It seems to me that the doom and gloom crowd is increasingly unhinged. I wish I had a nickel for every “death cross” posted on Zero Hedge in the last year. They post negative economic reports like we are about to succumb to the zombie apocalypse. Don’t get me wrong, I like ZH and I get a kick out of their posts, but there’s a line between pessimism and lunacy and they seem to cross it a lot lately. Karl Denninger is following the same path. He posted this the other day.

Ok, now this is a pretty nasty report...

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $439.8 billion, a decrease of 0.8 percent (±0.5%) from the previous month, but up 3.3 percent (±0.9%) above January 2014. Total sales for the November 2014 through January 2015 period were up 3.8 percent (±0.7%) from the same period a year ago. The November to December 2014 percent change was unrevised from -0.9 percent (±0.3%).

Yuck.

What’s worse is the unadjusted numbers.  Keep in mind that there’s this holiday called Christmas in December, but….

Retail, total, was down about 21% unadjusted.  But what’s worse is the lie in the above caption — previous-year comparisons.  The unadjusted January figures were up only 2.85% from January 2014, and if you exclude cars it was only up 1.41%.  Incidentally, ex-autos sales were down 24% sequentially.

You don’t need a seasonal adjustment for the same month in different years!

There was one bright light — gasoline, which was down big (24%).  But the claim that this drop in gas price would translate inexorably to other purchases appears to be flat-out wrong.  Instead, consumers are paying down debt and reducing their leverage — except on cars.

One final interesting point — non-store retailers were only up 2.57% from last January.  It appears that the “internet shopping craze” has finished its large growth numbers; this has an interesting set of implications for everyone selling and marketing on the Internet, particularly Spamazon.

PS: People are getting drunk more — to the tune of 13.1% more over last January.  Gee, I wonder if the lies are finally getting to ordinary folks……

Month to month changes in retail sales may be of importance to a retailer trying to pay his rent. In macro economics, no one really cares about it since holidays and seasonality play such a big part in retail. Restaurants and flower shops do better in February than January for obvious reasons. What matters is year over year. January 2015 was better than January 2014. But, Karl and his cult can have none of that so they focus on the month to month figure, which is meaningless.

As far as his comment about adjusted numbers, that’s nonsense. Lots of retail is done on weekends. If you gain a weekend day or lose a weekend day, it can make a big difference. The government plays games with the numbers so a certain amount of skepticism is warranted with regard to adjusted numbers. that does not mean all normalization of data is a fraud.

I took some grief for my position on death taxes. I am not surprised. The tax debate in America has been so cluttered with group-think there’s simply no way to stake out a position on taxes that does not get someone fired up. Liberals are supposed to be for high rates, progressivity, social engineering and fairness, whatever the hell that means. Conservatives are supposed to be for lower taxes, business incentives and different types of social engineering. Libertarians are supposed to be for no taxes and free weed.

The trouble here is none of those positions make any sense. The point of taxation is to fund government. The point of government is to address “common burdens”. In the Anglo-Saxon tradition, that meant military service, fortress work, and bridge repair. As human societies have become more complex and interdependent, the number of things considered “common burdens” has increased. Roads, schools, hospitals, parks and other things have all be put in that basket, requiring greater government and greater taxation.

The point here is there can be but one position on this aspect of taxation. That is, the tax rates must be sufficient to pay for the cost of government. Once you uncouple taxes from government services, taxes become theft. They may be lawful and commonly accepted theft, but they are theft nonetheless. That means the amount of tax is irrelevant. All that matters is what to tax in order to fund government.

How I come at it this is to ask which taxes have the least impact on the natural functioning of society? Road taxes, for example, are an attempt to peg taxes to usage. The more you use, the more you pay. That links the value of the road to the cost of the road. Ideally, taxes will have zero impact on the economic decisions of the people. That’s not always possible, but it should be the goal of tax policy. Otherwise, the impact of the tax could very well exceed the value of the tax.

An example of the latter is George Bush’s luxury tax on expensive toys. Rich people are not infinitely rich. The guy that could swing a yacht before the tax was priced out of it after the tax so he bought something else that was not subject to the tax, like stocks or real estate. Thus the tax was never paid, all the yacht workers lost their jobs and stopped paying income taxes.

That brings me back to the death tax. No matter how high the tax, there will never be a change in the mortality rate. It has been stubbornly fixed at 100% for years now. Experts predict it will remain 100% long into the future. That means confiscating all of the goods from the dead will not do much to change human behavior, at least in regard to dying.

Now, Joseph K makes what I think is the best argument against death taxes:

The estate tax is the single biggest cause of the rise and dominance of Progressivism in the 20th century. The formation by business magnates of massive charitable foundations in order to save their fortunes from government depredation created a massive slush fund for the financial support and promulgation of every lunatic Progressive idea in existence. Without the Ford, Rockefeller, MacArthur and other foundations, Progressive lunacy as we know it would not exist. Heck, PBS and Sesame Street, which poisoned the minds of innocent children with liberal dreck for generations, would not exist.

Taxation, particularly the estate tax, wrecked the landed aristocracy that ruled England for centuries, and which ruled half the earth for the better at its height, leaving a battered welfare state carcass currently being picked clean by the feral children of former colonial lands. One cannot call this progress.

There are a few things here. The first being that the rich will do crazy things with their money in order to avoid the tax. I’ll concede that point, even though I doubt that’s really what’s going on with these foundations. These are monuments to their own lives, in the same vein as monuments or great public buildings in antiquity. The royalty returning with booty from France in The 100 Years War built castles in honor of themselves, not to avoid taxes.

That said, the death tax could cause all sorts of behavior in an attempt to keep the fortune alive after the death of the plutocrat. That’s why I specifically avoided any discussion of exemptions. If you’re going to have a death tax, it must be 100% and universal – no exceptions. The use of insurance to mitigate the tax for businesses and family farms is not an exemption; it is private mitigation. Setting up foundations and trusts would not be exempt either. The money would have to be given away in life.

The other piece of his argument is that destroying the wealth of the rich has unintended downstream consequences. Toppling over the landed aristocracy, for example, opened the door for socialist lunatics to seize power. I’m not entirely sure about that timeline, but I’ll concede the greater point. Wiping out the rich through taxes is not consequence free and those consequences are not always known.

That’s why I specifically said the rich can give away their wealth before death. To quote myself,

“There’s nothing to prevent Bill Gates from giving his fortune away. He would just have to do it while he is alive. If he wants to set his kid up with a billion dollar gift, that’s his choice. That option exists now. Whatever is left upon his death will go to the government.”

The trouble with everything I’m saying here is summed up by juice.qr.

“what gets me is you make several points about how ‘if it such and such was implemented’ , ‘if it was done this way’ … problem is none of your brilliant fixes have been implemented, or are likely to be.”

That, I think, bookends Joseph K’s argument very well. Even if the defects of the death tax can be addressed, the people doing the addressing have insurmountable defects, primarily the fact that they are crooks, liars and lunatics. The death tax gives them the tools to inflict much wickedness on the people.

To sum up, I’m convinced that the death tax can never be done well and I’m open to the argument that a not done well death tax is way worse than other taxes not done well.

I saw this the other day on Maggie’s Farm. I can’t recall how many times I have had debates with people over death taxes. Everyone is always shocked by my position on the issue. I guess it is just assumed that Progressives like inheritance taxes so anti-Progressives must be against them. That’s generally the assumption on all taxes and tax policy. Once again, we see how the Left’s hive mindedness shapes public discussion.

Taxes are necessary if you wish to have a government. Government is necessary if you wish to have a state. Even libertarians get this. The question is, what do you tax in order to fund government? The amount of taxing should always track the amount of spending. The great disaster of late 20^th century American conservatism is the uncoupling of taxes from spending. The modern Right is just a different brand of liberal, offering a free lunch in exchange for a vote.

It seems to me that taxing the dead is a great way to fund the state. After all, the dead have few spending needs. They have no rights and no claims on the living. Taking the property of the dead is well within the traditions of western people so it’s not like we are breaking new ground. Throughout history, failure to properly name an heir meant your property was awarded to the state upon your death. To date, the dead have never petitioned their government for redress of death taxes.

The only snag is when it comes to property held in association with others, like a business or jointly held lands. If your business partner dies and the state takes ownership of his shares in the business, you now find yourself in partnership with the government against your will. Worse yet, the state could auction off that ownership stake and you end up out of business entirely. But, key-man polices have been around a long time so there’s a remedy.

A key-man policy is a type of insurance policy. If one partner dies, the policy pays off so that the other partner can acquire the shares of his partner from his estate. Putting that into law so that the state gets the insurance money rather than the company stock is not terribly difficult. It would protect the rights of the living without giving rights to the dead.

The thornier problem is property or a business sort of owned by a family. The patriarch builds up a company and has his kids join in the business. Before they are ready to gain a share of the business, the old man gets hit by a bus. There’s no insurance policy to cover the business so the tax obligations would wipe out the family business. Again, this could be addressed with minor changes in the law such that life insurance could cover this sort of calamity.

The only sensible objection, it seems to me is one of equity. The guy who works hard, saves his money and builds up a fortune ends up paying a greater tax than the bum who never bothered to save. Bill Gates, according to some, should have the right to give his great fortune to his children if he chooses. It should not be confiscated by the state.

There’s nothing to prevent Bill Gates from giving his fortune away. He would just have to do it while he is alive. If he wants to set his kid up with a billion dollar gift, that’s his choice. That option exists now. Whatever is left upon his death will go to the government. People have been doing this sort of planning for generations.

The counter to this is the modest, middle-class family cannot take advantage of these laws. The folks who have their wealth in their primary home, maybe a vacation spot and the family business cannot be expected to liquidate before death and give away their money. As a practical matter, it must be done at the time of death. At the risk of sounding callous, life is unfair like that sometimes. No tax is without its unfairness.

That’s the thing I come back to when it comes to the death tax. No one likes paying taxes. There is no tax scheme that makes everyone happy or everyone equally miserable. Every tax irks someone more than others. The dead have bigger problems than the disposition of their property so taxing them strikes me as the least harmful of the possible taxes.

Unlike most other taxes, death taxes have the benefit of breaking up large fortunes. Concentration of wealth is the number one enemy of civilization. There’s nothing wrong with someone getting fabulously rich through his own initiative. There’s an assumed link between the fortune and the talent. Inheriting a fortune and the power that comes with it is hitting the lottery. Worse yet, it subjects the rest of us to sortition, thus pegging the fate of society to the mating choices of the long since dead.

In conclusion, taxes are about paying for the current operations of government. The best taxes are those that retard the normal functioning of society the least. No one escapes death so taxing it will not get less of it. It’s not perfect, but no tax is perfect. It is the only tax that has any plausible social benefit.

I was paging through Twitter and saw this posted by Gavin McInnes. The story itself is not the point of this post. It is an example of how race is covered in America. If a white guy executed two black guys, the major news companies would devote all of their coverage to it for a year. That’s because it fits into the mythology that animates the liberal narrative. But, that’s a topic for another day.

I was thinking about writing something about it when sound mysteriously started coming through my speakers. For some reason I was using Chrome rather than Mozilla, the former not having the array of pop-up blockers, script blockers and flash blockers installed. I hunted around and found the offending video and stopped it. If you have clicked on the above link, you will be doing the same thing in a few seconds.

The story was actually blocked until you took a survey. The page is plastered with ads, in addition to the video crap in the middle. Just doing a little estimating, I’m going to say that the page is 60% advertisement. The story takes up maybe 10% of the page. The rest is promotions for the site and other features on the site. They are perilously close to the point where the story is so hard to find in the clutter that we’ll need an app to help find it.

This is happening all over and not just on the Internet. Websites have no way to make money other than ads and even then the money is small. They have no choice but to pack their pages with ads. The weaselly tactics some use is not wise, but maybe they are desperate. Breitbart is a useless site, as far as I’m concerned, because it is so cluttered with ads and embedded audio. I really hate the embedded audio.

I was talking to a friend the other day after one of the football games about how a 60 minute game is now a five hour event. A football game is a three hour commercial with a football game woven into it. The promotion of it and other games before and after the game is just more marketing, disguised as content. Even replays have sponsors now so that we end up with “this replay brought to you by Viagra shows…” I’m all for the NFL making money, but do they really need to sell so many ads?

I read the other day that the NBA will start placing ads on the uniforms. It will not be long before technology allows them to have rotating ads on the uniforms. The courts will soon be plastered with ads. The NHL is using video technology to digitally place ads on the ice for TV viewers. During World Cup, they had ads crawling on the screen because there are no breaks in the game to run ads. That means the rules of the game will be changed so they can run ads during games. “This water break brought to you by…”

Getting back to the web page ads, there’s a limit. I don’t go to Brietbart because I hate the ads. Even if they don’t care about old hate-thinkers like me, there is a limit to the number of ads they can post on their site. Similarly, there’s a limit how much crap they try to sell us on our phones and TV’s. What happens when the limit is reached? The whole economic system of the west is based on never ending growth and that includes advertising.

What happens when there’s no more room to grow?

I saw this in a Taki column by Ann Sterzinger. I’m not a fan of Sterzinger’s brand of groaty snark. It may be a generational thing. Maybe it is my sexism. Who knows, but the New Yorker piece on the Internet parasite was worth wading through Sterzinger’s many references to bodily functions. Jim Goad has this habit too. Anyone he does not like is compared to a bowel movement or vomit or some other base human function. I don’t get the point of painting such pictures for the reader.

Anyway, the linked piece above is interesting and free of scatological references. The title is what gets me. A virus is always bad. Calling someone a “virologist” should be an insult, unless the person works for the CDC. Even after reading the article, I’m not sure if it is an insult or compliment here. What’s clear is the subject of the story makes his money by deceiving people and stealing the property of others. His sites are built around appropriating the ideas of others to draw an audience.

Deception is the primary line of business.

Much of the company’s success online can be attributed to a proprietary algorithm that it has developed for “headline testing”—a practice that has become standard in the virality industry. When a Dose post is created, it initially appears under as many as two dozen different headlines, distributed at random. Whereas one person’s Facebook news feed shows a link to “You Won’t Believe What This Guy Did with an Abandoned Factory,” another person, two feet away, might see “At First It Looks Like an Old Empty Factory. But Go Inside and . . . WHOA.” Spartz’s algorithm measures which headline is attracting clicks most quickly, and after a few hours, when a statistically significant threshold is reached, the “winning” headline automatically supplants all others. “I’m really, really good at writing headlines,” he told me. “But any human’s intuition can only be so good. If you can build a machine that can solve the problem better than you can, then you really understand the problem.”

At the bottom of a Dose post, there is usually a small “hat tip” (abbreviated as “H/T”). Many people don’t notice this citation, if they even reach the bottom of the post. On Dose’s first day of existence, its most successful list was called “23 Photos of People from All Over the World Next to How Much Food They Eat Per Day.” It was a clever illustration of global diversity and inequity: an American truck driver holding a tray of cheeseburgers and Starbucks Frappuccinos; a Maasai woman posing with eight hundred calories’ worth of milk and porridge. Beneath the final photograph, a line of tiny gray text read “H/T Elite Daily.” It linked to a post that Elite Daily, a Web site based in New York, had published a month earlier (“See the Incredible Differences in the Daily Food Intake of People Around the World”). That post, in turn, had linked to UrbanTimes (“80 People, 30 Countries and How Much They Eat on a Daily Basis”), which had credited Amusing Planet (“What People Eat Around the World”), which had cited a 2010 radio interview with Faith D’Aluisio and Peter Menzel, the writer and the photographer behind the project.

What passes for building a better mousetrap in the new economy is usually just using technology to game the system. In this case, the guy started out by attaching himself to the Harry Potter franchise. Calling it a “fan site” let him skirt the rules governing theft of intellectual property. If he tried selling Harry Potter shirts he would have been sued out of existence. Selling ads on a “fan site” is essentially the same thing, but it skirts the rules just enough to avoid a lawsuit.

The click bait sites are just fraud, for the most part. He’s gaming search engines and he’s misrepresenting his site to get hits. He then uses the traffic to defraud advertises. Increasingly, mainstream sites employ the same tricks. They split stories into many pages to drive up page hits. Bleacher Report has figured out how to game Google so that their crappy pages show up at the top of any sports related search. I’ve had to modify by browser to block that site.

Stealing from one another is not economic activity. There are only three types of economic activity that can increase the nation’s wealth. You either invent things, make things or fix things. Emerson Spartz is not doing any of that. He is siphoning money from people who make things, invent things and fix things. These parasites are the only part of the economy that are growing. The parasite economy has a natural limit. When the host dies, the parasite economy dies with it.

I’m old and I hate change so naturally I think the kids, with their smartphones and sharing economy, are just a bunch of addled-minded commies, high on stupid. After all, what was wrong with hailing a cab and paying the fare? Now I’m supposed to hop in with some weirdo who drives strangers around town because he finds livery work self-actualizing? Fiddlesticks to that!

In all seriousness, I’ve been skeptical of Uber from the start. It has that slippery con-man vibe to it. Like everything else about the “sharing economy” it is real good at sharing the costs, but even better at privatizing the profits. Apparently, they are not very good at screening their drivers.

A man who works as a driver for the ride-sharing service Uber is accused of raping a woman he picked up in Boston.

The suspect, 46-year-old Alejandro Done of Boston, was arraigned Wednesday on charges of rape, assault to rape and assault and battery.

Authorities say on December 6, the victim was waiting for a ride-sharing driver at a residence on Tremont Street in Boston.

When the victim got into the car, the driver told her that he would need a cash payment for the ride, so he brought her to an ATM.

The driver then allegedly drove to a location the passenger was not familiar with, pulled over in a secluded area and jumped in the backseat where she was sitting.

“He allegedly struck her with his hands, strangled her, locked the car doors so that she could not escape and covered her mouth so she could not scream,” according to the Middlesex County District Attorney’s office. “During an ensuing physical struggle, the defendant allegedly sexually assaulted the woman.”

Uber says Done was not the driver the victim contacted to pick her up.

“This is a despicable crime and our thoughts and prayers are with the victim during her recovery,” Uber spokesperson Kaitlin Durkosh said. “Uber has been working closely with law enforcement and will continue to do everything we can to assist their investigation.”

Uber says Done passed a background check prior to becoming an independent contractor with the company. He is being held pending a dangerousness hearing scheduled for December 24 in Cambridge District Court.

Uber strikes me as one of the pet rock businesses of post-reality America. By that, I mean it is is a fun fad that people get rich from, but otherwise is not a real business with staying power. The reason is they are basically making money by deception. Part of that deception is cost shifting. They shift the operating costs of a taxi company onto the drivers, cell phone carriers and general society.

Let me explain that last part. On their site they say you don’t need extra insurance to be one of their drivers. That’s not exactly true. My insurance policy explicitly says I am not covered as a for-hire driver and my car will not be covered as a commercial vehicle. Uber says they cover you while you are on a trip, but the limits are the bare minimum and it is unclear if they are the primary or secondary carrier.

That’s just one piece of the cost shifted to the driver. If your fare spills their coffee, tears a seat of some other common occurrence, Uber is not paying for it. Uber is not getting your oil changed or your tires rotated. Basically, Uber is dodging the costs taxi companies face in fleet expenses, by suckering people into working for them under the table, in effect. What Uber is doing is no different than what landscapers do with illegal alien labor.

The old school taxi company they are “disrupting” is required to comply with a long list of laws, regulation, and insurance requirements. Those have costs which show up in the fare. No one is getting rich driving a taxi. Uber either shirks those costs or shifts them to the rest of us. That let’s them undercut the taxi companies and make money.

The argument from libertarians is that Uber is forcing changes to those regulation, taxes and so forth, by functioning as an above ground black market. We’ll see. It may be easier just to put Uber out of business. Either way, Uber is not magically making taxis cheaper. They are just hiding the costs. When you factor back in the cost of being raped by the Uber driver, a taxi starts looking pretty good again.

Over at National Review, where I occasionally post in the comment sections, I’ve taken some flak for pointing out that falling oil prices are not due to market forces and they are not necessarily a good thing. The people who post there tend to be running dog Republicans, worshipping at the alter of capitalism. They think suddenly cheap oil is vindication of their “drill baby, drill” chants from a decade ago.  This post from the Beeb explains one of the down-side effects of an oil glut.

Oil companies and service providers are cutting staff and investment to save money.

Robin Allan, chairman of the independent explorers’ association Brindex, told the BBC that the industry was “close to collapse”.

Almost no new projects in the North Sea are profitable with oil below $60 a barrel, he claims.

“It’s almost impossible to make money at these oil prices”, Mr Allan, who is a director of Premier Oil in addition to chairing Brindex, told the BBC. “It’s a huge crisis.”

“This has happened before, and the industry adapts, but the adaptation is one of slashing people, slashing projects and reducing costs wherever possible, and that’s painful for our staff, painful for companies and painful for the country.

“It’s close to collapse. In terms of new investments – there will be none, everyone is retreating, people are being laid off at most companies this week and in the coming weeks. Budgets for 2015 are being cut by everyone.”

The thing that people don’t understand about the business of digging stuff up and selling it is there are costs. It cost money to set-up an oil well – lots of money. If you can get a million barrels from a well and the cost of extraction is fifty million dollars over the life of the well, you need to sell that oil for $50 a barrel to break even. If you started your project assuming $100 prices and now the prices are $40, your business collapses and the well closes.

Almost all of the new oil sources coming on-line were planned and executed in a world of $60-$70 oil. That was the assumption of the investors. That’s an important piece of the puzzle that no one considers. Every BTU of energy is backed by a debt instrument these days. In fact, those debt instruments are backed by debt instruments.

The debt pyramid in the energy business probably looks like every other asset market. That means bankruptcies in the energy markets ripple through the financial world in the same way that foreclosures in Nevada brought down the housing market.

There’s that and there is the fact the oil glut is about things other than supply and demand. Demand is slightly down of late as the world economy has slowed. That has driven up relative supply. There’s also more supply due to speculators jumping into a hot market the last decade. But, there’s also the financial war with Russia lead by the US and Saudi Arabia.

The Saudis, of course, see this as manna from heaven. They can knock out the Russians who have been a source of mischief to them in the Middle East. A collapsing Russia would take Syria and Iran down, plus open the door for the Saudi pipeline projects.

An oil glut also knocks out North American producers who suddenly face margin calls. No one pumps at a loss so the high cost producers will have to shut down. An extended price slump means they go bankrupt. It also means credit flees the market, making even profitable operations less profitable. The Saudis can weather even $30 oil so this is good for them in the long run.

Cheap energy is always a good thing, but it is not without trade-offs. It’s why our next currency arrangement will probably be pegged to energy. If everything is priced in joules, price stability in the energy markets becomes the default state. Until then, energy is a tool of war and even cheap gas has negative consequences.