Socionomics and political shifts: target U.N.

One aspect of social mood that I try to keep in mind is that one doesn't want to place too much meaning into the terms negative and positive social mood. At the macro level, a society is better off in positive or rising social mood, but negative social mood also plays a positive role. Just as a recession cleans out the bad investments, declining social mood in a healthy society will allow the political and cultural forces to target areas that were ignored or reached excess. For example, the United Nations has been a cesspool of corruption and criminal activity (UN Peacekeepers raping in Africa is just one example), but nothing has been done about it. Certain political groups in the U.S. have long opposed the United Nations and at the extreme, they would like to drop out entirely. While that isn't likely in the near future (how low can social mood go?), more people will likely turn sour on the international body and that will allow some pressure to be applied on the organization, resulting in a more efficient and less corrupt body.

House GOP targets the U.N.
House Republicans are planning to introduce legislation Tuesday that will force major changes at the United Nations, an organization that the bill’s author has called a “stew of corruption, mismanagement and negligence.”

The bill, by Republican House Foreign Affairs Committee Chairwoman Ileana Ros-Lehtinen, would require the UN adopt a voluntary budget model, in which countries selectively choose which UN agencies to fund.
It's not just the House Republicans though, members of the diplomatic corps are also speaking out.
Speaking on behalf of the United States, senior U.S. diplomat Joseph Torsella recently objected to a nearly 3 percent cost of living raise to the approximately 5,000 UN employees in New York City, saying that “a raise is inappropriate this time of global fiscal austerity, when member state governments everywhere are implementing drastic austerity measures.”

Bloomberg has a longer article: Republicans to Unveil Bill to Force Major Changes at the UN


Germans reject united Europe

The following is translated by Google.

CSU wants to banish debt of euro zone countries
In coping with the euro crisis is the CSU after SPIEGEL information on collision course with Chancellor Angela Merkel (CDU). In a policy paper for a meeting of the Presidium of the party with European experts on Monday intends to CSU collect red lines for the euro rescue.

"A permanent and unlimited liability joint and transfer union would mean a pooling of financial policy and change the character of European countries associated decision," says the paper, the CSU General Secretary Alexander Dobrindt and Vice President of the Bavarian Parliament, Reinhold Bocklet, have written. Instead, calls for the CSU ", means an insolvency procedure for sovereigns and banks in the euro zone."

Debt notorious sinners are to leave the monetary union. "Is not a Member State willing to meet the convergence criteria permanently, there is the possibility of leaving the euro zone," it says in the paper.


Centralization versus Decentralization

The trend towards central government in the United States kicked off with the Civil War and accelerated throughout the 20th Century. Although the federal government wasn't at it's peak power relative to the states in 2000, it was a government that was far more centralized than in the past. As social mood declines, the states are asserting their rights and powers versus those of the federal government. Here's an interview with Ken Ivory, a member of the Utah House of Representatives, who pushed a bill allowing the use of gold and silver as legal tender. (The main benefit is that people can now trade gold and silver with no capital gains or sales tax.) In the interview, which covers this bill, he also discusses how Utah has prepared for a total cutoff in federal funding and how the states need to reclaim power from the federal government. There has been a lot of talk about states rights, secession, devolving powers, etc., but Utah is taking action and 11 other states are looking to follow their example.

King World News interview with Ken Ivory


Why is there more racial violence during negative social mood?

Diversity and trust
Another major player has now come into the game, even if his main focus is not the welfare system: Robert Putnam, Harvard professor, best known for his work on social capital. He has recently published a study based upon a wide-ranging and detailed survey of ethnic diversity carried out in the US. Social capital can be understood as the informal networks of relatives, friends and associates that people depend upon for support in their everyday lives. Putnam found a direct relationship between the homogeneity of neighbourhoods, the level of trust and the existence of social capital. In neighbourhoods where most people are alike—such as predominantly white suburbs—people tend to trust one another more, and also be more involved in community activities, voluntary associations and so forth. In diverse areas, such as inner cities, trust and social capital diminish.

Most people wouldn’t be particularly surprised by such findings. Like, one could say, attracts like; people feel most comfortable with others who are similar to themselves. However, Putnam discovered something else quite unexpected. In the more diverse communities, there was not simply a retreat into the in-group. In such communities, people have lower levels of trust in those who are different from them, but also in those who are the same. In other words, diversity seems to lower trust and social capital in general. People in more heterogeneous areas have markedly lower levels of voting, do not trust their local authorities, are less involved in community groups and are less content with their lives than those in the more uniform ones.

Other factors might explain this finding. Diverse neighbourhoods might be poorer than more homogeneous ones. They might have higher rates of crime, delinquency or anti-social behaviour. Yet Putnam is able to show that such is not the case. Trust and social capital are diminished in diverse areas regardless of their overall level of affluence or incidence of crime, delinquency and other influences that could affect the results. Putnam concludes that it is diversity as such that reduces connections with, and confidence in, others.

This conclusion is itself distinctly uncomfortable for liberals. Perhaps multiculturalism just will not work? Putnam rejects such pessimism. The negative effects of diversity can be overcome by a mixture of positive social change and enlightened public policy. He provides a number of encouraging examples. For instance, a generation ago the US army was divided along racial lines, but today it has become a “colour-blind institution.” American soldiers today on average have many more inter-racial friendships than Americans as a whole.

The aim of social policy up to now has nearly always been to reduce the segregation between ethnic groups, concentrating mainly upon minorities. Putnam’s research, however, strongly implies that getting all groups to identify with the community is most important. Building up community identity means trying to foster an overall sense of pride and involvement with an institution or neighbourhood. Pride in the military and identification with its goals was almost certainly a prime factor underlying the observed changes in the army.
Diversity weakens social trust and when the social mood declines, the weakest points of social trust will be where the violence flares. In the last part of this snip, the professor argues that people can be unified, but the example he gives is the military, which is a rigid and essentially totalitarian institution as far as its members are concerned. Putting aside whether it's possible for liberty and this level of enforced unity to co-exist, there's no way this will occur during a declining social mood.

Two men fighting for lives after bloody 49ers-Raiders game violence

Blame the Finns, or blame social mood?

New Rift Over Terms Threatens Greece Aid
The €110 billion ($158 billion) bailout package for Greece could be disrupted if other countries seek to imitate Finland's deal on collateral, the commission, the European Union's executive arm, said.

Finland and Greece announced a deal Tuesday under which Greece would deposit about €500 million in an escrow account with the Finnish government, as a precondition for Finland agreeing to release funds from the euro-zone's bailout fund.

The bailout fund's loans are guaranteed by the euro zone's solvent member states. The latest Greek bailout deal is politically contentious in Finland, where many voters and lawmakers opposed further aid loans. To assuage fears that taxpayers' money will be lost, the Finnish government insisted on obtaining collateral from Greece in return for underwriting the rescue loans.

Finland's quest for special treatment has drawn criticism from other euro-zone members, including Austria, the Netherlands, Slovakia, Slovenia and Estonia. Several officials from those countries have said that if Finland can get collateral from Greece, then others should, too.


Right ascendant in Hungary

EU Remains Silent as Hungary Veers Off Course

Hungary's conservative government won a big majority in 2010 and the pants crapping has begun. This article in Der Spiegel starts by making one think of Nazism, with a group of gypsies "forced" to work. But read just a little further, and the policy they are operating under is that social welfare benefits will only be paid to people who work and work is voluntary.

The 40 gypsies from Gyöngyöspata, who don't even use the more acceptable term Roma to describe themselves, have been assigned the job of clearing hibiscus bushes and undergrowth for four months. They are among 300,000 Hungarians who will soon be performing "community" work under a new law, which dictates that anyone who is out of work for more than 90 days in a row forfeits the right to social welfare and membership in the social insurance system.

Are "forced labor camps" being created here, in the middle of the European Union, as the Hungarian daily newspaper Népszava wrote? Are unemployed people from remote villages being housed in worker camps on large construction sites? No one has to work against his will, but everyone who does show up for work is paid the legal minimum wage, says Karoly Papp, the state secretary in the Interior Ministry in charge of the program.
The right-wing can get quite hyperbolic, but they can't hold a candle to the left once it gets worked up. Things take a socionomic turn when it comes to punishing the politicians who led the country and the world into this mess.
Péter Medgyessy, Ferenc Gyurcsány and Gordon Bajnai, the three Social Democratic prime ministers of the last decade, all face the threat of being put on trial. There has been little public outcry, partly because many voters believe that they were lied to and robbed by the "leftists." A speech that Gyurcsány gave in 2006, which was later released to the press, and in which he confessed to have not been telling the electorate the truth about the tense economic situation, as well as dubious real estate deals and the fact that a national bankruptcy was only averted with the help of the International Monetary Fund (IMF) and the European Union, weigh heavily on the legacy of the former socialist governing party.

Prosecutors are even looking into whether they can charge the former premiers with the "political crime" of incurring government debt, which is not considered a statutory offence today. Orbán and his party are fighting untiringly on this and other fronts. They seek to justify their mission to radically restructure the state with what they call a revolution in the voting booths: In April 2010, the Fidesz Party and its ally, the Christian Democratic People's Party (KDNP), won more than two-thirds of the seats in parliament.
Prosecuting the wrong doers is a popular during declines in social mood. Now we can see this in the political dimension and this is a textbook example of what I mean when I've said that social mood creates the conditions for change, but the facts on the ground dictate the events. A truly right-wing government is in power and it isn't going to target it's allies, it will target its enemies. The media in Europe is dominated by left-wing ideology, so it portrays this as a cout d'etat, but punishing politicians to satisfy negative social mood is exactly the same thing as targeting businessmen. Unless there's a clear plan for fascism, this is just a man bites dog story, where a right-wing has captured a government and is not behaving like the right-wing of the left.
Much has happened since then in the Goulash archipelago ruled by Orbán. Fidesz loyalists were given long-term posts in the corridors of power, including the presidency, the office of the chief prosecutor and the audit court, as well as top positions in cultural organizations. The powers of the constitutional court and the budget council were curtailed, the ministry of culture was eliminated, and consolidation is underway in the state media, the film industry and universities.

All of this produces jobs for men like Daniel Papp. As a media expert and the co-founder of the radical right-wing Jobbik Pary, he was long known only to the initiated. But in April they catapulted the pale 32-year-old to the position of editor-in-chief of the news office at the new MTVA media fund. The MTVA is the umbrella organization covering the formerly independent state radio and television stations, as well as the MTI news agency.
The left-wing did exactly the same thing, consolidating their gains in the 1960s. This is why Hungary is interesting, if we see the major decline in social mood from a multi-century as predicted by Prechter, this is very likely to happen in most countries. The "left" became ascendant in the 1700s with the Enlightenment and advanced in power throughout the rise in social mood. It has surged leftward at times with the Communists and created monstrous hybrids such as the Nazis, and pushed towards the right with Thatcher and Reagan. There were also some last gaps from the old right in places such as Franco's Spain, but even Pinochet's dictatorship was liberal, implementing free-market form of capitalism.

Is this current shift a counter-revolution, where the right-wing of the liberal movement knock the left-wing out of power for a generation or more, or is this the first shot of what might be termed reactionary politics? If the former, we will see the new government behave, for Americans, like heavy handed Republicans. If the latter, we would expect to see the media-university-government left-wing power alliance broken and a rise of new (old) institutions such as the Church. Note that this does not need to be a political, for example in the United States, if welfare is permanently cut, the churches will fill the role on a voluntary basis, whereas in Europe there are still state sponsored churches, so this may take a more official role. Currently the left uses government power and the finances of the state to fund the universities and many left-wing organizations. Therefore, for the right to defeat them, they can either take control of the government and the finances, or simply reduce the role of government and cut spending. The left can be replaced or it can be starved; I expect in countries with more individual liberty, power will return to the people. Where government has always been strong, the right will take over the organs of left-wing power.
It isn't necessary to smell fascism behind every bush, says Heller. "The worst thing is that the checks and balances are being eliminated in this country, and that the rule of the yes-men has begun." In fact, she adds, now dissidents are even being treated as criminals.

The Hungarian authorities are investigating Heller and some of her philosopher friends, known as the "Heller gang," for alleged embezzlement of research funds. But Heller, sitting in her apartment high above Guttenberg Square, laughs off the accusation.

What is most troubling to Heller, who survived both the horrific regime of the Hungarian version of the Nazi Party and the communists, is the disquieting feeling that the clique now running Hungary does so without "responsibility" -- and without a sense of the "danger that violence could erupt." "Orbán is extremely sure of himself," says Heller. "It's a typical characteristic of dictators."
Just as the rise of liberalism created the United States and the Soviet Union, so the new changing politics will create great advancements and great setbacks for humanity. History does not progress, it cycles, and if the 2000s were the peak of a super-cycle beginning in the early 1700s (From Wikipedia: If the Grand Supercycle theory is correct then the magnitude of the current recession should be of greater magnitude than the Great Depression, and possibly of greater magnitude than the severe economic recession from the 1720s–1770s that terminated the previous Grand Supercycle of the Renaissance.) then we will see major shifts in politics, philosophy, art, family and culture.


Closing the barn door

US Inquiry Eyes S&P Ratings of Mortgages

The Justice Department is investigating ratings on mortgages. The article mentions that Fitch and Moody's are not mentioned, but may also be part of the investigation. It would be strange for them not to be included, since they behaved exactly the same, but if not, Warren Buffett's support for Obama is paying off again.

In any event, the government is at least four years late. When social mood was more positive, they had no interest in shaking up the market. Now that housing has cratered and most of the extreme excess has left the market, the government is putting a case together.

Rising wages in China

In Labor costs soar in China, I laid out the demographic reason for rising wages in China. Now economists are coming to the same conclusion.

Caixin Survey: An Era of Wage Growth
China is approaching a new era of wage inflation that may last as long as 10 years. There are many contributing factors – rising consumer good prices, soaring property prices, a tightening labor supply and a new generation of more educated workers.

In addition, as per-capita GDP surpasses US$ 3,000 to 4,000, China's manufacturing workers' demands for leisure time has been growing, further increasing the pressure for wage growth.

Taiwan and South Korea experienced 10 years of high-speed wage growth in the 1980s, and China may now be poised to enter a similar period.
By the end of the decade, people will be obsessed with the Chinese consumer.


Socionomics Alert—NBA Contraction

David Stern: NBA to look at contraction
The NBA currently has thirty teams, but the league's commissioner, David Stern, seems open to the possibility that that number of franchises could shrink in the future.

Speaking on an ESPN.com podcast, Stern stated that there is some interest in contraction from both the league and players sides and that the subject will be picked up after the current Collective Bargaining Agreement negotiations are completed.

"[Contraction] is not a subect that we're against," Stern said. "In fact, when you talk about revenue sharing, a number of teams have said that if you have a team that is perpetually going to be a recipient, aren't you better off with the ability to buy them in? Because between the revenue sharing and the split of international and the TV money, we could almost buy them in with their own money.
Contraction is coming. I don't know if there was a specific prediction made by Prechter or others, but historic studies have shown contraction occurs during downturns in social mood.


Protest win in Dalian

Protests force Chinese factory to close

Sunday’s mass action was one of the largest urban protests of recent years and the latest in a growing number of demonstrations against environmental disasters and degradation caused by China’s rapid industrialisation and economic development.

It also presented the latest challenge to a stability-obsessed government that refuses to countenance meaningful political reforms but must govern a population that is increasingly wealthy, connected via the internet, critical of poor governance and distrustful of its leaders.

On Sunday, many of the demonstrators sang the national anthem and carried banners emphasising their patriotism in an apparent attempt to avoid the harsh response often meted out to dissidents.

Dalian’s senior officials, Tang Jun, the Communist party secretary, and Li Wancai, the mayor, “tried to appease the crowd by promising to move the plant out of the city”, reported the state-run Xinhua news agency.

But protesters told Xinhua they wanted a clear timetable for the removal of the plant. Some said they would refuse to leave the square until a timetable was given.
The nature of the protest is social mood. There's always a problem in a country and one can find a reason to protest anything, but why are the protests more intense?


They made us look like an occupied government

Jim Rickards has likened the latest European bailout plans to the Fourth Reich due to the level of control handed over to Germany. It's mainly financial control, but through this policy outlet they can wield a substantial amount of power. Italy's prime minister states it plainly: "They made us look like an occupied government."
Bail-outs chip away at France and Germany too
Criticism is mounting in Germany over the authoritarian creep of the Europe's crisis measures. Otmar Issing, the ECB's former chief economist and the country's most authoritative voice on the euro, said the EMU project was spinning out of control.

Far from evolving into an authentic fiscal union with "a European government controlled by a European Parliament, elected according to democratic principles", it is turning into a deformed creature where moral hazard is unchecked and the EU is intruding on sovereign matters.

By subverting the 'no bail-out' clause of the Maastricht Treaty the eurozone is "on a slippery road to a regime of fiscal indiscipline drowning hitherto solid countries in the morass of over-indebtedness."

Implicit transfers are taking place without parliamentary approval. "This type of political union would not survive. Its collapse would be brought by resistance from the people. In the past, cries of 'no taxation without representation' have brought war," he said.

Italy's leader Silvio Berlusconi lashed out at Europe yesterday after a leaked letter showed that the ECB had dictated the exact details of Rome's new austerity policies as a condition for ECB bond purchases.

"They made us look like an occupied government. They bought the bonds to save themselves, not Italy," he said, according to Il Messaggero.

"We're a long way from collective governance capable of scaring speculators. If it's our turn today, it can be Paris's turn tomorrow."

Socionomics—the nitty gritty

The main argument put forth by socionomics is that arrow of causation moves from mood to action. Most people believe mood is affected by actions, thus they see the cycle in terms of actions leading to a rise or fall in mood, which leads to another action, etc. In the midst of a cycle, to some degree it doesn't matter because whether the chicken or the egg, the result is the same. It is critically important, however, at turning points. Those looking at actions will predict the trend to continue for a long time, when in fact the mood has shifted.

This isn't a post about a turning point though, it's a look at one of the more nuanced effects of social mood. Grasping the effect of mood on stock markets and popular culture is straight forward, but how about the number of accidents? The Socionomics Institute published an article earlier this year on Aircraft Accidents. The data set is small, but for the period studied, it showed correlation with the stock market.

Now consider an ongoing story that has been burning up weibo all summer. The Forbidden Palace Museum staff have been smashing up ancient relics at a steady pace and it's drawing the attention of the media and government.
The wave of blunders began May 8 when a lone burglar slipped past the museum's supposedly impenetrable alarm and camera systems and snatched valuable cosmetic cases and purses on loan from the Liang Yi Collection in Hong Kong. The thief apparently scaled a 10-meter wall and escaped a security guard's custody.

One the heels of that gaffe, rumors spread on the Internet that the museum's newly renovated Jianfu Palace, usually closed to the public, was being used for gatherings of an exclusive club's ultra-wealthy members.

Perhaps even more mortifying for museum managers was a July 30 microblog posting that quickly went viral with claims that a precious Song Dynasty porcelain plate had been broken during a routine procedure, and the loss had been covered up by museum officials.

Next, termites initially found in 2006 feasting on wood in some of the palace's nearly 1,000 buildings were rediscovered, leading some experts to conclude that five years of pest controls had failed. Caixin has learned that the insects have spread and, unless checked soon, could eat the Forbidden City to the ground.

Palace Museum managers even shot themselves in the foot while trying to make up for the string of mistakes.
The staff handed a giant thank-you in the form of a colorful banner to police officers who helped nab the cosmetics case thief. But missing from the banner's message was the character for the word "protecting." In its place was the character for "shaking." The staff thus thanked the police for "shaking the country."
China Asks: What's Eating the Forbidden City?


1931—The Tragic Year

1931—"The Tragic Year"
The year 1931, which politicians and economists were sure would bring recovery, brought instead a far deeper crisis and depression. Hence Dr. Benjamin Anderson's apt term "the tragic year." Particularly dramatic was the financial and economic crisis in Europe which struck in that year. Europe was hit hard partly in reaction to its own previous inflation, partly from inflation induced by our foreign loans and Federal Reserve encouragement and aid, and partly from the high American tariffs which prevented them from selling us goods to pay their debts.

The foreign crisis began in the Boden-Kredit Anstalt, the most important bank in Austria and indeed in Eastern Europe, which, like its fellows, had overexpanded.[1] It had suffered serious financial trouble in 1929, but various governmental and other sources had leaped to its aid, driven by the blind expediency of the moment telling them that such a large bank must not be permitted to fail. In October, 1929, therefore, the crumbling Boden-Kredit-Anstalt merged with the older and stronger Oesterreichische-Kredit- Anstalt, with new capital provided by an international banking syndicate including J.P. Morgan and Company, and Schroeder of England, and headed by Rothschild of Vienna. The Austrian Government also guaranteed some of the Boden bank's investment. This shored up the shaky bank temporarily. The crisis came when Austria turned to its natural ally, Germany, and, in a world of growing trade barriers and restrictions, declared a customs union with Germany on March 21, 1931. The French Government feared and hated this development, and hence the Bank of France and lesser French banks suddenly insisted on redemption of their short-term debts from Germany and Austria.

The destructive political motive of the French government cannot be condoned, but the act itself was fully justified. If Austria was in debt to France, it was the Austrian debtors' responsibility to have enough funds available to meet any liabilities that might be claimed. The guilt for the collapse must therefore rest on the bank itself and on the various governments and financiers who had tried to shore it up, and had thus aggravated its unsound position. The Kredit-Anstalt suffered a run in mid-May; and the Bank of England, the Austrian Government, Rothschild, and the Bank of International Settlements—aided by the Federal Reserve Bank of New York—again granted it many millions of dollars. None of this was sufficient. Finally, the Austrian Government, at the end of May, voted a $150 million guarantee to the bank, but the Austrian Government's credit was now worthless, and Austria soon declared national bankruptcy by going off the gold standard.

There is no need to dwell on the international difficulties that piled up in Europe in latter 1931, finally leading Germany, England, and most other European countries to renounce their obligations and go off the gold standard. The European collapse affected the United States monetarily and financially (1) by causing people to doubt the firmness of American adherence to the gold standard, and (2) through tie-ins of American banks with their collapsing European colleagues. Thus, American banks held almost $2 billion worth of German bank acceptances, and the Federal Reserve Bank of New York had participated in the unsuccessful shoring operations. The fall in European imports from the United States as a result of the depression was not the major cause of the deeper depression here. American exports in 1929 constituted less than 6 percent of American business, so that while American agriculture was further depressed by international developments, the great bulk of the American depression was caused by strictly American problems and policies. Foreign governments contributed a small share to the American crisis, but the bulk of responsibility must be placed upon the American government itself.

Similarities Between the Great Depression and Today

This is frequently bumped to the top as events unfold. The bulk of it was written and first posted on March 23, 2009.

Similarities between the Great Depression and current events. Historical information from America’s Great Depression, Fifth Edition, by Murray Rothbard. (If you haven't read it, I highly recommend it.) Many of the similarities below were selected because Rothbard identified them as causing/prolonging the Depression. In some cases, the correlation is not one-to-one, but I felt the similarities were worth noting. There are more economic similarities, such as the decline in exports, imports and manufacturing, but I focused on the political responses from government and the Federal Reserve.

—Federal Reserve inflated the money supply in the years leading up to the 1929 crash.
—Federal Reserve inflated the money supply in the years leading up to the 2008 crash.

—The U.S., the world’s largest exporter, inflated its currency to aid Great Britain’s economy.
—China, one of the world’s largest exporters, inflated its currency (through the currency peg) and aided the U.S. economy.

—European importers could not export to the U.S. due to tariffs. Instead they financed their imports with loans from America.
—American importers could not export to China due to, among several factors, tariffs. Instead they financed their imports through loans from China (via the Treasury market).

—Under President Harding, Secretary of Commerce Hoover pushed for State Department oversight of foreign loans. Although voluntary and ad hoc, the public came to believe that all of these loans had the State Departments approval.
—Fannie Mae and Freddie Mac entered the subprime market in the early 2000s and subprime lending quickly exploded, while purchasers of Fannie & Freddie debt assumed the loans had Federal approval.

—Throughout the 1920s, the U.S. government aided the agricultural sector.
—Throughout the 2000s, the U.S. government aided the housing sector.

—In October 1929, Boden-Kredit-Anstalt was about to fail, but it merged with Oesterreichische-Kredit-Anstalt, financed with loans from J.P. Morgan and the Federal Reserve.
—In January 2008, Countrywide was about to fail, but it merged with Bank of America, financed by the Federal Reserve.
—In March 2008, Bear Stearns was about to fail, but it merged with J.P. Morgan, financed by the Federal Reserve.
—In September 2008, Washington Mutual failed and was merged with J.P. Morgan, financed by the Federal Reserve.
—In October 2008, Wachovia failed and was merged with Wells Fargo, financed by the Federal Reserve.

—After the crash, President Hoover rejected the calls to allow markets to clear and failed businesses to liquidate.
—After the crash, President Bush/Obama rejected the calls to allow markets to clear and failed businesses to liquidate. AIG, GM, Chrysler are among the most prominent examples.

—After the 1929 crash, the Federal Reserve cut interest rates from 6% to 4.5% and inflated the money supply by 10%.
—After the initial 2008 crash, the Federal Reserve cut interest rates from 2% to 0% and inflated the money supply by 81%.

—One year after the crash, the Federal Reserve cut interest rates from 4.5% to 2% and inflated the money supply, but the actions of banks and borrowers reduced the total supply of money and credit.
—After the crash of 2008, the Federal Reserve cut interest rates to 0% and inflated the money supply, but the actions of banks and borrowers reduced the total supply of money and credit.

—In 1930, unions and the “Progressive Block” pushed for the Smoot-Hawley Tariff.
—In 2009, unions and the “Progressive Block” pushed for a “Buy American” clause in the stimulus bill.

—In 1930, Hoover effectively banned immigration through a State Department press release.
—In 2009, illegal immigrants are returning home due to the bad economy, and the crackdown begun under Bush continues under Obama. Congress also has its immigration opponents, “[Senator] Grassley (R-IA) is urging Microsoft to furlough those temporary foreign workers first before handing out pink slips to Americans and permanent U.S. residents.”

—Hoover pushed for public works and a tax cut, both passed.
—Obama pushed for public works and a tax cut, both passed.

—In 1931, Oesterreichische-Kredit-Anstalt (see above) failed, forcing Austria off the gold standard.
—In 2009…"A failure rate of 10pc would lead to the collapse of the Austrian financial sector," reported Der Standard in Vienna.
-In 2009, Dubai???
In 2010, Greece and other indebted nations threaten the euro system.
—Austria back on the front burner as Hungary says default is possible.

—In summer 2011, Europe is in the midst of a banking crisis.

—In 1931, the money supply declined even as the Federal Reserve desperately tried to inflate.
—In 2008/9, the money supply declined even as the Federal Reserve desperately tried to inflate.

—GDP fell 16.2% in 1931 and government spending increased 30.7% relative to GDP. Federal spending rose 42%.
—GDP grew 3% in 2010 (changed from 2009 on 8/28/09), but government spending increased 7%. However, when one adjusts for government borrowing, the real private GDP contracted.
Federal spending is up 23% since the FY 2009 budget (pre-crisis) , not including off budget spending on bailouts.

—Throughout the depression, Hoover uses moral suasion to pressure industry into maintaining high wages. Congress passed Bacon-Davis Act, mandating “prevailing wages”.
—On February 6, 2009, “Obama issued an executive order Friday requiring federal agencies to consider putting in place agreements that set wages, work rules and other benefits when awarding major construction contracts.

—Hoover created the National Credit Corporation in 1931 to lend to banks, who were then expected to lend to business.
—Bush/Paulson/Bernanke/Obama/Geithner created TARP in 2008/9 to lend to banks, who were then expected to lend to business.

—In 1931, State and Federal governments collude to increase oil prices through restrictions on production and imports.
—In 2008/9, State and Federal governments’ efforts to fight global warming and attack foreign oil will have the effect of increasing energy prices.
Update: Climate Change bill passes House, massive cost increases on every American household, estimates range from about $850 to $1500 and higher.

—In 1932, Hoover accomplished nine goals.
1.Creation of RFC (originally NCC)
2.Creation of Home Loan Bank
3.Aid to Federal Land Banks
4.Public Works
5.Aid to the States
6.Restrictions on natural resource production
7.Increase Federal Reserve powers
8.Reduce immigration
9.Bankruptcy reform

—In 2008/9, Bush/Obama accomplished, are implementing, or plan the following:
1.Creation of TARP
2.Mortgage relief
3.Aid to banks
4.Public Works
5.Aid to States
6.Restrictions on natural resource production (carbon taxes)
—Deepwater Horizon disaster has led to ban on new drilling in the Gulf of Mexico
7.Increase Federal Reserve powers
8.Reduce immigration
9.Bankruptcy reform

—In 1931, Hoover asked for, and in 1932, received, tax increases on income (then only paid by the rich), estates (the rich) and sales, to close a huge budget deficit. Despite the tax increases, federal receipts dropped 10% in 1932.
—In 2009, there are plans to increase taxes in the states, and we may yet see Federal tax hikes on the rich in 2010.
—In 2010, discussion of a VAT tax has increased.
—In 2011, following the debt ceiling battle, the Bush tax cuts for the wealthy may expire.

—Overall, from 1929 through 1932, government’s share of the economy increased sharply. Rothbard’s “private GDP”, which excludes government enterprises, shows government grew from 14.3% of the economy to 24.8% in 1932, a 73 percent increase.
Obama's 2009 budget spends 28% of GDP.
—Private GDP remains depressed and shows little sign of recovery.

—In 1932, Virgil Jordan, economist for Business Week, supporting the public works said, “Just as we saved our way into depression, we must squander our way out of it.”
—In 2009, supporting pubic works, Jon Meacham and Evan Thomas writing in Newsweek, “In the short run, since neither consumers nor business is likely to do it, the government will have to stimulate the economy.”

—In 1932, Hoover bullied the NYSE into effectively banning short-selling.
—In 2008, politicians pressured SEC Chairman Cox into banning the short-selling of financial stocks.
—In 2011, in the midst of a banking and sovereign debt crisis, Greece banned short selling for two months.

—In 1932, until Congress forced the RFC to publicize its activities, its loans were made in secret.
—In 2008/9, Bloomberg sued the Federal Reserve to learn who it lent to, but the information is still secret. Update: Bloomberg won its lawsuit, but the info is still not public. (08/28/09)

—In 1932, RFC money, intended for banks, eventually went to the states.
—In 2009, states asked for TARP money.

—In 1932, the first Glass-Steagall Act allowed the Federal Reserve to use government bonds as collateral, in addition to commercial paper.
—In 2008, Federal Reserve Chairman Bernanke mentioned the possibility of the Federal Reserve issuing its own debt.

—In 1932, Federal Reserve monetary reserves grew 36%, but deflation reigned.
—In 2008/9, monetary reserves grew more than 80%, but deflation reigned.

—In 1932, Federal Reserve inflation of reserves was ended by foreigners and citizens who drew cash and gold out of the banking system.
—In 2010/11 (assuming we are roughly in 1930), will foreigners and citizens finally give up on the U.S. dollar?
—In 2011, U.S. Treasury debt was downgraded by S&P Ratings, though there was no immediate impact on the dollar.

—In 1932, bankruptcy reform weakened the rights of creditors.
—In 2009, bankruptcy reform will weaken the rights of creditors (though many argue they were strengthened too much in 2005).

—Politicians and economists expected a recovery in 1931.
—Politicians and economists expect a recovery in late 2009-early 2010.
—Politicians and economists expect a recovery in 2011, but fears of a "double-dip" are now widespread.

Originally posted on March 23, 2009. Periodically bumped and/or updated.
April 12, 2009 Update: Economic indicators show the beginning of this contraction surpass the Great Depression. A Tale of Two Depressions.
June 28, 2009 Update:Tale of Two Depressions has been updated. Also, climate change legislation added above.
August 28, 2009 Update:Some changes updated due to new data and Bloomberg suit.
November 26, 2009 Update: Dubai sovereign default could potentially set off the next deflationary wave.
May 4, 2010 Update: Greece is going down.

June 4, 2010 Update: Hungary says default is possible and now the focus turns back to the Austrian banks. Also BP has brouhgt about natural resource restrictions.
August 9, 2011 Update: Private GDP and other areas updated.


The fall of Warren Buffett continues...

Schiff - Gold up $27, Dow Futures Down 276, Buffett Wrong
When asked about Warren Buffett’s comments where he said S&P made a mistake by downgrading US debt Schiff responded, “Well he owns a big chunk of Moody’s doesn’t he? Moody’s hasn’t lowered their rating, so somebody is mistaken, it’s either Moody’s or S&P. It stands to reason that Buffett would say his competitor was mistaken rather than himself.

What’s important, people are criticizing S&P, and I think it’s kind of funny because they are criticizing them for missing the subprime crisis. Well, why not criticize Moody’s and Fitch for the same reason, and what makes us think that their AAA rating is right?

So, potentially the real mistake they’ve made is to have had the US government at AAA so long because they (the US) are just as AAA as those mortgage backed securities that went under.”

Junior gold miners ETF

Is this a head and shoulders?If it is...low 20s is the target.


Throwing rocks at rescued miners

Whoa. Chile's economy has been growing, it's stock market has been one of the better performers since 2009. How to explain this story except by social mood?

Protesters throw fruit at Chile’s rescued miners
It has been a bittersweet anniversary for Chile’s rescued miners, who were honored as heroes in their home town only to come under attack by anti-government protesters who threw fruit and small stones at them, accusing them of being ungrateful, greedy sellouts.

...But the events were marred by scuffles between riot police and protesting students, teachers, environmentalists and other miners, all trying to pressure Pinera to accede to their demands on reforming public education, increasing miners’ pay and stopping controversial dams and power plants.
Throwing rocks at the miners is partly explained by what sounds like the leftist makeup of the protest. Spitting on soldiers or throwing rocks at people trapped underground for 69 days is OK in the advance of politics. But still, the greater story is the shift in social mood, how else to explain the large drop in the president's popularity?
Pinera’s popularity has plunged to 26 percent, the lowest of any president since Chile recovered its democracy in 1990, as protests have roiled the country. Environmentalists hope to block hydroelectric dams in southern Patagonia and a huge coal-fired power plant in northern Chile. Unionized miners have briefly paralyzed the nation’s largest copper mines, costing companies millions in lost production. Mapuche Indians have occupied ancestral lands, setting off violent confrontations with police and landowners. Striking high school and university students have stopped classes for more than two months.


European right headed for bigger victories?

Many people instinctively viewed the attacks in Norway as bad news for anti-immigration politicians in Europe, but the trend they are riding is too powerful to be derailed by one incident. Here's an older article (from April 2011) on the issue, but which makes it clear that the right is winning a total victory.

Strict Immigration Laws 'Save Denmark Billions'
But things may soon get pushed even further. Elections are due to be held this fall, and the ruling parties apparently want to put forward even stricter rules, driven by the xenophobic rhetoric of the right-wing populists. In polls, the approval ratings of more liberal politicians have fallen, and the opposition center-left Social Democrats have promised not to change current immigration laws if they win the election. Immigration will always be a big issue in Denmark -- almost 10 percent of Denmark's 5.5 million people are migrants -- and the issue was a decisive one in the last election, in 2007.
I have no doubt that if the United States and other European nations tightened their immigration laws, they would prove just as popular and the pro-immigration politicians would be forced into the position of Denmark's left, one of accepting current changes by fighting further changes. Which, as any conservative can tell you, is a losing strategy in the long run. Immigration restrictions will continue tightening until social mood has bottomed.


Social mood in China

What can save this country?

After the high-speed rail accident, a poll on Kaixin, a social media site, asked what could save the country. Choices included freedom, economics, technology, etc. Respondents could vote for up to five choices. Two received votes over 10%: faith and law. The top response, with 73%? There’s no hope; don’t want to save it

Social mood in the polls

Are People Becoming Ruder in the Obama Economy?

It's from a political site, but why cover this aspect and why does the author have their own examples? Most likely because the author is "feeling it", it being the declining social mood.

Socionomics—Rise of mob violence

Scare at State Fair: witnesses describe mobs, including some claiming racially-charged attacks
"I saw them grab this white kid who was probably 14 or 15 years old. They just flung him into the road. They just jumped on him and started beating him. They were kicking him. He was on the ground. A girl picked up a construction sign and pushed it over on top of him. They were just running by and kicking him in the face."

Then, Eric talked about trying to get out of the car to help the victim.

"My wife pulled me back in because she didn't want me to get hit. Thankfully, there was surprising a lady that was in the car in front of me that jumped out of the car real quick and went over there to try to put her body around the kid so they couldn't see he was laying there and, obviously, defenseless. Her husband, or whoever was in the car, was screaming at her to get back into the car. She ended up going back into the car. These black kids grabbed this kid off the ground again, and pulled him up over the curb, onto the sidewalk and threw him into the bushes like he was a piece of garbage."

Eric claimed that the victim in that beating was by himself, and that there was a split of white people on one sidewalk and black people on the other.

"There was nobody else around to help him. There were no other white people, period, on that side of the street. They were going in the opposite direction because, those people who were coming out of the fair that saw these people coming, they either went back into the fair or took off running south on 84th Street."


Generational conflict and social mood

Neil Howe talks about the growing conflict in America between competing visions of America's future.

Financial Sense Newshour

He discusses the return of nationalism, Generation X values, the decline of compromise and more.

Debt ceiling fracas

The above chart shows federal discretionary spending after the debt ceiling deal. The executive and legislative branch of the government, much of the mainstream media and even Nobel-prize winning economists went nuts in the past few weeks and many of them are still screaming about massive cuts and economic crisis. Politics is just expressing the negative social mood. Imagine what happens when the real cuts are made (when social mood is much more negative)...

Socionomics Alert—NBA, NHL Contraction

Contraction talk is picking up for hockey and also a bit for the NBA.

Sprint Center doing fine without NHL or NBA franchise
“A prospective owner or management group is going to look at the attendance potential, because ticket sales are so much more important in hockey than it is in other sports,” said Patrick Rishe, an economics professor at Webster University in St. Louis. “In other sports, ticket revenue is the second-leading source of revenue. Media is first. In hockey, ticket revenue is first, and media revenue is second.”

NBA commissioner David Stern told The Star in April that his league hasn’t ruled out Kansas City as a potential market. But while the New Orleans Hornets are often rumored to be a relocation candidate, Rishe has his doubts, even if LeBron James and the Heat sold out the Sprint Center for an exhibition game last fall.

“They have more revenue overall, but 17 of 30 teams are losing money,” Rishe said of the NBA. “… I think if you’re going to see anything in the NBA, it’s going to be contraction of two teams at some point in the next couple of years rather than seeing a relocation.”

Islanders arena vote fails: What now?
Hamilton: We have to throw it on the list because, quite frankly, the number of markets is drying up fast for the NHL to move in to. You have to wonder if Gary Bettman and the Maple Leafs would be OK with another team in southern Ontario when faced with a possible alternative of contraction. No commissioner wants to have that on their resume.

NBA Lockout: CBA Changes NBA Must Make During Lockout
Some are calling for contraction, and I am one of those people.

It's like pruning a nicely kept yard. If your bushes get too big, you cut them back down to size, don't you?

The league doesn't need 30 teams. Not at all. The league could conceivably contract 4 or 5 teams and be perfectly fine, if not better off, on even just a competitiveness level.

Sports leagues expand during periods of rising social mood and they contract or go bust during periods of declining social mood.