The US is going broke due to dependency.

Our basic fiscal problem in the US is too few people pay income tax and too many received welfare benefits.

Only about 1/2 of the population live in households that pay taxes:

This parallels the increase in the numbers of "takers" relative to "givers."

Finally!?! Is the monetary transmission mechanism (i.e. bank lending) starting to function again in the US?

From the Wall Street Journal.

Famous last words

David Tang has this anecdote in today's FT: “Talking of death, I have always admired the optimism of Spain’s General Franco who regarded himself as almost immortal.  Once, it is said, he was lying, extremely weakly, in bed and everyone around him thought he was going to die.  Hearing a great deal of commotion and noise, the dictator asked, with a weakening hand, “What’s all that noise?”  His aide replied: “General, that's the crowd outside.  Your people.  There are thousands of them chanting your name.  They have come to say farewell.”  The General looked faintly puzzled and asked: “Where are they going?”

WIll Russia benefit from sanctions?

Interesting article on Russian agricultural in yesterday's FT. Russia exports energy and imports food and manufactured products. It's exports have not been affected by sanctions, therefore. In response to western sanctions, Russia has banned the import of many foodstuffs.

Russia has 0.8 hectares of arable land/capita, about the same as Argentina and Ukraine but still imports 40% of its food. With bans on imports from Europe and a weaker ruble, Russian agriculture may grow. Since the collapse of the Soviet Union, land under cultivation dropped from 90 mn hectares to 73 mn. The poor logistics infrastructure is a barrier. Nonetheless, poultry production is up 60% since 2008 and pork 36%. Will Russia become self-sufficient in and then an exporter of food? Russia already generates excess cash flow; this would increase greatly without food imports.

IBM: "Skim milk masquerades as cream."

I liberated these graphs from Dan Oliver of Myrmikan Capital.

IBM has clearly benefitted from Quantitative Easing by replacing expensive equity with cheap debt.

Over the past five years, IBM's stock has nearly double and its EPS have increased by 50%. But inside the numbers, it doesn't look very healthy. What happens when interest rates rise?

Are credit conditions returning to "normal?"

Auto loans by credit score:

Proof that Americans are more smart than those other dopes

from the New York Times

In the early 1980s "the A&W restaurant chain released a new hamburger to rival the McDonald’s Quarter Pounder. With a third-pound of beef, the A&W burger had more meat than the Quarter Pounder; in taste tests, customers preferred A&W’s burger. And it was less expensive. A lavish A&W television and radio marketing campaign cited these benefits. Yet instead of leaping at the great value, customers snubbed it.

"Only when the company held customer focus groups did it become clear why. The Third Pounder presented the American public with a test in fractions. And we failed. Misunderstanding the value of one-third, customers believed they were being overcharged. Why, they asked the researchers, should they pay the same amount for a third of a pound of meat as they did for a quarter-pound of meat at McDonald’s. The “4” in “¼,” larger than the “3” in “⅓,” led them astray."