Shocked and Persuaded


Separating Fact From Fiction

The SPADE Defense Index

So I just finished an amazing book by Naomi Klein called “The Shock Doctrine”, which basically chronicles the dark side of capitalism via the actions and thinking of folks like Milton Friedman, Friedrich Hayek, Eugene Fama, and Jeffrey Sachs. Anyway the book is revealing and pokes lots of holes in the Efficient Market hypothesis of Fama and Adam Smith’s “Invisible Hand”. Ms. Klein mentions in passing the SPADE Defense Index, which according to

“…is a modified market capitalization weighted index, comprised of publicly traded companies that seeks to measure the performance of securities in the defense, homeland security, and space marketplace.”

For those that deny the existence of the Military Industrial Complex (MIC) described by Dwight D. Eisenhower as he left the oval office I think I can prove empirically that the SPADE Index demonstrates the naivete of such a view (See Figure).


Between the end of 1997 and September 10th 2001 the SPADE rose by 107%, but between 9-11 and 9-14-2009 it more than doubled (205%). Overall the SPADE has grown by 233% since it’s origination in December of 1997. So whats so important about these data? Well looking at the Dow Jones Industrial Average (DJIA), S & P 500, and NASDAQ we see that they grew by 103%, 99%, and 90% respectively between December of 1997 and 9-11. These trends are well alligned with what I described for the SPADE during the same time period. Heres the rub these indices only grew by 111%, 103%, and 142%. It is understandable that the NASDAQ would outpace the DJIA and S & P 500 as it was operating from a lower base. We are seeing that this country is relying more on the financial services and war profiteering industry 2 nefarious and wealth concentrating sectors of our economy. I must wonder where the outrage is? We have been conditioned to believe that all of us can have a big piece of the pie when infact the folks that pull the strings of these industries would in no way allow such an event to occur. It would be called wealth redistribution and we know what the neoconservatives and evangelical right-wingers think about such a prospect. The SPADE provides concrete evidence that we are moving towards a society that embraces Frederick the Great’s belief that “Diplomacy without war, is like music without instruments.” For those that think that Bush, Cheney, Rumsfield, et al’s fingerprints have been removed from the dialectic I call your attention to the Supreme Court and the SPADE’s trajectory.

The Conflict Within

“Even as Islamist terrorism grabs the headlines, more familiar varieties cling stubbornly to existence. It would be a brave man willing to bet where the next attack will come from.”

This is a quote from an article titled “The Airline Bombers: Bang to Rights” in the September 12th-18th 2009 edition of The Economist ( However, given a recent and very disturbing story emanating from from a town called Big Creek in Clay County, KY this quote could easily be superimposed on the current moral and political divide in this country (; Bill Sparkman a Boy Scout leader and substitute teacher was found dead, naked, and gagged in the Daniel Boone National Forest, with a rope hung around his head and looped over a tree. The coroners believe that Mr. Sparkman was dead prior to being hung as his feet were in contact with the ground. One of the more disturbing aspects of this story is that Mr. Sparkman a part-time census field worker was found with the word “FED” written across his chest with red ink. Folks at New America Media noted that a blogger named “Hill Jill” an appalachian resident was defending her region on the Daily Kos:

“This does not strike me as a “native” crime. A native might shoot you, I won’t argue there-but they would not do the whole elaborate staged crime scene.”

This is something I would whole-heartedly agree with and having worked in Northeastern Kentucky and much of Western West Virginia I know that there are plenty of folks in this region that are pissed that they are immediately conflated with the folks in Deliverance. Yet, there is a problem here and unfortunately The Times has not deemed it worthy of sending someone to the region relying instead on AP reports. Yet, apparently the Roman Polanski story is worthy of round-the-clock editorials and in-depth coverage. Why is this so scary? Well because we need to know how many people are in this country and census workers in no way reflect the Big Brother image promulgated in this country since Orwell’s “Nineteen Eighty-Four”. I must wonder why the coward that killed Mr. Sparkman didn’t revolt against the Bush administration’s constant probing of our phones, emails, and if they had their way our bedrooms? Why did the coward who killed Mr. Sparkman not revolt when the 2000 election was literally stolen from the people of this country by Antonin Scalia et al.? Why did the coward who killed Mr. Sparkman not revolt when his or her taxes were used to bail out a bunch of criminals on Wall Street?

I think the reason he or she didn’t revolt is because this country has transformed from the United States of America into nothing more than a bunch of “tribes with flags”, which ironically was coined by Tahsin Bashir to describe the 22 Arab states of the Middle East and Africa ( I think if we were to lift up all the rocks surrounding the crime scene in Big Creek we would be mightily disturbed by what we find. But here in this country the truth more often than not doesn’t set you free, rather it gets you jailed, fired, or relegated to the marginal fringe. It is a shame because what happened in Clay County, KY last week is a symptom of a great sickness that appears to be spreading. It will be easier to address this issue now rather then later. This will require us to engage in thoughtful inter-state dialogue with the politicians and lobbyists locked out, because all they seem to want to stoke rather than quash divisiveness.

The lack of attention this story has received in favor of more titillating and irrelevant events is a shame but in no way surprising. Accountability is something we need to demand of our politicians and current-event purveyors alike.

Peak GDP

It seems that we may be hitting the point the Romans and many others inevitably approached and violently surpasses. It is the point at which our cumulative GDP growth has flattened out while population growth continues to grow albeit at a mild rate.

To the right you see a graph of the ratio of Cumulative Annual US GDP to Population Growth from 1930 to 2008.


This ratio did not become positive until 1940 on the eve of WW II and spiked at the war’s conclusion in 1944-45. At this point this ratio began a steady decline to a low of 4.52 in 1963. While it experienced a bump between the 60s and late 90s it has remained relatively flat between 1950 and 2008 deviating very little from it’s ~60 yr average of 5.43.

Another way of looking at this “Economic Ceiling” is from an agricultural perspective. I have plotted the Yield to Nitrogen (N) Applied ratio for Corn here in the US from 1943-2007. On the Primary Y- and X-Axis the relationship for the raw data is shown, while the Secondary Y- and X-Axis depicts the relationship on a log scale. We see two things here: 1) the shape of the relationship is dependent on how the data is presented and 2) the raw data demonstrates quite conclusively that we have reached a similar asymptote to that described above for our economy relative to population growth. This is a disturbing trend given our over reliance on corn here in the US. GMOs and fertilizer technology will only be able to do so much in fighting this apparent biological inertia. The rest of the quagmire will require a new paradigm if it is to be fixed. That should include a gradual transition to a more diverse produce and dry goods food economy in keeping the the proselytizing of Michael Pollan. However, alot of this will involve tough medicine, which should start with decreasing national obesity from it’s current rate of 33% to 15% or what it was in 1980. This may sound quixotic but really it is a necessity and weening ourselves off our addiction to High Fructose Corn Syrup would probably put a 5-7% dent in our national obesity on it’s own.


It is high time we start to seriously discuss the idea that Eugene Fama’s “Efficient Market Hypothesis”, Adam Smith’s “Invisible Hand”, and Milton Friedman’s “Shock Doctrine” are a thing of the past designed solely to benefit the top 0.1-0.5% of the G20, G8, or OECD. We must turn our attention to what I will call an Asymptotic Economic Hypothesis or the Steady State Economy ( acknowledging the ubiquitous influence of Keynes’s “Animal Spirits” and the fact that nothing grows forever.

economic-growthIt would be absolutely acceptable if we didn’t shift towards an economy with strict ceiling and floor constraints BUT if we do our children will be very mad at us!