What does crowdfunding replace or displace?

In How crowdfunding and the JOBS Act will shape open source companies, Fred Trotter proposes that crowdfunding a la Kickstarter and IndieGoGo is going to displace venture capitalists as the normal engine of funding for open-source tech startups, and that this development will be a tremendous enabler. Trotter paints a rosy picture of idealistic geeks enabled to do fully open-source projects because they’ll no longer feel as pressed to offer a lucrative early exit to VCs on the promise of rent capture from proprietary technology.

Some of the early evidence from crowdfunding successes does seem to point at this kind of outcome, especially near 3D printing and consumer electronics with a lot of geek buy-in. And I’d love to believe all of Trotter’s optimism. But there’s a nagging problem of scale here that makes me think the actual consequences will be more mixed and messy than he suggests.

In general, VCs don’t want to talk to you at all unless they can see a good case for ploughing in at least $2 million, and they don’t get really interested below a scale of about $15M. This is because the amount of time required for them to babysit an investment (sit on the company’s board, assist job searches, etc.) doesn’t scale down for smaller investments – small plays are just as much work for much less money. This is why there’s a second class of investors, often called “angels”, who trade early financing on the $100K order of magnitude for equity. The normal trajectory of a startup goes from friends & family money through angels up to VCs. Each successive stage in this pipeline is generally placing a larger bet and accordingly has less risk tolerance and a higher time discount than the previous; VCs, in particular, will be looking for a fast cash-out via initial public offering.

The problem is this: it’s quite rare for crowdfunding to raise money even equivalent to the low-end threshold of a VC, let alone the volume they lay down when they’re willing to bet heavily. Unless crowdfunding becomes an order of magnitude more effective than it is now (which seems to me possible but unlikely) the financing source it will displace isn’t VCs but angels.

On the face of things, this would seem to sink Trotter’s optimism – if VCs don’t see any competition for investments in their preferred range there’s no obvious reason that VC pressure for proprietary rent-collection should decrease at all. But I think there will be significant second-order effects of the kind Trotter envisions via another route. That’s because crowdfunders are unlike angels in one very important respect: they’re not buying equity. Typically they’re contributing to buy an option on a product that can’t be built without startup capital. There’s no pressure on the company to produce a return to “investors” beyond that option, and in particular nobody pushing for a fast cash-out.

What this does is improve the attractiveness of a growth path that doesn’t pass through an IPO or the VCs at all. I think what we’ll see is a lot more startups crowdfunding to angel levels of capital investment, then avoiding the next round of financing in favor of more crowdfunders and endogenous growth. But think about this: how will the VCs adapt to this change in incentives?

They’ll still want to turn their ability to nurse early-stage companies into cash, but their power to set the term of that trade will be weakened precisely to the extent that crowdfunding makes the low-and-slow, no-IPO route more attractive. In another way, though, crowdfunders make a VC’s job easier. VCs can monitor the results of crowdfunding to measure the size and estimate the stickiness of the startup’s market, then see how effectively the startup executes on its promises. (You can bet that the smarter VCs are already doing this.)

Now look at the sum of these trends. If a startup has a successful crowdfunder, its bargaining power with the VCs increases in two ways. First, it’s going to be less desperate for capital than a company that can’t run out and do another crowdfunder for the next product. Second, the VC’s uncertainty about its ability to build and sell will be reduced. These changes will both increase the startup’s ability to bargain for doing things its way and reduce the VC’s pressure for an early IPO.

At the extreme, we might end up with a new normal in which VCs compete with each other to court startups that have done successful crowdfunders (“Hey! Think about what you could
do with fifteen megabucks and call us back!”), neatly inverting the present situation in which startups have to compete for the attention of VCs. That, of course, would be a situation in which open source wins huge.

165 thoughts on “What does crowdfunding replace or displace?

  1. Social decay is causing problems with the existing model of company formation. The elite don’t trust each other.

    For example MF Global made Jon Corzine CEO hoping to gain corrupt advantage, but instead the board’s money, and their customer’s money, was pissed away bailing out Greece and personally enriching Jon Corzine and his political allies. They were robbed to bail out bums in Greece when they expected to rob taxpayers in the USA. Jon Corzine started in finance, went into politics and regulation under Clinton, from regulation back into finance, from finance at Goldman Sach back into politics as a Democrat senator and financial regulator, from politics and financial regulation back into finance, from finance back into politics as a Democrat Governor, then back again into finance as CEO of MF Global. Most of today’s senior regulators have analogous stories.

    The public service act (Pendleton act and Hatch act) has a rule against jobs for the boys, but in practice the rule only applies to republicans and conservatives. Used to be that members of the losing faction got sacked, to make room for members of the winning faction. The last time that happened was when Hitler won in Germany, which is probably the major real reason that schools teach Hitler, rather than Mao as the earthly incarnation of eschatological evil. These days Democrats get appointed, and when a Republican gets elected, stay in power sabotaging him, for example the Justice Department and State under Bush. Since everything is politicized by a political public service, everything gets corrupted, after the fashion of Jon Corzine and MF Global. Apple has to go green to woo favor.

    Thus a path to becoming a big company with lots of shareholders is shutting down, making it increasingly difficult for ordinary people to invest at all. So money is piling up in banks, rather than being invested.

    Increasingly therefore, companies will become large companies through internal growth, becoming closely family held companies. This means severe inequality, a quite small number of very rich people, as in much of the third world. These people are politically vulnerable, hence hide their wealth underground, get multiple passports in other names, and so on and so forth, living in gigantic private jets with ridiculously large and elaborate facilities, while flitting from one wealth friendly country to another.

    Silicon valley’s primary advantage is a wealthy elite that trusts each other, thus can cooperate to fund new businesses. Crowd funding reduces demand for them, at the same time a political corruption and social decay is reducing the supply of such people by reducing trust. Expect that shortly, new technologies will be primarily appearing only in the sort of places where private jets have basketball courts inside them.

  2. I expect the modularity of solutions will become more granular, so that will scale down to match the crowd sourcing and everyone will be happier because there will be less latency between funding and output.

    I believe this because network effects from the First Industrial Revolution lead to the railroads (where the steel was formed into modular components), and mass production resulted from network effects leading to modularity from Second Industrial Revolution. Now we are seeing network effects starting to kick from the First Personal Computer Revolution.

    I will have more to say about this and tie it into the 78 year technology cycle– 2 x 26 year generations boom and 1 x 26 year generation bust.

    I am droopy eyes, forehead-on-keyboard sleepless, so I can’t collect my thoughts in prose on the remainder now.

  3. ESR, to sanity check something:

    Am I correct in thinking the Kickstarter is an example of Coase’s therom in action?

    – FooQuuxman

  4. I’m busy doing a “this is gonna be HUUUUGE” happy dance, but let’s see if I can be reasonable anyway.

    One thing is that by selling stock, crowd funding can attract more money than it has in the past. I don’t know what the largest crowdfund has been so far (Reaper got 3.5 million dollars). On the other hand, the wikipedia article says that the restrictions are pretty severe:
    increase the number of shareholders a company may have before being required to register its common stock with the SEC and become a publicly reporting company. These requirements are now generally triggered when a company?s assets reach $10 million and it has 500 shareholders of record.[13][14] The House bill would alter this so that the threshold is reached only if the company has 500 “unaccredited” shareholders, or 2,000 total shareholders, including both accredited and unaccredited shareholders.[11][12]
    provide a new exemption from the requirement to register public offerings with the SEC, for certain types of small offerings, subject to several conditions. This exemption would allow use of the internet “funding portals” registered with the government, the use of which in private placements is extremely limited by current law.

    One of the conditions of this exemption is a yearly aggregate limit on the amount each person may invest in offerings of this type, tiered by the person’s net worth or yearly income. The limit ranges from 2% of people earning (or worth) up to $40,000, up to a cap of $10,000 for people earning (or worth) $100,000 or more. This exemption is intended to allow a form of crowd funding.[15] While there are already many types of exemptions, most exempt offerings, especially those conducted using the internet, are offered only to accredited investors, or limit the number of non-accredited investors who are allowed to participate, due to the legal restrictions place on private placements of securities. Additionally the Bill mandates reviews of financial statements for offerings between $100,000 and $500,000, and audits of financial statements for offerings greater than $500,000 (noting maximum offering of $1,000,000).

    It looks to me as though this is supplementing family and friends funding, and if open source wants to get the equivalent of angels from crowdsourcing, it had better figure out how to create attractive premiums. Contribute some non-stock-buying money, and you can get a variable named after you. (I’m guessing about whether this is reasonable.)

    I think you’re right about credibility, and having people willing to buy stock may well amplify the effect of conventional crowd-funding.

    If the JOBS act leads results in more people having good stocks from open source, then they’ll be more willing and able to invest in open source in the future, so that should be a virtuous cycle.

    Any thoughts about this sort of regulation? I can see government as having a legitimate interest in the sort of contracts it’s willing to enforce.

  5. Nancy nails the biggest problem. Any human activity that becomes popular will attract the attention of governments, which without fail translates into new regulation of that activity. The companies that can afford to pay for the sherpas to guide them through the obstacles of the SEC and other agencies will not appreciate this new competition, and will lobby to stifle it with sufficient regulatory burdens to make things “fair”.

  6. I suspect that crowd funding may reduce the floor for VC investment. My understanding is that part of what a VC brings to the table is go-to-market knowledge. Business management, effectively. However, you need a lot less hand-holding when you already have committed purchasers for 100k widgets before you start production. That drastically de-risks the investment for VCs from a cash-flow perspective and would let them take more of an oversight position rather than a hand-holding position.

  7. >Am I correct in thinking the Kickstarter is an example of Coase’s therom in action?

    Yes. Yes it is.

  8. “Any human activity that becomes popular will attract the attention of governments, which without fail translates into new regulation of that activity.”

    Which is why the “freedom” that BitCoin and 3D-printed guns is supposed to grant will be short-lived, at best.

  9. @The Monster
    “So you’re equating crowdsourcing with witch trials?”

    You obviously did not read Charles MacKay’s book. No witch hunts, just solid investments.

  10. @The Monster

    I believe Winter is from The Netherlands. The story of the Tulip Mania hits home for him.

  11. @The Monster:

    Nancy nails the biggest problem. Any human activity that becomes popular will attract the attention of governments, which without fail translates into new regulation of that activity.

    Bingo! That is why (referring to my prior comment) the solution will come from reducing the amount of capital required for each modular step. Note how the personal computer decreased the amount of capital required for one person to change the world (I’ve already done it once by myself with coolpage.com stimulating friendster, but I didn’t know open source at that time).

    Btw, appears to me the government tried to sneak a trojan horse of regulation and monopolization into our digital payments through a clever back door, but I am on to that and the technical door for monopolization can be stopped with competition and open source (if we move before the first mover advantage overtakes).

    Bitcoin: The Digital Kill Switch

  12. “VCs, in particular, will be looking for a fast cash-out via initial public offering.”

    Not in 10 years. Not since SoX. There’s a reason that IPOs have dropped somewhere in the range of 90%, and VCs no longer expect their liquidity event via the stock market.

    Now they’re looking for a business plan which sets the company up to get acquired.

    Kickstarter will help with small projects, stuff that doesn’t require a LOT of IP or tooling. But for major innovation you’ve got to spend a LOT of time on that last mile that Open Source is really, really bad at.

  13. Maybe but none of the Kickstarters I’ve funded were open source and some of these are the ones that hit the millions of $ mark (games).

    Nor do I really want to buy shares of these companies but the actual product.

    “Funded by their open source communities” is an unproven assertion and frankly assumes that many/most software entrepreneurs care more about “freedom” than making money.

    Nor do some open source projects, even important ones, seem to want to go down this path.

    http://www.gimpusers.com/forums/gimp-developer/15077-do-you-plan-to-create-a-project-on-www-kickstarter-com

    Some dev did ask for money to work a feature but only raised $1600:

    http://www.thepowerbase.com/2012/11/gimp-seeks-crowd-funding-model-for-gegl-components/

    http://www.freedomsponsors.org/core/issue/78/add-other-samplers-that-properly-reduce-downsample-and-warp-images

    /shrug

    Would I help crowdfund open source? Sure, but only in limited circumstances since typically I don’t need/want the source and mostly want the end product. For example I would help crowd fund AAA graphics upgrade for Wesnoth if I played Wesnoth.

    But that community didn’t seem all that interested either:


    The problem is that we would never get enough money to pay all the contributors. It would also be an enormous pain in the butt to do so (taxes, legal, international crap). And so the money would just sit around (like it’s doing right now).

    Wesnoth actually has a decent amount of money from the iOS sales (we get 50% IIRC). The development pace is just fine, and it’s comforting to know that Wesnoth can pay for servers until long after we’re all dead.

    There aren’t enough artists eligible to do art scholarships (AFAIK; I am not an art director), and they threw a right fit when someone outside the community volunteered to hire external artists for us. It’s definitely not worth losing any of our current team that contribute art because they love the game and they enjoy it in exchange for some people who would contribute as a job and leave the minute the money stopped flowing.

    http://forums.wesnoth.org/viewtopic.php?t=36871

    That was a year ago so maybe something changed. I’m guessing not so much.

    Or for a AAA game title that pledged to open source their engine after. I only really care about the game…the open sourcing of the engine is secondary.

    This worked:

    http://www.kickstarter.com/projects/homebrew/brew-test-bot?ref=tag

    So for specific communities and specific projects it works.

    This one, which strikes me as useful if successful, hasn’t made it yet although it still has 18 days to go:

    http://www.kickstarter.com/projects/421164014/openshot-video-editor-for-windows-mac-and-linux?ref=tag

    But that’s only a $20K goal. Frankly, it might be nice to have an open source iMovie but 20K isn’t going to provide the level of refinement to make it a contender. Nor am I really incentivized to fund it except out of good will.

    If he asked for $2M well maybe that would be worthwhile. If I thought he could do it.

    Ask for $20K and I’m sure he can’t at any reasonable timeline or value.

  14. @Jeff Read:

    Which is why the “freedom” that BitCoin and 3D-printed guns is supposed to grant will be short-lived, at best.

    AFAICS, bitcoin is a trojan horse takeover of society, w.r.t the game theory economics of the processing of transactions by mining peers as the debasement geometrically declines to 0. See my prior linked document for the technical argument on that. Separately, Satoshi (who ever he was?) specifically designed processing and thus control of our digital transactions to fall into the lap of monopolists. I can find no other Occam’s Razor conclusion.

    IMO, this can be fixed if we act soon before Bitcoin is significantly adopted by the compliant sheep mainstream. After that, it may be too late.

  15. @The Monster
    “Nancy nails the biggest problem. Any human activity that becomes popular will attract the attention of governments, which without fail translates into new regulation of that activity.”

    If a human activity becomes popular, it involves a lot of people by definition. Lots of people involved tends to lead to lots of conflicts, especially when money is involved. It is the central task of government to handle and resolve conflicts. If you do not want government to get involved, you must organize your own conflict resolution and security.

    Even if some government does not want to get involved, their people will drag them in by the hairs after the first scam or riot.

  16. @William O. B’Livion:

    But for major innovation you’ve got to spend a LOT of time on that last mile that Open Source is really, really bad at.

    You are referring to (e.g. making a GUI interface) how design-by-committee diverges to Frankensteins. For example, how the developers of Bitcoin can’t see the egregious design error, even I have spent days trying to explain it to them (the reason is that the “no debasement” like a “better gold” is locked into their irrational philosophy that is part of the reason for the mania for Bitcoin).

    In short, design-by-group is failure, but refinement-by-group trumps closed-source. That is precisely why one of my major goals has been to figure out how we can write open source software modules which are more composable.

    The way to stimulate Coase’s theorem is the decrease the granularity of modularity, then you have more degrees-of-freedom to route around failure modes.

    So then design-by-one is really open source again, where each “one” is leveraging modules of others. This would then decrease the capital needed to accomplish those last miles.

  17. > They were robbed to bail out bums in Greece

    By ‘bums’ you mean bankers, right? Bailout money never goes to poor people, as far as I can tell.

  18. One general rule I like is don’t create software or movements that have public interest failure modes, because government is well-tuned for making legislation to “fix” that which can not be fixed.

  19. You are all of course right, The problem is that regulation makes the transaction cost of capital formation hugely high, in fact with stupid laws like “accredited investors” they make it illegal in some cases.

    The arguments for this — protecting grandma from being scammed out of her savings — seem to fall apart when one takes a lot at the latest atrocity in Cyprus. One can only trot out the old aphorism: Quis custodiet ipsos custodes?

    (Of course, the outrage associated with Cyprus comes from the explicitness of it because of the handcuffs the Eurpoean Central bank has put on itself. Normally that sort of thing is easy by “printing money”. After all, we Americans probably had 5-10% of our savings robbed by the Fed through their various QE schemes. However, control of the currency just meant it could be done without anybody much knowing.)

  20. @esr:

    I have grave misgivings about the viability of crowdfunding while copyright and patent laws remain in force. I’m hopeful that it will be viable enough to make it easier to argue for their abolition by demonstrating that innovation and art can be funded without them, but the entire point of copyrights and patents is to distort the market and prop up a certain set of business models on the theory that they are the only possible way to fund innovation or art. While I’m confident that crowdfunding can show that innovation can happen without a stacked deck, I’m not so confident that it can be dominant despite the stacked deck.

    @Monster:
    >It NEVER occurs to anyone to achieve “fairness” by reducing the regulatory burden on incumbent business models.

    In the case of crowdsourcing, the incumbent business models it’s competing with are propped up by regulation.

  21. Jessica Boxer, I agree that restriction on capital formation are quite problematic. However, I disagree with your characterization of QE, for a variety of reasons. QE has in fact been quite successful and will probably be unwound in the near future. The core problem is that the enduring recession has made the “natural” interest rate (the interest rate that would prevail, absent liquidity effects) negative: demand for the safest stores of value is so high that these assets actually lose a tiny portion of their value over time. QE solves this problem by increasing the flow of spending, and lifting the economy out of recession.

    Back to the main topic: crowdfunding (ala KS) actually makes it possible to fund open source projects (and free cultural works) on their own merits, quite apart from any “startup” business model. The greatest challenges to this IIRC have to do with transaction costs (potential users of the open source software have to be aware of the funding opportunity), and assurance that the work will actually happen (and be of suitably high quality) after the money is raised.

    Proprietary products and business ventures have been more successful, because then the proposers have a strong incentive to actually go forward with their product.

    One interesting possibility is to apply crowdfunding to “buying out” existing proprietary software. IIRC, Blender used to be a proprietary product, and its open source release was secured with a “ransom” payment of about $ 100K. This is a bit high, but well in the range of successful crowdfunding initiatives. And “ransoming” largely solves the assurance problem, since arranging for the release of an existing proprietary product is a lot easier than monitoring the creation of an open source one.

  22. Pingback: What does crowdfunding replace or displace? | The Freedom Watch

  23. The Monster: “Nancy nails the biggest problem. Any human activity that becomes popular will attract the attention of governments, which without fail translates into new regulation of that activity.”

    I wasn’t in that mode– I wasn’t looking at it from the angle of “government is bad” so much as “here is this thing– what effects can be expected from it?”. Other people have annoyed me when they’re in facts rather than value mode, and now I’m passing it along. Don’t get me started about jurisdiction nerds…..

    Even if this change in the law won’t do as much as we hope, it’s still going to open things up to some extent, and I’m interested in how much difference it can make.

    A fast look at kickstarter turned up a rather interesting minimal wallet, but no one selling stock. The JOBS act (can I regain my libertarian credentials by saying that I hate the cutesy acronym?) has been law since April 5, 2012. Googling on [crowdsourced stock] turns up this:”While the JOBS Act awaits implementation, hybrid models, such as Mosaic Inc., are using existing securities laws to enable the public in approved states to invest directly in clean energy projects as part of a crowd.”

    I don’t know what “awaits implementation” means, or how long it’s likely to take.

  24. Perhaps I just experienced my first crowd-sourced induction to lead on a new open-source project to challenge Bitcoin, by the Bitcoin supporters no less! It is like I was just born again. I don’t know if I have the free time!

  25. > > They were robbed to bail out bums in Greece

    Mikko on Friday, March 29 2013 at 2:41 pm said:
    > By ‘bums’ you mean bankers, right? Bailout money never goes to poor people, as far as I can tell.

    Greece taxes everyone, including the working poor, at well above the laffer limit. Nonetheless, has a massive deficit, primarily caused by welfare, government employees few of whom do any useful work, and pensions for government employees, whose early retirement is probably a good thing since those of few of them that actually turn up for work generally do damage.

    Greece is able to continue this system due to bailout after bailout. Without bailouts it would be forced to throw the bums off welfare, inflate away public service pensions, fire most of the public service, and cut taxes to the laffer limit.

    (Government employees like taxes to be above the laffer limit for status reasons, since such taxes lower the status of people in the private sector)

    For example Cyprus banks were forced to make loans to Greece, which loans were, predictably not repaid, being spent largely to support people on welfare, being pissed away on bums. When the proverbial hit the fan, the Cypriot bankers were bust, as were all of their depositors who found themselves deemed the evil rich. To Europe’s great astonishment, confiscating the evil wealth of the evil rich has sent the Cypriot economy down the drain. Since everyone knows that government is the source of all wealth, this outcome is quite astonishing.

  26. guest on Friday, March 29 2013 at 4:42 pm said:
    > QE has in fact been quite successful and will probably be unwound in the near future. The core problem is that the enduring recession has made the “natural” interest rate (the interest rate that would prevail, absent liquidity effects) negative: demand for the safest stores of value is so high that these assets actually lose a tiny portion of their value over time. QE solves this problem by increasing the flow of spending, and lifting the economy out of recession.

    Quantitative Easing means the Fed buying up dud mortgages, piling them up in a crate somewhere and forgetting about them rather than foreclosing, thereby kicking the can down the road to the next administration, which will attempt to kick the can down the road a bit further.

    The vast unresolved pile of bad debt hangs over the economy, as it hangs over the Japanese economy.

    At some point we have to liquidate, foreclose, punish some of the sinners, and forgive some of the sinners, and announce that whatever bad things were done in the past, in future contracts shall be honored and debts shall be paid. And we have to punish enough sinners hard enough to persuade people that in future contracts shall be honored and debts shall be paid.

  27. Pingback: Daily Linkage – March 30, 2013 | The Second Estate

  28. Hi, Eric,
    Off topic: but i am having trouble reading the text in your blog these days. It’s much too light on a white background. Is it just me? I am using Iceweasel 10.0.12 on Debian Testing/Unstable.

  29. Pingback: Looking at crowdfunding as a replacement for venture capital « Quotulatiousness

  30. @JAD
    “For example Cyprus banks were forced to make loans to Greece, which loans were, predictably not repaid, being spent largely to support people on welfare, being pissed away on bums.”

    I am unsure whether you are disingenuous, monomania, or ignorant. Probably all three.

    On a GDP of 20B euro Cypriot banks took in 25B euro in mostly tax evasive Russian money. No one else in their right mind would deposit that much money on such a small island with no other economic activity to speak of. The risk premium on the interest was enough warning.

    To entice all this money, Cypriot banks offered an interest higher than any other bank in the euro zone. To get a return that honors the interest they offered, these banks were “forced” to invest in high-risk high-return bonds. The only bonds available in quantity were the Greek bonds. And the Greek did not collect enough taxes to repay their own bonds. That the Greek squandered the money they originally borrowed is something that is irrelevant to this story.

    The Cypriots were offered a deal: The northern euro countries would lend them 10B euro if they would cough up the other 5.8B needed. The Cypriots could not borrow more because 10B was the maximum they could possible pay back.

    Initially, these 5.8B would come from a modest (6-15%) slice of all deposits at the banks. Just 1-2 years of interest. However the Cypriots rejected that offer. Instead, they came with a package that would confiscate all deposits over 100k euro. As the bulk of these deposits were from tax evading Russians (and others), there were few tears spend over their plight.

    Now, explain to me why *my* tax money should be spend on saving some Russian billionaire’s untaxed hoards? They got a risk premium on their interest, now that that risk realized, they should live with it.

  31. James Donald has a major part of the story right, but overregulation, including SOX, has a lot to do with it too, and so does the housing collapse.

    To put it bluntly, all of the world’s largest banks are insolvent and have been since 2008. They’ve been hiding the fact by dragging their feet about foreclosing on mortgages that aren’t being paid, so that they can keep counting those as assets on their balance sheets — and FDIC is deliberately looking the other way, because if it called them on it, it would be legally required to close the banks and pay insurance claims much greater than the funds it has, including its statutory authority to borrow from the Fed to handle emergencies. (Yes, Congress would probably remove the limit in a hurry, but the result would be immediate runaway inflation of the dollar.)

    This is why the banks aren’t lending to anybody. And that is unlikely to change anytime soon. The biggest difference between ourselves and Greece right now is that there is nobody in the world big enough to bail out the US.

  32. >To put it bluntly, all of the world’s largest banks are insolvent and have been since 2008.

    Yes. Most of the world’s governments are broke, too. After too many decades of ever-upward-ratcheting entitlement spending, their political commitments are vastly in excess of any revenue they can ever hope to raise. The only thing keeping the system afloat is (what else?) massive borrowing and general willingness to participate in the delusion that politicians can somehow materialize wealth out of nowhere to keep the scam running.

    This is why I seldom blog about politics any more. The big-state system is like Coyote run off a cliff, frantically windmilling its legs in the air. The moment it looks down it’s going to fall, long and hard. Nothing I could write is going to make any difference to that outcome, any more.

  33. Winter on Saturday, March 30 2013 at 8:49 am said:
    > Cypriot banks took in 25B euro in mostly tax evasive Russian money. No one else in their right mind would deposit that much money on such a small island with no other economic activity to speak of.

    The problem was not where the money came from, but where it went to. It was loaned to Greece, to pay bums on the dole, to pay uncivil servants who got their jobs for their political views and political activities, jobs for the boys. In other words, to buy votes for the left.

    For many years, no one has loaned money to Greece except someone twists their arms, or, which comes to much the same thing, to buy political favor. Perhaps the Cypriot banks were loaning to Greece to bribe European Union regulators to allow them to bank for Russians. Or to say the same thing in different words, perhaps the European Union regulators threatened to put them out of business if they did not lend to Greece.

    In the case of Ireland the bankers lost money in incestuous self dealing. They lent to themselves and their mistresses to speculate irresponsibly in land and building. Heads the banker wins, tails the bank loses. The Irish bailout was a corrupt favor by politicians to the bankers. In Cyprus, however, the bankers lost money on lending money to Greek politicians to buy votes. In effect, the EU stole Russian money to buy left wing votes.

    In the US the politicians stole the bankers money to buy left wing votes, but when the banks threatened to go belly up, the bankers had enough political pull that the fed proceeded to print as much money as needed to make the bankers whole again. Cypriot banks evidently have less pull.

    The moral of Cyprus is that it is only safe to invest with crony capitalists – but Jon Corzine was a crony capitalist, and the moral of MF Global is that it is not safe to invest with crony capitalists either.

  34. Eric P2P currencies might be one way humanity can route around the failure, sidestepping ZIRP control that has us locked into the trajectory of increasing debt instead of defaults and reset. Perhaps provides a means to cross the chasm to the new economy rising exponential fast from the ashes. Wondering if you have already or might consider blogging about them. Apologies for the double-post.

  35. Winter:
    > To entice all this money, Cypriot banks offered an interest higher than any other bank in the euro zone.

    You could get substantially higher interest on UK bank deposits than on Cypriot deposits, and comparable rates on large deposits in German banks.

    Cypriot interest rates were higher than most EU interest rates, but not dramatically higher. For your argument that interest payments did them in, they would have to be paying ponzi scheme interest rates.

    For many years, loans to Greece have been political loans, not speculative loans. People lend to Greece as part of political horse trading. Interest payments on loans to Greece have become almost irrelevant. Greek loans don’t really have a well defined interest payment, just as medical treatment in America does not have a well defined price.

  36. Winter:
    > To entice all this money, Cypriot banks offered an interest higher than any other bank in the euro zone.

    This is of course a political lie: On googling up pre crisis ads for Cypriot banks soliciting funds I found: http://cyprus.deposits.org/ which offered 1% per year and 0.25% per year – pretty standard EU rates.

    Mortgages in Cyprus were running at four to six percent, so, bankers business was to borrow at short term 1%, lend long term at 5%, which is pretty much what bankers normally do – except when politicians run short of cash to fund wars or vote buying.

  37. I wrote “The big-state system is like Coyote run off a cliff, frantically windmilling its legs in the air.”

    I should have said “The incestuously intertwined system of big-state and Big Finance”. The Occupy Wall Street types who complain about “banksters” have a point, they’re just doctrinally-blinded or too shit-stupid to notice that financial gigantism is a direct consequence of statist gigantism.

  38. esr:
    > The incestuously intertwined system of big-state and Big Finance
    And no one exemplifies that incestuous intertwining better than Jon Corzine of MF Global, who spun at dazzling speed on the revolving door between finance, financial regulation, and politics, not only wearing his regulator hat, his politician hat, and his bankster hat in rapid succession, but sometimes simultaneously.

    Whosoever favors regulation, should meditate on the career of Jon Corzine, the man who mysteriously mislaid billions of dollars, the man who, when asked by his fellow senators where the money went, told them he could not recollect, and was asked no further.

    Japan’s economy is screwed up by the system of descent from heaven, wherein senior civil servants expect a lucrative retirement as senior business executives, but Jon Corzine, banker, regulator, Democratic Party activist, Democratic Party senator, Democratic Party governor, financier, went back and forth like a yo yo.

  39. @JAD:

    Social decay is causing problems with the existing model of company formation. The elite don’t trust each other.
    [...]
    Expect that shortly, new technologies will be primarily appearing only in the sort of places where private jets have basketball courts inside them.

    Good riddance.

    I hope via technology such as P2P currencies, open source, more modular semantics, computer revolution network effects, the freeloading “elite” rent seekers end up irrelevant drooling away their sorrow on Jack Daniels in alleyways. At least we have the compassion to let them sleep on the park bench in peace. Social decay by whose definition? We are discarding the top-down control. We only need a few more network effect innovations from the PC revolution to complete this.

    They were robbed to bail out bums in Greece when they expected to rob taxpayers in the USA.

    Thieves trusting thieves– belly busting hilarious.

    Like we really need these investment bankers:

    Young Chuck moved to Texas and bought a donkey from a farmer for $100.

    The farmer agreed to deliver the donkey the next day.

    The next day the farmer drove up and said, ‘Sorry Chuck, but I have some bad
    news, the donkey died.’

    Chuck replied, ‘Well, then just give me my money back.’

    The farmer said, ‘Can’t do that. I went and spent it already.’

    Chuck said, ‘OK, then, just bring me the dead donkey.’

    The farmer asked, ‘What ya gonna do with a dead donkey?

    Chuck said, ‘I’m going to raffle him off.’

    The farmer said ‘You can’t raffle off a dead donkey!’

    Chuck said, ‘Sure I can. Watch me. I just won’t tell anybody he’s dead.’

    A month later, the farmer met up with Chuck and asked, ‘What happened with
    that dead donkey?’

    Chuck said, ‘I raffled him off. I sold 500 tickets at two dollars apiece and
    made a profit of $898.00.’

    The farmer said, ‘Didn’t anyone complain?’

    Chuck said, ‘Just the guy who won. So I gave him his two dollars back.’

    Chuck now works for Morgan Stanley.

  40. Pingback: Crowdfunding vs angels vs VCs » Cafe Turing – Jared Sylvester

  41. @Winter:
    I read on Martin Armstrong’s blog that the Russians were in negotiations to bailout Cyprus in exchange for their offshore gas rights, and the USA intervened and told Russia to back off. Apparently Europe is already very dependent on Russian gas. Some people think this confiscation will cause even more capital to flee Europe. Apparently European (and Chinese) capital flight to the USA is at an all time high, which is offered as one reason (along with the QE) the USA stock and real-estate markets are (likely dead-cat) bouncing. Meanwhile dollars and dollar loans are flooding into Latin America, likely to sharply reverse course when the next liquidity crunch comes and the global demand for dollars climbs. Distortions all over the place. What happened to the free market?

  42. @guest:

    The core problem is that the enduring recession has made the “natural” interest rate (the interest rate that would prevail, absent liquidity effects) negative: demand for the safest stores of value is so high that these assets actually lose a tiny portion of their value over time.

    Myopic. It also means that the natural interest rate on bonds not backed by the full faith and credit of the US federal government are skyrocketing (before this dead-cat bounce). QE ZIRP is a distortion of the free market that captures and enslaves capital, preventing distribution to those investments which are worth anything post-crash, thus delaying the crash precisely as Eric wrote.

    This is only causing debt to accumulate into malinvestment worldwide, which is going to make the crash post-2017 horrific (right on time with the 26 year downturn within the 78 year cycle, prior being 1929 – 1955). We will get a significant war, as always repeats throughout history during the 26 year downturn of the periodic 78 year cycle. My best bet is this is caused by a 26 year reproduction cycle of humans. I posit that the 2 x 26 yr. generations build out the new technology paradigm shift, while the last 1 x 26 yr. generation (Boomers now displaced by personal computer productivity & automation, cottage industry workers in early 1900s displaced by mass production) can’t adjust to the next one.

  43. JustSaying on Saturday, March 30 2013 at 11:30 pm said:
    > This is only causing debt to accumulate into malinvestment worldwide, which is going to make the crash post-2017 horrific
    There is a lot of ruin in a nation. 2017 seems too soon for currency collapse. I am betting on currency collapse some time not very long after 2020, followed by civil war 2, perhaps around the 2026 mid term elections, supposing we are still holding elections by then. Allende stuffs the ballot boxes a little more blatantly than usual, and Sulla takes the army into politics.

  44. @JAD:
    I doubt even 1% of people realize that we are heading into another world war 2 level of chaos and pain. I am hoping our internet is going to make it less bloody and painful this time.

    The model expected the 26 year downturn to start 2007. The Economic Confidence Model model (global gyrations of capital flows to where confidence is highest, currently towards USA) predicts a dead-cat bounce for USA until 2016, then 2017 down we go again. The dollar and fiscal situation might linger on for years after that, given the USA is the strongest fiscally compared with Japan, China, and the PIIGS. Japan is on the precipice now of currency collapse. Spain can’t be far behind, except for the ECB backstop. Spain’s bond rates came down with a combination of ECB jawboning and Spain raided the entire social security fund to buy their own bonds! Spain’s banks are levered 26-to-1. And this doesn’t include the $100s of trillions of derivatives (“weapons of mass destruction”) on top of all these global debts. The elephants-in-the-room are France and China, which are in much worse condition than most people realize. China probably has the most egregious debt-to-GDP of all (maybe higher than Japan), yet it is hidden.

    USA has significant economic growth in oil & gas, high tech, and automated manufacturing (and?). The cycle model expects the bottom of the crisis to be 2033, which would correspond to 1955. Armstrong claims he spent for example $21 million to construct a chart of silver value during the rise and fall of the Roman empire. Armstrong’s models are based on feeding volumes of historic data in a computer (newpapers clippings, archaeological evidence, etc) and searching for periodic correlations, which he claims lead him to discover his models from evidence– the scientific method. He has apparently successfully tested his models’ predictive power, and NY Times claimed he was paid $33 per minute in the 1980s for his advice. He consulted to Margret Thatcher, central banks, etc.. However, I reserve skepticism since we are not allowed to see open source data and the models.

    Can you say anything me about Satoshi on or off record, given you were apparently the first to respond to him on the cryptography mailing list? If this request is out-of-bounds, ignore the inquiry.

  45. JustSaying
    > Can you say anything me about Satoshi

    I have confidence in Satoshi’s competence and good intentions. I disagree with ending bitcoin inflation and debasement, but in the past, he has been right and I have been wrong.

  46. Hail Eris!

    With ESR’s permission, I am announcing that…

    I have put up a new, prettier version of the “What Would Eris Do?” website that includes significant new content at: http://www.wwed.info

    Some serious weirdness has entered into my life, and I may not get back to this for a while (or even proofread it when I am not half-asleep).

    For folks that visited the initial crude one-page website, I would like to say that I have become much more enlightened in relation to the Law of Fives – the new page is definitely worth checking out if you are into this stuff at all.

    All Hail Discordia!

  47. @BRM: Messing with the minds of people dedicated to order and rules

    +1

    In the spirit of the duality of order and chaos, I would like to propose a generalization of the Law of Fives to the Law of n– it’s an ordered law with a chaotic harmonic.

  48. @JustSaying
    It was German kansler Merkel who told the Cypriots they would not get a EU loan if they sold their gas to the Russians.

    @JAD
    Our newspapers write about 7% interest rates on Cypriot banks. And no one forced the Cypriots to invest in Greek bonds. However, it was the only way to get high returns in volume.

    @esr
    Europe has been destroyed several times in the last two centuries. A few empires fractioned and some small countries. But even the biggest carnages and disasters did not destroy the nation states. So why would a pesky banking crisis destroy them?

  49. >But even the biggest carnages and disasters did not destroy the nation states. So why would a pesky banking crisis destroy them?

    Because it isn’t just a banking crisis. It’s a government-debt crisis on a historically unprecedented scale.

    What we are now entering is the end phase of the era that began when Bismarck instituted the Prussian state pension system in the 1840s and moved into high gear with the invention of the welfare state in the 1930s. In this era government legitimacy became tied to the amount of goodies the state could hand out to its client/citizens. It thus became impossible to cut spending without triggering a legitimacy crisis. In fact, due to the pressure of interest-group politics as analyzed by Mancur Olson (see Some Iron Laws of Political Economics) the logic of the big-state system requires spending to accelerate without limit.

    But what cannot go on forever will not. The unsustainability of this system was masked by the tail end of the two-century-long demographic boom produced by the Industrial Revolution, but that ended around 1970. Since then the big-state system has been dependent on increasingly massive government borrowing and an ever more desperate search for greater fools to hold the planet-sized debts this incurred. Today it is difficult to identify any government in the world whose debt and entitlement commitments don’t swamp even the most insanely optimistic estimates of its future revenues.

    The banking crisis is, at bottom, a crisis of uncollectable sovereign debt. Governments hold off the collapse of the banks with bailouts made possible only by printing fiat money. But there isn’t enough real wealth in the world economy to back all the debt, derivatives, and fiat currency sloshing around – not by more than an order of magnitude. It’s all smoke and mirrors. The euro crisis is prologue – soon, very soon, it is going to become inescapable that all that paper is worthless. When the crash comes, the inability of governments to meet their political promises will destroy the legitimacy of the political system at the same time that the real economy has to unwind all that debt-fueled malinvestment.

    “The Gods of the Copybook headings with terror and slaughter return.” It’s going to be really, really bad. Mass-starvation bad. Fascist-demagogue bad (there are worse creatures than Jean-Marie Le Pen and Jorg Haider and Beppe Grillo lurking, and their day is coming). Major-warfare bad. To pick out just one of the many failure paths that is likely to produce megadeaths, ever since the “Green Revolution” Third-World agriculture has become dependent on high-energy fertilizers produced in Western chemical plants. That’s fine as long as the global trade network keeps ticking over, but what happens when nobody has any currency they can trust? Ships won’t move, oil feedstocks won’t get to refineries, fertilizer won’t get to farms. Watch the collapse and starvation of Egypt over the next year, after it runs out its last three months of the foreign-currency reserves it’s been using to buy grain, for the merest foretaste of what that’s going to be like.

  50. @esr
    My country has around a complete GDP in pension entitlements stored in mutual funds. The remainder in entitlements is linked to tax income of the state. All pensions were recalculated (lowered) to incorporate the losses due to the US triggered banking crisis.

    Our national debt is around 60% of GDP. The funny thing is that our government recently auctioned off bonds at negative interest. It seems some people are so desperate to store their money safe that they pay for it.

    But that is not my point. Even if the complete financial world colapses, that has already happened twice in the last century. The result was a strengthened state each time. The same in Germany. And Russia, for that matter.

    Disasters bring people together and strengthen their cooperation. The state is simply the highest level of cooperation.

  51. @esr
    And Egypt will not run out of fertilizer. Even if they cannot pay for it, they will be send boatloads of it.

    Europeans might be stupid, but not that stupid.

    In the end, money is not really that important.

  52. >The result was a strengthened state each time. The same in Germany. And Russia, for that matter.

    And how well did that work out for them, eh? Both regimes are dead. Germany got levelled and then mass-raped by the Soviet army, Russia has slid from superpower to a demographically-collapsing Third-World pesthole with the world’s highest rate of alcohol poisoning. The “strengthened state” does not stave off any of these consequences, it defers them for a few years while making the eventual reckoning even worse.

    The reason is simple: the “strengthened state” doesn’t generate increased real wealth. Instead, it generates increased redistribution of a shrinking pie.

  53. esr, to be frank, I think this is quite misguided. Some governments are paying interest rates on their national debt which are well below the rate of economic growth – which means that their national debts are broadly sustainable. (The stock of national debt does not matter _that_ much, since it can just be rolled over indefinitely. You can call it a Ponzi scheme if you want, or think of it as governments providing a useful store of value by relying on their future economic growth.)

    To be sure, many governments need to scale back entitlements and cut spending; and this is slowly happening although yes, it’s going to be quite painful and unpopular. But the banking crisis has a lot to do with a dearth of liquidity in both the US and Europe, although the Fed is successfully addressing this nowadays. Economic recession (and perhaps social/political unrest, as in Egypt) is a lot more likely to be a danger to global trade networks than “running out of currency one can trust”.

  54. @esr
    I do not contest that strong states can be a living and murderous hell. A strengthening of the state is simply what happens. Citizens did not always benefit as we have seen to our great horror.

    I think states will be rebuild after each and every disaster as long as there are enough people. It has happened so many times in the history of Europe.

    And trade has predated currencies by quite a stretch. If we loose our current currencies, we will create new ones.vWherever there is credit, there are currencies.

  55. >esr, to be frank, I think this is quite misguided. Some governments are paying interest rates on their national debt which are well below the rate of economic growth – which means that their national debts are broadly sustainable.

    Yes, at constant government spending levels, or (more precisely) spending not exceeding today’s fraction of GDP. But the logic of the Olsonian interest-group scramble tells us that spending levels are always unstable upwards. Your “some governments” are at the rear end of the train, but the train wreck is still coming.

    The politics of today’s soi-disant “spending cuts” are straight out of a Surrealist parody. Governments are required to represent simultaneously that the are making real spending cuts (to pacify the bond markets and keep the debt financing coming) and that they are not really cutting spending at all (because real cuts would ignite a political backlash that wouldn’t be survivable for whoever is in power when it’s done). In fact they effectively always opt for not cutting spending while pretending that they are. The most usual way to do this is to sell minor decreases in the rate of increase in spending as decreases in spending. And so it goes.

  56. >The state is simply the highest level of cooperation.

    Ha. Tell that to Jews and Gypsies being machine-gunned into trenches.

    The state is the highest form of theft and murder.

  57. @esr
    What is is not what ought to be. Mass murders require (some) organization too.

    You predict the violent dissolution og states. I say the historical evidence is against you. Finacial troubles rarely if ever destroy a state.

  58. Winter on Sunday, March 31 2013 at 7:27 am said:
    > Our newspapers write about 7% interest rates on Cypriot banks.
    Your newspapers are not a reliable source. They are official truth, which is to say, lies. Since the EU is robbing Russians to pay people to vote left, so of course they are going to say the Russians got extortionate interest rates regardless of whether they did or did not. If they were robbing Jews, would say the same.

    If Cypriot banks were offering seven percent interest rates before the crisis they would be advertising and announcing it before the crisis. Find such an advertisement or announcement, preferably on the internet archive, archive.org, where we can all see it, an announcement of seven percent interest on a normal savings or cheque account from a Cypriot Bank. I went looking, found only normal interest rates.

  59. Winter on Sunday, March 31 2013 at 2:24 pm said:
    > You predict the violent dissolution og states. I say the historical evidence is against you. Finacial troubles rarely if ever destroy a state

    Hyperinflation frequently prefigures radical political transformation and/or war, for example the German, Hungarian, and French hyperinflations.

    The US army is resentful about having political correctness imposed upon it. You cannot make racially insensitive remarks about people who are shooting at you! They are going to be really resentful when their pay is not worth anything.

  60. “I say the historical evidence is against you. Finacial troubles rarely if ever destroy a state.”

    …At least for a given value of “destroy;” but the inflated Continental nearly wiped out the original Federal government of what was then the “united States” and the mess that began in Oct 1929 resulted in fulfillment of Garet Garrett’s “Revolution within the form,” de facto socialism with the trappings of free-market capitalism (though it can be argued — and he did — the roots of that go far deeper). Wiemar Germany and France (the latter at least twice) also found The State as then constituted brought low by what were largely financial troubles. –Because “finance,” in the from of trustable money and trust itself, is at the root of civilization, it can be difficult after the fact to point to any single cause: do people riot because the money’s no good, or is the money no good because of unstoppable rioting?

    We’re already over the cliff and it’s a long way down.

  61. Winter on Sunday, March 31 2013 at 1:10 pm said:
    > I think states will be rebuild after each and every disaster

    That has been the trend from around fourteen hundred AD to the present. On the other hand, was not the trend from four hundred AD to one thousand AD.

    Of course, it might be a bad idea to bet against a trend that has been running strong for well over six hundred years, but here is why I am betting against it:

    That trend, from 1400 AD to the present, has in large part been driven by what I call left singularities. Leftism enforces ever greater leftism, so society moves leftwards ever faster, until things blow up, a still surviving leftist movement conquers the exploded society, with the result that anglosphere leftism conquers everyone – until anglosphere leftism blows up.

    The first leftist movement began as the false popes of Avignon, which eventually culminated in the first left singularity: The red terror and Napoleon.

    Thus the false Popes became French leftism, which became revolutionary leftism and the war in the Vendee, which became Bonapartism, which self destructed, and which conquered by anglosphere leftism, thus had government modeled on the mother of parliaments imposed on them.

    Similarly, leftist Czars manufactured a left wing movement that led to their own overthrow and execution, eventually resulting in Stalin, who halted the ever leftwards movement, announced that utopia had arrived, and there would be no further movement leftwards or rightwards.

    If Stalin had not put a stop to it, Russia probably would have gone all the way to Pol Pot style socialism under Trotsky.

    Stalin placed Russia in political stasis, which eventually cracked. Russia was initially conquered by anglosphere leftism, attempting a rerun of what was done to France, but today’s leftists are less virile than the Duke of Wellington, and Russia may well be rejecting the foreign imposition.

    Anglosphere leftism originated from the Puritans, and was heading into a left wing singularity with the civil war, the commonwealth, and the execution of Charles the first. Oliver Cromwell took fright at the sight of the levelers and, like Stalin, froze things, heading off the looming chaos. After his death, General Monck reversed the left wards movement, creating a theocratic monarchy based on latitudinarian (tolerant) Anglicanism. Some Puritans were purged from government, academy, and the Church, and the rest saw which side their bread was buttered on, and quietly decided that they were not only latitudinarian Anglicans, but always had been latitudinarian Anglicans,

    Similarly, I expect that if we get a reactionary restoration in the US today, 99% percent of the gender studies movement will cheerfully agree that organizations generally function better with male leadership. (After one percent of them have been fired)

    Under this excellent system (theocratic monarchical latitudinarian anglicanism) British colonialists, pirates, merchants, slavers, and adventurers conquered most of the world, and Britain created the scientific revolution and the industrial revolution.

    Then in the late Georgian or early Victorian period, the ever leftwards slide resumed, perhaps starting with the inability of George the Fourth to penalize queen Caroline for flagrant adultery. (Whatever happened to that stick no thicker than a woman’s thumb?)

    The trouble was that they were too latitudinarian. Leftists, once in power, did not make the same mistake.

    Because the anglosphere left singularity lagged behind the others, it tended to occupy the rubble when other left singularities collapsed. The movement to ever stronger states has in large part been a movement ever left, and to ever greater anglosphere domination.

    The ever leftwards movement eventually killed off science shortly after World War II, replacing it with state sponsored religion dressed in lab coats. (See the cartoon http://dresdencodak.com/2011/04/19/dark-science-09/ ) Peer review and consensus means that instead of the experimenter telling the scientific community what he sees, the scientific community tells the experimenter what he sees. As with Wikipedia, believing one’s own eyes constitutes original research, and we should leave original research to the trained professionals.

    Technology continued to advance, but after 1972, in ever fewer areas. In one area after another, the advance in technology has come to a stop. Last man on the moon, 1972, tallest buildings in the west, 1972. Coolest muscle cars around then. In the outposts of fallen empire, however, technology has continued to advance in some areas abandoned by the west. Cool tall buildings continue to be built in Shanghai, Singapore, and Dubai, but in the center of anglosphere, when the two towers fell, they could not be rebuilt, and London looks ever poorer, ever shabbier, ever more early twentieth century. Stockholm is in a timewarp from the pre war period.

    The anglosphere left is moving ever further leftwards ever faster. Trees do not grow to the sky. At some point, I hope short of Pol Pot leftism, it has to collapse.

    With good luck, a reactionary regime might be reconstructed, as general Monck did. With bad luck, we will probably be conquered by a Caliphate or China, or just overrun by bandits, pirates, and adventurers like the Roman empire in the West. I think that Europe will mostly go Caliphate, parts of the US will create reactionary regimes, and the rest of the US will resemble Latin America. If we are lucky, parts of the US will resemble the wild west.

    Much of the world will become protectorates of the new Chinese empire, as is already happening in Africa. The rest will be patchwork of monarchies, aristocracies, good anarchy, bad anarchy, and general chaos. Russia will chart its own path. At present, Russia is not a favorable environment for high technology despite the abilities of many Russians, and it has a rather long history of not being a favorable environment for high technology.

  62. @guest:

    Some governments are paying interest rates on their national debt which are well below the rate of economic growth – which means that their national debts are broadly sustainable.

    You did not understand my prior reply to you. Siphoning money from the private sector (free market interest rates are not below GDP growth) into the government sector (where ZIRP is artificially lower due to Fed backstop and only place to park funds that is backstopped), thus funds those activities which are not producing. Thus as Eric points out, the deficits will increase, because tax receipts relative to entitlements will decrease. Governments will try to raise taxes as they did in France, but this never works because societies have a natural level of tax they will tolerate and more than that leads to reduction of production, again cutting tax receipts.

    This is the death spiral. The only way to get out of it is to let everything crash. If you delay it with ZIRP, you waste more capital and the wars and confiscations are going to be more horrific.

  63. The US Army understands that saying stupid racial shit on camera helps the enemy recruit and is not just PC bullshit. That saying stupid racial shit greatly reduces the odds that a local will provide useful intel that might save your ass. That saying stupid racial shit goes against effective COIN doctrine which is why it’s the US military will become disloyal because of a near term financial crisis you have no clue.

    Folks were not joining up during a decade of active combat just for a paycheck and there are more than a few military families are on welfare. We need to take better care of them and increase pay but that’s a different issue.

    Their pay is already not worth the sacrifices many make to serve their country.

    However, in the event of a financial meltdown as long as families can buy food and necessities from the exchange using eagle cash things will be okay.

    If we can’t manage even that then things have gone so horribly pear shaped that it stops mattering.

    The problem for the Germans was the dissolution of the Imperial Reichswehr as part of the peace terms, the formation of the resulting freikorps and an artificially small Weimar Reichswehr and the imposition of the Weimar government by the allies which made it less legitimate.

  64. @JAD:
    There won’t be hyper-inflation in the reserve currency, because the bankers always need a deflating currency to hold their assets in. Instead every thing paper will be confiscated as you see in Cyprus, including all bonds which thus mean retirement funds, life insurance plans, etc.. Confiscations may take the form of “forced loans” where the government hands you a 30 year bond in exchange for your confiscated paper asset, then devalue the bond (similar to FDR’s upward valuation of gold after trading for paper, now the opposite direction because people hold paper not gold). They already did this in Spain for the Bankia bailout. The depositors were given non-preferred paper instruments (I forget if they were stocks or bonds), which then crashed in value.

    This is deflation just as in 1929 – WW2. The price inflation during WW2 was due to scarcity and rationing as production was used in the war.

    Gold will go up not because of inflation, but because everything paper will be stolen, a la MF Global and Cyprus.

  65. because the bankers always need a deflating currency to hold their assets in

    That specific part was nonsense (the rest was accurate). Let me correct it by quoting Martin Armstrong, since I am apparently too sleepy (worn out) to form a coherent summary.

    http://armstrongeconomics.com/2013/03/03/i-just-dont-get-the-goldbugs/

    The system is collapsing from its own weight. You can die from extreme cold or extreme heat – both will kill you. The same is true of hyperinflation and deflation. This is NOT about how high will gold soar in price – that assumes the dollar survives even as a measurement tool. This is about a store of wealth for the transition to the new currency that will inevitably be forced upon the world. Communism collapsed – now it is the Socialist’s turn.

    http://armstrongeconomics.com/2013/02/24/the-untold-truth-about-the-german-hyperinflation/

    So while many point to the German Hyperinflation and then say we will enter the same result, are taking only the hyperinflation and ignoring the events that caused it. There were NO gold reserves. There were no lenders to the government. There were no bond markets. There was absolutely nothing. Nobody would dare lend anything for the fear was Germany would go the way of Russia.

    http://armstrongeconomics.com/2013/02/24/the-world-is-going-nuts-gold-may-not-help/

    There is a far greater danger than what the Goldbugs preach. I have written about Maximinus I (235-238AD) and how his three actions against the people of Rome set in motion the collapse of the entire monetary system. Maximinus did what governments are moving toward with lightening speed right now. He was desperate for money as they are to sustain power and declared that ALL wealth within the Roman Empire now belonged to the state! He established a network of spies and paid rewards for anyone who turned in people hiding their wealth.

  66. I want to retract my prior attempt at oversimplification that the bankers need a deflating currency as the reason there won’t be hyperinflation. I have a longer explanation in moderator queue.

    @Winter & esr: I think the reconstruction of the (literally and figuratively) discredited nation-states will be the formation of global governance that is in its infancy smaller and more efficient (by being less intrusive). This is how the enduring emergent collectivism (politics) will continue and coexist with the massive increase in individual freedom that must come in order to rebuild from the current mess. I visualize it as different size gears moving at different speeds. So while the nation-states gear is decaying, the individual freedom and global governance gears are accelerating (but the former at much faster rate since it is bottom-up distributed, e.g. open source, p2p currencies, 3d printer, etc.). I have circumstantial evidence of this, for example the significant migration from south-to-north in Europe to find work and the migration of southern youth to former colonies.

    I wrote at mpettis.com:

    Europe’s south-to-north migration is more efficient than de-unification chaos. Those who could benefit from chaos, migrate instead, and the rest left behind are technologically incapable of benefiting in any case. The degrees-of-freedom that de-unification chaos would create, are already available through migration.

    The global governance will likely once again be abused in the distant future and we repeat the process all over again, but with even more centralization.

  67. I want to retract my prior attempt at oversimplification that the bankers need a deflating currency as the reason there won’t be hyperinflation. I have a longer explanation in moderator queue.

    @Winter & esr: I think the reconstruction of the (literally and figuratively) discredited nation-states will be the formation of global governance that is in its infancy smaller and more efficient (by being less intrusive). This is how the enduring emergent collectivism (politics) will continue and coexist with the massive increase in individual freedom that must come in order to rebuild from the current mess. I visualize it as different size gears moving at different speeds. So while the nation-states gear is decaying, the individual freedom and global governance gears are accelerating (but the former at much faster rate since it is bottom-up distributed, e.g. open source, p2p currencies, 3d printer, etc.). I have circumstantial evidence of this, for example the significant migration from south-to-north in Europe to find work and the migration of southern youth to former colonies.

    I wrote at mpettis.com:

    Europe’s south-to-north migration is more efficient than de-unification chaos. Those who could benefit from chaos, migrate instead, and the rest left behind are technologically incapable of benefiting in any case. The degrees-of-freedom that de-unification chaos would create, are already available through migration.

    The global governance will likely once again be abused in the distant future and we repeat the process all over again, but with even more centralization.

  68. In the post in moderator queue, I quoted Armstrong where he explained that the hyperinflation in Wiemar Germany was because they had no bond market, so no one would loan them any money, so resulted hyperinflation. That is not situation now with the USA.

    I refuted Armstrong’s claim in Cyprus & Confiscation of Assets is Global Plan that a P2P currency such as Bitcoin would necessarily also be confiscated and not a possible protection for the destruction he sees coming. In the The Short Dollar & The Debt Bubble, he explains that the entire world is awash in dollar debt, and thus effectively betting short on the dollar, which will lead to a massive dollar rally while the other countries fail first, then dragging the USA down into the abyss after. I quote from Forced Loans They Can Take Your Money Giving Gov’t Bonds:

    This why we have HOMELAND SECURITY buying 1.6 billion hollow-tip bullets that are illegal in war. They are buying illegal ammunition for domestic use.

    The interesting aspect of HOMELAND Security buying armored tanks is the absence of press coverage in the primary media outlets. Put this in Google see who has reported it. They bought 2,717 of these ‘Mine Resistant Protected’ vehicles for service on the streets of the United States. These are virtually tanks. You can throw gasoline bombs at them and nothing will happen. They are preparing for outright war against the population.

    Anyone who thinks these people will just hyperinflate to meet their promises are living in a dream world. They will defend their power at all costs and have no intention of meeting promises. You do not buy all this stuff for domestic use unless you expect a problem. That problem emerges only from defaulting on the socialistic promises they have been making with no intention of honoring anything.

    The Big Brother & his Whole Family Have Arrived talks about the level of financial privacy we no longer have. In Two-Tier Monetary Systems & Local Currencies, he explains further:

    Here is what has been known as Depression Scrip from the United States. While hyperinflation takes place in revolutionary governments for they lack any resources and capital remains in hiding as it is hoarded, in a major economy with a bond market governments cannot hyperinflate and STILL expect to sell bonds. They normally turn against the people hunting down anyone with capital they can confiscate. This produces a collapse in the VELOCITY of money and suddenly a shortage appears that is filled with local currency.

    Seems to me that he is saying we will really need something like Bitcoin.

    And finally in Gold – Reality Check:

    Gold will rise NOT because of hyperinflation, but because of the Sovereign Debt Crisis and the lack of a place to put money. The dollar is rising because you have NO place to put big money. Europe has no federal bond issue. Japan is a basket case, and China has no bond market of any size. Thus, the US bond market remains it.

  69. JustSaying on Monday, April 1 2013 at 2:25 am said:
    > the massive increase in individual freedom that must come in order to rebuild from the current mess.
    I will be relieved if we avoid both Pol Pot Socialism and the fate of the Romano British. I would like a Monck or a Sulla, but a Cromwell would be fine, and even a Stalin is less bad than what we may well get.

  70. @JAD
    “Your newspapers are not a reliable source. ”

    That is a common theme in your comments: Never ever trust a professional. I am very curious how you select a plumber?

    @JAD
    “They are official truth, which is to say, lies. Since the EU is robbing Russians to pay people to vote left, so of course they are going to say the Russians got extortionate interest rates regardless of whether they did or did not.”

    It is very obvious that you do not read European (euro-zone) newspapers. You just project your own attitudes onto others. Latches into your other theme: You cannot trust the facts, make up your own.

    @JAD
    ” If they were robbing Jews, would say the same.”

    Obviously a trolling comment. Or maybe just wishful thinking.

    @JAD
    “Hyperinflation frequently prefigures radical political transformation and/or war, for example the German, Hungarian, and French hyperinflations.”

    States became stronger after hyperinflation.

  71. @JustSaying
    “Europe’s south-to-north migration is more efficient than de-unification chaos. ”

    Indeed, we need a lot more migration. Sadly, the language barriers are still rather high.

    A lot of Spanish youth are moving north. But they have grave difficulties learning German, Dutch, Danish, etc. Polish people had the same problems. The result is that these people get into low-pay jobs way below their educational level.

  72. Just an aside to the Black Helicopter brigade…

    Homeland Security did NOT buy 2717 of those tanks. They bought 17. That’s 17 for the entire nation….and no, they did NOT buy millions of hollow-point rounds either. Calm down.

  73. @LS
    What amazes me most in the “internet crowd” and political activists from the USA is their fundamental distrust of their compatriots. They seem to believe they share the US with the likes of Pol Pot and Gestapo. But I assume they will know each other best.

  74. @guest
    > QE has in fact been quite successful

    This is the story that our political masters would have you believe. However, it is not true. In fact the opposite is true. What QE has done is hidden a massive problem that will explode in our faces “real soon now.”

    Here is a graph that should terrify anyone who has a basic understanding of money.

    http://www.shadowstats.com/alternate_data/money-supply-charts

    You see the credit bubble of M3 followed by a massive crash of M3 even while M1 was rising. You continue to see the fed pumping cash in while credit continues to crash through the floor, and even today as M1 grows, M3 grows by a tiny fraction.

    Remembering that M3 is M1 leveraged, and they are supposed to grow in sync, what that means is that banking regulation has utterly crushed the lending industry, and consequently investment in new growth is in the tank.

    How is it possible to pump $2 trillion dollars into the economy and not get inflation? Simple, crush the lending industry so that commercial money doesn’t grow to offset the inflating effects of cash.

    Which is another way of saying that inflation is hidden by destroying growth in the economy. Real value growth and capital formation originated growth has been hidden under a fake blanket of cash growth. That is to say, it is all smoke and mirrors, and when the lending industry recovers inflation will be leveraged, and go through the roof.

    It is political pantomime of the best kind, but, to quote one of our president’s friends, the chickens are coming home to roost.

    BTW, it is an interesting fact that the Fed stopped publishing M3 numbers. I’m no conspiracy person, but I think that is very suspicious.

  75. @Winter
    > is their fundamental distrust of their compatriots

    Skepticism is the root of science and technology. And since they are the root of modern civilization, then skepticism seems a pretty effective strategy.

    The distrust of, for example, politically generated numbers, or the establishment press, is not much different in my mind than the rejection of the unquestioned authority of the church. Check out Galileo. Appeal to authority is for the birds.

  76. Skepticism is the root of science and technology. And since they are the root of modern civilization, then skepticism seems a pretty effective strategy.

    Distrust of the experts when you lack the domain knowledge to make that call is not skepticism, it’s bloodymindedness. See also: global warming “skepticism”, vaccine “skepticism”.

    “Rugged individualism” is what’s for the birds. When things get dicey, humans organize into collectives. A very little known fact about the settlement of the American West is that expeditions would draw up a wagon-train charter, under which the responsibilities of each individual in the expedition were carefully and explicitly delineated. Abandonment was a frequent punishment for shirking your duties as outlined in the charter. Some people living in the U.S. today do not have the same surname as their patrilineal ancestors because said ancestors changed their name in order to cut off completely a family member whose ideas got a little too individualist when food was scarce and it was still hundreds of miles to Oregon.

    Winter is correct: financial collapse will result in strengthened states, not weakened ones. Because it’s human nature to get hella collective hella quick when the chips are down. It’s how we survive.

  77. @Jeff Read
    > Distrust of the experts when you lack the domain knowledge to make that call is not skepticism, it’s bloodymindedness.

    I disagree, on the contrary, that is when your skepticism radar should be at its most aggressive. The solution to lack of domain knowledge is hiring people who have that knowledge. That is meta expertise. And is fundamentally different than accepting such utterly contemptible ideas as “scientific consensus.”

    You raise a perfect example: climate skepticism is indeed something everyone should be aggressively skeptical about, regardless as to whether the prophets of doom are wrong or not. Here the scientific experts are unilaterally trying to impose their views on everyone else at immense cost to everyone. There is far too little skepticism about it, though, by my view, it looks like it has mostly collapsed in on its own contradictions and is not an effective force for change any more, thank god.

    > Winter is correct: financial collapse will result in strengthened states, not weakened ones.

    I’m not really sure what will happen. You might be right. However, it reminds me of an interview I saw after that horrible shooting of school kids in Newton CT. Some big ass Cardinal or Bishop was being interviewed, and asked the obvious question: how can a loving god allow something terrible like this to happen.

    Cardinal so and so trotted out the usual insane arguments about free will, and taking the little children to be in a better place, bla bla bla. However, when the interview challenged the insanity he said something like: regardless of what you think, the truth is that these tragedies don’t drive people away from god, they draw them closer. Which is of course both true and insane, but people aren’t logical.

    So perhaps the cause of the downfall will be strengthened by the downfall. It happens many times with government programs. But it doesn’t change the fact that it is insane.

  78. Great blog on KickStarter. I thought where you were going to go was a little different. In addition to the structural problems of replacing VCs, there is also the functional problem.

    Kickstarter provides funding for ideas to become viable, but not, as a matter of definition, for them to become mature to the point where they could be monetized. Angel investors don’t usually just bring funding … they bring expertise in maturing a technology into a product that can somehow be involved in the market. Kickstarter’s game is that this “wisdom” can be crowd sourced, and in some cases, they are clearly correct. But I am not convinced that it is the panacea that they believe. Kick starter seems liable to send some good ideas into endless black holes of social media suck rather than ruthlessly focusing them on maturing.

    VCs try to make their money by capitalizing on the wisdom of angels… that the technology is mature enough to monetize, and that they wisdom of the angel investors has focused it in such a way that the VCs can provide scale to the business plan through the infusion of money. This is where I think that kick-starter will really make waves, because I am not sure that crowd-sourced initiatives will be _as_ mature economically or technologically when they seek VC money, even though they have met a certain scale. VCs will have to take on more risk to fix the issues created through a lack of ruthless efficiency.

    It is one thing to “kick start” a movie, or even a small android app. It starts to smell like this … http://www.southparkstudios.com/clips/151040/the-underpants-business.

  79. > VCs will have to take on more risk to fix the issues created through a lack of ruthless efficiency.

    But they’ll be taking on less risk because they have a floor on their market estimates.

    Which effect will dominate isn’t certain, of course, but I’m still betting on the risk-reducing ones.

  80. I guess it depends.

    You are saying that the kickstarter model puts a floor on the market estimates by defining a ready-made market for a given idea, which by definition reduces risk. But the kickstarter model is largely based on a “cool” factor – people are convinced that something is worth funding, but that only defines a small portion of what the risk really is.

    For example, kickstarter provides no mechanisms for channeling expertise back into the project. Angel Investment is better at that, especially for intricate or specialized ideas where the Angels provide some level of expertise that can guide iterations of the project towards a sustainable threshold. A VC investing in a crowd-funded project of sufficient complexity might be mis-identifying the risk just because the project raised a certain dollar amount. They may be missing technical complexity or lack of expertise. And then there is the fact that a lot of very necessary things in an innovator’s economy will simply never pass the “cool” test to generate sufficient interest.

    Of course, not all angel investment is successful at providing guidance, or even, for that matter, in providing feedback at all. At then end of the day, crowd-sourcing isn’t going to replace anything, but it is a nice addition to funding channels and a slightly different metric for risk.

  81. @Jeff Read
    >“Rugged individualism” is what’s for the birds. When things get dicey, humans organize into collectives.

    This is a false dichotomy. Humans organize for collective action voluntarily, creating such things as families, public-service organizations, and corporations. These together form the civil society, which does not require the power to send Men With Badges And Guns against those who don’t want to participate. Where no one is coerced, all parties benefit, leaving each of them with more wealth and security than he could have as a “rugged individualist”.

    Statists pretend that all social interaction must be under the control of the state. It either does not occur to them that voluntary arrangements for how to run voluntary organizations could be more effective than coercive methods, or they are knowingly cutting out the competition. I suspect that the former applies to the rank and file, and the latter to the leadership. And that’s why they must destroy the civil society. They must make everything come from the state, or people will realize they can do better.

  82. Winter on Monday, April 1 2013 at 5:58 am said:
    > It is very obvious that you do not read European (euro-zone) newspapers. You just project your own attitudes onto others. Latches into your other theme: You cannot trust the facts, make up your own.

    I challenged you to find a pre-crisis ad by Cypriot bank soliciting deposits with the offer of unreasonably high interest rates. Obviously you could not find one, therefore your sources are lying to you.

    When I went looking, I found only low interest rates offered by Cypriot banks.

    If your sources were telling the truth on this topic, you would be able to find pre crisis ads from Cypriot banks soliciting deposits with the offer of ponzi interest rates.

    I read Eurozone newspapers occasionally, and see nothing but lies, fanaticism, and crazed vicious hatred. If Europeans were not powerless, disarmed, and ruled by the US state deparment, they would be murdering us and each other.

    If your only source is Eurozone propaganda, you probably believe that Sarah Palin said she can see Russia from her house, that the Tea Party screams nigger, and that slaves are auctioned on the streets of the US.

  83. Oh, BTW I was thinking about this whole “expert” thing some more, and the difference between a central group of experts telling you stuff, and you hiring your own expert (a doctor or mechanic or plumber for example) to fill in your shortcomings in domain knowledge.

    It reminded me of a perfect example of this, related to your comment on vaccination.
    There are two types of polio vaccination, an inactivated virus and a live, but attenuated virus. They seem to be both about equally effective in the recipient (with slightly different characteristics), but the difference is that the live vaccine can, in rare cases actually cause polio, the disease you are trying to prevent. However, it has the advantage that it is deposited in the sewer and is mildly contegeous, meaning that the community receives a communicated immunity.

    So the attenuated virus is a trade off for me: a slightly increased risk of iatrogenic disease, with the benefit that the community as a whole benefits. For the central group of experts who doesn’t care about me individually, this is a no brainer. If I hire my own doctor it is also a no brainer. But the no brainer goes in different directions depending on who the client is: me or the community.

    Plumbing, curiously, is another profession with similar trade offs, and my crappy shower is the price I pay for the benefit of the whole community.

    Consequently, I want to hire my own experts.

  84. @Jessica Boxer:

    They seem to be both about equally effective in the recipient (with slightly different characteristics), but the difference is that the live vaccine can, in rare cases actually cause polio,

    I think that’s an oversimplification. I think the live virus is somewhat more effective (especially against the traditional infection route), so that’s the one you want when there is polio in the community. If you are in a community where polio is rare, then you want the other one.

    Plumbing, curiously, is another profession with similar trade offs, and my crappy shower is the price I pay for the benefit of the whole community.

    FWIW, flow restrictors are usually not integral to the shower head, and quite easily removed.

  85. @Patrick Maupin
    > I think the live virus is somewhat more effective (especially against the traditional infection route),

    Your source? According to wikipedia the opposite is true. The inactivated virus produced 99% immunity and the live vaccine produces 95% immunity in the individual. Live vaccine is used in areas where polio is endemic because of its ability to communicate, the theory being that the risk of iatrogenic disease is much lower than the risk of non immunization. However that is a society risk, not an individual risk.

    > FWIW, flow restrictors are usually not integral to the shower head, and quite easily removed.

    A fact you need an expert to tell you, and society’s needs override your needs here too, because plumbers aren’t supposed to tell you. (Though obviously they do, because the rule is so patently dumb.)

  86. Jeff Read on Monday, April 1 2013 at 2:25 pm said:
    Distrust of the experts when you lack the domain knowledge to make that call is not skepticism, it’s bloodymindedness.

    As it happens I do have the relevant domain knowledge: Statistics.

    I know enough statistics to know that Mann does not know statistics.

    When someone goes to an ordinary university, does subject X and cannot handle X, they fail him. When he goes to an elite university, and cannot handle X, he gets transferred into interdisciplinary X or administrative X. Mann did interdisciplinary X.

  87. @Jessica:

    I would have to look it up, but thinking back, I seem to remember it was needle-free IPV injection which was worse than OPV. For all of them, you need several visits, and in some situations the needles are problematic. (Of course, keeping OPV live is problematic, too.)

    A fact you need an expert to tell you, and society’s needs override your needs here too, because plumbers aren’t supposed to tell you.

    Umm, no. You just have to have a tiny bit of curiosity about how a shower head works, and take the thing apart. I mean, yeah, that won’t make you an expert in hydrodynamics or anything, but you can figure out what’s slowing the water down…

  88. @LS: even if you dispute whether Homelove will take delivery of the “2717 retrofitted armored vehicles”, 90% of major cities in USA have been militarized with Bearcat mini-tanks which can withstand 50mm rounds. The USA has the highest incarceration rate in the world, an order-of-magnitude higher than the Netherlands and Denmark, and higher than Africa and Latin America (so our minorities can’t be the reason).

  89. @Jessica Boxer:

    You see the credit bubble of M3 followed by a massive crash of M3 even while M1 was rising. You continue to see the fed pumping cash in while credit continues to crash through the floor, and even today as M1 grows, M3 grows by a tiny fraction.

    Remembering that M3 is M1 leveraged, and they are supposed to grow in sync, what that means is that banking regulation has utterly crushed the lending industry, and consequently investment in new growth is in the tank.

    How is it possible to pump $2 trillion dollars into the economy and not get inflation?

    Thanks for that explanation, it had been in front of my face for years and I didn’t put 2+2 together.

    Apparently the money was invested in dollar loans outside the USA, and Armstrong documents it is rushing back as Europe created a confiscation crisis (China and Japan right behind), into USA real estate, stock market, and risk assets, which will break the economies of the rest of the world that is thus inherently short the dollar. This economic failure will create more demand for dollars, snowballing the effect. If this is the correct model, then the USA will get stronger (dead-cat bounce) before it succumbs to the rest of the world going into economic chaos.

    I read that Canada and New Zealand have put in place plans to use depositor’s money to bailout future instances similar to the Cyprus one.

  90. @JAD
    “I read Eurozone newspapers occasionally, and see nothing but lies, fanaticism, and crazed vicious hatred.”

    Try these “regional” two from the Netherlands:
    http://www.volkskrant.nl/
    http://www.nrc.nl/

    Or this bigger one from Germany:
    http://www.faz.net/

    But I question your selection of news sources. Most newspapers print a lot of anti-euro and even anti-EU stuff. The reports of the high Cypriot interests are mostly from people who opposed any bail out of Cypriot banks.

    For views from the WSJ and the Christian Science Monitor:
    http://blogs.wsj.com/brussels/2013/03/19/cypriot-deposits-paid-well-but-loans-cost-a-lot-too/
    http://news.yahoo.com/whats-behind-bailout-crisis-cyprus-141557962.html

    @JAD
    “If your only source is Eurozone propaganda, you probably believe that Sarah Palin said she can see Russia from her house, that the Tea Party screams nigger, and that slaves are auctioned on the streets of the US.”

    Actually, the reports about USA affairs I read are all fairly even-handed. Eg, when they reported that Sarah Palin was considered a moron by most from the middle and high class, they did not even use that word. And they must have been right about that, because Palin left politics and did not make it even to run as a candidate for the Republicans anywhere.

    About your other claims, I have never seen them in print in Europe. However, I saw quite a number of these in the Daily Show.

  91. @Jeff Read:

    “Rugged individualism” is what’s for the birds. When things get dicey, humans organize into collectives.

    To claw at the generative essence underlying the points made by the The Monster and Jessica Boxer, at the root of the maximum division-of-labor and individualism is the fungibility and time preference stability of the currency. The stability is corrupted by failure modes of collective. Free market proponents are the antithesis of anti-social; we want more degrees-of-freedom so that society prospers with the least turbulence as fitness is maximized.

    If there was no seniorage because capital had become only program code (art, writing, etc), then we would have reached my vision of a total free market.

  92. In case my prior comment was too abstractly obtuse, I mean the impedance mismatch between the real capital and fungibility, creates the economic need for top-down control from the collective governance (and include the Theory of the Firm). Our goal must be to increase modularity and thus fungibility.

  93. @John Koisch:

    Angel investors don’t usually just bring funding … they bring expertise in maturing a technology into a product that can somehow be involved in the market.

    Modularity can reduce this advantage, because you focus on making your modular part of many marketable products. I am thinking specifically of writing modules of software, instead of end products. Programmers are good at focusing on a specific technical solution, without concern for how it is going to marketed in end products. The finer grained the modularity, the less capital the end products need to be created. Then crowd-funding simply becomes advance orders, and the feedback loop is the shifting patterns of crowd funding. Hopefully combining this with my prior post, you can see where I am trying go with this.

  94. Jessica Boxer, so your gripe is that the Fed has boosted the monetary base to offset a crash in the broader money supply (and actually the crash is even clearer when looking at indicators of the overall “flow of spending”, such as nominal GDI)? Excuse me, but I am rather unimpressed. I agree that they will soon have to pull back much of that increase, but the Fed has a variety of instruments that allow them to pull money out of the economy.

  95. @guest:
    Why (scientifically) is it that you think (the effects of) capital misallocation is (are) reversible, or for that matter that time is only an inductive (reversible) algebra?

  96. @justsaying

    The Forbes “article” is an oped piece not an article. DHS is getting some undisclosed number of MRAPs not 2000 of them.

    They procured up to 1.6b rounds over 10 years. Or up to 160M rounds per year. Both the 10 year and the “up to” clauses are relevant. The total number that will actually be bought will be determined by budget and actual needs. There are probably price penalties if they drop below a certain volume.

    They use about 100M-150M per year for training and ops so up to 160m per year seems about right for their current usage levels.

    They support 60k-70k LEOs. The 450M rounds of .40 over 5 years is a mere 1400 rounds/officer if they bought all 450M. That’s around a 100 rounds a month. If you aren’t spending at least 100 rounds a month at the range you aren’t going to stay proficient.

    http://www.nraila.org/news-issues/articles/2012/federal-law-enforcement-agencies-buy-ammunition.aspx?s=DHS+purchase&st=&ps=

    The bearcat is not a tank. It’s a small (relative to military) armored car designed for SWAT teams. I take their armor claims with a grain of salt.

  97. JAD:
    > … and London looks ever poorer, ever shabbier, ever more early twentieth century. Stockholm is in a timewarp from the pre war period.

    Are you talking about London, UK and Stockholm, Sweden, or the ones in Canada (or possibly about cities on your planet)?

    I’m not sure how the tall buildings are supposed to be an indication of anything, but in case you haven’t noticed, London (UK) is in the middle of a skyscraper-building spree. They just opened the tallest tower in the EU. I’ve seen more complaints about gentrification in London than about shabbiness.

    Ever been to Sergels torg in Stockholm (Sweden)? The Swedes were just as good at demolishing old buildings and building post-war modernist blocks as anyone else. Stockholm wasn’t bombed in WWII and they’ve had the sense to preserve a good proportion of their historical building stock, including the medieval old city. Those were rebuilt after WWII in many places in Germany (such a lot of timewarpists, the Germans). Stockholm has grown rapidly after the war, as have all the other Nordic capital cities. It has happened mostly under the modernist design principles based on private car ownership (quite explicitly imported from the US), but mostly without building freeways in the centers, at least not on the surface. The cities have kept their historical centers and sprawled, massively. A lot of Stockholm would look quite familiar to an American.

  98. @Winter

    Whatever Sarah Palin’s merits as a politician, the fact that she left politics does not indicate a lack of intelligence. She was savaged rather badly by the press in the 2008 election. (Republican, female, attractive = DANGER!!!!) and may very have decided it wasn’t worth it. What she does now probably pays much better, too.

  99. @Nigel

    The piece in Forbes is opinion. The Associated Press article, carried in the Denver Post is not.

    The blogger piece assumes malice, rather than bureacratic overfunding and tendency to spend it on toys.

    I tend to agree with the Forbes article. Malice isn’t necessary to explain all this. Unfortunately, people tend to want to use their fancy toys.

  100. Whatever Sarah Palin’s merits as a politician, the fact that she left politics does not indicate a lack of intelligence. She was savaged rather badly by the press in the 2008 election. (Republican, female, attractive = DANGER!!!!) and may very have decided it wasn’t worth it. What she does now probably pays much better, too.

    Palin wasn’t savaged because she is female or attractive. She was savaged because she’s a dangerous right-wing idiot.

  101. @JustSaying ….

    That’s a good point. But there’s also a problem … modular software requires some overall architecture that can map to an actual marketing plan. And at the end of the day, we all need those business drivers to tell us which modules people are willing to pay for.

    Pace Kickstarter, the flow is something like …. “I can think of a great module that needs to be written” and you can get your minimum funding. But in that mix is no one to provide the business driver … that is, to guide the building of the module (or the stitching together of multiple modules) to actually build something that solves a problem and people will pay for.

    I’m not saying that Angels do that all the time, or even do it well. I’m just saying that the old model exists because it has provided that feedback loop which is essential. And I’m also saying that KickStarter does not provide that feedback loop by structure. ESR’s point, I think, is that as VC enters the brew, they at least know that X people were willing to pay $Y to see the idea come to a certain level of maturity, and that reduces some of the risk, or at least quantifies it. All in all, this is a good thing.

    The reality as I see it (and I am deeply embedded in this particular scene right now) is that the answer is d) all of the above. The particular problems are more systemic than anything that crowd-sourcing can solve, to wit, a mis-allocation of capital because of an over influence of government and a mis-allocation of software expertise because of an over-abundance of top-heavy programming languages. This is not an innovators market, nor is it a responsive one.

    And that is where KickStarter is really making waves in that it is providing a credible alternative to funding to risk averse VCs. And – to ESR’s point – this lower level of funding does perhaps convince a VC that they can invest because their risk-aversion has been overcome by a crowd-sourced alpha sprint. But to me, this just kicks the can down the road, because the risk aversion has less to do with viable ideas or competent software developers and more with the fact that big money only sees a viable market if the big players like the government or mega-corps are willing to give their blessings. Software development as an innovative market is seeing a pattern of ossification, and at the end of it, that is a bad thing.

  102. @BobW
    Sarah Palin did not run for office because too many voters think she is a moron or too right wing or both. I suspect these voters are largely right, but that is immaterial. The point I was making was about the perception of the voters. Not whether these voters were right.

    It seems to be illustrative for the disconnect at the Republican party that you are unable to make that distinction.

  103. @Winter

    I doubt you know any more about Sarah Palin’s motives than I do, and I am not in her fan club.

    I don’t think that Alaska politics prepared Sarah Palin for the national stage. Small-state politics are more like small-town politics than they are like national politics. Alaska has fewer than a million people.

    That said, the American left reacts virulently to the prospect of Republican crossover candidates. The knives come out against anyone who threatens to appeal to the demographics the Democrats think they own, such as women or blacks. Sara Palin got much rougher treatment than Geraldine Ferraro, for example. Herman Cain got rougher treatment by the press than Bill Clinton.

    Don’t anyone bring up the “Republican Hypocracy” argument again.

    This is why Our Host’s prediction that Condoleza Rice would be drafted for Vice President failed. She wanted no part of it. She’s a smart woman.

  104. JustSaying on Tuesday, April 2 2013 at 1:30 am said:
    > which at least 200 million have been requested already as hollow point.

    I am confused as to the horror over the use of hollow point. This place is populated by gun nuts who surely know that hollow point is usually the right choice of ammunition for law enforcement agencies where your goal is to stop the bad guy without hurting anyone else.

    It seems to be a reflection of the general “hollow point are evil cop killer bullets” mentality that is prevalent amongst people who wouldn’t know a hollow point bullet from an rpg.

    Hollow points are, in fact, considerably safer in the situations LEOs are likely to find themselves.

  105. @nigel:
    You’ve proved to me in the past (discussion about my assertion that Air Force didn’t scramble F15s in time for 9/11) that you are more studied on military issues than I am. I am just a computer programmer with an inquisitive mind.

    DHS is getting some undisclosed number of MRAPs not 2000 of them.

    How do you know they will never take delivery of 2717 of them?

    I have read that Homelove only needs 10 – 15 million rounds per year for training, but you claim 10 times more. You say 100 rounds per month for 60 – 70T LEOs to stay proficient. How can you counter my claim that 100 rounds per month at a practice target, can also be shifted to 100 rounds per month at a human target (for example if we have social chaos in USA if all the paper money is confiscated which is roughly what I expect)?

    The Bearcat may not be as militarized as a Sherman tank, but it is more militarized than the citizens which is against what our founders intended when they created “the right to bear arms” in the constitution. The citizens should now have the right to buy tanks, but the problem is the government has more capital than the citizens do, because of the ability to print money out-of-thin-air. I read that the Bearcat was an initiative of the the Pentagon to better equip the police forces. Our founders never intended that the police would become soldiers.

    In short, the USA is now militarized, which is countervailing to the Posse Comitatus Act of 1878.

    Obama just signed an executive order to ramp up propaganda against gun rights.

    I have my popcorn stockpiled and my satellite TV, to watch from some remote location the carnage coming before probably 2020. That is just an opinion and not one I feel happy about.

  106. The knives come out against anyone who threatens to appeal to the demographics the Democrats think they own, such as women or blacks.

    The knives came out against Sarah Palin because she opposes protection of women’s reproductive rights, including abortion or contraception. It has nothing to do with carrying an R after her name and everything to do with her personal views on issues which are important to women. She’s a modern-day Phyllis Schlafly.

  107. @nigel: somewhere I read that a man in Tyler, TX unloaded 35 rounds from an AK47 at close range at a Bearcat and the LEOs inside were not harmed. I am not for harming LEOs, I hope the readers are smart enough to understand this is about the balance-of-power between the citizens and the government, because our founders understood that the latter can be co-opted by the power elite cattle herders of collectivism.

  108. The knives come out against anyone who threatens to appeal to the demographics the Democrats think they own, such as women or blacks.

    The knives came out against Sarah Palin because she opposes protection of women’s reproductive rights, including abortion or contraception. It has nothing to do with carrying an R after her name and everything to do with her personal views on issues which are important to women. She’s a modern-day Phyllis Schlafly.

    Are you afraid that Sarah Palin can persuade the majority of the American people that a blastocyst deserves equal protection under the law?

    I don’t remember anything about her being opposed to contraception.

  109. @Jessica Boxer: Hollow point are illegal for use by the military due to international law in 1899, because they inflict maximum death and suffering.

    Besides maximizing death and suffering versus serving as a disabling stand-down method of policing, by allowing the police to have them but not the citizens, this is against the spirit of the Second Amendment and the Posse Comitatus Act, per the logic of my prior two comments that the citizens should hold the power over government.

  110. If you take away the collective’s power to print money, confiscate, and tax, the whole threat will crumble like the Berlin wall. I am working on it now. I’ve got a name now DURACASH.

  111. JAD:
    > > … and London looks ever poorer, ever shabbier, ever more early twentieth century. Stockholm is in a timewarp from the pre war period.
    Mikko on Tuesday, April 2 2013 at 9:19 am said:
    > in case you haven’t noticed, London (UK) is in the middle of a skyscraper-building spree. They just opened the tallest tower in the EU

    A whole 235 meters, similar to skyscrapers in 1920s America.

    On a few of the outposts of fallen empires, civilization continues, but the centers of empire sink into ignorance and superstition, into dirt and poverty. To save the earth people huddle in darkness haunted by imaginary demons.

  112. @John Koisch:

    modular software requires some overall architecture that can map to an actual marketing plan. And at the end of the day, we all need those business drivers to tell us which modules people are willing to pay for.

    I am working on a technology that will I hope make your statement false. The modules will be designed to be orthogonal to any specific market, and thus reusable for numerous markets.

  113. @JustSaying
    > Hollow point are illegal for use by the military due to international law in 1899, because they inflict maximum death and suffering.

    It is true that they are illegal according to the law of war, though that is not the reason why. However, the DHS and the police are not the military. The plain fact is that nearly every police force I know of typically carries hollow point rounds in their side arms.

    Why? Because they expand when they hit the target meaning they take down the target more reliably, and, because they dissipate their energy in the target, are much less likely to go through the body and hit an innocent bystander. Which is to say they kill the bad guy more reliably, and are less likely to hurt or kill the non bad guy. Ideal for police, not so important for military.

    > by allowing the police to have them but not the citizens,

    Hollow point ammunition is perfectly legal for private citizens, in fact, for handguns, it is pretty common. In the USA anyway.

  114. >I don’t remember anything about [Sarah Palin] being opposed to contraception.

    That’s because she isn’t. Nor is she a creationist. Nor her church “Dominionist”. Nor did she ever claim to be able to see Russia from her house. Nor is she even “right-wing” compared to where Pew Foundation psephological studies have identified the U.S. political median.

    But never mind. The left and the media (but I repeat myself) have made up their mind about Sarah Palin; you’re not going to be able to confuse them with mere facts.

  115. JAD:
    > A whole 235 meters, similar to skyscrapers in 1920s America.

    Again, I don’t know what the height of the skyscrapers is supposed to signify. Currently the tallest one is in Dubai. I guess that one is a monument to their real estate bubble, as the project had to be bailed out by Abu Dhabi and it got renamed after the sheikh of Abu Dhabi in the process, a poke in the eye of the local sheikh if there ever was one. The tower itself is hardly a great real estate investment. Historically, neither have the record-breaking towers on Manhattan been.

    Anyway, your point seemed to be that London is getting shabbier and shabbier. They are building several supertall buildings, as unimpressive as the heights may be, and the real estate prices have been rising rapidly in the urban area. Many districts are gentrifying fast and middle-class local people are getting priced out. A lot of the apartments in the Shard went to rich people from the Middle East and Russia, who have no intention of living full-time in London. Your point is probably much more true of the rest of Britain, where real estate prices have actually been declining since 2008. London, like NYC, is one of the places where the rich park their money in real estate. I guess we’ll find out how safe that bet is. The prices seem to have disconnected from reality a long time ago.

    Btw., if any of you libertarians fancy having a laugh at the oh-so-leftist Swedes, take a look at Stockholm’s rent control scheme. I thought the Finnish ones were pretty dysfunctional, Helsinki’s first and foremost, but Stockholm seems to be in another league entirely. A few scandals around the local politicians of the Social Democratic Party getting their children etc. into (very) affordable city-owned rental apartments past the queue is just par for the course.

  116. @Jessica Boxer:

    Hollow point ammunition is perfectly legal for private citizens, in fact, for handguns, it is pretty common. In the USA anyway.

    Let’s see how long that remains true. Submachine guns are not legal for private citizens, but are used by SWAT teams in the USA. Even the AK-47 and AR-15 are more freely used by SWAT than the private citizens.

    Because they expand when they hit the target meaning they take down the target more reliably, and, because they dissipate their energy in the target, are much less likely to go through the body and hit an innocent bystander. Which is to say they kill the bad guy more reliably, and are less likely to hurt or kill the non bad guy.

    Since when were police ever first to the crime scene? Since when was the function of police to be death over containment and deescalation? What advantage does it serve to transform the role of the police as such?

    If you desire a militarized police force, then you desire a militarized society to offset its otherwise asymmetric power. This is no different than your logic up thread, where you correctly argued the asymmetric effects (w.r.t. to immunizations) of collective versus individual good.

    …though that is not the reason why … not so important for military.

    You think they were banned from military use because collateral damage is tolerable in a military setting. But that can’t be the reason, because according to Wikipedia the hollow point has numerous characteristics that make it more desirable, such as accuracy.

  117. @JustSaying
    > Let’s see how long that remains true.

    I know of nobody who is specifically calling for the banning of hollow points, any more than they want to ban all guns and ammo. Hollow point is, in many contexts safer, not more dangerous than other types of ammo.

    > Submachine guns are not legal for private citizens,

    That isn’t strictly true even for fully automatic rifles, and it is certainly not true of semi automatic rifles. (Except, of course, if Barbara Boxer thinks they look “scary”.)

    > Since when were police ever first to the crime scene? Since when was the function of police to be death over containment and deescalation?

    I don’t know what this means. And I definitely have no idea what it has to do with my original contention that there is nothing especially scary about the DHS buying hollow point ammo over other types.

    > If you desire a militarized police force,

    You are contradicting yourself. You just pointed out that the military are required to use FMJs. So how does the police using hollow points mean they are being militarized. In fact, it is exactly the opposite.

  118. @Jessica Boxer: maybe you don’t even need to ban them, if you buy all the forward production.

    Hollow point is safer when it is more deadly and potentially 1.6 billion rounds could be employed in a chaotic scenario where everyone has been ordered to be destitute by the government?

    That isn’t strictly true even for fully automatic rifles

    You wrote “perfectly legal”. The asymmetric power exists, even if there are some imperfect avenues for some few people to obtain balancing force (and often the criminals who can get them in the blackmarket but that is besides my point).

    I don’t know what this means.

    What is the possible ramification of giving the police the firepower to slaughter a significant proportion of the US population?

    What is the benefit of having a police which have that power, instead of the role of police to be only a weak force of containment and deescalation? Police are never first to the crime scene anyway, so giving them more firepower does not reduce crime (and if it does, then not sufficiently to justify the other ramifications).

    You are contradicting yourself. You just pointed out that the military are required to use FMJs. So how does the police using hollow points mean they are being militarized. In fact, it is exactly the opposite.

    Semantic shell games won’t help you when the police have enough power to kill all citizens.

    I define that power to be military in nature, not policing. Because policing can’t stop all crime any way– only private gun ownership can.

  119. If you aren’t scared being in the USA, then you really aren’t thinking.

  120. Mikko on Tuesday, April 2 2013 at 5:35 pm said:
    > Again, I don’t know what the height of the skyscrapers is supposed to signify.

    Like landing on the moon, supersonic transport, or supersonic warfare in the air, skyscrapers are an indicator of the technology level.

    Similarly hot burglaries, burglary by riotous entry into an occupied dwelling is an indicator of order, or the lack thereof.

    The stench of death in hospitals is an indicator of to what extent the hospital serves the social goal of eradicating pensioners, or the individual goal of keeping people alive, as do such “treatments” as deep sedation for elderly people with breathing difficulties.

    The striking cleanliness and pleasant smell of Singaporean hospitals demonstrates commitment to individual goals of life, while the stench of British hospitals demonstrates commitment to the collective goals of death.

    The Marina Sands hotel is an exuberant display of conspicuously superior technology – which display implies that superior technology demonstrates high status and is high status. In a declining civilization, status is associated not with accomplishment but with state authority. Thus, for example the recent British Olympic ceremonies were a celebration of state authority, not any accomplishments, whereas the opening ceremonies of the Nazi olympics celebrated not the state, nor Nazism, but human accomplishment and human greatness.

  121. I wrote:
    “the recent British Olympic ceremonies were a celebration of state authority, not any accomplishments, whereas the opening ceremonies of the Nazi olympics celebrated not the state, nor Nazism, but human accomplishment and human greatness.”

    My intended point may have been unclear: I meant that the democratic welfare state is nazism with lower ambitions, crappy uniforms, and self hatred.

  122. @JustSaying
    > You wrote “perfectly legal”.

    About hollow point ammo. Sheesh! You are are being disingenuous.

    > What is the possible ramification of giving the police the firepower to
    > slaughter a significant proportion of the US population?

    The police have, and should have, a lot of fire power. If you doubt that you should read about the North Hollywood shootout. (You can look it up on wikipedia.)

    You are nuts if you think that you are going to ever have more guns than the police.

  123. @JustSaying
    > If you aren’t scared being in the USA, then you really aren’t thinking.

    I strongly dislike statements like these. In essence you are saying “if you don’t think the same way I do then you are stupid or uninformed.” I am neither, and I don’t agree with you. Make an argument, not foolish ad hominem claims.

  124. @Jessica Boxer:

    I don’t agree with you

    Which facts of the post that precipitated my offending conclusion do you disagree with?

    Homelove has (or could soon have) enough power to machine gun the USA population into trenches. Do they not?

  125. @JustSaying
    > Homelove has (or could soon have) enough power to machine gun the USA population into trenches. Do they not?

    I presume you mean the DHS? No, they do not. They have enough bullets, apparently, but it takes more than bullets to “machine gun the USA population into the trenches”, if I am to interpret that to mean — kill everyone.

  126. @justsaying

    What Jessica said x 2. She’s already refuted every point you made so I don’t need to other than the one about 2000 MRAPs.

    How do I know? I don’t. So what? DHS getting 2000+ MRAPs doesn’t change anything other than fewer bearcat sales and maybe save a little taxpayer money.

    To me it’s no different than ex-military gear like DUKWs ending up in police departments and fire houses after WWII.

    There’s a surplus of excess vehicles and MRAPs have little residual value in a conventional fight so the army is going to dump most of them.

  127. Which facts of the post that precipitated my offending conclusion do you disagree with?

    Maybe the part where they aren’t facts but either erroneous or opinion.

  128. @Jessica Boxer:

    About hollow point ammo. Sheesh! You are are being disingenuous.

    The argument all along has been the inability of the citizens to defend themselves against the government. Semantic strawmen escapes from the point don’t impress me. I have no incentive to be disingenuous, there are very smart readers here and my rationality reputation is at stake.

    Also I have no desire to get an argument with you, so if this reply doesn’t bring agreement, then I will just bow out on this topic. I gain nothing from arguing. I tried to warn you.

    You are nuts if you think that you are going to ever have more guns than the police.

    Didn’t our country for the vast majority of its history?

    The police have, and should have, a lot of fire power

    Then you choose for them to have offensive power and not just as a containment and deescalation role, backed up by citizens carrying a firearms.

    This social preference always ends as a killing spree in the history of mankind. ALWAYS. FACT.

    They have enough bullets, apparently, but it takes more than bullets to “machine gun the USA population into the trenches”

    Okay only enough bullets perhaps, and some indication of the possibility of 2717 tanks in addition to the Bearcat armored vehicles in 90% of major cities, and only 70T soldiers. So as soon as the destitute and desperate citizens (after all their paper promises are confiscated) fight back with rage against the system, and what percentage of the population will be signing up for a job to protect the system so as to eat (or just because they’ve always want to stick their pants down young kids underpants)?

    JAD is likely correct, civil war ahead. Socialists versus socialists F.U.B.A.R..

    You are entitled to your opinion and myself to mine. My analogy is that if I know based on our up thread discussion of ZIRP (and your excellent point about M3) that Big Ben is deep throwing me against my will, and other circumstantial evidence strongly hints that Homelove is coming up from the rear with a BIG GUN, then Occam’s Razor tells me to not make the least assumptions and bug out of dodge so as to be safer than sore and hemorrhagic.

    I am sorry if the reality I see doesn’t fit with your admiration of men in uniform– not that I don’t in some emotional way admire the selflessly heroic ideal of Pat Tillman (I was an MVP football player too, as well league champion in cross-country, and even at 48 I am very athletic just ran up a mountain today). One of us will be correct. Let’s see before 2033.

    @Nigel:

    To me it’s no different than ex-military gear like DUKWs ending up in police departments and fire houses after WWII.

    Maybe the part where they aren’t facts but either erroneous or opinion.

    Surely you can see difference between being worn-out and tired of fighting and the current head-in-the-sand lust for violence in the USA under the guise of admirable memes such as “protect our men in uniform”, “make our neighborhoods safer”, when in fact Jessica has no refuted my point that the police don’t deter crime, because they are always the last one on the crime scene.

  129. There is a reply to Jessica and Nigel in moderator queue. I have to head out for few days. Cya.

  130. Typo:

    Occam’s Razor tells me to not make the least assumptions and bug out of dodge so as to be safer than sore and hemorrhagic

    to make the least…

  131. @nigel:
    In case my other comment doesn’t come out of queue in my absence, the facts that have not been refuted are:

    1. Every society in history that has prioritized a police force stronger than the collective firepower of the citizens ends up in mega death.

    2. Such a strong police force is rather ineffective on crime relative to a role of containment and deescalation backed by a highly armed citizenry, given the police are the usually late to the crime scene.

    3. AFAIK for most of USA history, the citizens had more collective firepower than the police.

  132. @JustSaying

    Ad1
    The USA is maybe the only country not involved in civil war that follows your point 1. Do you mean the other 6.5 billion humans are on the verge of being destroyed by their own security forces?

  133. @Winter: my landlady showed up unexpected delaying my escape, so I have the pleasure of replying to you.

    I maintain my claim and challenge you to find a counter example. For example, here where I am there might be the appearance that the police have more force because the people generally don’t own firearms, but I promise you the police (even the military) would be handed their heads performed with a 50 million bolo swords if they dared attack the people-at-large. The Americans put up a sign in Balangiga, Leyte offering a bounty “per head” of Japanese. They were quite shocked when the bodies were left in the jungle and the heads were delivered for the bounty. They had to modify the sign to be more explicit to something akin to “head & torso intact preferably alive”.

    The London riots showed the police in the UK probably don’t have more firepower than their citizens. I doubt in your non-violent (low incarceration rate) European countries that you need that much police power, so the people probably still have the upper hand should they ever need to use it.

    Is your government ordering the same number of hollow point bullets and armored SWAT vehicles per capita as our Homelove?

    Statistics please on any counter claim.

  134. And I should add that there was large-scale death where I am during the 1970s martial law, yet it wasn’t mega death because the people held enough fire power to resist.

  135. In case my point wasn’t clear, there aren’t 6.5 billion people under police forces with radically superior killing power.

  136. @Justsaying
    London rioters were by and large unarmed. Fire arms are rare in the UK. That is why UK police is largely unarmed.

    And I have no idea where you are. But the megadeaths occured in only 4 cases, all 4 related to a single man gaining absolute power after a war followed by a civil war. and all megadeaths occured during roughly the half century from around 1930 and 1980, give or take a few years.

    How you want to link that to gun laws in the USA is a mystery to me.

  137. @Winter

    The disarmament of the UK population is recent. We have not seen all the fallout from that.

    The UK police have traditionally not carried firearms. That does not mean they were unarmed.

  138. @BobW
    “The disarmament of the UK population is recent.”

    You are gaming words. Fire arms have always been scarce in the UK. And the police will patrol unarmed unless there is a danger of armed suspects.

    It is centuries since the last time any UK government mass murdered UK citizens. Irish and other colonial population is a whole other matter. But these populations were under foreign occupation.

    You are all also rather disingenuous. The mass murders around WWII were committed after armed forces won an often bloody war of occupation (Germany) or a civil war (Russia, China, Cambodia). Any concept of “Armed popular uprising” was moot as
    THE PARTY IN POWER ALREADY HAD DEFEATED THE POPULATION IN THE WAR.

    Trying to apply such logic to the UK, France, or even modern Russia and China is completely bogus.

  139. @JustSaying
    > The argument all along has been the inability of the citizens to defend themselves against the government.

    Not mine, my objection was to your “scary music” when you said the word “hollow point” as if it was something special. Go check, that is what I said. Maybe you are confusing me with someone else.

    > Didn’t our country for the vast majority of its history?

    No. Well aside from the fact that police are a pretty new thing, but from the point we had professional police they had a bunch of guns.

    > Then you choose for them to have offensive power and not just as a containment and deescalation role, backed up by citizens carrying a firearms.

    No, I chose to have the police be able to outgun bank robbers with body armor shooting at innocent civilians and police officers, where the bad guys are capable of sustaining that barrage against a large number of officers for several hours. The Hollywood shootout I mentioned was an example of where they plainly didn’t have enough guns.

    > This social preference always ends as a killing spree in the history of mankind. ALWAYS. FACT.

    FACT? Apparently that preference has happened here in the USA but there hasn’t been any police originated mass killings here, AFAIK. European police vastly outgun the populace — no police originated killing sprees there in the last fifty years.

    So FACT? Hardly.

    > So as soon as the destitute and desperate citizens (after all their paper promises are confiscated) fight back with rage against the system,

    So let me see if I understand your contention. The closest thing I have seen to that recently are the riots by teachers in Wisconsin over microscopically small changes in their public pensions. Is it your concern that those self same teachers should be much better armed than the police so that they can invade the capitol building and shoot down the legislators who had the audacity to ask for a minor change to unrealistic promises?

    When the social security recipients find their promises are phony, is it your view that we should see roving gangs of senior citizens running around the streets, shooting down the cops so that they can demand at gunpoint an increased amount of YOUR income?

    What the hell makes you think all those gun totin’ citizens are going to advocate for more liberty? Really? Is that your experience of the American polity?

    This is the political condition of our country. The citizenry don’t want a return to liberty, they want more of your paycheck. I’m not sure that you really want what you are asking for.

    Sorry, but the problem in America is not that the citizens don’t have enough guns (though I am in favor of them having as many as they want), no rather the problem is that America has long abandoned the ideas of liberty, self reliance and limited government. The problem is that wealth redistribution is considered a public good, not a dreadful evil.

    That is why America is headed for a fall. A people mostly get the government they deserve.

  140. Winter on Wednesday, April 3 2013 at 10:20 am said:
    > You are gaming words. Fire arms have always been scarce in the UK

    Reading old English fiction, it seems to take for granted that every gentleman possesses deadly weapons, but does not commonly carry them.

    It is perfectly clear that before the reforms of the Crimean war, in a conflict between gentlemen and the army, the gentlemen would have effortlessly defeated the army, because the gentlemen were the army. Before the Crimean war, the army was pretty much a loose and disorderly coalition of privately funded gentlemen adventurers. Supplies and logistics came through a horde of camp followers, largely privately paid, not a government logistic department. Power in the army was personal, coming from a gentleman’s wealth, family connections, good name, and military reputation, rather than coming from the pips on his uniform. William the Marshal would have felt right at home. In large part, the army fought with weapons privately owned by gentlemen adventurers and lived on supplies privately obtained.

  141. >Reading old English fiction, it seems to take for granted that every gentleman possesses deadly weapons, but does not commonly carry them.

    This is correct. It continued to be true until at least 1920, when the British government began a major but (initially) covert campaign to get weapons out of civilian hands in response to fears of Red terrorism.

  142. “Well aside from the fact that police are a pretty new thing, but from the point we had professional police they had a bunch of guns.”

    No. Originally (in the US), before there were police forces, it was the militia that got called out and brought their bunch of guns to a riot. After the formation of the London police force (1825), people here in America advocated for the creation of our own forces on the grounds that they would be better able to suppress riots without the bloodshed that the militia left in its wake. (It didn’t really work out that way.) In New York, a police officer could carry a small revolver as a strictly personal decision. Many did not, as guns were very rare until the time of the Civil War. After the war, the city was flooded with cheap, surplus arms; all the cops started carrying, and later, it became the official rule that you must have sidearms or you could not go out on patrol.

    Back in the 1970s, one of my coworkers told me that, where he grew up in Philadelphia (he was born in 1908), the neighborhood cops did not carry guns. They felt that they were better off without them.

    I have, in my library, a really cute history and description of the New Haven Department of Police Service, published in 1899. The history chapters mention all sorts of unusual incidents, but not a single mention of guns being carried, much less actually fired.

  143. “…as guns were very rare until the time of the Civil War.”

    This claim has been well and truly debunked.

  144. ““…as guns were very rare until the time of the Civil War.”

    This claim has been well and truly debunked.

    @Deep Lurker: Give me some references. The New York cops of that time seem to agree with me. Their weapon of choice was the nightstick, preferably made of locust wood.

  145. >Give me some references.

    http://www.claytoncramer.com/popular/BellesilesWrong1.PDF
    http://www.claytoncramer.com/popular/BellesilesWrong2.PDF
    http://www.claytoncramer.com/popular/BellesilesWrong3.PDF

    All claims that guns were rare in the U.S. until the Civil war derive from one source: Michael Bellesisles’s Arming America, uncritically echoed by anti-gun journalists and politicians. But Bellesiles falsified data, claiming he had examined probate records that never existed. In fact, firearms were extremely common in the U.S. clear back to the pre-Revolutionary period, as Cramer shows from primary sources. He also shows that Bellesisles deliberately altered and distorted quotes from his sources; Bellesisles was lying, not merely mistaken. Cramer’s indictment was so telling that, once academics began checking. Bellesisles was stripped of his Bancroft Prize for scholarly misconduct.

    The backlash from Bellesisles’s deliberate fraud discredited anti-firearms historians and legal scholars in general (as well it should have; many of them had been cooking their own sources in less blatant ways). I believe this contributed substantially to the Supreme Court’s finding in the Heller case.

  146. @Winter:
    My point is that there is a shift in the USA towards an increasingly militarized domestic force which is centrally controlled and thus not checked by a “we the people” grassroots sanity. And many of the citizens of the U.S.A. think this is normal and preferred, especially with the attitude of keeping the problem far from them personally (let the government handle it). That signals to me potential danger ahead if the widespread financial confiscation (default) that I expect occurs, similar in miscalculation by the general population of the potential runaway craze that can result such as preceding the horrible suffering that led those cases of megadeaths.

    The mass murders around WWII were committed after armed forces won an often bloody war of occupation (Germany) or a civil war (Russia, China, Cambodia). Any concept of “Armed popular uprising” was moot as
    THE PARTY IN POWER ALREADY HAD DEFEATED THE POPULATION IN THE WAR.

    And what the USA ends up with total financial confiscation, bloody civil war, and a decade of fighting a destitute and thus desperate China (and North Korea and perhaps Russia by proxy) in the SE Asia.

    No. Well aside from the fact that police are a pretty new thing

    bingo.

    This social preference always ends as a killing spree in the history of mankind. ALWAYS. FACT.

    FACT? Apparently that preference has happened here in the USA but there hasn’t been any police originated mass killings here, AFAIK. European police vastly outgun the populace — no police originated killing sprees there in the last fifty years.

    AFAIK there is no significant militarization of the police in Europe at the moment, but I am not there. The police become sort of a military (or the same) such as megadeaths in China to purge all the non-believers, and the other cases Winter mentioned.

    Is it your concern that those self same teachers should be much better armed than the police so that they can invade the capitol building and shoot down the legislators who had the audacity to ask for a minor change to unrealistic promises?

    Ridiculous. I am thinking about a madmax chaos coming post financial collapse, where Homelove becomes a gestapo.

    What the hell makes you think all those gun totin’ citizens are going to advocate for more liberty?

    Power in the hands of the people is liberty. You confirm to me that many Americans no longer want liberty.

    No, I chose to have the police be able to outgun bank robbers with body armor shooting at innocent civilians and police officers, where the bad guys are capable of sustaining that barrage against a large number of officers for several hours. The Hollywood shootout I mentioned was an example of where they plainly didn’t have enough guns.

    This is an example of trading a large pervasive liberty for a very short-sighted excuse. We won’t even have physical banks in another 10 years.

    You’ve clearly chosen to trade your liberty for nearly nothing.

  147. I forgot to attribute the latter quotes on my prior comment to Jessica Boxer.

  148. I’m sorry that I have to admit that I made a major boo-boo when I stated ‘guns were very rare before the Civil War’. I had read the hoohah about Bellesiles’ book years ago and the phrase seems to have stuck in my mind. A more accurate statement would refer to handguns used to commit crimes, and I should have restricted it to the northern section of the US. (I don’t believe that anything in the sources esr gave really contradicts this.)

    Some other data points that I can add:
    1. The NYPD started patrol in 1845. The first NYPD officer killed in the line of duty was indeed shot to death in 1857.
    2. In that same year, there was a famous police riot on the steps of New York’s City Hall. TWO rival police forces, in full uniform, battled each other with clubs. The fight ended when units of the state militia drove them off with fixed bayonets. NO shots were fired by anyone.

  149. LS on Saturday, April 6 2013 at 8:49 pm said:
    > NO shots were fired by anyone.

    This assumes that which needs to be proven: That widespread gun ownership leads to homicide, and that therefore low levels of homicide are indicative of low levels of gun ownership.

    We know that back when gun ownership levels were extremely high, homicide levels were, for the most part, very low.

    To deduce your desired conclusion, that guns were uncommon, you need evidence not that homicide was low, but that gun homicide was low relative to other forms of homicide, which evidence you have not provided.

  150. @JAD: No, not guns were uncommon…handguns were uncommon in northern cities before the Civil War. The cops were armed with clubs. (A few chose to carry ‘virtue pistols’ – small revolvers used by prostitutes.) Criminals carried knives, blackjacks, slung shots and other homemade saps. There was plenty of homicide perpetrated with those weapons, chiefly by gang rivals, so lack of handguns was no impediment.

    The way that cops of that era equipped themselves is known. It will have to remain a proxy for the statistics you desire, which are either unavailable or if available, are untrustworthy.

  151. LS on Saturday, April 6 2013 at 11:42 pm said:
    > The way that cops of that era equipped themselves is known. It will have to remain a proxy for the statistics you desire, which are either unavailable or if available, are untrustworthy.

    Cops of that era were analogous to today’s mall security, since enforcement was overwhelmingly private. Mall security today generally does not carry guns either.

    The late nineteenth, early twentieth century saw a fundamental and radical transformation in the nature of police and policing, which is the likely cause of any change in their armament.

    As late as the early 1930s, bank robbers were usually hunted down and killed or captured by heavily armed private security. Bank robbers were not the sort of person police dealt with. They dealt more with pick pockets, drunks, and suchlike, the sort of offender mall security deals with. Hence the lack of guns.

  152. Pingback: Daily Linkage – April 7, 2013 | The Second Estate

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