HALF-FULL REPORT 10/28/11

There’s no resisting starting this week’s HFR with the funniest headline of the year:  Man Beats Woman With Frozen Armadillo.  Only in Texas.

I also have to tell you about Steven Pinker’s book that just came out:  The Better Angels of Our Nature:  Why Violence Has Declined.  Both Joel Wade and I are fans of Pinker, professor of evolutionary psychology and cognitive science at Harvard.  (See Joel’s The Blank Slate, April 2006.)

Earlier this month on Columbus Day in A Triple Celebration of Western Civilization, I referenced the research of anthropologist Lawrence Keeley, who documents the fantastic level of violence perpetrated by pre-Columbian Amerindian tribes upon each other in War Before Civilization: The Myth of the Peaceful Savage.

Pinker takes Keeley’s research and a gargantuan amount more to amass an irrefutable case that we today are living in the most peaceful era of human history – by far.  Really far.  But is it the freest?  That’s another question.  Euroweenies are way less violent than they used to be, but are also way less free, having relinquished their freedom to Leviathan.  This, of course, is Zero’s plan for us.

Nonetheless, Pinker provides cause for optimism.  The trajectory of declining violence is one of centuries now.  We are on the cusp of staying on it while expanding our freedom, which we have the opportunity to do little more than 12 months from today.  All we have to do is carpe diem.

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Speaking of Euroweenies.  The euphoria over their Euro Summit this week and that of the markets pumped by it is ephemeral.  The euro is a political currency, not an economic one.  Trying to force the square peg of the former into the round peg of the latter cannot be done.  Today the euro is the most overvalued currency on the planet.  Germany’s economy is the most export-dependent on the planet.  Good luck selling your stuff.

And good luck begging the Chicoms for a handout.  They are not stupid enough to sink a trillion bucks into the EU sinkhole, and besides, they’re broke.  They put their dollars into US Treasuries – how do they get them out to put into euros except at a haircut loss?

Also, bad timing to go begging to Beijing the week China’s massive housing bubble pops.  Housing prices in Shanghai are between $300 and $700 a square foot – bare walls, no furnishings whatever.  Overnight they’ve dropped 20-25%, and that’s just the start.  No wonder the Wall Street Journal reports (10/25) riots by Shanghai homeowners. 

Y’all know from recent and personal experience what happens to an economy when a humongous housing bubble deflates.  Expect China’s to plummet 60 to 70%.  Couple that with the Chicoms blowing their wad on bad loans to their local governments and state-owned companies. 

China is headed for Hard Landing City.  A lot of folks who see this are shorting commodities – except gold, which becomes more valuable as the euro inflates.

As a friend who knows every main participant in this week’s vaunted Euro Summit tells me, "the ‘leveraged up’ EU bailout fund is fool’s gold, a pipe dream of security which will serve to transfer greater cost and risk to taxpayers leading to inflationary tendencies and implosion of debt already too high.  Every message it sends to the market is wrong and it won’t take long for the market to figure it out."

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More ephemeral euphoria this week:  the big run up in US stock prices.  One main reason for this is the nearing end of 2011’s one year only of full business expensing.  Businesses large and small are splurging, buying stuff now when they can write the whole cost off, instead of next year when they can’t.

Thus the spending splurge becomes a spending crash in at least the first two quarters of 2012, which will be reflected in a similar crash of stock prices.  Just what Zero needs in an election year, right?  How could he and the Dems been so blind to this?  It’s tempting to think the Pubs snookered the Dems into this "bonus depreciation" 2011 special, but no, it was passed by the Pelosi Congress in 2010.

Earlier this month, several dozen business groups called the Depreciation Bonus Coalition wrote a letter to the House and Senate leadership urging Congress to extend it through 2012.  There are a lot of caveats and restriction to the program and does not come close to full 100% expensing of all depreciable assets.  Yet its extension will help the economy next year – and thus help Zero.

So will the Pubs say yes or no?  It will be interesting to see.

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Zero has gotten a popularity boost since the offing of Gaddafi on October 20..  In the 8 days that have passed, Libya’s Transition Council leader, Mustafa Abdul-Jalil, announced that "Sharia law will become the main source of legislation in liberated Libya"; Afghanistan’s leader whom the US placed in power and over 1,800 US soldiers have died to keep him there, Hamid Karzai, announced that "if ever there is a war between Pakistan and America, Afghanistan will side with Pakistan"; and Iraq’s Prime Minister Nouri al-Maliki announced his government was kicking out all US soldiers in the next two months.

So much for Zero’s "victory."  Yet these humiliations just scratch the surface of Zero’s Middle East disasters.  Foremost among them is Egypt.  The Iqwan Muslimi, the Moslem Brotherhood, is taking the place over.  All over Cairo and other cities, you see Iqwan tents offering free food, medicine, and clothing.  Iqwan’s influence is expanding rapidly – Egypt is becoming a radical Islamist state filled with hate for America and of course Israel.

Yesterday (10/27), the results of elections in Tunisia were released.  Tunisia has a new Islamist government.  Egypt, Libya, and Tunisia are creating a great Islamist swath along the coast of North Africa. 

Who is paying for this?  The answer will surprise you:  the Persian Gulf Emirate of Qatar.  Even more surprising is who the Qataris are the proxies for:  Iran.  Iranian and Qatari money is financing the Islamists of Egypt, Libya, and Tunisia. Yet Qataris are Sunni and Iranians are Shia.  Nonetheless, they are cooperating together to turn the Arab Spring into a Radical Moslem Hate America Winter.

Zero is either winking and nodding at this, or too hopelessly incompetent to stop it.  Note that this applies just as strongly to his Secretary of State.

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We’ll close the HFR this week on an optimistic note – actually an add-on to Jack Kelly’s Spindletop on Steroids earlier today (10/28).

America’s chemical companies use ethane, a natural gas liquid, as a feedstock in numerous applications.  Their association, the American Chemical Council, has issued a well-researched report: Shale Gas and New Petrochemicals Investment: Benefits for the Economy, Jobs and US Manufacturing.

Jack Kelly dwelt on the overall benefits of the large increases of natural gas supply in the US.  This report focuses on the specific benefits to the petrochemical industry.  It determined that a modest (given the enormous potential of fracked shale gas) increase of just 25% in ethane supply would generate:

*17,000 new knowledge-intensive, high-paying jobs in the U.S. chemical industry

* 395,000 additional jobs outside the chemical industry (165,000 jobs in other industries that are related to the increase in U.S. chemical production and 230,000 jobs from new capital investment by the chemical industry)

* $4.4 billion more in federal, state, and local tax revenue, annually ($43.9 billion over 10 years)

* A $32.8 billion increase in U.S. chemical production

* $16.2 billion in capital investment by the chemical industry to build new petrochemical and derivatives capacity

* $132.4 billion in U.S. economic output ($83.4 billion related to increased chemical production (including additional supplier and induced impacts) plus $49.0 billion related to capital investment by the U.S. chemical industry)

This is just one industry.  The extraction of shale gas (and oil) with hydraulic fracturing really is a world-changing technological breakthrough.  All we need now is a new president who understands this and will get the government out of its way.

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Hope everyone has a fun Halloween.  I’ll be headed to Central and West Africa.  Once again, Jack Kelly will be coming to the HFR’s rescue for the next three weeks.  I’m doing expedition planning, which entails being in places out of touch with the rest of the world.  You’ll hear from me whenever I surface.  Hopefully that won’t be too infrequent.