Tuesday, July 26, 2016

What sort of terror attacks will come next?

After all the incidents of recent weeks in Europe and the USA, I suspect we're in for a long period of such disruptions.  Some will be relatively small, using knives or firearms.  Others will be much worse, using explosives or arson.  Following questions from readers as to what to expect, I'm going to discuss a few likely possibilities here.  In case you're worried about it, I'm not saying anything new.  Wannabe terrorists have openly discussed these and other ideas on the Internet for years.

First of all, I think we can expect small-scale 'lone wolf' attacks in ever-increasing numbers.  Individuals or small groups will use firearms, home-made explosives or arson (fueled by gasoline or whatever they can lay their hands on) to attack night clubs, churches, cafes, festivals, etc.  Such attacks are almost impossible to defend against in advance, because the perpetrators will seldom need to talk to others about them.  Little or no co-ordination will be necessary.  The armed citizen has a decent chance of disrupting or stopping such attacks if he or she is prepared, alert and ready to act.  I hope and trust most of my readers will be that kind of person.

On a larger scale, I've been warning for years (as regular readers of this blog will know) that I expect one or more Beslan-style attacks on US schools.  It would be relatively simple for groups of terrorists to sneak across our porous southern border, congregate in two or three or four towns and cities where they could blend into already-resettled populations of Middle Eastern refugees, scope out local schools, obtain firearms and fuel such as LP gas cylinders and gasoline, manufacture home-made explosives, and prepare for co-ordinated attacks with other groups.  It's a nightmare scenario, but I have no doubt whatsoever that it's in the minds of terrorists right now.  Our schools are almost completely unprepared for such attacks.

Another likely possibility is the use of LP gas tanks, either stand-alone units, or gas cylinders on trucks, or actual LP gas tankers (road, rail or ship-borne), as blast and incendiary bombs.  They can be absolutely terrifying in the destruction they cause.  For a start, in case you've never heard of a BLEVE (Boiling liquid expanding vapor explosion), here's a video explaining it.

The force of such an explosion depends, of course, on the amount of fuel available.  For example, here's a road accident in Russia that caused several consecutive explosions of individual gas cylinders.  Each explosion is relatively small, but is still big enough to devastate a single shop or dwelling or passing vehicle, and kill people nearby with flying fragments of the cylinder(s).

An entire tanker truck filled with liquid natural gas or propane would be far more dangerous.  Consider the disaster at Los Alfaques in Spain in 1978, which killed over 200 people and injured as many again.  There have been many others. Here are three that were caught on camera.

Now, imagine that one of those explosions took place in an urban area - a built-up residential or commercial district.  Think of it in the business or shopping districts of New York, or Chicago, or Los Angeles.  Think of the casualties it would cause, and the carnage as the entire area became clogged with people trying to escape, others trying to get closer to gawk, and emergency services trying to get in and out. It would be catastrophic.

I'm not saying this because I like being alarmist.  I lived in an environment of terrorism for many years, and I've seen at first hand the sort of things these people can and will do.  I've seen rocket attacks on oil and gasoline storage tanks from a nearby road;  bombs planted in restaurants;  gun and knife attacks on innocent civilians;  mob violence directed against anyone and everyone who did not agree or sympathize with one side or another;  and so on.  Those were all relatively unsophisticated.  In our urbanized, highly concentrated western cities, something like a gas tanker attack would be far more dangerous.  Even more so would be an attack on a LNG carrier like the one illustrated below.

Such a ship, in harbor, would be an extraordinarily attractive target, provided terrorists could be found with sufficient knowledge and expertise to board her and plant their explosives in the right places.  It would cause immense damage and many casualties.  Needless to say, extraordinary precautions are taken to stop that happening.

LP gas isn't the only threat, of course.  A gasoline tanker could be hijacked, driven into a transportation tunnel (say, the Holland Tunnel or the Lincoln Tunnel in New York City), stopped halfway through it, its valves opened to empty its cargo into the road, and an incendiary device used to ignite it.  The resulting fire would almost certainly kill a lot of people in the tunnel, cause so much damage that the structure might become unsafe for future use, and disrupt traffic (and emergency responders) for days, or weeks, or months.  Multiple co-ordinated attacks of that sort might bring an entire city to a standstill, causing immense economic disruption.  (Yes, I know trucks and hazardous materials are banned from such tunnels.  Do you think such a ban is going to deter or stop a terrorist?  Even physical barriers might not be enough, particularly if he and/or his accomplices can shoot or grenade their way past defending officers to open the barriers.)

The same sorts of attacks could be launched on individual buildings.  The World Trade Center was attacked with vehicle-borne bombs in its basement in 1993.  Regulations and precautions notwithstanding, it's not at all impossible for similar attacks to be launched in future, particularly if security grows lax (or can be suborned . . . how many security personnel have been recruited from population groups that might be sympathetic to, or susceptible to intimidation by, terrorists?).  Tanker trucks would obviously not fit into basements or parking garages, but smaller vehicles could carry drums or cylinders of fuel, or bombs.

I'd say those are the most likely forms of terrorist attack we have to anticipate.  I've no idea how likely they are in the short term, but I know terrorists have discussed them on their bulletin boards and in messages.  The authorities are well aware of it.  One hopes adequate precautions have been taken, but the powers that be simply can't guard every tanker truck, or every LNG rail car, or every piece of critical infrastructure such as tunnels or bridges.  Such attacks will be attempted, as sure as I'm sitting here.  We'd better all be hoping and praying that the authorities foil them before it's too late.  We can help by being alert, reporting suspicious behavior, and most of all being prepared to stop perpetrators ourselves if at all possible.

We live in an age of terrorism now.  It's a fact of life.  We'd better get used to it, and conduct ourselves accordingly.


Doofus Of The Day #917

Today's award goes to two over-enthusiastic Army junior officers in England.

Two young Army officers set fire to a mess during a boozy dinner after they tempted to settle a disagreement by shooting flares at each other.

A room and corridor in the officers’ mess at Allenby Barracks in Bovington, Dorset, were gutted by fire after the incident at a “fathers and sons” dinner to celebrate the end of a training course.

Flares were fired after the unnamed officers decided to settle an argument by taking a kayak into the swimming pool outside and firing at each other on Friday night, Forces News reported.

. . .

The incident happened during a dinner to celebrate the end of a three-month course for young tank troop commanders of the Royal Armoured Corps officers who had recently graduated from Sandhurst.

One of the flares, which were not military ammunition, was fired through a window in a seven story block and managed to set the room alight.

When personnel tried to put out the fire, sources said the base’s fire hoses had been shut off due to fears over Legionnaires disease following an outbreak on the base in January.

The whole block was left empty for the weekend until the fire alarms could be reset.

Army sources suggested the incident was being viewed as “high jinx rather than criminal damage”.

One former officer told the Telegraph: “They wouldn’t be the first to fire flares at each other at the ‘Bovvy Hilton’. This sort of thing used to happen all the time in my day.”

There's more at the link.

It sounds as if not much has changed since my younger days in the military . . . and the incident confirms yet again that armies (and young men in uniform) are much the same all over the world!


What a hurry and a scurry and a flurry . . .

I'm not generally impressed by or interested in political party conventions.  They're heavily scripted public relations exercises, designed to portray the party and its candidates in the best possible light.  However, when things go wrong, they can become a lot of fun - at least to outside spectators.

I'm afraid the high jinks and shenanigans surrounding the Democratic Party convention in Philadelphia this week have been so delicious as to provoke the onset of schadenfreude.  Frankly, the consequences of the party bureaucracy's misconduct are richly deserved, and one can only hope there's more to come.  They deserve every bit of it.  The party structure is supposed to be neutral towards its candidates until one is selected, whereupon it swings into action to support the chosen candidate(s) during the election process.  Instead, it turns out that the Democratic National Committee has been partisan throughout the selection process, actively conspiring against one candidate and for another, and hoodwinking the party's own members in the process.  No wonder the members are angry.  They have every reason to be!

What I find most strange about this whole thing is that more heads have not rolled over the issue.  Only the DNC's chairperson has resigned - and that won't take effect until after the convention.  For such egregious misconduct, one would have expected that every single person involved should have resigned the moment their activities were uncovered.  If they did not do so, someone should have fired their asses instanter.  However, such conduct is apparently too honorable to be expected.  I seriously question whether most of the guilty parties will be punished at all.  The ethical and moral blindness of the party's leadership is astonishing.

I suppose, in a way, it's similar to the problem that the Republican party establishment had with Donald Trump.  He defied the establishment, running his own campaign his own way, and going over the heads of the party's bureaucracy to appeal directly to its members.  He succeeded.  His Democratic Party rival, Bernie Sanders, tried valiantly, but couldn't overcome the entrenched establishment of his party in the same way.  I think that was a great pity, for the sake of American democracy overall.  There's nothing like skewering the self-proclaimed powers that be!

I'm also greatly enjoying the DNC's attempts to 'spin' the crisis.  They're now trying to blame President Putin of Russia for the debacle.  I don't think he'd have hesitated for a moment to arrange it, if he could have;  but the DNC should pause to think about that.  If he is, indeed, behind the Wikileaks revelations, why would he release so many of them now?  Surely he should have held onto them until they could have the greatest impact on the electorate as a whole, just before the election date?  To me, that suggests that if he is involved, he's 'keeping the best wine until last' - he's got a whole lot more information that he's going to release at the most appropriate moment, from his point of view.  Some people in the DNC appear to be very worried about that - with good reason.  (It would be the best possible outcome, IMHO, of Hillary Clinton's criminal misconduct in using an unsecured private e-mail system for classified communications of state.  Serves her right!)

Of particular irony is this comment:

If the Russians were behind the leaks, said former CIA director Michael Hayden, “they’re clearly taking their game to another level. It would be weaponizing information.” He added: “You don’t want a foreign power affecting your election. We have laws against that.”

Oh, really?  Well, Mr. Hayden, what about US interference with elections in Ukraine a couple of years ago - interference that had a great deal to do with subsequent Russian intervention in that country?  'We have laws against that', you say?  Well, then, why didn't the US government itself obey them?  It's not the first time the USA has done that, of course.  Try Haiti and Chile, among others.  Pot, meet kettle.  Kettle, pot.

You know what would be the best possible outcome of this whole kerfuffle?  Let disgruntled Republicans, who can't stand the thought of Donald Trump as their party's candidate, vote instead for Governor Johnson of the Libertarian Party.  Let disgruntled pro-Bernie Sanders Democrats, who can't stand the thought of Hillary Clinton as their party's candidate, vote instead for Jill Stein of the Green Party.  With luck, this will lift both minor parties out of the doldrums and into the mainstream of future political activity.  That might be the beginning of the end of the US's de facto two-party system.  Far better, IMHO, to have four mainstream parties, and meaningful choice for the electorate.  Bring it!


Monday, July 25, 2016

So hot!

Right now, here in northern Texas, in the small town where I live:

Our geothermal air-conditioning system is working full blast, and doing a pretty good job considering the sweltering conditions, but the interior of the house is still about 8 degrees higher than it's supposed to be. The house has absorbed so much heat today that I guess it'll stay that way until the small hours of tomorrow morning. Tonight I'll be sleeping nekkid on top of the sheets, for sure!


Three very important articles

In preparing my posts about the economy last Friday and Saturday, plus the one about politics yesterday, I used three articles as sources that I think capture very important aspects of the current malaise in this country.  I'd like to recommend them to your attention.

The first dates back to 2010.  It's from the American Spectator, and it's titled 'America’s Ruling Class — And the Perils of Revolution'.  I've referred to it before in these pages on several occasions, but it's so profound that it bears revisiting.  Here's a brief excerpt.

Never has there been so little diversity within America’s upper crust. Always, in America as elsewhere, some people have been wealthier and more powerful than others. But until our own time America’s upper crust was a mixture of people who had gained prominence in a variety of ways, who drew their money and status from different sources and were not predictably of one mind on any given matter. The Boston Brahmins, the New York financiers, the land barons of California, Texas, and Florida, the industrialists of Pittsburgh, the Southern aristocracy, and the hardscrabble politicians who made it big in Chicago or Memphis had little contact with one another. Few had much contact with government, and “bureaucrat” was a dirty word for all. So was “social engineering.” Nor had the schools and universities that formed yesterday’s upper crust imposed a single orthodoxy about the origins of man, about American history, and about how America should be governed. All that has changed.

Today’s ruling class, from Boston to San Diego, was formed by an educational system that exposed them to the same ideas and gave them remarkably uniform guidance, as well as tastes and habits. These amount to a social canon of judgments about good and evil, complete with secular sacred history, sins (against minorities and the environment), and saints. Using the right words and avoiding the wrong ones when referring to such matters — speaking the “in” language — serves as a badge of identity. Regardless of what business or profession they are in, their road up included government channels and government money because, as government has grown, its boundary with the rest of American life has become indistinct. Many began their careers in government and leveraged their way into the private sector. Some, e.g., Secretary of the Treasury Timothy Geithner, never held a non-government job. Hence whether formally in government, out of it, or halfway, America’s ruling class speaks the language and has the tastes, habits, and tools of bureaucrats. It rules uneasily over the majority of Americans not oriented to government.

The two classes have less in common culturally, dislike each other more, and embody ways of life more different from one another than did the 19th century’s Northerners and Southerners — nearly all of whom, as Lincoln reminded them, “prayed to the same God.” By contrast, while most Americans pray to the God “who created and doth sustain us,” our ruling class prays to itself as “saviors of the planet” and improvers of humanity. Our classes’ clash is over “whose country” America is, over what way of life will prevail, over who is to defer to whom about what. The gravity of such divisions points us, as it did Lincoln, to Mark’s Gospel: “if a house be divided against itself, that house cannot stand.”

There's more at the link.  Excellent reading.

Next, from the Spring 2016 edition of City Journal comes 'The End of Democracy in America'.

Over today’s swarming millions of equal, materialistic, utterly isolated individuals, [de Tocqueville] wrote, “stands an immense tutelary power, which assumes sole responsibility for securing their pleasure and watching over their fate.” This new kind of sovereign, “after taking individuals one by one in his powerful hands and kneading them to his liking,” will spread over society “a fine mesh of uniform, minute, and complex rules,” which constrain even the best and brightest. “He does not break men’s wills but softens, bends, and guides them. He seldom forces anyone to act but consistently opposes action. He does not destroy things but rather prevents them from coming into being. Rather than tyrannize, he inhibits, represses, saps, stultifies, and in the end reduces each nation to nothing but a timid and industrious flock of animals, with the government as its shepherd.”

Under the New Deal’s mesh of minute and complex rules, the sovereign—with the Supreme Court’s blessing—punished a farmer in 1942 for growing grain in excess of his allotted quota, to feed to his own livestock. Today the iron cage of administrative rules prevents new businesses from opening, old ones from hiring, doctors from treating patients as they think best, groups of citizens from uttering political speech, even a landowner from moving a pile of sand from one spot to another on his property, purportedly because it could affect a navigable waterway 50 miles away. It slows projects to a crawl, so that building a bridge, a skyscraper, a power plant takes years—whereas in the old America, the Empire State Building rose in 11 months.

And today’s sovereign does force men to act as well as suppressing action, so that nuns must provide their employees with birth control that their religion holds to be sinful, bakers must make cakes celebrating homosexual marriages that their religious beliefs abominate, private colleges must regulate their students’ sex lives, banks must lend to deadbeats. The immense tutelary power has turned private charities into government contractors, so that Catholic Charities or Jewish Social Services are neither Catholic nor Jewish—though most public welfare comes direct from the state, from babies’ milk to old people’s health care and pensions, for which only a minority has paid. As Tocqueville observed, “It is the state that has undertaken virtually alone to give bread to the hungry, aid and shelter to the sick, and work to the idle.” In New York State, where even in the 1830s Tocqueville saw administrative centralization taking form, the sovereign has commanded strictly private clubs to change their admissions criteria, so that even the realm of private association is subject to government power. And whatever traditional American mores defined as good and bad, moral and immoral, base and praiseworthy, the sovereign has redefined and redefined until all such ideas have lost their meaning. Is it any wonder that today’s Americans feel that they have no say in how they are governed—or that they don’t understand how that came about?

Again, more at the link.

Finally, from the Summer 2016 edition of City Journal comes 'Why Are Voters So Angry?  They Want Self-Government Back'.

Haunting this year’s presidential contest is the sense that the U.S. government no longer belongs to the people and no longer represents them. And this uneasy feeling is not misplaced. It reflects the real state of affairs.

We have lost the government we learned about in civics class, with its democratic election of representatives to do the voters’ will in framing laws, which the president vows to execute faithfully, unless the Supreme Court rules them unconstitutional. That small government of limited powers that the Founders designed, hedged with checks and balances, hasn’t operated for a century. All its parts still have their old names and appear to be carrying out their old functions. But in fact, a new kind of government has grown up inside the old structure, like those parasites hatched in another organism that grow by eating up their host from within, until the adult creature bursts out of the host’s carcass. This transformation is not an evolution but a usurpation.

What has now largely displaced the Founders’ government is what’s called the Administrative State—a transformation premeditated by its main architect, Woodrow Wilson. The thin-skinned, self-righteous college-professor president, who thought himself enlightened far beyond the citizenry, dismissed the Declaration of Independence’s inalienable rights as so much outmoded “nonsense,” and he rejected the Founders’ clunky constitutional machinery as obsolete. (See “It’s Not Your Founding Fathers’ Republic Any More,” Summer 2014.) What a modern country needed, he said, was a “living constitution” that would keep pace with the fast-changing times by continual, Darwinian adaptation, as he called it, effected by federal courts acting as a permanent constitutional convention.

. . .

Deference to the greater wisdom of government, which Wilsonian progressivism deems a better judge of what the era needs and what the people “really” want than the people themselves, has been silently eroding our unique culture of enterprise, self-reliance, enlightenment, and love of liberty for decades. But if we cease to enshrine American exceptionalism at the heart of our culture—if we set equal value on such Third World cultural tendencies as passive resignation, fatalism, superstition, devaluation of learning, resentment of imaginary plots by the powerful, and a belief that gratification deferred is gratification forgone—the exceptionalism of our institutions becomes all the more precarious.

More at the link.

All three articles contain important material, and all are, IMHO, exceptionally important reading in preparation for the 2016 election.  I recommend them all.


In defense of larger handgun calibers

In the wake of the spate of recent terrorist and criminal incidents, I've again been getting queries about what cartridge or caliber is 'best' for self-defense.  In particular, some folks with what they consider to be 'old-fashioned' heavier-caliber weapons are asking whether they need to go to lighter caliber equivalents that can hold more ammunition.  Whilst there are definitely factors that favor such a switch, there are others that motivate against it.

I've written extensively about this in the past, and I don't want to re-hash everything here;  but for the benefit of those who may have missed earlier articles, I'll provide a brief summary.  See these previous articles for more in-depth information:
In recent years a number of law enforcement agencies and other authorities have concluded that ammunition performance in smaller cartridges such as 9mm. Parabellum has improved to the point that they offer performance almost as good as traditionally 'superior' cartridges such as .45 ACP, .40 S&W, etc.  The FBI, which inspired the development of the .40 S&W after the infamous 'Miami Massacre' incident, has decided to switch back to the 9mm. for this reason among others.  Other important factors are that many (perhaps most) shooters find the recoil of the 9mm. round easier to control than its bigger brethren, and also that pistols using the smaller round can be made physically smaller, thus enabling those with smaller hands to use them more easily.

Nevertheless, larger rounds retain a significant advantage in terms of bullet momentum and its resultant effects on the target.  I discussed momentum in the third part of my 'Myth of handgun stopping power' series;  please read the discussion there.  Briefly, momentum (and hence depth of penetration) is generally improved with a heavier bullet, while velocity (and hence bullet energy) is generally improved with a lighter bullet.  (That's an over-simplification, but in a brief overview like this, it'll have to do.)

Whilst maximum energy delivery on target is an important aspect of a defensive round, momentum has a value all its own when it comes to penetration.  Examples include the need to penetrate concealment such as vehicle bodies, or deal with heavy-set attackers (i.e. having greater volumes of flesh and hence distance to penetrate between their skin and their vital target zones), or get through heavy outer clothing such as multiple layers worn in colder climates.  A round with greater momentum will generally penetrate more easily, and penetrate deeper into, such targets.

There's also the issue of the shock delivered to the target.  I think it's unquestionable that a heavier bullet, with greater frontal area and momentum, will deliver a greater initial shock to the target.  I offer two real-world tests that you can conduct for yourself.

The sport of bowling pin shooting has become very popular over the years.  Briefly, the shooter engages a table full of bowling pins and attempts to not just knock them down, but drive them off the table, as fast as possible.  Here's a video clip demonstrating the sport.

There are classes of competition for smaller, less powerful cartridges, even down to the lowly .22 Long Rifle (using smaller, lighter targets, of course);  but in general, for the same size and weight of bowling pin, a larger, heavier, more powerful cartridge will be more effective than a smaller, lighter, less powerful one.  Try this for yourself.  Set up a big, heavy bowling pin on a table-like surface six feet in depth behind the bowling pin.  Shoot at it with both a heavier and a lighter caliber, using the same point of aim.  (I suggest .45 ACP and 9mm. Parabellum, two of the most-used defensive cartridges.)  See which one knocks it down more easily, and drives it further back down the surface.  See which one knocks it right off the rear of the surface more quickly.  I think you'll find that the heavier cartridge does better than the lighter one, almost all the time.

The second real-world test is hunting.  Many hunters have shot game animals roughly the same weight as (or sometimes heavier than) human beings with handgun cartridges.  All too often, rounds that are very highly rated for self-defense against humans don't do well at all against such animals.  One of my favorites, Winchester's RA9TA 127gr. 9mm +P+ round, did very poorly for my friend Lawdog in an encounter with a wild hog.  (On the other hand, so did a .45 ACP round from the next officer to arrive on the scene.)  Jim Higginbotham, a firearms instructor and active shooter with decades of experience whose views I respect very highly, reports that the fabled 125gr. .357 Magnum round, beloved of experts for many years, has performed very poorly on deer in his hands, as have many 9mm. rounds.  On the other hand, he's used .45 ACP on deer with good results.  (Admittedly, whitetail deer are generally a lot less tough than wild hogs!)  My own favorite cartridge for handgun hunting (not that I do a lot of that these days, since my disabling injury) has long been the Federal 300gr. CastCore load in .44 Magnum.  In general, larger calibers and cartridges have performed better on human-size and -weight animals than smaller ones.

This is not, repeat, NOT, to say that a 9mm. pistol or .38 Special revolver can't be a perfectly satisfactory means of self-defense against a human being!  They most certainly can, particularly when loaded with an effective round that's accurately directed against a suitable target zone.  I carry such cartridges almost every day, and I'm comfortable relying on them.  However, I also accept that they have their shortcomings, some of which we've discussed above.  I saw those shortcomings magnified in actual combat in southern Africa during the 1980's (admittedly with earlier-generation ammunition that wasn't as advanced as modern versions), and I therefore remain more comfortable with larger, heavier, more powerful cartridges than I am with smaller, lighter, lower-powered alternatives.  When I'm carrying the latter, I expect to have to use more rounds to achieve the same results that I would with fewer rounds of the former.

Jim Higginbotham's comments bear repeating.  I endorse them from my own experience (which, I hasten to add, is far less than his!).

Your skill is far more important that what you carry, within reason. We are not really talking about “stopping power”, whatever that is, here but rather effectiveness.

I can find no real measure – referred to by some as a mathematical model – of stopping power or effectiveness. And I have looked for 44 years now! Generally speaking I do see that bigger holes (in the right place) are more effective than smaller holes but the easy answer to that is just to shoot your smaller gun more – “a big shot is just a little shot that kept shooting”. True, I carry a .45 but that is because I am lazy and want to shoot less. A good bullet in 9mm in the right place (the spine!) will get the job done. If you hit the heart, 3 or 4 expanded 9mms will do about what a .45 expanding bullet will do or one might equal .45 ball . . . IF (note the big if) it penetrates. That is not based on any formula, it is based on what I have found to happen – sometimes real life does not make sense.

. . .

In real life, your gunfight may be dark, cold, rainy, etc. The subject may be anorexic (a lot of bad guys are not very healthy) or he may be obese (effective penetration and stopping power of your weapon). There are dozens of modifiers which change the circumstance, most not under your control. My only advice on this is what I learned from an old tanker: “Shoot until the target changes shape or catches fire!” Vertical to horizontal is a shape change, and putting that one more round into his chest at point blank range may catch his clothes on fire, even without using black powder.

We tell our military folks to be prepared to hit an enemy fighter from 3-7 times with 5.56 ball, traveling at over 3,000 feet per second. This approach sometimes worked, but I know of several cases where it has not, even “center mass.”

With handguns, and with expanding bullets, it is even more unpredictable, but through years of study I have developed a general formula, subject to the above mentioned unpredictable circumstances.

  • 2-3 hits with a .45
  • 4-6 with a .40
  • 5-8 with a 9mm
With a revolver, the rounds are not necessarily more effective but I would practice shooting 3 in a .38 or .357 merely because I want 3 left for other threats. Not that those next three won’t follow quickly if the target hasn’t changed shape around my front sight blade. A .41, .44 or .45 Colt I would probably drop to two. Once again, they are not that much more effective than a .45 Auto but I don’t have the bullets to waste.

In any case, I want to stress the part that it is more about how you shoot than what you shoot, within reason. It is also more about the mindset and condition of the subject you are shooting which is not under your control. Take control – buy good bullets and put them where they count the most! And remember “anyone worth shooting once is worth shooting a whole lot!”

There's more at the link.  Sage advice, and worth following, IMHO.

I hope this discussion has helped to clarify the situation.  Don't rely on my words alone!  There's an immense volume of material out there.  Read widely, and learn from as many sources as you can.


Sunday, July 24, 2016

OK, that's an impressive machine!

According to Popular Mechanics, this rail-laying machine "created by Austrian manufacturer Plasser & Theurer which performs all the functions of an assembly line needed to lay down miles of railroad track, with only a few workers running the process."

I wonder how many workers were replaced by that behemoth?


Trying to tax the shadow economy

The US 'shadow economy' (where payments are in cash or in kind, and nothing ever gets officially reported, much less taxed) was estimated in 2012 to be as high as $2 trillion per year.  The IRS reckoned that unreported turnover and income cost it $500 billion in lost taxes.  Heaven knows how high the figures are today - but I doubt they're any lower.

All over the world, the 'shadow economy' is booming even as the 'official economy' is stagnating.  People who are shut out of the regular system are turning to the irregular alternative to survive.  A lot of it involves crime, of course;  but a very large proportion is probably the exchange of goods and services, working for cash under the table, and so on.  It's not surprising that the tax authorities in every country are trying to get a handle on the shadow economy in order to get what they see as rightfully theirs.

Australia's situation is probably a microcosm of what the authorities are trying to do all over the world.  It's certainly instructional.  The Sydney Morning Herald reports:

The Tax Office is targeting the growing number of people making a living or supplementing their regular income from the sharing economy.

"We have a team of data doctors developing the sophisticated tax return analysis we do," says Tax Office assistant tax commissioner Graham Whyte.

"They have PhDs in machine learning, data mining and predictive analytics," he says.

The models scrutinise returns for missing income, over-claimed deductions and also identity crime.

"The models learn and are not based on thresholds so that you can't second guess the models or try and beat them," Whyte says.
Income from working as a taxi driver for UberX or renting out a room on Airbnb should be declared, he says.

Usually the sharing economy "employers" do not pay income tax to the Tax Office on behalf of their "contractors". They therefore do not provide drivers with PAYG payment summaries.

Such income is easy for the Tax Office to track, at least in theory, as most payments in the sharing economy are electronic.

. . .

For the first time, the Tax Office is checking self lodgers' deductions as they complete their tax returns online in real time.

"If your claims are substantially higher than others in similar occupations, earning similar amounts of income, a message will appear, asking you to check them," Whyte says.

The online forms are automatically populated with interest income from bank accounts, for example.

There's more at the link.

I'm sure that Uber and Lyft drivers, and Airbnb landlords, are going to be targeted in the same way in this country.  I'm also aware of efforts to get illegal aliens to talk about their employers, some being offered leniency and even (depending on the importance of their information) immunity from deportation, provided they agree to testify against those paying them in cash and not paying tax on that income, or not paying other statutory requirements such as Workers Compensation premiums, etc.

I think we'll see growing efforts to tax payments in kind as well.  Technically, if you service my car in return for me fixing your plumbing, we're both supposed to report the services we receive 'free' as income equivalent, and pay income tax on them;  also sales tax, as if we'd bought them from a contractor and paid in cash.  However, very few people do.  I don't know how the authorities are going to crack down on it, but I daresay some sort of automated expert system such as they're developing in Australia will be part of it.

Worth keeping in mind by those who are looking to supplement their incomes, or make their scarce dollars stretch just a little further.


Doofus Of The Day #916

Courtesy of a tip from Australian reader Snoggeramus, today's award goes to two bungling bad boys in Perth.

Master crooks, that pair.  Absolutely top-notch.


Truth, reality and politics

If we look at US politics today, I think the underlying sentiment for many Americans is disillusionment.  They no longer trust their political leaders.  They realize they've been lied to for decades, treated like idiots, taken for suckers.  They're no longer willing to accept or put up with that.  Examples are legion.

  • The 'official' rate of inflation has nothing whatsoever to do with Americans' day-by-day experience of the real cost of living (as we discussed on Friday).  The government's economic statisticians are not just inaccurate;  they're deliberately lying to us.  They try to excuse this by citing 'hedonic quality adjustments' and other statistical intricacies that are little more than academic constructs.  They make no sense whatsoever in the lived experience of ordinary people.  This began under Reagan and continued under Clinton.  Both parties are equally complicit in this lie, and both are (rightly) blamed by voters.
  • We've been told for years that globalization is good for the economy, and good for us.  However, lived reality doesn't correspond to that propaganda.  US jobs have flooded abroad to countries with lower employment costs, leaving millions of American workers jobless and dependent on Government handouts to survive (handouts that are increased only by the 'official' rate of inflation each year, which is far below the real rate of inflation, and which therefore buy less and less for those who have nothing else to live on).  All the agreements that have underpinned globalization (the WTONAFTA, the proposed TPP and TTIP, etc.) are now widely perceived among the working and middle class as benefiting the establishment while harming everyone else.
  • The unemployment rate is another example of political manipulation.  The only reason it's officially so low is that government statisticians arbitrarily remove from their calculations everyone who's been out of work for a certain period.  They classify them as 'not in the labor force'.  That excludes them from the statistics, because only those in the labor force can be employed or not.  As of June 2016 there were over ninety-three million Americans classified as 'not in the labor force';  almost a third of the national population.  A large proportion of them desperately want to be in the labor force, and want a job.  Statistical gerrymandering can't alter that reality.  When those people hear politicians and their 'tame' statisticians proclaiming that unemployment is low and the economy is doing well, they know from their own bitter experience that those politicians and statisticians are lying.
  • There's a growing disconnect between large urban areas on the one hand, and smaller urban areas and rural areas on the other.  Increasingly, population is concentrated in the former and draining out of the latter.  This means that political parties are focusing their efforts on the largest concentrations of voters - but in doing so, they're increasingly ignoring the needs, aspirations and views of the rest of the electorate.  One article even asked, 'Will Liberal Cities Leave the Rest of America Behind?'  It notably failed to ask another question.  Will the rest of America be willing to be left behind?  America's food supply and most of its raw materials don't come from the cities . . . but the urban 'elite' have largely forgotten that, and the voters who produce them.  I think that's a very serious mistake.  (See the foot of this article for another comment on this subject.)
  • The mainstream news media, with few exceptions, are the tame servants of the establishment that owns them.  With few exceptions, they parrot the official line of propaganda.  Listen to the average financial news broadcast.  How many will tell you that government figures for inflation, unemployment, etc. are statistically 'massaged' until they bear little or no relationship to reality?  Short answer - almost none of them.  Add to that the blatant bias and partisanship of most mainstream news media (repeatedly displayed during the recent Republican national convention), and their studied contempt for 'flyover country' and those living there, and you realize why so few Americans outside the establishment and the 'urban elite' are willing to trust anything the media says.

I could provide many more examples, but those will do for now.  The picture they paint is broadly similar.  Those who hold the reins of power, and those who serve at their whim and pleasure or because they 'toe the party line', have lost touch with the ordinary people of this country.  They think that what's good for them is automatically good for the rest of us, whether we know it or not, whether we like it or not.  For that matter, some question whether the rich (who are, after all, the establishment in this country) even need the rest of America any more.

The ordinary people of America don't agree, and increasingly they're no longer willing to put up with it.  That applies on both sides of the aisle.  It's led to Donald Trump's nomination as the Republican Party candidate for president, and almost led to Bernie Sanders earning the same nomination for the Democratic Party.  (It's now becoming clear why Sanders didn't succeed:  his own party was actively working against him, making the contest entirely uneven - not to mention, in a supreme irony given the party's name, undemocratic.  Trump faced the same opposition from the Republican establishment, but was able to generate sufficient support to overcome it.)

The question is:  where will this lead us in the next Presidential term of office?  Let's say Donald Trump wins the election and becomes President.  He'll have to work with a Congress and Senate whose members are largely opposed to his view of America's needs and priorities.  They are, in the main, representatives of the establishment.  For all that they talk a good fight back home in their constituencies, when they return to Washington they revert to the 'same old, same old' of expensive dinners with 'consultants' and 'lobbyists' who are lavish with their donations to 're-election funds' and 'campaign expenses' . . . provided that the politicians support the measures they're proposing.  Those same lobbyists and consultants are all in favor of the establishment point of view.  They're going to work with might and main to block any and every measure that departs from the establishment line.

The only way we're going to achieve meaningful reform in this country is to elect a set of politicians that will work together to resolve the issues described above, and many others.  The President alone can't do it.  Congress alone can't do it.  The Senate alone can't do it.  It'll take all three institutions, working together, to fix things.  That's why it's time to begin asking ourselves about the incumbent politicians in our states and constituencies.  Has our Congressional representative, and have our Senators, voted in support of the real needs of America?  Or have they supported the establishment and the party line?  If the former, well and good.  If the latter, we need to replace them.

This brings me back to a point I've made many times before.  It's no good voting for a political party, or its representative.  The parties and most of their 'insiders' are part of the so-called 'ruling class', which is notorious for its insularity and studied contempt for 'outsiders'.  Therefore, don't waste time on them.  Instead, vote for the individual.

  • Vote for the person who best represents what you believe in, and will work to achieve it, irrespective of his or her political party.
  • If there isn't a candidate who exactly embodies your point of view, vote for the one who comes closest.
  • If no candidate comes close, vote against the candidate who least embodies your point of view.  Vote his or her opponent into office.  You still won't like the taste, but at least the meal is less likely to choke you!
  • If the above three points don't work - if no candidate is satisfactory, and you don't trust any of them - then I suggest you vote the incumbent out of office as a general principle.  If he or she has done nothing to earn your vote during their previous term, why allow them another one?  Their opponent is at least unlikely to be any worse!  If you can't reward action, punish inaction.
  • Make sure that the candidates and their parties know how you voted, and why.  Make sure they understand that you intend to hold both candidates and parties accountable.  They've grown used to a free ride.  Make them stop that right now.  Make them pay their freight!

Pragmatism is a useful tool in politics.  If ever there was a time for pragmatism among the voters, it's now.  We can't afford to waste time on party loyalties.  Both mainstream parties have failed us miserably over the decades.  If they aren't prepared to get back to reality and do what's necessary, we need to punish them by switching our loyalties to individuals who will be accountable to us.

If we don't do that . . . we deserve all that's happened to us, and all that's yet to come.


EDITED TO ADD:  A telling quotation from Bloomberg on the subject of cities versus rural areas:
“Most people in cities are now several generations away from life on the farm, and some even think of rural areas as our dumping ground,” said Daniel Lichter, a sociologist at Cornell University in Ithaca, New York. “It’s where we send our prisoners, our garbage and our toxic waste.”
Oh, really?  I'm sure rural voters will be delighted to hear that!

Saturday, July 23, 2016

The Munich terror attack

I've refrained from comment on yesterday's Munich terror attack until details became clearer, because there was a lot of confusion.  However, enough has now been cleared up that we can begin to make sense of it.

First off, a lot of reports are referring to it as a 'shooting' or 'mass murder'.  They're afraid to use the T-word.  'Terrorism' is becoming a politically incorrect description, as these two articles show.  Personally, I think any reporter or news media eschewing that word for politically correct reasons is the epitomy of hypocrisy, cowardice and moonbattery, but I suppose they're not interested in my opinion . . .  In the same light, the BBC initially dropped the shooter's first name, 'Ali', from its reports on the tragedy, presumably trying to hide his Islamic or Middle Eastern connections.  Moonbats indeed!

Next, we're told that the shooter was fixated on mass shootings, in particular the massacre perpetrated by neo-Nazi Anders Breivik in Norway in 2011.  He also claimed (to a bystander during the shooting) that he had been 'bullied for seven years'.  I don't find that surprising;  Turkish migrant workers in Germany have complained about racist abuse and bullying for decades.  If this young man was the child of Iranian refugee parents, as has been reported, he'd have looked very similar to a Turk, and would probably have attracted the same unwelcome attention.  However, not many people commit mass murder as a result of bullying!  He's reported to have had psychotic tendencies for which he'd received treatment.  If those reports are true, then they probably contributed to his last, lethal explosion of anger at the bullying.

Therefore, I don't think we can ascribe this incident to fundamentalist Islamic roots.  It's more likely to have been a single, psychotic explosion of violence.  That doesn't make it less tragic, of course . . . or less of a terrorist act.

The one thing that struck me very forcibly about this attack was how easy it would have been for an armed citizen to stop the terrorist in his tracks, before he'd killed so many people.  Consider this video, showing the perpetrator opening fire on passersby.

Any of those running in panic could have sought cover and fired back, if they'd been armed.  Others nearby (not shown in this particular video) could have done the same.  Anyone who says that armed civilians could not have prevented this attack, or stopped it, is lying to you.  Any competent shooter could have dealt with the terrorist.

The corollary to that is:  if, after all the terror attacks in recent weeks and months, you aren't carrying a gun as you go about your daily routine . . . for heaven's sake, why not?  Do you want to be a helpless victim?  Do you want to have to see your spouse and children shot in front of you because you couldn't stop their murderer?  Get a gun, learn how to use it effectively, get a concealed carry permit if one is available to you - and then carry your gun and be prepared to use it!


An interesting (and very large) amphibian aircraft from China

Back in the 1970's China designed the large Harbin SH-5 amphibious maritime patrol aircraft.  Only one prototype and six production aircraft were built.

Harbin SH-5 (image courtesy of Wikipedia)

With China's increased activities in the South China Sea, and the need for additional water-bombing aircraft to deal with forest fires, the country embarked on an ambitious design project for an even larger amphibious aircraft.  The prototype of the Avic TA-600 (also known as the AG-600) has just rolled off the assembly line.  Yahoo News reports:

The AG600, which is about the size of a Boeing 737 and was developed by state aircraft maker Aviation Industry Corporation of China (AVIC), rolled off a production line in the southern city of Zhuhai on Saturday, Xinhua said quoting the firm.

AVIC deputy general manager, Geng Rugang, said the plane was "the latest breakthrough in China's aviation industry." A plan for the development and production of the AG600 received government approval in 2009.

The aircraft has a maximum flight range of 4,500 km and can collect 12 tonnes of water in 20 seconds. It has a maximum take-off weight of 53.5 tonnes, Xinhua said.

There's more at the link.

The new plane hasn't flown yet, but already China is making big plans for it.  Here's a promotional video from that country.

I'm not sure of its utility in firefighting, given its very large size.  That's not a problem in the air, of course, but if it needs to land on water to refill its tanks, it's probably going to need a pretty long stretch of unobstructed, smooth water to do so - much longer than a smaller, lighter water-bomber would need.  Still, I daresay the Chinese authorities have made allowance for that.  What's more, 14 Chinese pilots have already completed water-bomber flight training in the USA.

The Coulson Group that owns two huge Martin Mars flying boat air tankers trained 14 Chinese test pilots last year who will be the first to fly the AG-600. The training included ground, water taxi, flight, scooping, and dropping water. The trainee pilots went through classroom and hands on training using Coulson’s Hawaii Martin Mars, actually taxiing and flying the huge flying boat.

Again, more at the link.  You can also read more about the pilots' training here.

It looks as if China's really serious about getting this plane into production.  I'll be watching further developments with interest.


The economy: "Things fall apart", Part 2

In Part 1 of this article, we looked at the current state of the US economy in terms of the devaluation of money, inflation (which is running right along at plus-or-minus 10% per year, irrespective of 'official' government figures, edicts or prognostications) and globalization.  It's not a happy picture.

In this second half of the article, I'd like to look at the latest ideas from central banks on how to deal with the current crisis, and what they're likely to do to 'ordinary people' like you and I.  I'll then make suggestions as to ways we can prepare for and handle the problems that lie ahead.

Let it be said, right at the outset, that central banks don't care about 'ordinary people'.  They look at the economy overall, examining issues and trends, trying to make it behave according to the blueprint of what they consider desirable and appropriate.  They're also constrained by political reality, irrespective of any lofty words about how they're 'independent'.  If the government of the day wants a given fiscal policy badly enough, it will force its central bank to go along, one way or another.  If persuasion won't work, it'll replace those in charge, or even pass laws that change the status of the central bank to bring it more directly under political control.  To take just one example, witness Japan in 2013:

A joint announcement between the Bank of Japan and government officials said the bank would pursue “open-ended” asset purchases starting next year. The bank also upgraded Japan’s economic growth forecasts...

. . .

Prime Minister Shinzo Abe’s government had pressured the Bank of Japan and Gov. Masaaki Shirakawa to enact bolder monetary policy in the run-up to January’s meeting. In light of the new policies, Abe’s chief cabinet secretary backed away from earlier threats by the Prime Minister’s LDP Party to push for reforms that would undermine the central bank’s independence.

There's more at the link.

If you believe that the Bank of Japan would have taken such steps without such pressure from the Japanese government, there's a bridge in Brooklyn, NYC I'd like to sell you.  Cash only, please, and in small bills.  Want another example?  Try German pressure on the European Central Bank.  There are many more, including the Federal Reserve enabling US government deficit spending by 'printing money' to fund it.  Quite literally, without the Fed, present US government spending levels could not possibly continue.  It's as if the Fed were a drug dealer, handing out free crack to keep addicted politicians dependent on it.  Whose fault is that?  The Fed's, for accommodating the politicians, or the politicians, for pressuring the Fed to do so?

Whoever's responsible, the result of the Fed's connivance is the US government deficit, the cumulative effect of which has pushed gross federal debt to almost $20 trillion at the time of writing.  How is that ever going to be repaid?  My guess is that the government and the Fed will tolerate - if not encourage - inflation levels so high that it'll be repaid in dollars that have been inflated into worthlessness.  We discussed that yesterday.  With real inflation running at about 10% per year, that can be accomplished in only a few decades.  The fact that the 'little people' - folks like you and I - will be impoverished in the process doesn't bother either central bankers or politicians, who will make sure they're insulated from such side-effects.

The central banks, influenced by Keynesian economics, went all-out for 'quantitative easing' in an attempt to recover from the 2007-08 financial crisis.  QE temporarily stabilized the situation, but could not solve the problems at the root of the crisis.  Its benefits are now wearing off, despite repeated applications.  Central banks are now talking about 'doubling down' on this approach by deploying so-called 'helicopter money'.  This is, at its root, nothing more than another form of QE:  money 'created' by a central bank, disbursed either to the government in the form of bonds for which it doesn't have to pay, or more directly to corporations and citizens, in an attempt to boost economic activity.

There are great dangers in such an approach.  As David Stockman points out:

... “helicopter money” isn’t some kind of new wrinkle in monetary policy, at all. It’s an old as the hills rationalization for monetization of the public debt—–that is, purchase of government bonds with central bank credit conjured from thin air.

It’s the ultimate in “something for nothing” economics.

. . .

The unstated essence of it is that our monetary politburo would overtly conspire and coordinate with the White House and Capitol Hill to bury future generations in crushing public debts.

They would do this by agreeing to generate incremental fiscal deficits—-as if Uncle Sam’s current $19 trillion isn’t enough debt—–which would be matched dollar for dollar by an increase in the Fed’s bond-buying or monetization rate. That amounts not only to teaching children how to play with matches; it’s tantamount to setting fiscal forest fires across the land.

There are a few additional meaningless bells and whistles to the theory, which we will dispatch in a moment, but the essential crime against democracy and economic rationality should be made very explicit. To wit, this is a central bank power grab like no other because it insinuates our unelected central bankers into the very heart of the fiscal process.

. . .

... what makes helicopter money so positively insidious is that it relieves elected politicians entirely from their vestigial fears of the public debt and from accountability for the burdens it imposes on future generations ... the crucial element in [Bernanke's] helicopter money scheme ... is an explicit and loud announcement by the Fed that the incremental debt will be permanent. It will never, ever be repaid——not even in today’s fictional by-and-by.

Again, more at the link.

A British financial journalist, discussing 'helicopter money' and its prospects in his country, notes:

But what form will [helicopter money] take? The most likely option is probably a direct monetisation of government debt ... The state could create infrastructure bonds to finance a public works programme and those could be bought directly by its central bank and then cancelled. Instead of adding to the national debt, the bonds would simply be written off.

A more radical idea would be directly putting money into people’s pockets. Technically, the Bank of England would simply credit everyone’s account with £1,000, or whatever sum it chose. A more subtle way of doing that might be through a basic citizen’s income, a proposal already being discussed in Finland and Switzerland, two countries either in or close to recession. Everyone could be paid £5,000 a year, and the central bank would pick up the tab.

Another option could be an incomes policy, which some economists are now advocating for Japan, with the government simply mandating a pay rise. Here in Britain, with our traditional reliance on the property market to boost the economy, don’t be surprised if it takes the form of a more generous “Help To Buy” scheme.

If any of those policies were implemented, expect retail sales to soar, along with car sales and house prices.

Of course, helicopter money won’t work any better than Zirp and Nirp did. It will just further undermine faith in the soundness of currency and reduce incentives to work and save. Worse, unless people can be convinced it is permanent, they may not spend it anyway – many of us might just use the “helicopter money” to reduce debts, which will defeat its purpose. It could backfire as badly as negative rates.

In reality, the major problem for our economy is that we have too much debt, the state is too big, productivity is not growing quickly enough, and technology is no longer delivering sufficient innovation to create new industries in the way it once did. None of those problems will be fixed by printing more money.

More at the link.  Bold, underlined text is my emphasis.

Please note the final paragraph quoted above.  Those problems are at the root of our current economic malaise.  None of the measures taken by central banks will solve them.  Those measures are merely 'papering over the cracks' - indeed, they are making some problems (e.g. the levels of debt in the economy) much worse.  What's more, by devaluing our currency and rendering it essentially worthless (as discussed yesterday), they're ensuring that we will never be able to dig our way out from under those problems as long as we follow current policies.  The longer those policies continue, the worse the situation will become.

These 'big picture' economic developments are all very well, but what do they imply for us as individuals?
  1. Our incomes are being reduced in purchasing power by approximately 10% per year (the real rate of inflation, as discussed yesterday).  If I earn $50,000 per year, and receive a 1% increase this year to compensate me for the official rate of inflation, this is worse than meaningless.  In reality I will suffer a 9% decrease in my purchasing power.  Next year, my income of $50,500 (including the previous year's 1% increase) will be worth only $45,450 in terms of this year's purchasing power.  That decline will continue, year in, year out.  I have to plan accordingly, and expect that my money will buy less and less as time passes.  Unless I can somehow find extra money from somewhere, I'm going to be in serious financial difficulties in due course.  (Many people already are.)
  2. Our financial preparations for the future will become more uncertain, and much more difficult.  For example, we're being urged to plan for a longer retirement, because we're living longer than our predecessors.  This is all very well . . . but in an era of interest rates so low as to be ridiculous, and with our budgets stretched to afford day-to-day necessities, how are we expected to save for our retirement?  A lot of US pension funds are in trouble.  Technically, their members are state-insured against their failure - but that insurance is very parlous indeed, and should not be relied upon.  Pensions may also be drastically cut if reserves aren't sufficient to pay out what was promised.  Playing the stock or bond markets (particularly given their current turmoil) is an expert's job, and even the experts often get it wrong.  Small investors are effectively reduced to participating in investment funds or other joint investment opportunities, where we're dependent on the judgment of others as to what to buy or sell and when to do it.  If they get it wrong, we suffer.  Furthermore, big Wall Street investors, deprived of meaningful yields in their traditional markets, are moving into avenues that were once dominated by small investors (e.g. the housing market - see this report for more information).  That makes it more difficult for those who lack the huge investment resources of the 'big boys' to compete with them, and get a decent return on their (much smaller) investments.

So, in the light of these cold, hard facts, we are confronted by some stark realities.
  • Just to keep pace with inflation, we have to achieve an increase in disposable income (i.e. after taxes and other 'up-front' costs) of at least 10% per year - and higher than that, if inflation gets worse.  If we can't do that, the purchasing power of our disposable income is going to go down every year, whether we like it or not.
  • If we can't achieve that increase, we have to take a long, hard look at our present economic circumstances, and plan for them to get worse.  We need to reduce our debt load, so that more of our disposable income can go towards everyday needs.  That means reducing or eliminating credit card and other consumer debt.  For example, that may mean buying cheaper vehicles, or buying them used instead of new, and saving up to pay cash for them instead of taking on a loan or lease to buy them.
  • We need to plan for an entirely different savings environment.  It's no longer any use to keep large sums of money in a savings account or certificate of deposit, where the interest rate is a small fraction of the real inflation rate.  Our money will lose value - i.e. purchasing power - every day that it's in such accounts.  Instead, we need to treat bank accounts as convenient places to keep our short-term, day-to-day spending money and our emergency reserves.  Some of those funds (perhaps a significant proportion) might be better kept in a safe place at home or elsewhere, because banks are no longer necessarily a safe haven.  Longer-term savings (e.g. for retirement) will have to go into safer investments producing higher rates of return . . . even though finding them will be very difficult for 'small fry' like you and I.

Our spending decisions need to be realigned to take account of a high-inflation environment.  Every cent we spend on fripperies is basically wasted.  We can afford to do that when we aren't struggling financially, but we can't afford it in a high-inflation environment.  We need to get value for our money, and - apart from essentials like food and household needs - that means concentrating on things that will hold their value.  Let's be honest:  we can do without a lot, if we try.
  • Our kids will have to learn that the latest Barbie doll, or a 'happy meal', isn't essential, no matter what the social pressure from their friends.
  • Many Americans eat out relatively often - several times a week.  Cooking at home is more work, but it's a lot cheaper!
  • The quality of US television programming is generally abysmal.  Miss D. and I haven't had a TV service since we got married, and we don't miss it at all.  We can get all the news, etc. we need over the internet, and if we want to watch a movie, there are streaming video services, DVD's etc.  Why pay a monthly cable subscription?
  • In the same way, membership fees for gyms, subscriptions to periodicals, etc. are often luxuries rather than necessities.  One can keep fit and strong in the comfort of one's own home, if money is tight.  It's not even essential to buy fitness equipment.

Another benefit of reducing non-essential expenditure is that the money thus saved can go towards things of real value.  For example, Miss D. and I are paying extra on our mortgage every month, reducing the capital owed.  We'd like to pay it off within a decade, if possible.  That will give us several hundred dollars a month extra in disposable income, at a time when inflation is likely to be hurting us much more than it is now.  Another option might be to stockpile basic essentials that you know you're going to need in future.  That way, you won't have to buy as much of them in future when your money might be tighter - you can draw on your stockpile instead.  (Of course, you need space to store them as well, which can be a limiting factor.)

As a corollary, if a tax refund or 'helicopter money' program gives us some unexpected cash, let's use it to reduce debt, pay down mortgages, buy essential items like a more reliable or economical car to replace one that's costing us a lot of money, and so on.  Let's use the windfall wisely to improve our long-term financial position, rather than waste it.

We should take a long, hard look at where we're living, and why.  If we absolutely have to be close to family members, or to a particular job (perhaps because there are few or no other jobs available), perhaps we can't move;  but why not consider our options?  If we sell our existing home and move to one that's more affordable, we might save a bundle.  That might even involve moving to another city or state, where housing is cheaper.  Miss D. and I did that early this year, because a good house here cost less than half as much as one of comparable size and quality in our previous location.  We moved for a number of reasons, not only for cheaper housing, but the latter was a decisive factor.

We need to consider whether we will ever be able to afford to retire.  We may need to continue earning at least something, to supplement inadequate pensions and Social Security benefits (which won't keep pace with the real rate of inflation, as we've already pointed out).  Some examples:
  • Have you noticed how many elderly people are working as greeters at Walmart and similar businesses these days?  There are a lot of them.
  • In my case, I'll go on writing books for as long as I'm able.
  • Other folks I know are using their knowledge of antiques or other markets to buy things at garage sales or from other sources, then re-sell them on eBay or other outlets.  Some are making a tidy living out of it.
  • It may be that younger families will no longer be able to rely on free child care from grandparents while the parents are out at work.  Without grandparents' help, parents would have to pay for child care;  so why not expect them to pay at least something (in cash and/or in kind) to relatives doing the same job?

We can try to improve our self-sufficiency.  Many people are growing their own herbs, fruits, vegetables, etc. in their back yards.  The produce is usually cheaper than store-bought, and often tastier, too.  Others are learning skills such as plumbing, vehicle maintenance, furniture-making, etc.  By doing at least some of that work themselves, they're saving what they would otherwise have had to pay to others to do it for them.  Some groups (e.g. churches, neighborhoods, clubs, etc.) are pooling their skills and resources in this way.  One person might be good at plumbing, and help his friends in that area in return for help cutting the grass, or cleaning gutters, or in exchange for a piece of furniture he needs.  Another might can or bottle fruits and vegetables, and trade them for electrical work or vehicle maintenance.  (Best of all, such trades are tax-free, unless the taxman gets to hear about them!)

Finally, we can learn useful lessons from countries that have already experienced high inflation.  For example, in Zimbabwe, Venezuela, Argentina and other nations, canny consumers used their spare cash to buy goods that they knew were - and would continue to be - in constant demand:  easily stored foods (e.g. rice, pasta, cereals, etc.);  household goods (e.g. toilet paper, diapers, feminine hygiene products, soap, etc.);  automotive spare parts;  tools;  and so on.  When they found themselves in need of cash, they would take some of their accumulated stockpile and sell or trade it (at its then-inflated price) to buy what they needed.  If, after the transaction, they had money left over, they immediately bought more goods to add to their stockpile, in the confident expectation that they'd get more for them in future than they paid for them now.  (The danger, of course, was that if they bought goods that turned out to be not in high demand, their prices didn't rise as much, so they lost money.  This applied even to seemingly solid investments like jewelry or precious metals.  In a high-inflation environment, with all its stresses and risks, essentials come first;  and you can't eat diamonds or gold!)

I know a number of people who are already trying to do this in the USA.  Right now, their stockpiles aren't in much demand because there are enough goods available at affordable prices;  but in future, they expect that to change.  Some of them were encouraged by the recent 'ammunition drought'.  They took ammo from their stockpiles and sold it at greatly inflated prices, netting a return of several hundred per cent on their initial investment, then used their profits to buy other things they needed.  Now that ammunition is more freely available, they're replenishing their stocks in anticipation of another 'ammo drought' in future.

I'm sure there are more things we can do to prepare for and endure the problems that lie ahead.  Please contribute your suggestions in Comments.


(EDITED TO ADD:  There are those who say that in a high-inflation environment, it makes sense to incur more debt by buying items on instalment credit.  Future years' instalments will be the same dollar amount as this year's, but they can be paid in inflation-depreciated dollars, making them cheaper in real terms.  That's all very well if, and only if, one's income is indexed to the true inflation rate.  In other words, if real inflation is 10% per year, one's income will also rise by at least 10% per year.  If that's not the case (and for most of us, it isn't) then it makes no sense to increase one's indebtedness and incur higher monthly payments.)

Friday, July 22, 2016


Some recent lessons in how not to drive a rally car.

Those were some expensive-sounding noises . . .


The economy: "Things fall apart", Part 1

There have been a number of insightful articles in recent weeks that have started me thinking again about the world economy.  I've analyzed it often on this blog in recent years, and haven't seen much reason for optimism.  These recent articles have shed new light on a few things I've noticed and written about, and added new concerns.

First, here's how Don Pittis sees the value of money when it's being 'printed' by central banks at the drop of a hat.

A basic principle of economics is that money has value because there isn't enough to go round, but as governments keep creating more of it, the rules may be starting to change.

. . .

The greater the threat to the financial system (Turkish coup, anyone?) the more likely central bankers will propose to create more money.

There is an odd thing going on in global economics right now that's very hard to grasp because it's outside our day-to-day experience, and it's contrary to the founding paradigm of conventional economics: the world's central banks are increasingly making money valueless.

As I've mentioned before, it may be possible to adapt to a world where capital is free, but if so, the rules must change radically.

Among the conventions of economics, the idea that money is in short supply is near the top of the list. But if the value of money is zero or negative, many of the rules go out the window.

If governments produce all the money needed for finance, why should retired people expect interest on their savings? After all, interest is someone paying you for your scarce money. Why pay if it's not scarce?

Far more revolutionary, why should rich people — those who have somehow captured large chunks of money — profit from something that's being created, free, by governments, while so many other citizens get a much lesser benefit?

There's more at the link.

This has huge - I say again, HUGE - implications for investors large and small.  Let's put it in terms relevant to us as individuals.  We're told to save for retirement;  but what if the interest rate on our savings is so low that it's less than the rate of inflation?  If we leave our money in savings accounts or IRA's, we're effectively losing money on it.

In particular, with governments manipulating the 'official' rate of inflation so as to limit inflation-indexed spending (e.g increases in entitlement payments, Social Security, etc.), we can no longer rely on the 'official' numbers for planning purposes.  (I examined this in detail a few years ago.)  The current reality of inflation is dire.  I'll give you two examples.

First, from Shadowstats (which we've met in these pages before), two charts.  The upper calculates inflation according to the standards used in 1990, the second those of 1980.  Compare both lines to the standards currently in use, and you'll get a very good idea of how the 'official' numbers have been deliberately skewed in order to make the 'official' rate of inflation appear lower than the economic reality.  (You can learn more about why they're doing that here and here.)

Second example:  the Chapwood Index calculates actual (not theoretical) inflation rates for specific cities in the USA, using a standardized basket of goods as a hard measurement of year-on-year price increases.  It's very hard to 'fudge' that sort of calculation.  Here's Ed Butowsky, founder of Chapwood Investments, explaining what he does and why.  The video dates from August 2013, and the figures quoted in it are accurate for that period.

Here's an example of ten cities analyzed by the Chapwood Index, taken as a screen-shot from their Web site this morning.  (Click the chart for a larger view.)

Note that the 5-year average annual rate of inflation, averaged across those 10 cities, is 10.91% - let's round it up to 11%, for convenience.  The Chapwood Index thus indicates an even higher city-specific inflation rate than the Shadowstats calculations.  There's an easy way to check their calculations for yourself.  Compare the cost of a shopping trolley full of goods that you used to buy at the supermarket ten years ago, with the cost of that same trolley full of goods today.  For almost anyone in the USA, it's probably at least doubled, if not more so, hasn't it?  That indicates a real, compound inflation rate of at least 10% per year as experienced by consumers like you and I - and demonstrates in real life that Shadowstats and Chapman's calculations are far more accurate than the 'official' statistics.

Compare that real rate of inflation to the risible rates of interest you're being offered by the banks.  They range from fractions of one per cent up to a couple of per cent per year (the latter only for really big deposits).  On the other hand, inflation is eating the value of your deposit at five to ten times that rate every year.  What's even worse is that you have to pay tax on your interest earnings, so your return on your savings is even lower than that.  It's no longer worth leaving money in the bank except as a safe deposit facility for short-term use.  Apart from the safety aspect, you may as well keep cash at home (and if the bank should fail, you'll definitely be better off with cash at home, since your bank deposits are likely to be 'bailed-in' to save the bank!).

In the light of those real inflation figures, let's go back to Don Pittis' remarks quoted above:

Among the conventions of economics, the idea that money is in short supply is near the top of the list. But if the value of money is zero or negative, many of the rules go out the window.

If governments produce all the money needed for finance, why should retired people expect interest on their savings? After all, interest is someone paying you for your scarce money. Why pay if it's not scarce?

That's precisely the point.  The artificial 'creation' of money (merely binary zeroes and ones in an official computer system somewhere) means that there's no economic value underlying that currency.  It's 'funny money' in the un-funniest sense of the world.  If it can be created out of thin air, with no assets underpinning it, is there any wonder that the real inflation rate is so much higher than what officialdom would have us believe?  The value of our money is being deliberately undermined each and every year.  Inflation is merely a way to measure that officially-sanctioned and deliberately-caused reduction in value.

What's more, on top of inflation, globalization has contributed to a fall in real income levels across the lower- and middle-income sections of our society.  Thus, our already inflation-ravaged incomes have been even further reduced, to the benefit of a small upper-income slice of our population, and poorer nations abroad.  They have every reason to be grateful for globalization.  Apart from the flow of cheaper goods to our supermarkets, we have rather fewer reasons for gratitude.  Globalization has cost the average American and European a lot of money in terms of lower and/or lost earnings.

The impact of (real) inflation and globalization has led to people seeking better returns on their investments, by turning to the stock and bond markets, and to assets such as property.  However, all is far from well there too.  Central banks now own large parts of their countries' private corporations, as they've bought up bonds in an effort to stimulate economic growth.  They've also guaranteed loans and other financial instruments to aid companies (and entire sectors of their economies) that are in trouble.  Combined, those measures have led to a stealthy and possibly unintended form of partial nationalization, although they'd never refer to it as such - and it's having the same unhealthy effects on the economy.

Let's face it:  if a government - through its central bank - owns large parts of a nation's productive capacity, or owns or guarantees the debt (i.e. bonds and loans) owed by that productive capacity, it's going to face irresistible pressure to take economic measures that favor the productive capacity it owns, at the expense of other parts of the economy and of its trading partners.  That's one of the factors that's led to so-called 'currency wars' all around the globe, as well as countries with cheaper manufacturing costs 'dumping' their products on those with higher costs of production.  (China is a particularly egregious offender in this regard at present.)  The effects of those practices are currently affecting trade all around the world.  Local businesses can't compete price-wise with such low-cost imports.  That means more local workers lose their jobs as employers are forced to cut back.

What will these pressures lead to?  What can central banks do to 'fix things' that they are not already doing?  And what can we, as individuals, do to prepare for the risks these factors are bringing with them?  That'll be discussed in a second part to this article, later today or tomorrow.