This is why we like Ilargi and Stoneleigh at the Automatic Earth:

"Ilargi: When the New York Times starts publishing articles on how bad the financial crisis really is, despite all the green recovery shooting stories sprouting from government circles and media such as, among others, the New York Times, I'm going to have to guess that it's official now."

 June 27, 2009: Is That the Sound of a Baton Dropping?

 http://theautomaticearth.blogspot.com/2009/06/june-27-2009-is-that-sound-of-baton.html

Ilargi is commenting on two NY Times financial reporters, Floyd Norris and Bob Herbert. Herbert's op-ed "No Recovery in Sight" and Norris' article "Off the Charts: A Recession Measured by New-Home Sales" both appeared in June 26, 2009 in the NY Times online:

 Watch out for the pop ad... it's annoying:

http://www.nytimes.com/2009/06/27/opinion/27herbert.html?_r=2

http://www.nytimes.com/2009/06/27/business/economy/27charts.html

Let us let Ilargi, a person with a written history of clarity summarize this:

"Can the editorial staff wash their hands clean of revered writers like Floyd Norris and Bob Herbert? Or should we perhaps look at this from another angle? Is the Times changing its stance on the entire Obama government politics? Is it going to give up the noble art of cheerleading? Is that the sound of a baton dropping?

Herbert's piece is entitled: "No Recovery in Sight". Some quotes:

• There are now more than five unemployed workers for every job opening in the United States.
• Economists are currently spreading the word that the recession may end sometime this year, but the unemployment rate will continue to climb. That's not a recovery. That's mumbo jumbo.
• There were roughly seven million people officially counted as unemployed in November 2007, a month before the recession began. Now there are about 14 million.
• By May 2009, [..] the total number of underutilized workers had increased dramatically from 15.63 million to 29.37 million -- a rise of 13.7 million, or 88 percent. Nearly 30 million working-age individuals were underutilized in May 2009, the largest number in our nation's history".
• Three-quarters of the workers let go over the past year were permanently displaced, as opposed to temporarily laid off. They won't be going back to their jobs when economic conditions improve."

Me: Yeah, the problem with the BLS U3 unemployment measurement which is well addressed at John Williams' Shadow Government Statistics:

http://www.shadowstats.com/alternate_data

... and we shall take some time in the future to document changes (manipulations) in the measure of unemployment and statistical tampering in the future...

Back to Ilargi:

"Those are serious points, and there's nothing green about them. They're also bordering on a direct attack on everything rosy that Obama and his administration have been claiming lately. They fall about 0.0001% short of painting the president as a liar."

Me: No mincing words or analysis with Mr. Ilargi...

"Floyd Norris's "A Recession Measured by New-Home Sales", also in today's edition of the Times, has this:

• There have been bad housing markets before, but never in post-World War II history has the market for new homes suffered as badly as it has in this decline...

(There is more, here)...

• Of the 135,000 completed but unsold new homes at the end of May, nearly half had been sitting for a year or more. The median age of such homes was 11.5 months, an unprecedented figure."
  

Me: Ilargi's punch line:

"For those among you who read websites like The Automatic Earth, there is nothing here that wasn't already known and obvious. The same is not true for the average reader of the New York Times. And that, when you come to think of it, is completely insane. After all, why do people read a paper? To find out what's going on, or to see confirmed that la-la land still exists?

These numbers don't suddenly come falling out of the sky in broad daylight. They merely depict an ongoing trend that is worsening fast. That last part is temporarily hidden behind a $13.8 trillion veil, but all that has achieved is for the worsening trendlines not to hit exponential territory. It hasn't stopped the numbers themselves from deteriorating."

Me: This is true. The numbers are posted and analyzed by numerous individuals, all smarter in their fields, with more time, financial experience and writing talent than I will ever posses, Yves Smith at Naked Capitalism, Tyler Durden at Zero Hedge, Karl Denninger at The Market Ticker, Bill the Brain at Calculated Risk...

Back to Ilargi:

"And it should be clear that the next $13.8 trillion will be much harder to find. And that it won't be able to stop the deterioration either. It will at best halt the plunge in mid-air for another painfully expensive fleeting moment in time.

People have a right to know what's truly going on in their societies, rather than fall prey to the interests of politicians and financiers that are better served by hiding what's real. The situation is about to get a whole lot worse, and people deserve the right to make preparations for that as best they see fit."

Me: See this story about Congress members on the House Financial Services Committee make stock trades on banks beneficial to themselves in he midst of negotiating bailout to those very same banks:

From the Cleveland Plain Dealer:

Members of U.S. House Financial Services Committee snapped up or dumped bank stocks as bottom fell out of market

http://blog.cleveland.com/metro/2009/06/members_of_us_house_financial.html

Back to Ilargi:

"The ongoing refusal to inform them of what's real and what is not, perpetrated by governments, media and industry, is a disgrace. It's not how a civilized society treats its citizens. Perhaps the New York Times today put a first step on the path to doing what needs to be done. Not that I'm not skeptical about it."

Me: Ouch...

Can it be that Obama head economic stooge Larry "the Moe" Summers is running out of "Green Shoot Lime" Obama Kool-Aid? Was it not just last week that Moe and Larry (Summers and Geithner) were op-ed opining in the Washington Post? Spent a lot of Kool-Aid on that one, boys?

Ilargi and Stoneleigh

Ilargi and Stoneleigh are realists. Formerly of  "The Oil Drum", Ilargi cuts through rhetoric daily while his writing partner Stoneleigh posts to the Daily Kos on occasion:

http://stoneleigh.dailykos.com/

Both are always worth reading... Ilargi's early 20th century photos heading the blog appear to be from the Library of Congress. Those history buffs out there will enjoy the photo slice of Americana. Those resource economics officinatos will enjoy Ilgari's view that growth is not exponential and unlimited. It performs more like Logistical Growth... you know, every environment has a carry capacity that can not be exceeded?

It has often been my humble view that economists fail to follow their own rules.... like the Law of Diminishing Returns. But then again I wonder about calling a social study a social "science" when it takes 24 feet of black board to write a mathematical formula to describe an economic principal.

Diminishing returns apply to more than the typical first microeconomic course treatment. Imagine Ben Stein of the Ferris Bueller era... a farmer plants an acre of corn. Plants his best acre, uses his best seed, puts in his best effort and gets X amount of corn. So he plants a second acre expecting 2X corn but the second acre produces less than X...

Why? He planted his second best acre, with the next best available seed and now had to expend the effort on two acres instead of one.... Hence, diminishing marginal return for every additional unit of resource employed. But debt and interest can grow exponentially for ever with out bound? Economies can continue to grow at 3-5% on every economic forecast from the late 20th century until... well ... post September 2008, with out bound?

One of my few dumb jokes I lifted from some source somewhere:

"The purpose of economic forecasting is to make astrology look good." Anonymous.

I will try to find the real author for credit...

It just doesn't apply to acres of corn or industrial production either. Think about it.

• We pay more and more money into education and get less out of every additional dollar we pour in.

• We pour more and more money into health care and get less out of every additional dollar we pour in.

 • We pour more and more money into the military and get less out of every additional dollar we pour in.

• We pour more and more money into law enforcement and get less out of every additional dollar we pour in.

 • We pour more and more money into financial regulation and get less out of every additional dollar we pour in.

 • We pour more and more money into the government in general and get less out of every additional dollar we pour in.

This my friends, is the Law of Diminishing returns. Are diminishing returns related to the complexity level a society is limited to? Is a society's complexity limited by its technology?

As Stoneleigh pointed out in "40 Ways to Lose Your Future,"

http://theautomaticearth.blogspot.com/2009/06/june-17-2009-40-ways-to-lose-your.html

 " Hard limits to capital and energy will greatly reduce socioeconomic complexity (see Tainter)"

Me: Stoneleigh is referring to Dr. Joseph Tainter, anthropologist by degree, archeologist by specialization. Dr. Tainter's book "The Collapse of Complex Societies" is a text book, but affordable, a little dense but very informative.

 http://www.amazon.com/Collapse-Complex-Societies-Studies-Archaeology/dp/052138673X

When Dr. Tainter states collapse, he does not mean collapse like the Roman Empire specifically. Collapse means a reduction in complexity with in the society...

Complexity is measured by the number of defined roles with in the society. Societies run from groups, to clans, to chiefdoms to organized modern societies. What separates us from a tribe or clan is giving up our autonomy to a state or government. i.e. giving a government or state life and death power over us. Like criminal laws, military conscription, execution for desertion, etc. In these circumstances, we have surrendered the power over our own life to the state.

Now count the roles, leader, food gatherer, hunter/self defense member, child. Pretty simple.

Now think of all the occupations and roles in current US society, from Wall Street scammer... I mean financier, to Congressional Aid, to Principal Accounting Technician, to Program Administrative Analyst IV... well you get the drift. Collapse can mean from some current 20k distinct role society... maybe down to 10k roles. Maybe auto manufacturer and used mortgage salesman and mortgage backed securities analyst fall by the wayside.

Would America be worse off with 1 million less salesman all vying for the zero sum gain of tricking you by hook or by crook to pay more for your mortgage than you otherwise would if the truth be told?

You think that is a false analogy? Guess what?

6 out of 10 Americans did pay too much for mortgages between 2004 and the present than they had to if banks and mortgage brokers had been forced to follow the laws on the books. And we won't even get into Wall Street's role in these top down MBS frauds.

So, to Tainter, collapse means simplification usually due to strategies for energy capture. In agrarian societies, how much energy in acres of food production is required to support all of those who do not raise food to feed themselves, but engage in other roles in society. That is how you measure if a society has a successful strategy for energy capture. Does the society have the ability to feed all the people necessary to run the society at its complexity level that do not produce food and energy for say... heat.

It is viewed as progress that a small percentage of US society is involved in food production and home heating so the rest of us can be involved in more profitable pursuits for ourselves and then benefit our society with further productivity and innovation.

But what if it takes 10 calories of fossil fuels to produce, processes, refrigerate and truck to market one calorie of food?  That is a pretty major net energy negative. As long as there is easy to get cheap oil, then this system is economically feasible. What happens when the cheap, easy, sweet, light crude diminishes and we have to hunt from hear to the arctic looking for easy to refine non sour crude? Can't just pump it out of McCamey Texas anymore.

That is when the energy capture of food by the massive, corporate, industrial, petro chemical industry becomes too difficult and non economically sustaining. Dr. David Goodstein. Professor of Physics at CalTech wrote a very readable brief book on the subject. Physicists tend to study energy and work and all those mind numbing equations.

http://www.its.caltech.edu/~dg/

The Book: "Out of Gas: The End of the Age of Oil"

http://www.amazon.com/gp/product/0393326470

If you prefer videos:

http://video.google.com/videoplay?docid=5763291727572188135

Like I say, the guy studies energy, work and its usage. Goodstein, Tainter, Ilargi and Stoneleigh... what I learned during summer vacation...last year.

Back to math...