World leaders take action to protect the economy

That would be Victor Leonardi reporting from the IMF world headquarters..

The Keynesian Clowns are back

The Swamprats from DC, Blanchard, Krugman, Summers and DeLong.

The same idiots the caused HSR nightmare in California, a 68 billion dollar
Sword of Damocles hangin over the California budget. We cannot get rid of HSR, it is recurring nightmare.

The same group that fouled the fiat banking system.

These same idiots brought us 15 years of No Child left behind, nothing but volatility to the California education system. We pay a 25% tax bonus to be a member of Swampland, that is how much extra tax they take from us to pay for this crap, and we are not that rich.

The Keynesians are the same group that refuse to allow the Keystone pipeline, even though it was privately funded.

The same group that brought us the dead weight San Jose Light Rail system. This group had nothing but a string of failures in California, and have caused nearly 20 years of a floundering economy out here.

The California Legislature is not that smart.  They are easily swindled by the DC carpet baggers, and California is better off leaving DC behind and give our legislatures some time to learn a few things about governance.  We will not escape the Carpet Baggers from DC, they will haunt California into bankruptcy, and we almost went there.  It is time to finish the secession. It is time for the tenth largest economy to stand on its own two feet before the Swamp Creatures devout us.

Market down again

SP500 off 1.65%, which I think makes about 4% in the past week or so.  I guess the economy now hangs on whether George Soros and Carl Icahn know what the proper shorts should be. Tell them the number is about 15%.

They are simply units of an accounting system

The stuff in the basement of the Fed. They are units of an accounting system and their job is to move those units in and out of the economy.  They need that pile of ink and paper, in the basement, to count money not in the economy. The fiat banker operates the first differential, their pile are units of flow, and they come in and out of the basement. Otherwise they are like any other normal manufacturing business.

 If by law Congress is required to go into the basement and take all of the Fed inventory, then it is a nearly hopeless task for the Fed to keep track of their business. Imagine if the shareholders of General Motors monthly went to the factory and removed all of the aluminum stock. General Motors would be forever tracking down aluminum in the open market for instant delivery.

 I would expect Congress to overdraw their seigniorage, and I thought that is what we meant by the term. But evidently, all of the Fed inventory in the basement is classified as earnings to Congress. I never would have imagined something this stupid would have become law.

I am visibly shaken by fiat money

I still hope, wish that I am mistaken. 

I always thought that fiat banking was a balanced flow proposition.  Interest earned by the fiat banker becomes paper and ink in the basement.  Ink and paper paid out in interest becomes money.  And the fiat banker simply balanced the flow.  I would hope he would do it with an efficient transaction rate, but balancing the flow every eight years is still OK.  The proposition is so simple that even an eight year balance cycle would work.


If anyone ever flushed a toilet, then they know how a fiat bank operates.

I want to see that; I want to see the point where money into the bank becomes 'ink and paper. in' I hope it was me being stupid when I looked for the 'ink and paper in' account in the Federal Reserve, and could not find it.  It was just me failing to understand the accounting system. The 'ink and paper in' account really does exist. I am  not talking to anyone until I see a banker or economist points toward the 'ink and paper in' account.  If that account does not exist then mathematicians should be ashamed for failing to stomp their feet, scream out loud, and file lawsuits. I need to see some sort of chart like the one below:

If this chart does not exist then we end up with one great big unit sphere, the wealthiest thing in the Milky Way. The economy will minimize a redundant exponential growth of fiat.

Tiniest dictator in the world is missing

The tiniest dictator in the world, at 3'4", Dim Kim Son of North Korea is missing:

Business Insider: The formerly tiny band of journalists and academics who specialize in North Korea has expanded dramatically in numbers over the past several years. Watching this has been a cause for rejoicing.
The pendulum may have swung a bit too far, though, judging from the current mad rush by what has become a veritable horde of Pyongyang watchers to put forth theories about the meaning of Kim Jong Un’s mysterious month-long absence from the public eye.
On the basis of scanty evidence we’re hearing theories that:

• Kim is gravely ill (if not dead).
• He has been replaced by his sister.
• He has been removed in a coup.
• He is under house arrest and — this one you gotta love — in danger of being hung out to dry as the fall guy taking the blame for the three-generation Kim dynasty’s horrible human rights record.

Josh Zumbrun at the WSJ is hilarious

His headline report:

The Federal Deficit is Now Smaller than the Average Since the 1980s 

And he shows this chart.  But he has one problem. Unless Obama is Bill Clinton, the deficit has to get back to its normal giant size.  There is only one way to get the deficit higher, we have to crash the economy.

I don't think we will have a real crash, you know a watched pot never boils.  But in order to drive that deficit higher we will need a long period of the slogs, slow growth, less than 2%, for about a year.

Here is the IMF:

The Washington-based IMF said that more than half a decade in which official borrowing costs have been close to zero had encouraged speculation rather than the hoped-for pick up in investment.

In its half-yearly global financial stability report, it said the risks to stability no longer came from the traditional banks but from the so-called shadow banking system – institutions such as hedge funds, money market funds and investment banks that do not take deposits from the public.

José Viñals, the IMF’s financial counsellor, said: “Policymakers are facing a new global imbalance: not enough economic risk-taking in support of growth, but increasing excesses in financial risk-taking posing stability challenges.”

Viñals said the IMF had analysed 300 large banks in advanced economies, making up the bulk of their banking system. It found that institutions representing almost 40% of total assets lacked the financial muscle to supply adequate credit in support of the recovery. In the eurozone, this proportion rose to about 70%.

“And risks are shifting to the shadow banking system in the form of rising market and liquidity risks,” Viñals said. “If left unaddressed, these risks could compromise global financial stability.”

Does the grey market explain money velocity decline?

Here is Jonathan Ashworth and Charles A.E. Goodhart doing real economics, actual good stuff, not the hand wave.

http://www.voxeu.org/article/trying-glimpse-grey-economy
Despite the growth of online and card payments, the ratio of currency to GDP in the UK has been rising. This column argues that rapid growth in the grey economy has been a key cause. The authors estimate that the grey economy in the UK could have expanded by around 3% of UK GDP since the beginning of the Global Crisis.

We use the currency demand approach to estimate the likely increase in the size of the grey economy. The currency demand approach has historically been one of the main methods for estimating the size of the ‘shadow economy’ (grey plus black economy).1 The basic idea is that, since tax evasion is illegal, almost all grey (and black) economy transactions will be made in cash.2 For obvious reasons, cash is almost always anonymous, whereas most other payment mechanisms leave a record. What one does, then, is to estimate how much of the currency-to-GDP ratio is due to incomes, interest rates, technological trends, and such other variables as theory or direct observation suggest (a standard currency demand regression). One can then either take the residuals from such an equation as an estimate of the shifting shape of the hidden economy, or, better, add additional variables that should be correlated with the grey economy, such as tax rates – especially VAT – and the ratio of the self-employed and unemployed to the total workforce. We did the latter/

There are, however, a couple of other factors that probably have raised currency holdings in recent years. The first is the decline in interest rates to nearly zero. If you cannot earn interest on a bank account, there is less incentive to put spare cash on deposit in a bank. We test for this effect in our empirical exercises and, like most other studies of this kind, we find that the demand for cash holdings is reduced if interest rates on bank deposits rise and vice versa (i.e. that the interest elasticity of cash holdings is negative), although the impact is relatively slight in terms of magnitude. (In this particular instance, however, the decline in interest rates was very large, meaning the overall effect was quite sizeable).

A 1.5% YoY growth in the grey economy puts the money velocities right on track for the USA.

In economics its transaction rate

The red and blue lines indicate how often money turns over in a specified period. Look at the red line which includes checking and short term accounts.  This is the nominal middle class and how often they make purchases.

The rate of transactions is below any level ever recorded by the Fed. One would think economists would be looking at that value, any many are, I am sure.  But for Keynesians its not even in their equation yet!  Yet they claim to  know how the economy works.  Absent any transactions, the economy simply breaks up, it can no longer keep pricing accurate enough to engage in investment.

 Look at producer prices and consumer prices.  Producers are in blue, consumer in red. Producer price is a difficult statistic because the supply chain is long while the consumer prices are end points, so producer prices are both input and output. Producer prices crash during the recession, mainly folks stopped buying oil, especially the transportation sector.  Since the crash, producer prices have held steady while consumer prices kept on rising.

Retail input prices held steady while consumers pay more.  Somewhere in the value chain profits are rising. Where? Who knows.  But clearly consumers are shopping less and someone else making better gains, hence the drop in velocity.

Sphere packing with inert bubbles

In natural units, where , the expression becomes .

This shows that the gravitational coupling constant can be thought of as the analogue of the fine-structure constant; while the fine-structure constant measures the electromagnetic repulsion between two electrons, the gravitational coupling constant measures the gravitational attraction.

Now that I see this, I want to revise my interpretation of the fine structure constant.  I am fishing here, so beware.  Gravity is  about how much motion bubbles of a single size need to measure 4*Pi exactly when filling the balloon.  Thus the fine structure is about how much motion is required when filling the balloon with two sizes of bubbles.  But something is wrong because the difference between the fine structure and the gravity structure is about 10e-45. So, there may be another Avogadro stuck somewhere between the two, I am not sure; an Avogadro squared is about 10e45. In terms of relative sphere size, the charge spheres, two of them, and the inert sphere cannot be that far apart. The Swarzchild radius gives the coupling constant when the balloon has all three bubble types:

 where p is the density.


The Sun is so round!

Yes, but it is emitting enormous excess energy, it has more motion than needed to get a good 4*pi.  This is still mostly a puzzle for me.

Inert spheres have no motion

Yes, but when optimally packed the variation in surface area should be enough to get the best 4*pi possible.  In fact, I think Gauss already did this problem.
 I am pretty sure physics is getting down to the business of sphere packing.

So all you sphere packing mathematicians, gear up, your skills will be in demand.