesale death and misery for all of mankind.” Harper’s Magazine: “Rising ocean waters may flood most of our port cities within the foreseeable future.“

       I could fill many more pages with the same stuff. How certain and how dire their warnings – comparing climate change to nuclear war, predicting massive starvation and severe climate for the next 20,000 years. Their predictions for 20,000 years did not survive even 20 years; all the quotes in this post are about global cooling and the coming ice age! Today, science, government and media are equally certain and apocalyptic about the opposite of what they were certain about a few decades ago.

     There constantly are new revelations about contrary science, shoddy research, concocted data, fraudulent peer review, plugged computer models, compliant scientific journals, refusals to debate, quashing of dissent and warming throughout the solar system. These often involve the same people who were so wrong about global cooling.

       But wait; it gets worse. The UN IPCC predicted that by 2010 there would be 50 million climate refugees and even published a map showing where they would be as a result of rising sea levels. That was 8 years ago; today there are exactly zero climate refugees, no rise in sea level, no food shortages and even the ozone hole has filled in.

       I apologize if you were momentarily fooled, but it is April 1st. We will have more to say about climate and the environment as we approach Earth Day. Stay tuned.

Our next post is about business ethics and social responsibility.

The Debt Crisis Revisited

George Noga
Many readers responded to my assertions that the US has crossed the point of no return on the debt crisis and that it is Gotterdammerung for America.
The Debt Crisis Revisited
By: George Noga – March 25, 2018

      Wow! My recent posts about the debt crisis Point of No Return (February 18) and Gotterdammerung for America (February 25) (available at www.mllg.us) elicited many questions and comments from readers. Following are my responses.

Question: Your current position differs from what you wrote in the past; explain.

Some readers have long memories. I wrote in 2010 and 2011 that the debt crisis would arrive in the early 2020s and possibly sooner. Now, I project it will arrive in the mid 2020s, maybe sooner. The difference is entirely explainable by (1) the budget sequester passed in 2013; (2) nine years without a recession; and (3) the lowest interest rates in history. There is another key difference: in earlier years I believed the crisis was still avoidable; now I believe we have crossed the point of no return. Fundamentally, nothing has changed except the timeline – thanks mainly to the sequester.

Question: What about Japan; isn’t its Debt/GDP ratio above 200%?

Japan’s ratio is 235%; however, it has pension and other assets, which partially offset the debt part of the equation and lower the ratio to around 100%. The NIKKEI 225 stock index nearly hit 40,000 in 1989; currently, it is around 21,200 – a drop of 47% that has persisted for 28 years and counting. Economic growth has barely averaged 1%; they have chronic deflation and now more deaths than births each year. They have avoided default mainly because Japanese citizens are willing to buy government bonds to finance the deficit. However, Japan has paid a steep price for its debt crisis.

Question: Hasn’t Greece avoided default despite a ratio way above 90%?

Greece’s ratio is around 175%. It has staved off default because it is small (GDP size of Massachusetts) and was bailed out by the EU, which imposed severe austerity in exchange for the bailouts. The US is far too big to be bailed out and if we go under, we drag the rest of the world with us. If Greece were on its own, it would have defaulted and would now be a third world country. Moreover, Greece has suffered; its economy has shrunk, pensions have been cut nearly in half and there is societal upheaval.

Question: Isn’t the US okay as long as people keep buying Treasury bonds?

Yes, witness the situation with Japan – which likely is unique to that country. When US debt reaches a level where it can’t be repaid, why would anyone buy more bonds? The very nature of a debt crisis means the debt can’t be repaid without default, devaluation or financial repression that forces bondholders to accept less than full value.

Question: Is a soft landing possible?

Translation: can we suffer a debt crisis with minimum pain and disruption? The debt ultimately must be reduced via: (1) less spending; (2) higher taxes; (3) inflation; (4) repudiation; or (5) a combination. However, the magnitude of the spending cuts or new taxes would be devastating. A crisis could take the form of a sudden cataclysm or a slow motion train wreck. One way or another, the debt must be purged and every possible method results in a crisis that will fundamentally reshape America.

Question: What do you really believe will happen and when?

If something cannot go on forever, it won’t. No nation has recovered from 90% without economic and social upheaval. The US will surpass 90% within a few years and the ratio will continue to skyrocket after that. The point of no return is 90%; that does not mean the crisis begins the day we reach 90%; it only means disaster can’t be avoided. The ratio may hit 125% or even 150% before the bottom falls out. Government will attempt fixes but they will be too little, too late. A painful readjustment process will purge the excess debt from the system. When it is all over, America will be a different country. Some readers have expressed a more sanguine outlook; I hope they are right.

Our next post on April 1st focuses on a serious environmental problem.