Author Archives: Editor of the Fabius Maximus website

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Read like a conservative to see the world in a new way!

Summary: Today’s exercise might open your eyes and raise you consciousness, hopefully in a good way. Here’s what a conservative, of the extreme variety, reads over the course of a week, stories describing a terrifying world of powerful enemies, foreign and domestic, poised to attack (or already subverting America from within). It’s about our weakness and their strength. But more importantly this distorted news flow has tilted the nation’s mental in an unbalanced and fearful way.  {2nd of 2 posts today.}

“you will know the truth, and the truth will make you free.”
— John 8:32. Yes, but lies told the weak are more politically useful.

Truth Will Make You Free

How have so many Americans become so fearful and militaristic since 9/11, urging an ever more belligerent foreign policy (despite its repeated failures)? There have been studies showing a large fraction of people with a bias or tilt towards these things, such as “Tea Party Members Cultural Dispositions ‘Authoritarianism, Fear Of Change, Libertarianism And Nativism’“.

But there’s more to it. An industry has arise to feed our fears. The information “diet” we consume exacerbates these traits, so that we see a distorted view of the world, with every threat exaggerated in size and immanence. The repeated failure of these threats to affect us does change their views, mysteriously.

Here’s a sample of stories from just a few days — most from respectable sources (it’s much worse in the shadowy corners of the Internet). Only a few from Fox News and the Washington Times, as that would be too easy. Nothing here from the flow of racism; we discussed that yesterday.

Some of these stories are accurate, but lack context. Some are exaggerated. Some are fanciful. It’s the selectivity of the diet that produces the desired effect, making the subject easy to rule. Imagine credulously reading these every day for years. Terror and a kind of paranoia are natural results, plus a desire to strike before they get us.

Foreign Enemies

How the Military Will Fight ISIS on the Dark Web“, Patrick Tucker, Defense One.  “Al-Qaeda morphs into a new movement since 9/11“, AP. AQ has gone thru more changes since 9/11 than Lady GaGa. Always threatening yet seldom acting.  “The U.S. strategy to defeat the Islamic State is underpowered“, Washington Post editorial.  “Islamic State group’s war chest is growing daily“, AP. Perhaps in a decade or so it will equal that of Liechtenstein ($420 million per year).

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We live in the America Bush Jr created, a break with our past.

Summary: Dazzled by Nobel Peace Prize President Hope and Change, people (including historians and political scientists) and have only slowly recognized that Obama has largely continued the policies of his greater predecessor — a man who truly changed the course of American history. Until we understand our past we cannot effectively cope with our future.  {1st of 2 posts today.}

Bush on Mt Rushmore

Passing years make it ever more clear that Bush Jr was one of the few transformative Presidents in US history, decisively changing the course of both domestic and foreign policy. Consider just a few of his major policy initiatives. The roots of these policy changes lie in the past, but he brought them to maturity.

  • His tax laws shifted the burden of Federal taxes from the rich to the middle-class (only slightly rolled back by Obama; State and local taxes were already regressive), continuing the work of our previous transformative President — Ronald Reagan.
  • He shifted the US from its post-WWII policy of containment and support for international law (largely a US-driven creation) to one of militaristic aggression — quite mad for a world in which new power centers are arising).
  • He decisively broke with the New Deal patterns, weakening the regulatory apparatus ability to interfere with corporate profits — and diminishing the influence of other interests, such as unions and environmentalists.
  • He decisively broke with  generations-old legal precedents (e.g., torture, preemptive war, indefinite detention without trial) or centuries-old (e.g., use of mercenaries).

As with many such key moments in time, historians only slowly recognized the change in course if America, and even more slowly explore the factors that made it happen. In the New York Review of Books Mark Danner continues his work reviewing books about this remarkable story (one reason the NYRB should be on everybody’s subscription list). Here we examine the person most responsible for crafting America’s new grand strategy. The origins of Bush’s domestic policies remain to be explored, on another day.

Excerpt from “In the Darkness of Dick Cheney

By Mark Danner
New York Review of Books, 6 March 2014 (red emphasis added)

Reviewing:

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A graph showing the end of America as we know it.

Summary: This is third in a series showing that we’re losing America. This post examines rising inequality of income, one of the major forces reshaping our society and politics. It’s not a class war if we don’t fight back.  {2nd of 2 posts today.}

The one graph that ties together the strands making a New America.
Click to enlarge.

The Great Decoupoling

Andrew McAfee, 12 Dec 2012 — Click to enlarge.

This one powerful but dense graph shows the transformation of what we know of as America — born in the fires of the New Deal, WWII, and the civil rights revolution — into the America of the Gilded Age. The top 2 lines (blue and grey) show America’s increasing economic strength: rising labor productivity and GDP. The bottom two show what we get from that (private sector jobs and median household income).

Here you see the slowly widening break in the early 1980s — the Reagan years, an inflection in so many American political and economic trends — as the 1% siphoned off an increasing fraction of America’s income. That growing gap gives them ever more power, allowing them to restructure America’s institutions to better serve them.

Labor unions were crushed. Workers increasingly became contingent, disposable — either “independent contractors” (often de facto employees without the protections of formal employment), or temps, or just pawns to be fired as needed to boost profits. Open borders brought in more workers to drive down wages (e.g., H-1B visas for skilled workers). Enforcement of labor regulations were gutted, allowing growing exploitation of workers, such as illegally treated cheerleaders in professional sports, plus dubiously legal “managers” (no overtime), unpaid interns, and not-independent independent contractors.

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Stories about a rising tide of black mob violence!

Summary:  Obama’s election brought hope for a new era of race relations in America. Instead we appear to be starting another downward part of the long cycle. As usual, these things just don’t happen — and bad relations work well for the 1%. Today we look at some of the ugly propaganda that guides American in the 21st century (so similar to that of the 19th and 20th C).

This is the 2nd in a series of posts showing how we’re losing America.  {1st of 2 posts today.}

The aide {Karl Rove} said that guys like me were ”in what we call the reality-based community,” which he defined as people who ”believe that solutions emerge from your judicious study of discernible reality.” I nodded and murmured something about enlightenment principles and empiricism.

He cut me off. ”That’s not the way the world really works anymore,” he continued. ”We’re an empire now, and when we act, we create our own reality. And while you’re studying that reality — judiciously, as you will — we’ll act again, creating other new realities, which you can study too, and that’s how things will sort out. We’re history’s actors . . . and you, all of you, will be left to just study what we do.”

— Karl Rove, as quoted in “Faith, Certainty and the Presidency of George W. Bush” by Ron Suskind, New York Times Magazine, 17 October 2004

Divide and Rule

One of the momentous and astonishing aspects of our time is that conservative leaders have erected a Potemkin village for their followers, and gotten them to move in. A fake history (e.g., the failures of FDR, we won in Vietnam excerpt for a “stab in the back” by peaceniks). A fake economics (e.g., cutting taxes usually increases tax revenue).  A fake science (e.g., creationism, climate science is fraud).  Over time they’re moving further away from reality. Divorcing people from mainstream and authoritative sources is a reliable tool of social control (effectively used, for example, by cults).  This probably will not end well for America.

διαίρει καὶ βασίλευ.
— ‘Divide and rule’, attributed to Philip II of Macedon (332-386 BC)
.

Today we look at an example showing they build myths in the minds of their flock, and lead  them. In this case, playing on people’s deep fear of the “other”. The  economic stress on blue collar demographic creates pressures with no outlets, as they don’t see the 1% in its protected enclaves — and have been taught that their gradual impoverishment is just — as their ancestors believed in the divine right of Kings. If the pressure grew without outlet we might get new political alliances and perhaps even change.

So they’re given myths (ideally based on exaggerations instead of fiction) creating enemies to fear. Such as Islamic fundamentalists abroad (rebelling against their corrupt, oppressive western-backed governments), so they can feel vicarious satisfaction from our bombing and killing.

But who to use as enemies at home? We don’t have the long deep history of antisemitism that’s served European elites so well. But America has an almost as deeply rooted racism, that’s served the same role as well for so long. It’s easily exploited using tried and proven methods, but the process is not pretty.

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More evidence that we’re losing America. It’s not too late to act.

Summary: I have long discussed what might make Americans rouse themselves to retake the reins of the Republic and reverse its evolution into a new regime. Clear warnings, descriptions and diagnosis of the problem? Anger at ourselves and what we’ve allowed America to become? None of these seem plausible. Perhaps fear will do it, produced by recognition that there is a class war — and we’re losing. A few posts will review the depressing news.

Will these spur you to act? Time is not our ally. Lots of groups talk about building a New America; the people doing so act in the shadows — visible only if you look. But the results of their work have become obvious.

Despair at losing

We discuss the progress of our foreign wars in great details, just as we track every vibration of the economy and the political machinery in Washington. The big things get less attention, such as the class war by the 1% against us. We’re losing. It’s like slowly boiling a frog; it’s happening so slowly that we don’t notice. But there’s still time to act.  {Also: zoologists consider this a myth; please don’t test it at home.}

(1)  COIN comes to America

As I and so many others warned for so long, the techniques of surveillance and oppression developed during our occupations of Iraq and Afghanistan would eventually come home. As we see at the crushing of the Occupy protests and on the streets of Ferguson. Here’s another example. Even I, who has chronicled so many horrific stories about America at this website, was shocked. I shouldn’t have been surprised.

The disappeared: Chicago police detain Americans at abuse-laden ‘black site’“, Spencer Ackerman, The Guardian, 24 February 2015 — Secret interrogation facility reveals aspects of war on terror in US. Protester details 17-hour shackling without basic rights. Accounts describe police brutality, missing 15-year-old and one man’s death.” Excerpt:

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About the disturbing disconnect between markets and the real economy

Summary:  Today we have a guest post about the often discussed but still mysterious disconnect between the US risk markets and the US economy — between Wall Street and Main Street. Since the crash, economists and investment strategists have confidently predicted it will close soon, certainly when the economy accelerated back to near normal speed. So far neither has happened. Today’s guest post by Lance Roberts examines this important phenomenon.

Disconnect!

Markets Vs Economy – The Great Disconnect

From StreetTalk By Lance Roberts
23 February 2015
Posted with his generous permission.

Since Jan 1st of 2009, through the end of 2014, the stock market has risen by an astounding 148.8% (based on Fed Reserve quarterly data). With such a large gain in the financial markets we should see a commensurate indication of economic growth.

The reality is that after three massive Q.E. programs, a maturity extension program, bailouts of TARP, TGLP, TGLF, etc., HAMP, HARP, direct bailouts of Bear Stearns, AIG, GM, bank supports, etc., all of which total to more than $33 Trillion and counting, the economy has grown by a whopping $1.9 trillion since the beginning of 2009. This equates to just 13.5% growth in real GDP during the same period that the market surged by more than 100%.

What do stock prices tell us today?

Click to enlarge.

However, as shown in the chart above, the Fed’s monetary programs have inflated the reserve balances of member banks by roughly 403% during the same period. The increases in reserve balances, which the banks can borrow for effectively zero, have been funneled directly into risky assets in order to create returns. This is why there is such a high correlation, roughly 85%, between the increase in the Fed’s balance sheet and the return of the stock market over that period.

Unfortunately, while Wall Street benefits greatly from repeated Federal Reserve interventions – Main Street has not. Over the past few years, while asset prices surged higher, personal consumption expenditures have remained mired at levels typically associated with very weak economic expansions. This is reflective of continued weak income growth which has been a function of a large amount of slack in the labor force.

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We see a stock market bubble but prefer to close our eyes.

Summary:  Bubbles in the information age differ from those of simpler times. Now we have real-time data showing our folly. Here’s a brief review, another in our series of posts about this mad cycle. Listen while you read and you’ll hear the stock market roaring to the moon.  {1st of 2 posts today.}

“You can’t cheat an honest man.”
— Title of W. C. Fields movie, describing the essence of bubbles (1940). Bubbles are consensual hallucinations. Each participant chooses to join.

Soyuz TMA-12M Prepares To Launch

(1)  Goldman tells the story

As usual, Goldman gives us clear analysis, in mild professional language — seeing events earlier than the rest of the pack. (Via Zero Hedge). The 21st century differs from anything seen before. We see it as distinct phases; future generations will see it as one event (as we’ve combined what participants saw as separate events into the War of the Roses and the Napoleonic Wars).

Stocks with attractive valuation are rare in the current environment of stretched share prices. The aggregate S&P 500 trades at 17.3x forward EPS and 10.2x EV/EBITDA. The only time during the past 40 years that the index traded at a higher multiple was during the 1997-2000 Tech Bubble. The median stock sports a P/E and EV/EBITDA of 18.0x and 11.0x, respectively. These valuations rank in the 99th percentile of both P/E and EV/EBITDA multiples since 1976.

Goldman: valuations

Valuation ratios are deceptively simple, as their interpretation relies on larger factors such as interest rates and the economy’s expected future growth rate. If fears of secular stagnation prove correct, people today pay big money for growth that will not arrive. Also likely to be disappointed are people hoping to sell at valuations like those of 1999-2000. Those were based on GDP growth rates almost twice ours. From 1996-2000 GDP grew at ~4.5%; it was 7.4% in Q4 1999 — fueling dreams of our economy roaring like never before.

Biohazard

(2) The biotech bubble

Every bubble has a heart from which the euphoria is pumped out into the wider society. In this cycle it’s the biotech industry. Like the railroads in 1840s and the internet in the 1990s, the biotech industry has a great future. But like its predecessors, valuations have grown beyond realistic bounds. For news from the front see this: “Forget the tech bubble. It’s the biotech bubble you should worry about“, Max Nisen, Quartz, 19 February 2015. — Excerpt:

Big pharma firms and investors have been showering billions on speculative companies that have never produced a viable drug. For four years running, biotech stocks have risen faster than any other sector of the market in the United States. Health care set new records last year for both IPOs and M&A spending. … Cheap debt, a frenzy of publicity for research that hasn’t yet led to any products, and obscenely high pricing for the medicines that make a difference are all adding fuel to the fire.

As usual, the extreme madness appears in the paper-manufacturing business: the people creating new companies and doing Initial Public Offerings. Fortunes are made by farming gullible investors. Drugs go through five phases from conception to approval: preclinical work, 3 rounds of testing on people, and getting FDA approval. The number of IPOs having only drugs in the first 3 phases has grown to insane levels.

Why are these bad investments? The odds are better at Las Vegas than for early stage drug development projects, and at Vegas you get free drinks served by pretty ladies. Look at the probability of success:

Biotech: Success rates by phase

Biotech: Success rates by phase. By KMR, 8 August 2012.

Printing paper for gullible investors

Bubbles just don’t happen even in the most favorable climate; they’re made. Creating start-ups in a hot market is easier than drilling for oil, and more profitable. Investors give up their money more easily than the Earth yields its treasure. The complex of venture capitalists, attorneys, and investment bankers have constructed a money magnet.

Another note from the front lines: “Look at how quickly the values of multi-billion-dollar startups have multiplied“, Nitasha Tiku, The Verge, 20 February 2015 — “A quick note on how profitability relates to valuations: it doesn’t! At least not yet.” See the following graphic; see the bubbles grow over time! Size of the circle shows the dollars raised in each deal. Go to the article to see this as an interactive graphic, where you can click on each dot for details. Click to enlarge.

Startup Sizes

Startup sizes by year. From The Verge, 20 February 2015. Click to enlarge.

Other articles about the bubble

  1. Stock market bubble warnings grow louder“, CNN, 19 August 2014 — “Some of the brightest minds in finance are sounding the alarm about a stock market bubble.”
  2. US equity markets in ‘dotcom style’ bubble“, The Telegraph, 28 November 2014 — “The UK’s top professional investors think most asset classes are overvalued after years of easy money conditions.”
  3. {CEO Elon Musk} Says Tesla’s China Sales Fell, No Profit Until 2020“, Bloomberg, 13 January 2015 — My personal favorite bubble stock.
  4. The billion-dollar companies Silicon Valley investors ought to fear“, Financial Times. 20 February 2015 — “Late-stage private companies have not endured the scrutiny of the IPO process.”

For More Information

Other posts about our new and strange world:

  1. Will 21st Century USA have a surprise boom, as did the 19th Century UK? — About the 1840s railroad boom.
  2. Four graphs showing a nation in decline. An unnecessary and easily fixed decline.
  3. The new tech bubble takes us to a new world. A mad world.
  4. Watch corporations strip-mine their future (and ours).
  5. America enjoys a time of sunshine in Hell. Let’s use the time wisely.
  6. A guide into the weird numbers that run our world, describing both financial bubbles & climate change.
  7. Let’s ignore another warning from the BIS. Do we enjoy paying for burst bubbles?
  8. How we’ve become accustomed to bubbles bursting the economy, instead of fighting them.