Every year we produce more hard drive space than we destroy. Every year we produce more LCD televisions than we destroy. Every year we produce more video games than we destroy. Anyone who wants a particular hard drive, LCD television or video game need only wait until it gets cheap to afford it. This is often called deflation, a wonderful symptom of wealth and prosperity.

Wouldn’t life be wonderful if the same thing held true for homes, cars, food and clothes? Anyone who wants a particularly sized home need only wait until the price drops to where he can afford it. Anyone who wants a particular car with a particular set of amenities need only wait — prices will come down and he can afford it. Want to eat steaks and fine Italian suits? Wait until the world produces enough that the price drops to an affordable level.

Things used to work this way. A basked of goods purchased in 1800 for $20 cost the same $20 or less in 1912, more than a century later. That is incredible when you think of the increasing demand due to population growth.

The population of Europe doubled from 203m in 1800 to 408m in 1900 (Wikipedia). The population of North America exploded more than 1000% from 7m in 1800 to 82m a century later.

In other words the United States needed ten times as much food to feed itself in 1900 than a hundred years prior. But prices did not rise; prices fell. The United States produced so much more food that prices fell. A basket of goods in 1800 cost around $50 but produced so much more food a century later that the cost dropped to around $20-$30.

The United States created the Federal Reserve in 1913. Life has become more and more unaffordable ever since. Bankruptcy is now more common than divorce. The same basket of goods that cost $50 in 1800 and $30 in 1900 now costs $600. No wonder people can no longer afford to retire!

Before he was chairman of the organization Benjamin Bernanke believed the Federal Reserve would make life forever more expensive and unaffordable:

I am confident that the Fed would take whatever means necessary to prevent significant deflation in the United States and, moreover, that the U.S. central bank, in cooperation with other parts of the government as needed, has sufficient policy instruments to ensure that any deflation that might occur would be both mild and brief.

Will the economic commanders at the Federal Reserve be any more successful in the end than their soviet counterparts? I hope not. Prices are falling:

The Commerce Department’s price index for personal consumption expenditures, a closely watched inflation gauge, fell 1.1% in November

Prices are falling enough that people can once again afford to save and build wealth:

savings from lower gasoline prices is showing up as savings – as opposed to other consumption

So the first part of Bernanke’s belief — that the Fed can always prevent savings, prosperity and the lower prices he calls deflation — looks increasingly false by the day. It is now up to us to decide whether we will allow him to reverse the course of society.

Saving will not be easy. It means working hard. It means earning more than you spend and learning to live without:

I believe that each of us, the communities we live in, and the organizations and companies we serve, are going to have to make choices. We are going to have to separate what is most important from least, and act accordingly. Where life was once limitless, it will now be constrained. And, like it or not, all of us will need to return to our vocabulary a simple phrase that I believe has been lost over the past 20 years: “I can’t afford that.”

I believe it is worth it. Learning to live without lowers demand. Lower demand lowers prices. Lower prices are a good thing. Celebrate lower prices.

Money measures the value of goods. It helps people who are not experts at building homes, writing software or growing food set a desirable exchange rate between them and with what they produce. Nowhere in this equation is the creation of more money necessary.

Creating more money makes it easier to acquire a particular nominal amount of that money. Does the amount of work required to write software or grow food change? No. it still takes the same amount; people bid up the exchange rate between money and food/software as a result.

Goods and services are what make prosperity. More money does not create more goods or services.

Saving is what makes us wealthy. Saving for a rainy day gives us the confidence to invest in new ways to produce more of those goods. Producing more goods makes those goods more affordable — not creating more money.

People who believe life becomes more affordable with more money may as well believe they can lose weight by moving from the US to Europe. Sure the scale now says 72 instead of 160, but 1kg is heavier than 1 pound. Bernanke is trying the same hocus-pocus on society right now by printing unfathomable amounts of money:

Bernanke thinks this improves life. Maybe for bankers at JPMorgan and Bernanke’s family. How about for the rest of us? Bill Bonner of the Daily Reckoning begs to differ:

It is amazing to us that so many people have so much faith in so much humbug.

We’re talking about the bailout…the fix…the save…the plan to revive the world economy by giving it more of what it least needs – more debt. [...] the feds aim to make [people] borrow more [...] and make them spend more…by causing prices to rise. [...] It’s a consumer economy, they say; all we’ve got to do is to lure people to consume. The simpletons.

Colleague Simone Wapler explains that it doesn’t work that way:

“Of course, a consumer economy requires consumption, but that’s not all it requires. Imagine an island where a fisherman, a hairdresser, a doctor and a central banker live. The fisherman sells his fish. The hairdresser cuts hair. And the doctor does whatever doctors do. They all live on their services, using shells for money. The population is stable; everybody does what he’s supposed to do. Everyone is fed. They all have nice haircuts. And they all get medical treatment. The number of shells is stable too. That’s all there is to the story.”

Simone gores on to explain that the only way people can get their hair cut two times a day…eat twice as many fish…or get sick more often and expect to get the same treatment they got before is by INCREASING PRODUCTION. And that requires saving…and investment. Otherwise, increasing consumption isn’t possible. Even if you add more shells, the productive capacity remains the same.

We don’t even know why we are pointing this out. Every fool knows it. But every fool also believes that if you mix in a little macro-economic mumbo jumbo that, somehow, central bankers can increase consumption by discouraging saving…and just getting more shells into consumers’ hands.

Increased production allows sustainable consumption growth and comes from saving. The Federal Reserve openly opposes saving due to the resulting price deflation — deflation is bad for banks. The faster the United States dissolves the Federal Reserve the better of the rest of us will be.

Join the cause.

End the Federal Reserve.

While I understand that what Michael Vick did to his dogs was reprehensible, I see zero justification for the following:

federal prosecutors asked a judge to set aside $1 million to care for the pit bulls left behind when Vick was busted

That is a ridiculous sum by any standard. How much does dog food cost, exactly?

I am all for Vick getting the punishment he deserves following his conviction. This does not mean that we need to throw a bunch of money at whoever the lucky caretakers for these animals happens to be — most likely whoever has the closest connections to the prosecutors or some other political power deciding how that $1m gets used.

All this does is encourage animal rights activists to sue their pet-owning neighbors in hopes that they can land a big settlement.

The surface of the Earth constitutes 510.072 million sq km. Of this, 70.8% (361.132 million sq km) is water. The remaining 29.2% (148.94 million sq km) is land. This is around 16x the size of the United States.

Interestingly, only 13.31% of this land is arable, or 19.82 million sq km. Of this, 2,770,980 sq km (1.86% of total, 13% of arable) are irrigated.

Only 4.84% of the world speaks English as a first language. For comparison:
Mandarin: 13.7%
Spanish: 5%
Arabic: 3.2%
Hindi: 2.8%
Japanese: 2%

33% of the world is Christian. 20% Muslim, 13% Hindu. 6% Buddhist.

18% of the world cannot read, of which 11.9% of the 18% live in: India, China, Bangladesh, Pakistan, Nigeria, Ethiopia, Indonesia and Egypt.

Average GDP: $10,000. 40.7% of the world is in agriculture, 20.5% in industry and 38.8% in services. Services make up 64% of the world’s wealth, agriculture 4%.

We consume 83 million barrels of oil per day, or 30 billion per year. There are 1,293 billion barrels of proven oil reserves. This means there is a 43 year supply of oil — assuming we find no more nor consume no more oil.

There are 172.8 trillion cu m of proven natural gas reserves. We are consuming 2.819 trillion per year, giving us a 61 year supply.

There are 2.1 billion cellphones in the world (1.2billion land lines).

From the CIA’s World Fact Handbook.

About 1 in 10,000 teenage men commit suicide every year. This is about 5x higher than teenage women. There was an 8% rise in the suicide rate the year after the government started putting warnings on anti-depressants about it causing suicide.

That concludes your random factoid for the day!

Slate thinks at least 419 people have been wrongly executed during the 20th century. We presently execute between 50 and 100 people per year. Assuming the present rate of executions was the same throughout the last century, between 5% and 10% of executions are erroneous. The majority of those executed are poor and/or minorities.

GM and Ford hemmorage marketshare and mindshare every year. More threatening than their blood-red balance sheets is the near universal opinion both in and outside the US that “American” is synonymous with “inferior” within the automotive industry. They desparately need to inject life into their products and stave off the terminal infection of foreign cars; GM and Ford show strong signs of ganggrene, contagious to consumers, lenders and investors alike.

Ford and GM have a cure at their disposal, but are they aware they need one? Most of the world assumes their cars are poorly designed, use cheaper parts and require far more maintence. Isolated in Detroit and divorced from the rest of reality, they may well insulate themselves from the fact that the people only buy American cars when they cannot afford a European or Japanese one.

The problem is not that marketing dropped the ball. The problem is that the perception of inferiority is grounding in reality. Marketing cannot turn lemons into lemonaide indefinitely. Eventually the sugar coating dissolves; the public will turn sour on poor products. Bad products will eventually destroy a company, especially if a competing company sells good ones.

The cure is a simple one. Produce a better car than the Europeans and Asians are willing to sell. Copy foreign designs, use higher-quality exterior and especially interior materials; sacrifice margins to produce a car people want to buy. Easy to say, not terribly difficult to do but very hard to swallow. People are willing and eager to buy American cars, assuming all else is equal to the competition. This is not the case presently.

To understand how out of touch with reality GM is, consider the ads they are currently running on TV:

GM seems to believe that if they wrap their products around enough American imagery, Americans purchase their automobiles reflexively. Nevermind the fact that they are a mulitnational corporation with factories around the globe. Nevermind that they spent the past 30 years abusing whatever way they represented America by producing inferior products at home and exporting jobs and wages overseas. Apparently their opinion of Americans is so low that need only assert that the American experience requires purchasing Chevys and Americans will line up to buy their cars like thoughtless drones. If they think that will cure their problems the future is very bleak.

Ford seems to have a much better handle on the situation:

Their advertisements implicityly acknowledge the superiority of the foreign competition’s design and construction. They present a rebuttal supported with expert opinion and a sampling of individual public opinion. They do not present a completely forgettable truck as “all-new” like GM. Assuming people really do get excited about driving a Ford after testing a Honda, make the purchase and continue to believe they made the right decision, people will slowly return to Ford.

At that point, unions will be the only ones holding Ford and Ford employees back from financial success.

I love how Buddhists (and Hindus?) express the concept of infinity by giving Gods a bunch of hands:

My grandparents celebrated their 60th anniversary this weekend. After taking 60 years worth of photographs, we found more than enough amazing ones to make a short slideshow in their honor. Have a look:

The situation grows ever more dire in Lebanon. Evacuations continue; blogger fears about this turning big have turned out all too true. So sad to compare this with the Lebanon of just three weeks ago.

The good news? The Lebanese PM Siniora continues to be a beacon of statesmanship: “The entire world must help us disarm Hezbollah“. The vast majority of Americans support Israel’s war. Israel may have killed the Hezbollah leadership (here’s Al Jazeera’s take on the same event). Hamas seems eager to negotiate in the south. Israel and Syria/Iran are not waging war on each other yet.

The scary news? Israel has begun the invasion. Bush has little interest in a cease-fire–not that the UN could do anything anyway. The Senate condemned Iran and Syria, who are determined to prevent peace. They seem determined to nuke Israel.