Productivity versus Inflation

Denninger's Productivity vs. Inflation chart is worth a look.  Denninger calls it theft, and it is, but, as some of the comments point out, this is where there really are two Americas. 

There is the Productive America and the Parasite America.  Parasite America, including politicians, bureaucrats, corporate campfollowers, and welfare recipients, lives off the difference between increased productivity and central banking-induced inflation. 

He Did Not Get the Peace Prize ...

... but he was a Nobel Laureate in literature.  He was arrested and imprisoned for comments made in private letters to his friends. 

And how we burned in the camps later, thinking: What would things have been like if every Security operative, when he went out at night to make an arrest, had been uncertain whether he would return alive and had to say good-bye to his family? Or if, during periods of mass arrests, as for example in Leningrad, when they arrested a quarter of the entire city, people had not simply sat there in their lairs, paling with terror at every bang of the downstairs door and at every step on the staircase, but had understood they had nothing left to lose and had boldly set up in the downstairs hall an ambush of half a dozen people with axes, hammers, pokers, or whatever else was at hand?... The Organs would very quickly have suffered a shortage of officers and transport and, notwithstanding all of Stalin's thirst, the cursed machine would have ground to a halt! If...if...We didn't love freedom enough. And even more – we had no awareness of the real situation.... We purely and simply deserved everything that happened afterward.

Aleksandr Isayevich Solzhenitsyn 

(Emphasis Added)

Musical Interlude

The Tennessee Ernie Ford Classic "Shotgun Boogie".

Stopping Power and the 9mm

Read the original at buckeyefirearms.org.

9mm Luger

# of people shot - 456
# of hits - 1121
% of hits that were fatal - 24%
Average number of rounds until incapacitation - 2.45
% of people who were not incapacitated - 13%
One-shot-stop % - 34%
Accuracy (head and torso hits) - 74%
% actually incapacitated by one shot (torso or head hit) - 47%

My initial comments on the study.

Stopping power and the .25 ACP.

Stopping power and the .22 rimfire.

Stopping power and the .380 ACP.
Stopping power and the .38 Special.

The funny thing about the 9mm is the number of people shot.  It is more than the .357 and .45 totals combined.  This could well be a result of the 9mm’s use as a military sidearm, which also probably contributes to its poorer performance in terms of one-shot stops since military ammunition is typically non-expanding.  The 9mm is not a bad self-defense arm if it is loaded with relatively high-velocity, expanding rounds. 

I do not have a 9mm to try out, but friends tell me that 115-grain bullets at 1200 or so feet-per-second perform well, giving in the neighborhood of 360 foot-pounds of muzzle energy.  Winchester Silvertips and Speer Gold Dots are probably the specific brands I heard mentioned most often. 

Notice that, on the plus side, only 13% of bad guys were not incapacitated.  That is quite respectable.  It may take an extra round or two, but the 9mm will stop trouble.  Since we are on the subject, think about what is required of a self-defense handgun.  We do not care whether our assailant dies, is knocked to the ground, or runs away.  We want the attack stopped.  That is all we care about.  If we walk away alive and more or less whole it is a win.  A meth-head who flops instantly to the ground with a chest full of buckshot no more successful from our viewpoint than one who turns and runs away after a miss whizzes by his ear.  It is just that we can’ t count on the latter working whereas the former is certain.

If I were looking for a Nine, I would probably seriously consider one of the smaller Glock models.  There is no reason for most of us to carry a big service pistol like the Beretta 92 to handle the 9mm.  It is better suited for concealed carry in smaller autoloaders.  Capacity, even with easily concealable weapons, is good.  So what if you need to do the Mozambique every time?  You have plenty of ammo.  And speaking of double-tapping, recoil on the 9 is not hard to control for most shooters even in the smaller pistols.

While the 9mm is not as potent or flat-shooting as the .357, it does allow the shooter to extend the range a little if that is necessary.  Lighter, faster bullets will take some of the hump out of the ballistic arc and require little compensation for drop over the distance of most gunfights.  Unlike the versatile .357 magnum, I do not consider the 9mm any kind of “all-around” cartridge.  It lacks the potency and flexibility of a .38/.357 revolver.  It is primarily a cartridge for self-defense, and there is nothing wrong with that.  

You can feed a 9mm fairly cheaply and get in a lot of practice.  If you have one, do that.  Then load it with quality expanding ammunition that feeds reliably and shoots accurately in your weapon, and you can count on having a good tool to defend yourself, your family, and your property. 

Coaching for the Prudent

One thing that we often neglect in preparedness is training, especially hands-on training with mentors and coaches.  I was reminded of this over the weekend as I took a motorcycle basic skills course.  I was pretty sure I could pass the practical portion of the state requirement to get my endorsement, but I had been off bikes for a long time.  I just was not as confident as I was when I was younger.  I decided that, in addition to lowering my insurance rates a little, the course might help me break some bad habits and form better ones. 

It was actually much better than I had expected.  Based on Motorcycle Safety Foundation material, we were taught good techniques, coached past personal obstacles, and given a great deal of useful information.  There were several experienced riders in the class along with complete novices.  I don’t think any of the participants failed to learn something they considered well worth the time.  The total scheduled time was 19 hours:  3 hours Friday night plus 8 hours of mostly riding on both Saturday and Sunday.  We were able to get through in a little less than that because the weather was very good, and all the students were motivated and positive. 

Just to give an example, I have a bad habit of tapping my front brake with one finger and relying mostly on the rear brake.  I started out as dirt rider and generally things go better if you keep the front end light in the rough stuff.  On pavement and in emergency stop situations, it is, however, best to use both brakes and to apply the pressure evenly while downshifting.  The coaches kept reminding me about my “bad finger” during the exercises.  During the evaluation, my strongest point was probably my braking in which I significantly beat the standard stopping distance while under control, without squalling tires or locking the back wheel.

I also improved my cornering technique – mainly by slowing down more going into the turns, and I still managed to beat the time standard a little.  As the coach reminded me, you can always accelerate a bike through a curve if you go in too slow.  It’s not so easy to fix if you go in too fast.    

Not everyone is interested in learning to be a better motorcycle rider, but whatever the skill is we are trying to acquire or hone, having a coach to watch us and catch our little faults and eccentricities can be beneficial.  Most places you can find someone to help you with firearms training.  There are classes you can take to be a better, faster shooter.  But even informal coaching is a great help.  You can get together with a friend or family member who can watch your technique and critically evaluate your habits.  You can do the same for others.  Things the shooter can’t see because he or she is concentrating on the mechanics of sight alignment and trigger squeeze may be obvious to an alert observer standing (safely out of the line of fire) to one side or behind.

If you are interested in acquiring a new skill or refining an existing one, seriously consider the benefits of working with a coach.  The commitment required can help motivate you, and you are almost certain to be encouraged as well as enlightened. 

Time for a New Thermometer

We have a strange habit of estimating our own happiness by what other persons think it is; and their opinion is likely to be based on our material success, since they have little else to go by. We continually try to obtain the things that the people around us want or profess to want, rather than what we want ourselves, because we have never really tried to examine whether there is any difference between the two. In trying to find whether we are hot or cold, we attach more importance to a dubious thermometer than we do to our own feelings – Henry Hazlitt, The Way to Will-Power

I don’t know much about economics so I'm probably misunderstanding and misstating a lot of this stuff.  However, this is how I see what happened in Europe addressing the problem of a default by Greece. 

The Euro is a single currency – a fiat currency – backed up by the property and productivity of several European nations.  In fact, the productivity in Europe, as a whole, is rather low.  But it is very high in Germany.  The Germans build things – like cars – for export. They sell these products across Europe at a relatively stable price as long as the Euro is stable.  You don’t have the price of a Volkswagen suddenly doubling in Greece because the drachma was devalued.  But Greece, Spain, Portugal, Italy, and, to a lesser extent, Ireland are importers with mainly service and tourism-based economies.  All of these countries have vast government sectors that employ far more civil servants than are needed for healthy private sector growth.  They offer relatively lucrative pensions to government workers, allowing them to retire after twenty or twenty-five years to make way for a new generation of bureaucrats who surrender a fairly high portion of their salaries to support the retirees. 

What happens, though, when the next generation is a little smaller than the current one?  And the next a little smaller still?  Eventually, you get one worker supporting the pensions of several retirees – on a government paycheck.  Add to this the expense of drug addicts, immigrants, losers and others who become additional parasites on the host government.  At some point the government runs out of money and must borrow to continue to pay the benefits and support its workers.  Eventually this leads to greater and greater deficits as the accumulation of interest due adds to the debt.  It is analogous to the situation many have found themselves in with regard to credit card debt on which they have paid the minimum.  All they are paying is the interest on the loan, which keeps getting higher and higher over time as the principal continues to grow through taking on more debt. 

There are a couple of solutions for the individual.  Preferably a person with excess debt will realize the difficulty of the situation, reduce spending to manageable levels, perhaps increase income, and begin to pay down the principal without accumulating new debt.  If things go too far, however, the only solution may be bankruptcy.  It should be noted that while paying down debt is more or less neutral with regard to money supply, bankruptcy is deflationary.  Not only does it take money out of the system in the form of zeroing out an asset on the creditor’s balance sheet, it usually deters the debtor from adding liabilities in the near future.  And, again, I am neither accountant nor economist so my understanding may be somewhat amiss here. 

A nation can do the same thing with its debt.  They have an additional avenue in some cases, that of printing money and devaluing the currency so that debts can be more easily discharged.  When you hear about the hyperinflation that took place in the Post-WWI German Weimar Republic, you have to keep in mind that the Treaty of Versailles imposed a huge war debt upon Germany to be paid to France.  This debt prevented Germany from rebuilding, and they could not eliminate it through default so they began to print money.  At some point, things got out of hand, and people lost faith in the currency altogether. 

Conceivably, Greece and the other heavily indebted nations of Europe could do the same thing, except they are not entirely in control of their currency.  The structure of the European Monetary Union, aka the Eurozone, prevents this.  The Greek government has financed its debt by selling bonds to private citizens throughout the world and Eurozone, to other governments such as China and Germany and to banks – including central banks like the ECB.  Banks took the bonds for which they had paid good money and used them to enhance their balance sheets so they leverage more borrowing because, of course, the bonds paid interest plus they could always be sold for some percentage of face value. 

Except now everyone realizes that Greece is never going to fully honor those bonds.  They are going to quit paying interest and default which would be a significant write off of assets for the banks in particular.  So the EU folks got together and said that they are going to devalue Greek bonds by 50%.  The debt is reduced but Greece still has to pay interest on half.  Initially the Euro rose sharply on news of this development because it is deflationary.  A few billion Euros disappear, which, in and of itself, is no big deal.  There are, however, a couple of things to note.  First, the full 50% haircut is only on privately-held bonds.  Bonds held by public entities, such as other governments, e.g., China or Germany, took, I believe a 21% cut in face value – not bad when the short-term interest rate was running about 100%.  But Greek bonds held by the European Central Bank and the International Monetary Fund took no haircut at all. 

The next is that the Greeks are not all that happy about the deal.  They want the monkey off their backs and the opportunity to start fresh via default.  They would probably even like to opt out of the EMU and return to screwing things up locally with the good old drachma.  Who could blame them?  This does not make the central bankers happy because, first, Greek is not the only EMU country that has out-of-control debt, and second, Greek bonds used as security for the infamous Collateralized Debt Obligations, CDOs, in a pool along with other bonds and instruments.  The Greek bonds are a part of the CDO – you will hear it called a “tranch” or slice of the pool.  Some of the higher risk CDOs that included Greek bonds are now are risk if the devaluing of these Greek bonds is seen as a credit event.  The CDOs are part of the leveraged structure of the Euro fiat system.  A pure Greek default might not be that big a deal, but it could conceivably ripple through the EMU and cause a lot of havoc.  If Greece goes down, is Italy next?  There is insufficient real value in the system if the potential defaults start cascading.

This is what caused such ridiculous exuberance in the markets last week.  When the Greek government started talking sovereignty and a referendum, the markets reacted negatively out of fear.  Right now, things seem to be holding steady, and the US market, at least, is buoyed somewhat.  My guess is that the Greeks will go along with some sort of deal that lets them keep living, for the most part, like parasitic bums.  The trouble is that all the EMU is doing is pushing the catastrophe a few months down the road.  Much like what the Fed is doing here.

Did you ever try to push a car up a slope?  Imagine you start out with a small, light car – I pushed an ‘80’s model Sunbird up a grade one time.  It wasn’t that hard.  But let’s say that as you are pushing, someone comes along and places a lead weight in the driver’s seat then another in the passenger seat and some in the back seat then another on the hood and so forth.  With every added weight you have to fight more and more against gravity.  Where you were pushing at a mile an hour at first, now you are down to half that then a quarter then a tenth.  If they keep adding weights, you may only be able to inch the car forward.  Finally you reach a point in equilibrium with gravity where you simply cannot push the car any farther.  It is all you can do to hold the car in place on the hill as it threatens to roll violently back down.  The global economy is at or very near the point of not moving forward at all.  The weights are the public debt of multiple nations and blocks of nations, not to mention the billions in private debt, much of it, like sovereign debt, unsecured. 

Debts are not decreasing in the face of crisis but increasing.  Central banks continue to buy bonds, which is the same as printing money.  They are the ones pushing the car.   But their best efforts, as we saw here with QE2 last year, simply held things in place while adding still more weight to try and move.  At some point, in some way the crash is coming.  Do not be deceived.  The gods of the copybook headings are never mocked in the end.