Submitted by Mike Krieger of Liberty Bitzkrieg blog,

One of the many civil liberties related themes I have focused on over the past several years has to do with how emerging technologies can pose a threat, first to our basic 4th Amendment rights, and then ultimately to freedom itself. Two of the most high profile technologies in this regard, and which have extremely high potential for abuse, are license plate readers and drones.

I’m no luddite saying that these technologies should be banned. In fact, I can certainly see reasonable uses for both within a broad range of society. However, I am saying that unless we have an engaged citizenry holding public officials’ feet to the fire, these technologies will certainly be abused and before you know it you’ll find yourself in Room 101 staring down at a ravenous rat army wishing you had said something earlier.

The biggest challenge we face is that the general public has become so dumbed down, distracted and confused when it comes to the most existential issues we face as a society. Rather than focusing on key issues that really matter, the mainstream media largely blows up and obsesses over immaterial, yet emotionally charged events that don’t mean anything in the larger scheme of things.

License plate readers and drones are two great examples of this dilemma. Both have been advancing into our lives in an increasing manner and most people don’t have the slightest clue. How can people have informed opinions on such keys issues when they have no idea what is happening around them.

Let’s start with the license plate scanners. Before reading further, I suggest going back and checking out my post from earlier this year: How the Repo Industry is Collecting Data on Virtually Every Car in America.

Now that you are sufficiently disturbed about the extent to which your privacy is being violated day in and day out, let’s focus on some good news. The fact that there is now a bill in the California state legislature that will attempt to put some boundaries around this technology.

We learn from CBS News that:

If you’ve been behind the wheel lately, odds are your trip has been tracked by small cameras called “automated license plate readers.”

 

They’re often mounted on law enforcement vehicles and street poles, and used by police to catch criminals. But in California, lawmakers are debating whether this technology needs restrictions to protect privacy.

 

The high-tech cameras zero in on the license plates of every car that passes, taking upwards of 2,000 images per minute.

 

The photos are instantly sent to national databases that log each vehicle’s exact location, along with the date and time it was there.

 

More than 70 percent of the nation’s police departments use this technology to find vehicles associated with crimes.

 

“They can track you around the country through these databases,” said California State Senator Jerry Hill.

 

Hill wants to regulate the technology. He’s pushing a new state law (S.B. 893) that would keep license plate cameras off private property, and ban public agencies from sharing their camera data.

 

“What we’re trying to do with the legislation is create some safeguards so the public’s rights and privacy are secure,” Hill said.

 

The California Senate will vote on the new law next week.

 

In the meantime, license plate cameras and the data they collect remain unrestricted.

There’s a fine line between fighting crime and living in a creepy total surveillance state. We need to define that line and do it now.

Now, onto the drone issue. This is another important subject for debate that just hasn’t been getting enough of it. For some context, read:

The FBI Has Been Using Drones Domestically Since 2006

Meet the MQ-4C Triton – A New Navy Drone with the Wingspan of a Boeing 757

The NYPD appears to be seriously looking into deploying drones in the city of my birth. We learn from The New York Daily News that:

Big brother may be watching and listening more closely than ever — as the NYPD considers using drones and other gizmos to fight crime in the city.

 

Police Commissioner Bill Bratton said the unmanned machines equipped with cameras and tiny microphones could help spy on crime hotspots — like housing projects, where shootings are up about 32% this year.

Guess they forgot to buy their S&P500 calls…

“Myself, I’m supportive of the concept of drones, not only for police but for public safety in general,” Bratton said Tuesday. “It’s something that we actively keep looking at and stay aware of.”

 

John Miller, the NYPD’s head of intelligence, said cops have been studying flying drones. They’re looking at “what’s on the market, what’s available.”

 

“You could see an application where a drone could be not only a very effective crime fighting tool but could actually show you where the bad guys are going leaving the scene,” he said.

 

Bratton sat on the board of ShotSpotter, a company that makes the detectors, before returning to his post as the city’s top cop in January. He said the bidding process hasn’t begun.

 

Seem as if “what’s available” may just happen to be produced by a company the police chief sat on the board of. How convenient. Sort of like how former head of the Department of Homeland Security (DHS), Michael Chertoff, has a private security company called the Chertoff Group, which stands to make lots of money from fear mongering the public about terrorism. As the Huffington Post reported in 2010:

Chertoff’s clients have prospered in the last two years, largely through lucrative government contracts, and The Chertoff Group’s assistance in navigating the complex federal procurement bureaucracy is in high demand. One example involves the company at the heart of the recent uproar over intrusive airport security procedures – Rapiscan, which makes the so-called body scanners. Back in 2005, Chertoff was promoting the technology and Homeland Security placed the government’s first order, buying five Rapiscan scanners.

As I have said before, the primary driver of U.S. GDP these days is fraud, corruption and theft. It’s up to us to change that.

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Students consume almost 400 billion junk food calories at school per year, equal to almost 2 billion candy bars and while the epidemic of childhood obesity is not 'news' per se – for one big employer in America, it is a major problem. As Bloomberg Businessweek reports, the number one reason people can’t join the military is that they’re overweight or obese, and "still too fat to fight." The problem is large for active service members also with over 51% overweight (though better than the civilian population) as the DoD alone spends an estimated $1 billion per year for medical care associated with "weight-related health problems."

 

 

As Bloomberg Businessweek reports,

The No. 1 reason people can’t join the military is that they’re overweight or obese, says a group of retired military leaders who are fighting for improved childhood nutrition. Under the name Mission: Readiness, they estimate that more than one in five young Americans is too heavy to enlist in the armed services.

 

…

 

The group has been advocating the removal of junk foods from schools and the imposition of better nutritional standards in school lunches. The epidemic, they say, is affecting service members as well.

 

In a report called “Still Too Fat to Fight” (below), the group writes: “Finding ways to reverse our epidemic of obesity is crucial because the U.S. Department of Defense alone spends an estimated $1 billion per year for medical care associated with weight-related health problems” for service members and their families.

 

…

 

The Coast Guard has the highest proportion of overweight enlistees (57 percent); more than half of male service members are overweight, vs. 34 percent of women. Obesity affected 12.4 percent of service members, most often in the Army (15.8 percent) and Navy (14.9 percent) and about twice as frequently afflicting males (13.5 percent) as females (6.4 percent).

 

 

 

Among males who had to lose weight to join the military, 36.1 percent had to lose 10 to 19 pounds, and nearly 40 percent had to lose at least 20 pounds. Still, the military is doing better than the civilian population.
 

 

The full "Too Fat To Fight" report is below:

Still Too Fat to Fight Report

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Submitted by Lance Roberts of STA Wealth Management,

 

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If there is one thing that the militarized warzone with the weapons ban (and which makes east Ukraine look like a kindergarten) namely Chicago, did not need in order to fall further into social chaos and disarray, it is a new tidal wave of unemployment: people freshly without jobs who for lack of better options would likely join the daily survival of the fittest routine on the streets of the windy city. And a tidal wave of unemployment is precisely what Chicago is likely to get if, as a group of Chicago aldermen have proposed, the minimum wage in the nation’s third-largest city is nearly doubled to $15 an hour. Why $15? Because according to recently striking McDonalds line cooks, it’s only fair, and is the minimum pay that fast-food workers have sought during national protests.

Chicago won’t be the first to push for a city-level minimum pay raise: Seattle Mayor Ed Murray announced a plan earlier in May to raise the minimum wage to $15 an hour, making it the first major U.S. city to commit to such a high base level of pay. The proposal awaits approval by the city council. New York and San Diego also are considering such raises.

However, unlike other cities, Chicago is unique in that it has not one but two wage hike proposals on the table. As Reuters reports:

The group proposing the wage increase is separate from a panel Chicago Mayor Rahm Emanuel named last week among aldermen, labor and business leaders to provide recommendations for raising the minimum wage.

 

Alderman Ricardo Munoz said 12 to 15 of the 50 council members support the proposal to raise the minimum wage to $15 per hour and he expected more to join.

 

Illinois lawmakers on Wednesday approved an advisory referendum for the November ballot that asks whether the state’s minimum wage should be raised to $10 an hour from $8.25. Governor Pat Quinn said he would sign the bill.

As for the justification, it’s a cliched as that old Keynesian broken window fallacy:

“Study after study demonstrates that when you put money into the pockets of consumers, they spend it,” Munoz said. “They don’t hoard it in their mattresses.”

And what does study after study show employers do to their employees when a mandatory and unexpected intervention by the nanny state tells them they have no choice but to see their profit collapse if they keep their existing workforce and have zero chance of passing on higher labor costs to an insolvent consumer? Do they, perhaps, fire a whole lot of people and tell those who still have jobs they have no choice but to work double as hard for the new minimum wage?

We should find out very soon.

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“Traditionally we’ve been a financially conservative company,” explains one fracking company, warning that “we’ve become more leveraged than we historically have been and we’ve become uncomfortable with that.” This is the growing message from a shale boom that, as Bloomberg reports, is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground. As everyone chases the dream, well counts have soared and production per well has tumbled. “The list of companies that are financially stressed is considerable,” warns one analyst as shale debt has almost doubled over the last four years while revenue has gained just 5.6% “not everyone is going to survive. We’ve seen it before.”

 

 

As Bloomberg reports,

The U.S. shale patch is facing a shakeout as drillers struggle to keep pace with the relentless spending needed to get oil and gas out of the ground.

 

Shale debt has almost doubled over the last four years while revenue has gained just 5.6 percent, according to a Bloomberg News analysis of 61 shale drillers. A dozen of those wildcatters are spending at least 10 percent of their sales on interest compared with Exxon Mobil Corp.’s 0.1 percent.

 

“The list of companies that are financially stressed is considerable,” said Benjamin Dell, managing partner of Kimmeridge Energy, a New York-based alternative asset manager focused on energy. “Not everyone is going to survive. We’ve seen it before.”

 

…

 

In a measure of the shale industry’s financial burden, debt hit $163.6 billion in the first quarter… companies including Forest Oil Corp. , Goodrich Petroleum Corp. and Quicksilver Resources Inc. racked up interest expense of more than 20 percent.

And here comes the vicious circle…

Drillers are caught in a bind. They must keep borrowing to pay for exploration needed to offset the steep production declines typical of shale wells. At the same time, investors have been pushing companies to cut back. Spending tumbled at 26 of the 61 firms examined. For companies that can’t afford to keep drilling, less oil coming out means less money coming in, accelerating the financial tailspin.

…

“Interest expenses are rising,” said Virendra Chauhan, an oil analyst with Energy Aspects in London. “The risk for shale producers is that because of the production decline rates, you constantly have elevated capital expenditures.”

…

While borrowing to spend is typical of start-up companies, it’s not always sustainable. Forest Oil, where interest expense totaled 27 percent of revenue in the first quarter, in February reported disappointing well results, and warned that it might run afoul of its debt agreements.

…

“Traditionally we’ve been a financially conservative company,” said Bruce Vincent, president of Houston-based Swift. “We’ve become more leveraged than we historically have been and we’ve become uncomfortable with that.”

So is there a limit to what excessively low credit risk premia will stand? Is there a limit to what the market will bear? It seems so… but the day of creative destruction in America appears to be over as nothing has consequences. The best case sceanrio is some major shakeout in the “black gold” rush, leaving stronger sustainable companies non-reliant on ultra-low interest rates to maintain their business model (or else energy prices must soar to maintain these companies)… be careful what you wish for from the Fed.

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Submitted by Frank Hollenbeck of the Ludwig von Mises Institute,

Hurricane season is nearly upon us, and every time a hurricane strikes, television and radio commentators and would-be economists are quick to proclaim the growth-boosting consequences of the vicissitudes of nature. Of course, if this were true, why wait for the next calamity? Let’s create one by bulldozing New York City and marvel at the growth-boosting activity engendered. Destroying homes, buildings, and capital equipment will undoubtedly help parts of the construction industry and possibly regional economies, but it is a mistake to conclude it will boost overall growth.

Every year, this popular misconception is trotted out although Frédéric Bastiat in 1848 clearly put it to rest with his parable of the broken window. Suppose we break a window. We will call up the window repairman, and pay him $100 for the repair. People watching will say this is a good thing. What would happen to the repairman if no windows were broken? Also, the $100 will allow the repairman to buy other goods and services creating income for others. This is “what is seen.”

If instead, the window had not been broken, the $100 may have purchased a new pair of shoes. The shoemaker would have made a sale and spent the money differently. This is “what is not seen.”

Society (in this case these three members) is better off if the window had not been broken, since we are left with an intact window and a pair of shoes, instead of just a window. Destruction does not lead to more goods and services or growth. This is what should be foreseen.

One of the first attempts to quantify the economic impact of a catastrophe was a 1969 book, The Economics of Natural Disasters. The authors, Howard Kunreuther and Douglas Dacy, largely did a case study on the Alaskan earthquake of 1964, the most powerful ever recorded in North America. They, unsurprisingly, concluded that Alaskans were better off after the quake, since money flooded in from private sources and generous grants and loans from the government. Again, this was “what is seen.”

While construction companies benefit from the rebuilding after a disaster, we must always ask, where does the money come from? If the funds come from FEMA or the National Flood Insurance Program (NFIP), the government had to tax, borrow, or print the money. Taxpayers are left with less money to spend elsewhere.

The economics of disasters remains a small field of study. There have been a limited number of empirical studies examining the link between growth and natural disasters. They can be divided into studies examining the short-term and long-term impact of disasters. The short-term studies, in general, found a negative relationship between disasters and growth while a lesser number of long-run studies have had mixed results.

The most cited long-run study is “Do Natural disasters Promote Long-run Growth?” by Mark Skidmore and Hideki Toya who examined the frequency of disasters in 89 countries against their economic growth rates over a 30-year period. They tried to control for a variety of factors that might skew the findings, including country size, size of government, distance from the equator and openness to trade. They found a positive relationship between climate disasters (e.g., hurricanes and cyclones), and growth. The authors explain this finding by invoking what might be called Mother Nature’s contribution to what economist Joseph Schumpeter famously called capitalism’s "creative destruction.” By destroying old factories and roads, airports, and bridges, disasters allow new and more efficient infrastructure to be rebuilt, forcing the transition to a sleeker, more productive economy. Disasters perform the economic service of clearing out outdated infrastructure to make way for more efficient replacements.

There are three major problems with these empirical studies. The first is counterfactual. We cannot measure what growth would have been had the disaster never occurred. The second is association versus causation. We cannot say whether the disaster caused the growth or was simply associated with it.

The third problem is what economists call “ceteris paribus.” It is impossible to hold other factors constant and measure the exclusive impact of a disaster on growth. There are no laboratories to test macroeconomics concepts. This is the same limitation to Rogoff’s and Reinhart’s work on debt and growth, and many other bilateral relationships in economics. Using historical data from the early 1900s, researchers found that as the price of wheat increased, the consumption of wheat also increased. They triumphantly proclaimed that the demand curve was upward sloping. Of course, this relationship is not a demand curve, but the intersection points between supply and demand. The “holding everything else constant” assumption had been violated. In economics, empirical data can support a theoretical argument, but it cannot prove or disprove it.

So what do we do if the empirical studies have serious limitations? We go back to theory. We know a demand curve is downward sloping because of substitution and income effects. Wal-Mart does not run a clearance to sell less output! Theory also holds that natural disasters reduce growth (i.e., the more capital destroyed, the greater the negative impact on growth).

More capital means more growth. Robinson Crusoe will catch more fish if he sacrifices time fishing with his hands to build a net. Now, suppose a hurricane hits the island and destroys all of his nets. Robinson could go back to fishing with his bare hands and his output would have been permanently reduced. He could suffer an even greater decline in output by taking time to make new nets. The Skidmore-Toya explanation is to have him apply new methods and technologies to build even better nets, allowing him to catch more fish than before the hurricane. Of course, we may ask, if he had this knowledge, why didn’t Robinson build those better nets before the hurricane? This is where the Skidmore-Toya logic falls apart. Robinson did not build better nets before the hurricane because it was not optimal for him to do so.

If a company decides to replace an old machine with a new one, among the primary considerations are the initial price of the new machine, the applicable interest rate, and the reduced yearly costs of operation of the new machine. Using net present value analysis, the company determines the optimum time to make the switch (a real option). A hurricane forces a switch to occur earlier than would have been optimal under a price and profit motive. The hurricane therefore created a different path for growth. The creative destruction would have occurred, but on a different, more optimal, timeline.

The same conclusions can also be drawn from manmade disasters. Contrary to what many Keynesian economists would have you believe, WWII did not grow the US out of the great depression. Capitalism did!

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