Taleb video: credit crunch not black swan, moral hazard now worse

From Bloomberg:

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Some great comments on the OMB (“lying on their forecasts”), Geithner (“who has a mortage on a house not far from mine… who didn’t understand risk and real estate prices”), Summers (“uses wrong mathematics in his papers” and has “systemic arrogance”), and Bernanke (“the one who crashed the plane”).

He has praise for David Cameron, whom he thinks understands how to solve the crisis.

Plenty of fodder for inflationists and bond bears here: Hard assets like metals and agricultural land would be a good way to protect value. Forget the stock market and most real estate.

Does anybody, such as professors, now understand the issues he raises? No. Don’t go to business school, but if you go, don’t take any business class that has equations in it: “it’s all bogus.”

Budget madness: Obama proposes 17% increase over fiscal 2010

From Bloomberg:

Feb. 1 (Bloomberg) — President Barack Obama proposes a $3.8 trillion fiscal 2011 budget today that calls for $100 billion in additional stimulus spending and projects this year’s deficit will hit a record $1.6 trillion.

The spending blueprint being sent to Congress for the fiscal year that begins Oct. 1 reflects the administration’s struggle to boost the economy and job growth — both top concerns of voters — while tightening the government’s belt to reduce deficits in the years ahead.

“We’re trying to accomplish a soft landing in terms of our fiscal trajectory,”Peter Orszag, director of the White House Office of Management and Budget, said in a briefing.

What nonsense! How on earth is the nation to benefit from further inflating the ranks of sand-in-the-gears bureaucracies?

The $1.6 trillion deficit forecast for the current year represents 10.6 percent of the U.S. gross domestic product, making it the biggest by that measure since World War II, according to administration figures. The deficit in 2009 was $1.4 trillion.

The White House deficit projection exceeds other forecasts. The Congressional Budget Office has forecast this year’s shortfall at $1.35 trillion. The median of 39 analysts survey by Bloomberg News is for $1.37 trillion this year and $1.10 trillion next year.

I am sure that the actual deficit will come in even higher, because it always does.

Spending Freeze

To address the shortfall, the administration wants to impose a three-year freeze in “discretionary” spending outside of defense and security. The freeze won’t be across-the-board. Some programs, such as education and research and development initiative, would get as much as 6 percent budget increase. The budget is subject to approval by Congress.

What kind of a spending freeze results in a 17% increase in total spending?

Obama’s plan also calls for creating a special debt commission to recommend steps to cut the deficit and tougher budgeting rules in Congress.

The result would be a deficit that declines next year to $1.27 trillion and to $828 billion in 2012, according to a summary provided by the administration. In subsequent years, though 2020, the annual deficit would still total between $700 billion and $1 trillion. By 2020, the publicly held debt would approximately double to $18.5 trillion, according to estimates.

I wonder if those projections take into account the hoardes of boomers entering retirement and running up medical bills? What GDP assumptions are in that equation  (those will be announced later this morning)? What employment assumptions? It is guaranteed that they are absurdly optimistic.

Orszag said the administration intends to slowly phase in its deficit-reduction plans, saying cutting too much too soon might stifle the economic recovery.

‘Selective’ Approach

“The worst thing we could do is act too quickly and throw the economy back into recession,” Orszag said. “But we do need to be starting, and so that’s why you see this selective approach where we are beginning the process in certain components of the budget.”

If back “act too quickly,” this Harvard genius means to cut the budget, that would be the best thing he could possibly do. Productive, accountable, efficient enterprises need this money, not the Federal government.

The increase totals 17 percent once the stimulus package is included, according to CBO estimates. The administration’s plan also calls for 120 program terminations, reductions and other savings it estimates would save $20 billion.

Wow, $0.02 trillion in savings out of a $3.8 trillion bugdet!

It would provide $33 billion in “emergency” funding this year to help pay for the administration’s troop buildup in Afghanistan. Next year, war costs would amount to $159.3 billion. The basic defense budget would amount to $549 billion, which represents a 1.8 increase adjusted for inflation. The Department of Homeland Security would get a 2 percent increase.

The budget has more than doubled from $1.9 trillion in 2001, according the OMB’s historical data.

Do you feel like you are getting twice as much value from the federal government as you were in 2001?

The US is bankrupt. That is a fact. We can’t pay all of our debts, so we should just get it over with an make an honest default. Why burden the economy for years with taxes and capital-sapping debt rollovers when in the end we’ll have to default anyway? This is like continuing to pay an underwater mortgage when you’ve lost your job and you could rent the same thing for 1/3 the cost, except that we could have a far better government for 1/20th the cost.

Start eliminating whole departments like the fascist Germany-style Department of Education, or the Soviet Russia-style Department of Housing and Urban Development. End the wars, abandon the cruel empire and stop occupying the globe (the Japanese have finally had enough of us anyway).

What cannot be sustained, won’t. If only our “leaders” would acknowledge it and do the right thing, the US could be a free and productive nation again (or better yet, group of nations).