I'm Not Making Any Progress In Trying To Understand The Bernie Sanders Phenomenon

A few days ago I asked if someone could explain the Bernie Sanders phenomenon to me, and commenter Justin Ferraro actually took me up on my request.  After giving a series of reasons, his conclusion is that Sanders supporters are just "normal people with brains."

Unfortunately, having read Justin's comment, I'm still scratching my head at the Sanders phenomenon, particularly the explicit willingness to embrace socialism by name even after the series of unmitigated disasters that it has inflicted on humanity in the last century and now the current one.  So, a few thoughts are in order.

I think Justin's main point is his first one, which is that somehow the Soviet Union was not real socialism and if we just execute correctly it will work this time.

Just as the USSR was a sham of a communist country it is also a failure of socialism, which is doomed, like any other economic system, if it exists within an authoritarian framework. American socialism, rooted in democracy, protection of workers, and representation of the people, is a vastly different (if equally maligned idea).

Well, we do have numerous examples of socialist systems implemented by democratically-elected governments.  The current prime example is Venezuela, with Bolivia and Ecuador not far behind.  Then there's Nazi Germany, although I'm not sure that Justin would embrace it as "socialist" despite the Nazis' own use of the term and their adoption of the economic model of extensive government ownership and/or control of industry.  Of course, despite the initial rise to power through democratic elections, each of these examples then more or less took forcible control of the election process to prevent political competitors from ever regaining power.

More importantly, what exactly is socialism without an "authoritarian framework"?  Isn't the very essence of socialism the forcible prevention of consensual economic transactions?  This asset cannot be owned, bought or sold (or only under restrictive conditions specified by the government) because if that is allowed some people will become wealthy and others will not.  The whole idea is to prevent people from enhancing their wealth by trading privately owned property.  That can only be accomplished by government force.

Justin does hold up current day Western Europe as the example of successful execution of socialism:

[T]he fact that [the Manhattan Contrarian] ignores the incredible, demonstrable success of socialist ideas in Western Europe is completely inexcusable.

I guess we'll just have to disagree about that one.  As far as I observe, Western Europe has hugely backed off the main principles of socialism during my lifetime.  When I was younger, governments in places like the UK, France, Italy and Spain owned huge swaths of the economy, mostly (but far from entirely) sold off since.  And of course, the waves of privatization led to substantial economic revivals.  Today these countries don't so much have public ownership of the economy as large welfare states, many consuming 50% and more of GDP in government spending.  Is that the current official definition of "socialism"?  Look at a chart of government spending as a percent of GDP by country and it's easy to see that those that spend the most have languishing economies with all or nearly all growth stamped out: France (56%), Greece (52%),  Italy (50%), Portugal (49%).  All these countries have lower per capita GDP than the U.S., and with no growth, no ability to catch up.  How does that help the middle class?  The UK has cut government spending by several points of GDP in the last few years and has seen economic growth revive.  The strongest economies in the world have dramatically lower government spending (e.g., Switzerland - 34%; Singapore - 17%!).  And then there's the issue that the coddling welfare states have brought plummeting birth rates and incipient population declines.  Are the Western European welfare states sustainable?  This issue will play out over a long time horizon, likely the next 20 to 40 years, but my prediction is that the current situation is not sustainable.  It's what I've called the "socialist death spiral."    An incentive structure has been created where it's in everybody's interest to maximize receipt of state benefits, work less, retire early, and have fewer children.  But we have less income inequality! (at far lower levels of income).  Is that how we define "demonstrable success"?  It's not how I would define it.

And let me mention a couple more of Justin's points.  One is the issue of "big money in politics":

[Sanders] wishes to combat a system that allows unlimited money from corporate interests to directly fund political campaigns, thus decisively wresting any vestiges of government control from the feeble hands of the individual citizen.

Go to Sanders' site, and sure enough he has a section on "Getting Big Money Out Of Politics."  That section talks about the evil Koch brothers and about a "constitutional amendment to overturn the Supreme Court’s Citizens United decision" -- I guess that means doing away with the First Amendment.  But here's my question.  Suppose you give government complete control over all money-raising to support political speech.  Then consider the phenomenon of the Clinton $500,000 speeches and the hundreds of millions raised by the Clinton Foundation, largely from the biggest corporations and wealthy foreign governments -- all completely outside the campaign regulatory process.  Can't everybody else then just copy that model?  So now we've done away with the First Amendment, only to find a completely cynical end run.  And how then do you do away with this end run?  Perhaps by making it illegal to pay anybody a large amount of money or to give any money to "charity"?  Well, that would be socialism all right.

And finally, here's something else that Justin thinks Sanders would do away with:

A system of unregulated, speculative finance that contributes nothing to society and in fact threatens to upturn it completely by triggering economic disaster.

I won't try to stand up for every aspect of our system of finance, but still, I'm fascinated by the fact that some people think it is "unregulated," and also that it "contributes nothing to society."   On the "unregulated" front, I do happen to have a copy of the Dodd-Frank legislation here on my desk, and it's almost too heavy to pick up, about 2000 pages in this printing.  That's just the statute, not the regulations, which are a multiple of the size, and still coming out today five years after the law was enacted.  I can say with great assurance that Justin has not read the Dodd-Frank law and regulations, because nobody has.  It's not physically possible to read it all in a lifetime, and if you could, you could not remember enough of it when you're done to be able even to give a comprehensible summary.  That's why we need hundreds of expensive lawyers, each to become expert in one little sub-part of the law.  And of course, Dodd-Frank itself is just a small part of the many statutes and regulations that cover the financial industry in this country.  Wasn't Dodd-Frank supposed to be the ultimate be-all-end-all answer to the supposed problem of "under-regulation" of the financial businesses in the U.S.?   What it actually demonstrates is the limits of the regulatory model.  The human brain is not capable of learning and complying with this much dense verbiage.  And Justin calls this "unregulated"!  By the way, all this "regulation" has little or nothing to do with market bubbles or their prevention, and even in the world of Dodd-Frank and twenty more such laws there will be more of them as surely as night follows day.

And finally we have the contention that our system of finance "contributes nothing to society."  Really?  I'll definitely have to have subsequent posts on this, but come on.  Our system of finance provides intermediation between millions of investors all over the world and tens of millions of homeowners to enable a housing stock far beyond anything previously known in the world.  Our system of finance enables vast saving for retirement independent of the government and use of those savings to finance factories, farms, offices and shopping centers around the world.  Our system of finance has created the venture and start-up culture that brought us the computer and the smart phone and the internet.  Our system of finance makes it so that a farmer can sell his crop before he plants it (to a speculator!) and be free of the wild price swings that regularly wiped farmers out in past generations.  Our system of finance makes it possible to go to just about any country and charge purchases on a card or withdraw local currency from an ATM with remarkably small losses in the exchange (a fraction of what the exchange losses were when I was younger).  Are there market bubbles that burst from time to time?  Sure.  They are a very small price to pay for the tremendous benefits of our modern financial system.  Really, I just can't get over that some people think the system "contributes nothing." 

UPDATE, September 11:  Word comes from Venezuela via Bloomberg News that opposition leader Leopoldo Lopez has been sentenced to 14 years in military jail for "inciting violence" in connection with his campaign in the 2014 "elections."  The sentence follows a year-long trial held in secret.  Question:  Is this the "authoritarian" or "non-authoritarian" version of socialism?

Can Somebody Explain The Bernie Sanders Phenomenon To Me?

About 25 years ago the Soviet Union collapsed.  For my whole lifetime up until then they had been loudly proclaiming the successful creation of the great workers' paradise, while not letting anyone in to see it.  When it fell apart, it was revealed that the experiment had been a disastrous failure.  The economy was about 10 - 20% the size they had been claiming, with a huge percentage of that (some said close to 50%) devoted to the military.  Factories were inefficient, worn out, and making the same stuff they had made thirty and fifty years previously.  The country produced literally nothing competitive  in the world marketplace other than extracted minerals like oil and gas -- in other words, their socialism had been a one hundred percent failure in keeping up with the change and innovation going on in the world, let alone providing for the material needs of the people.  Oh, and they had killed 25 million or so people as part of imposing totalitarian control.  Hey, if you want to make an omelet you have to break a few eggs!

OK that was a long time ago, before the birth of today's college students.  But we do keep Cuba and North Korea around today to remind us of how bad it was.  Plus we have Venezuela to show us what happens when you try to impose socialism on what had been a somewhat successful (if flawed) market economy.  Sure these guys try to avoid publicizing how bad their economies are.  But there's plenty of information about them out there for anyone who's curious, and they are a little big just to completely ignore.

And then we have the Bernie Sanders phenomenon.  The guy actually proudly calls himself a "socialist."  Could it really be that after the experience of the Soviet Union, and with Cuba, North Korea, Venezuela and others still out there, the concept of "socialism" is other than completely toxic?  Of course, it's the opposite.  It's not just that Bernie is drawing big crowds to make Hillary envious.  It's also that his self-proclaimed "socialism" is trendy among seemingly well-educated young recent college graduates otherwise known as "hipsters."

For example, we have Adam Gabbatt reporting in the Guardian on August 20 on "Millennials 'heart' Bernie Sanders: why the young and hip are #FeelingtheBern."   Gabbatt goes to a Bernie Sanders event in the Bushwick section of Brooklyn ("known for -- or lamented as -- being the hippest part of Brooklyn"), where some twenty-somethings have gathered to listen to a Sanders speech and make tee-shirts supporting their favorite candidate.  Gabbatt notes that the neighborhood remains "mostly Hispanic," but somehow everyone who makes it into his photograph is a white twenty-something.  Gabbatt interviews hipsters including one Nick Kowalczyk, a 29-year-old actor:

“Bernie Sanders uses socialism in the way it makes sense, which is just good, common, moral, ethical policy,” Kowalczyk says. “And I appreciate the guy’s honesty and his steadfastness to his beliefs. His consistency.”  

Well, that's certainly warm and fuzzy.  There are two possibilities here:  one is that none of these people have ever studied one word of the history of the twentieth century;  the other is that at every university in this country today the disasters of socialism are whitewashed and suppressed.

So what is this "just good, common, moral, ethical policy" that Kowalczyk is referring to?  You do have to give Sanders a little credit for at least having a web site where he lays out what he stands for.  (You'll never get that, for example, out of Hillary.)  Of course, he may be leaving a few things out.  For example, there's nothing here about nationalizing business.  Does he favor that, or is that not part of "socialism" any more?  No answer to that question here.  

A fair summary of the Sanders program is de Blasio-ism on a national scale.  There's endless railing against the injustices of the world (income inequality! racism! poverty! violence!) combined with limitless faith in government to fix these problems with programs, programs and yet more programs.  There's the usual socialist diversion of placing all the blame for the problems of the world on the speculators and hoarders, here known as "Wall Street" ("for the past 40 years, Wall Street and the billionaire class has rigged the rules to redistribute wealth and income to the wealthiest and most powerful people of this country").  There's no recognition whatsoever that we already have a trillion dollars a year of government anti-poverty programs that by his own assertion have not made the slightest dent so far in the problems he identifies.  And finally, of course, there are the proposed "solutions" that for a few more gazillions of dollars into the pockets of government bureaucrats either won't address the problems at all or are highly likely to make them worse.

Number one in Sanders's list of issues is of course income inequality.  A big chart shows the increasing share of the top 1% in pre-tax income.  And the number one proposed solution?  "Demanding that the wealthy and large corporations pay their fair share in taxes."  Should somebody tell the poor guy that doubling or even tripling the taxes won't change his chart in the slightest?  Other proposed solutions to income inequality include free college tuition for all (Do you believe that will have any measurable effect on the distribution of income?  I don't.) and a vast expansion of social security (Has anybody told him that it's already an unsustainable Ponzi scheme?). 

Then there's "creating decent paying jobs."  Who could be against that?  Turns out that every idea he has for "creating decent paying jobs" consists of government handout jobs programs.  ("Introduced the Employ Young Americans Now Act with Rep. John Conyers. It would provide $5.5 billion in immediate funding to employ one million young Americans between the ages of 16 and 24, and would provide job training to hundreds of thousands of others.")  If he has any recognition that real "decent paying jobs" have to be created by the private sector, you won't find that here.  Then of course he touts his opposition to all free trade agreements.  Does he acknowledge that the alternative to free trade is tariffs and trade preferences for the government's cronies?  Of course not.

There's a big section on "racial justice."  ("Communities of color also face the violence of economic deprivation. Let’s be frank: neighborhoods like those in west Baltimore, where Freddie Gray resided, suffer the most.")  Well, Baltimore and essentially every other city with the same types of problems in this country has been governed by left-wing Democrats peddling programs just like those touted by Sanders since beyond human memory.  When does it ever become time to take ownership of the failure of these programs?

There's more detail, but you get the gist.  Let's add another, and yet another, and then yet another government program until the world becomes perfect, without any critical examination of the vast expenditure already underway that has accomplished nothing.  And of course there is no limiting principle, no guiding star of any sort to tell us when the collection of programs has done all that it is capable of accomplishing.  We just keep going until the last bit of success has been stomped out of the economy.  But don't worry, there's a special exemption under socialism for families and cronies of the jefe to become billionaires. 

Yes, young hipsters, it's all so very inspiring. 

In Case You Thought The Chinese Know What They're Doing -- Part III

Spending hundreds of billions of dollars of state funds to support the stock market.  Spending more hundreds of billions of state funds to make new loans to failed businesses so that "zombie" factories won't close and keep operating with few to no customers.  Using state banks to allocate credit to businesses selected by the political leaders.  All these have been the economic policies adopted by the leaders of China in the face of the recent stock market downturn and revelations of significant overcapacity in major business sectors.  Could the economic policies followed by China possibly get any worse?

Yes!   For about the past two weeks there have been rumblings of the beginnings of criminal investigations against market participants for allegedly being the cause of the downturn.  This morning, the Financial Times has the latest in an article titled "China blame game spooks investors."  Seems like the economic genius powers that be in China, having never heard of the phenomenon of market bubbles, have decided that the downturn must have been caused by some combination of "malpractice, manipulation, and 'rumour mongering'."  They are in the process of rounding up the usual suspects:

The authorities have arrested, or investigated, several employees of brokerages, listed companies, and even the market regulator itself as they seek to tackle malpractice, manipulation, and "rumour-mongering". . . .  [O]fficial focus has shifted towards probing and punishing individuals and institutions the authorities believe took advantage of the state bailout to make profits, or who obstructed the government's attempts to shore up the market.

The FT reports that a prominent hedge fund head, Li Yifei (a woman) was "summoned" several days ago for meetings with the authorities, and hasn't been heard from since.  Then there was the reporter from Caijing magazine who reported (correctly) that the government was planning to scale back its massive stock market purchases.  He found himself forced to make a public confession on national television that his report had caused "panic and disorder" in the market.  Do they really believe that these kinds of witch hunts are somehow going to restore confidence in the markets?

Of course, it's exactly the opposite.  What they really should be trying to do is set up the conditions to encourage major outside investors to come in and start buying as soon as the market gets to appropriate valuations.  Instead, what they are doing is virtually certain to scare people off.  Investors have of course been spooked, and rightly so:

China has spent years courting foreign investors, in the hope that more institutional money would help anchor a retail-driven market long prone to bubbles and busts.  But many global funds -- even those long accustomed to China's erratic, opaque stock markets -- have begun pulling back.

It's all in the great tradition of economic ignoramuses who blame all economic problems on some kind of malign financial players, the "hoarders and speculators," the "greedy bankers," the Jews, whatever.  Like Chavez and Maduro in Venezuela, constantly announcing yet another crackdown against the hoarders and speculators, as if their own wild overspending, exchange controls, crony capitalism and currency printing had nothing at all to do with the economic problems.  Or Elizabeth Warren, who thinks that the U.S. economic downturn of 2008/9 was all the fault of "greedy bankers." 

In Case You Thought The Chinese Know What They're Doing -- Part II

Thomas Friedman of the New York Times has famously heaped praise on the autocratic leaders of China as that "reasonably enlightened group of people" who have sagely dispensed with the messiness of democracy so that they "can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century."  

The leaders seemed to be just so brilliant even as recently as a few months ago, as China's economy just kept growing at record pace quarter after quarter (at least, if you believed the official numbers).  Oh, a few naysayers had started to quibble around the edges, as by impolitely asking how the growing swarm of ghost cities was getting counted in GDP.  But that was then.  Now suddenly there is no denying that China has hit some major bumps in the road.  Its stock markets are down around 40% since June.  There are obvious gluts of steel, building materials, and many other products coming from China's factories.

The real test of a government's economic policy comes in how it acts during market downturns and corrections.  So now we're getting a chance to look at how the supposedly enlightened Chinese leaders perform under these conditions.  Although it's still early, they've already done plenty to make it possible to render a verdict.  And the verdict is, they don't have a clue what they are doing and are committing one huge blunder after another.  The errors are all of essentially the same sort, exactly the sort you would expect from a group of self-absorbed autocrats like these, namely that everything is geared to preserving and enhancing the power and image of those in power no matter what the cost in damage to the economy and  impoverishment of the people.  And all, of course, without any of the (however minimal) accountability that might come from a little democracy.

Several weeks ago (July 18), in the first part of this new series, I took note of the first inklings of the gross incompetence, when it came to light that the Chinese government had committed the equivalent of some hundreds of billions of dollars to propping up the stock market in an effort to stem the rout.  My comment at the time:

So, to protect their political image and narrative, the great leaders of China are in the process of transferring some 5% of GDP from their taxpayers and citizens into the pockets of stock market speculators, in a completely futile effort to prop up stock prices that with a high likelihood are destined to fall no matter what.

So, how has it gone?  The Financial Times (hey, I'm in London!) this morning reports the latest, in its lead article, "China ditches mass share buys after $200bn two-month spree."   According to the FT, it seems that after pouring a couple of hundred billion into stock purchases and seeing the markets barely stabilize, the government then eased off on the purchases early last week, only to see the markets immediately resume their rout.  Then the government got back into purchases on Thursday and Friday.  Why?

Traders and officials said the latest intervention was aimed at providing a "positive market environment" ahead of a military parade on Thursday to celebrate the 70th anniversary of the "victory of the Chinese people's war of resistance against Japanese aggression."

Two hundred billion from the taxpayers straight to the hands of savvy stock speculators and the only positive they were even trying to achieve was some image-burnishment for the leaders.  I mean, at least when the U.S. Congress and President decide to essentially waste $1 trillion on a "stimulus," we get a few new sidewalks and repaved roads to show for it.

And as more news comes out about Chinese economic policy in a downturn, the stock market purchases are only the beginning of the incompetence.  From the New York Times of August 29, we have "Zombie Factories Stalk the Sputtering Chinese Economy."   Excerpt:

Like many industrial cities across China, Changzhi, which expanded aggressively during the country's long investment boom, has too many factories and too little demand.  That excess capacity, many economists indicate, will have to be eliminated for the Chinese economy to return to healthy growth.  But rather than shut down, Lucheng Zhuoyue and other Changzhi companies are limping along in a kind of march of the undead. . . .   [T]he government and its state-owned banks sometimes keep money-losing businesses on life support by rolling over or restructuring loans, providing fresh credit, or offering other aid.

And there's more.  The government geniuses have also decided that they know the lines of business that the economy should get into now, and will direct investment to their cronies to get it done.  From today's Wall Street Journal Europe, "China's Xi Faces Mounting Crises": 

Over the past week, state media have touted a theory attributed to Mr. Xi that calls for an accelerated shift to higher-level manufacturing and away from steel and other industries with excess capacity.    

Something tells me that if the very-enlightened Mr. Xi had been running the U.S. economy in the 80s and 90s, he would not have come up with the internet, the smart phone, or the search engine.  He's doing exactly what will inevitably condemn his economy to long-term second-class status.  I guess we should thank him.  Up until now, there had been reason to think that China could be challenging the U.S. for world leadership at some point in the near future.

Back in Manhattan (where I will be returning shortly) it's not hard to see that the keys to today's success have been (1) letting the businesses of the past die, and (2) allowing private individuals to create new businesses that no government bureaucrat could ever have come up with.  We had the greatest and most active waterfront for shipping in the world; now it's entirely closed down.  We had hundreds of thousands of manufacturing jobs, now almost all gone.  We had the premier clothing manufacturing center of the world, now shrunken to near invisibility.  We had the corporate headquarters of a big plurality of the Fortune 500; most of them moved away.  (Who would possibly have thought that corporate headquarters would prove to be a low-value use?)  And most of the jobs worth having today are things nobody had even heard of thirty years ago.  Hedge funds?  Apps?  Search engines?  Digital advertising?  We would have had no place to put any of these things if we had used government power to preserve the low-value businesses of the past.

Good luck, Mr. Xi, if you think you and your little group of cronies are such geniuses that you can come up with the next thousand or so currently-unknown high-value businesses to put your billion plus people to productive work.

Maybe Those Rich People Actually Serve A Purpose

The cause of the moment on the Left is income inequality.  The rich must be vilified, and their wealth redistributed!  Different countries follow different prescriptions to achieve the goal.  In Venezuela they have mostly just driven the rich out of the country.  In France they have the tax on the "great fortunes" (a "grande fortune" being defined as 1.3 million euros, equivalent to approximately 3 CSUs or Clinton Speech Units).  In the UK, prospective new Labor Party leader Jeremy Corbyn has proposed bringing back the clause in the party's platform that calls for public ownership of "industry."   That one could have prevented even Warren Buffet from getting rich if only we'd had it in the U.S. at the right time.  After all, it's letting people own businesses that enables some of them to get rich.  Public ownership would be so much more fair.  Or as the next best alternative we could make it so that businesses can only offer such products, and at such prices, as the government allows (e.g., Obamacare).

And then along comes one of those great market downdrafts.  The price of oil has declined by more than half over the course of the past year, and may be staying at this new lower level for a long time.  The Chinese stock markets have fallen by some 40% since peaking in June 2015.  Other world stock markets have had steep but less severe drops, including a drop in the major U.S. market indices of over 10% over just a few days (although some of that has now been recovered).

So how do these events play out in countries following different economic approaches?    

In the U.S., it's simple:  lots of rich people have lost lots of money.  On Saturday August 22 Bloomberg News, using data from the Bloomberg Billionaires Index, reported that the world's 400 richest people had lost some $182 billion of wealth in the market downturn just that week.  Then on Monday August 24 they reported that the same people had just lost another $142 billion.   Well, nobody feels too sorry for them, nor should anybody feel sorry for them.  That was the deal.  We let them keep the upside, but in return they had to take the downside (or find somebody to sell to who would take the downside).  In the oil patch things are even worse for the J.R. Ewings of the world.  There's talk of many bankruptcies coming among recently-high-flying drillers and producers of crude.  Lots of people who were multi-millionaires a few months ago are getting wiped out.  Again, nobody should feel sorry for them.  

And how about the poor?  By definition, they don't own any meaningful amount of these assets that just declined in value.  They won't even notice that the downturn has occurred.  And the U.S. government?  Somewhere it will take a small hit in capital gains and oil taxes, but those are a very small part of its revenue.  Basically, it won't even notice either.

China?  Some of their billionaires are in that Bloomberg 400, and they have borne a portion of the declines.  But lots more has been borne by the state -- which means by everybody, even the poor.  There's the $483 billion that the Chinese state put up just in mid-July to prop up the stock market, over 5% of a year's GDP.  That's money that came from everybody, not just the rich.  Guess that didn't work out too well.  And then there's the immense overcapacity and overbuilding that has gone on in China, in industries from steel to consumer goods to real estate.  Ghost cities, anyone?  These things are the result of the state allocating and subsidizing credit to cronies to keep doing what has seemed so successful in the past, even after it is not any more.  Again, the whole of society is on the hook for the disaster, not just the rich.

Or take the far more extreme case of Venezuela.  When oil prices were over $100 a barrel, it seemed like such a good idea to have the state own the entire oil industry to collect the free money for the good of all of society.  Now the state itself is getting wiped out, and the people, down to the poorest, are losing everything they have saved in the country.  The government has stopped putting out GDP or inflation statistics, but a fair estimate is that GDP will decline by 30% or so this year.  They've taken to printing currency to pay the government's bills, and we all know where that ends.  Recently the largest bill they have has gotten to be worth only 14 cents at the black market (real) exchange rate, so it takes baskets of bills to buy anything.  But they have a solution:  they'll start printing bills in larger denominations!  That'll work for maybe a couple of months.

Meanwhile, as tough as things are in the oil business these days, somehow the sharpest entrepreneurs keep innovating at a breakneck pace to keep making money at lower and lower prices.  From Donald Luskin and Michael Warren in the Wall Street Journal on May 15, "The Shale Boom Shifts Into Higher Gear":

The nimblest and smartest competitors have worked relentlessly to increase their productivity. Leading-edge operators report that they can produce more profitably today at a price of $65 a barrel than they could at $95 a barrel three years ago. Where can they be profitable three years hence—$40 a barrel? $30? The oil patch today is afire with the same technological imperative and competitive mission that has powered the U.S. electronics revolution—think Moore’s Law—to dash headlong down the learning curve, crushing costs and prices and making up for it in volume.

Or then there's the oil business in the state ownership model in Venezuela.  From Mery Mogollon in Platt's, July 1:

Although officially the Venezuelan government says its production is around 3 million b/d, secondary sources and publications estimate a volume of 2.3 million b/d, compared to 3.5 million/b in 2008, one year after Chavez expropriated the oil fields owned by international companies and ushered in reforms. This was also the time when an exodus of engineers and other white collar workers began from PDVSA.  In addition to oil production, the human resources problem has impacted refineries at a time when Venezuela, formerly a net exporter, now needs to import oil products to meet domestic demand.

Somehow in socialism there is no longer an upside, only a downside, and the poor and middle class own it.         

UPDATE August 30:  I spotted this August 10 article in the Mail Online, pointing out that the richest person left in Venezuela is currently thought to be -- Maria Gabriela Chavez, daughter of deceased former strongman Hugo Chavez.  The Mail gives her wealth as $4.2 billion, held in banks in the United States and Andorra.  For its source, the Mail cites Miami-based El Diaro, which in turn cites "Venezuelan media sources."  I guess such rich as they still have in Venezuela are sufficiently well-connected to be insulated from the downside risk of the economy's collapse.  Then there's this quote from Chavez: "Being rich is bad."  For everyone but himself and his family and cronies. 

The Greatest Scientific Fraud Of All Time -- Part VII

With every passing month this just gets more and more bizarre.

So we're now deep into August, and the question on all of your lips has to be, where did July 2015 stack up in the world temperature history record books?

Checking first with the satellite records (that go back to 1979) we find that July 2015 was roughly a middling month.  Recall that these satellite measurements are worldwide, taken in the lower troposphere, with each equal volume of air counted equally.  Joe D'Aleo of the ICECAP website helpfully provided me this chart compiled from the UAH satellite data ranking the Julys of the last 20 years from warmest to coldest; July 2015 ranks ninth out of just these twenty, rather far behind number one, which is July 1998:

Checking next with US HCN (Historical Climate Network) data (going back to 1895 and covering just the U.S.) we find that July 2015 was again roughly a middling month.  This data comes from a network of ground-based thermometers in the U.S. only.  Tony Heller of the Real Climate Science website has compiled the data into this chart in which 2015 ranks 51st out of 120 years:

OK, dare we now check in with the guys at NOAA (National Oceanic and Atmospheric Administration)?  Here is their release of July 2015 temperatures.  These data are worldwide, again from a network of ground-based thermometers, although the density of coverage varies greatly from one area to the next.  The data here have been "adjusted" by so-called "homogenization" algorithms, which the bureaucrats in charge refuse to disclose the details of.  Key quote:

July 2015 was warmest month ever recorded for the globe.  Global oceans record warm for July; January-July 2015 also record warm.  

It's the hottest month EVAH!  And remember, these are the guys who previously loudly proclaimed that May 2015 and March 2015 were the hottest March and May on record respectively.  

So really, how could these different data sets be showing not just somewhat different, but wildly different results?

The increasing divergence between the UAH/RSS satellite records and the NOAA/GISS/HadCRUT thermometer records was the subject of a long comment posted at Watts Up With That in June by physicist Robert Brown of Duke University.  That comment deserves quoting at some length:

The two data sets should not be diverging, period, unless everything we understand about atmospheric thermal dynamics is wrong. . . .  [T]he growing difference is strong evidence of bias in the computation of the surface record. . . .  [E]very new version of HadCRUT and GISS has had the overall effect of cooling the past and/or warming the present! This is as unlikely as flipping a coin (at this point) ten or twelve times each, and having it come up heads every time for both products. . . .  If [the divergence between the data sets] grow[s] any more, I would predict that the current mutter about the anomaly between the anomalies will grow to an absolute roar, and will not go away until the anomaly anomaly is resolved.

In short, the divergence is just not plausible at this point.  My only quibble with Brown is that he is way too nice in using the word "bias" to describe what is going on with the NOAA/GISS/HadCRUT data sets.  I'm sorry, but there is no way this can be anything other than intentional reverse engineering to create an artificial warming trend.  What the divergence does is make plain to anyone who cares to inquire that the entire trend of increasing temperatures reported by NOAA/NASA has been artificially created by their "adjustments," which they resolutely refuse to explain.

So how is this subject reported in the news media?  CNN: "NOAA: July hottest month on record . . ."; no mention of satellite record or of divergence.   The Weather Network: "Earth Just Had Its Hottest Month of ANY Ever Recorded"; no mention of satellite record or of divergence.  Science Daily:  "July 2015 was warmest month ever recorded for the globe"; no mention of satellite record or of divergence.   USA Today: "July was Earth's hottest month ever recorded"; no mention of satellite record or of divergence.  Slate:  "July Was Earth's Hottest Month Ever Recorded"; no mention of satellite record or of divergence.  LA Times:  "July was warmest month on Earth in 136 years, NOAA says"; no mention of satellite record or of divergence.   UN Climate Change Newsroom (OK, you knew you couldn't trust these guys): "July 2015 Hottest Month Ever Recorded"; no mention of satellite record or of divergence.  Time: "July Was The Hottest Month Ever"; no mention of satellite record or of divergence.   CBS News: "July was Earth's hottest month in recorded history"; no mention of satellite record or of divergence.  Fortune: "July was the hottest month in the hottest year on record"; no mention of satellite record or of divergence. BBC: "July was Earth's hottest month on record, NOAA says"; no mention of satellite record or of divergence.   ABC (Australia): "Global warming: World sweats over July breaking warmest month record, 2015 hottest year so far"; no mention of satellite record or of divergence.  Washington Post: "July was the hottest month in Earth’s hottest year on record so far"; no mention of satellite record or of divergence.  AP: "Feeling the heat: Earth in July was hottest month on record"; no mention of satellite record or of divergence.  Reuters: "July was hottest month recorded worldwide: U.S. scientists"; no mention of satellite record or of divergence.   The Independent (UK): "Climate change: July was the Earth's hottest month on record – while 2015 could be the warmest year, scientists say"; no mention of satellite record or of divergence.  Bloomberg News: "July Was Earth’s Warmest Month in Records Going Back to 1880"; no mention of satellite record or of divergence.  

Really, you could go on literally as long as you want with this.  How stupid do these people think we are? 

Brown predicted that the current "mutter" about the "anomaly between the anomalies" will shortly be turning into a "roar."  It certainly should.  Actually, it should have already.  But remember that all the climate reporters at all those mainstream media outlets are perfectly aware of the satellite records and of the divergence between the satellite records on the one hand and the "adjusted" NOAA/NASA records on the other.  And to a person they are intentionally suppressing any mention of the satellite records or of the divergence.  It's remarkable, but it's how groupthink works.  Anybody who mentions the actual facts is subject to being shamed, ostracized, and run out of the profession.  See, Larry Tribe.  The whole affair is an embarrassment to the profession of journalism.

To review parts I through VI of this series on "The Greatest Scientific Fraud Of All Time," go here.