Sunday, July 31, 2011

What kind of fool was I?

Never found a compromise
Collected lovers like butterflies
Illusions of that grand first prize
are slowly wearing thin
Susy baby you were good to me
Giving love unselfishly
But you took it all too seriously
I guess it had to end

I was only joking my dear
Looking for a way to hide my fear
What kind of fool was I
I could never win

I was only joking | Rod Stewart

When I was in my early teens, I used to pour over album liner notes hoping to glean deep and wonderful secrets to the meaning of life and living from the philosopher song writers that I revered and cherished. Then I figured out they were just druggie kids that could spin a tune.

When I was in my early twenties, I used to pour over investment publications from Wall Street firms hoping to glean deep and wonderful secrets about business and industry and how the world economies worked. Then I figured out they were mostly coked up MBAs who never managed a real company or labored in a free market in their whole life.

When I was in my early thirties, I used to read the Fed publications hoping to glean an understanding of the macroeconomic models by the brain trusts that set interest policy for the world and arguably had more influence over the citizenry than the President of the USA. Then I figured out their models sucked, that macroeconomic theory is a lot like a religion, and that they in fact have really no idea WTF they are doing, but they are controlling interest rates and printing money.

I'm not sure why it took me so many decades to figure out that there is no brain trust that people can rely on. And maybe my naivete bespeaks a dark inner need to appeal to authority for direction or assurance, forever doomed to disappointment. Or maybe I was just erroneously taught that famous and influential institutions innately deserve our respect and compliance.

Whatever the cause or effect, I am sure my story is a common one. It is not like I'm recounting some outlier tale here, the product of some wayward cultural or psychological phenomenon.

What I do know is that since my admittedly belated epiphanies, I have been a strong proponent of flatter hierarchies and free markets ever since.

Zandi: Proposed deal should avoid downgrade

Former Moody's top economist Mark Zandi says he's quite "excited" by the framework of a debt ceiling deal being discussed Sunday-- and believes the certainty of substantive deal will lift markets and head off a downgrade from the nation's AAA credit rating.

"I'm not in the rating agency... but listening to what they have to say, I think this would be sufficient... but this is substantive and should avoid a big downgrade," said Zandi, adding that some agencies "may go down a different path."

Source: Zandi: Deal should 'avoid' downgrade - POLITICO Live -

Let me see if I get this right; double the deficit in 2 years. Run up more debt than in the history of the country. Promise to pay none of it back in 10 years, just slow future spending. Keep your rating, and you are good to go.

I get it. I really do.

Saturday, July 30, 2011

Lisa Benson

Lisa Benson has talent. Huge talent. Follow the link to see more.

Spending vs. regulation for job creation

The smartest guys in the room advocate more government spending and higher debt to 'create more jobs.'

I dare you to watch these two videos one after the other. Tell me which one makes more sense.

Or we could just get rid of regulation and licensing that prevents entrepreneurs:

Which approach do you think would provide more jobs?

Tainter and the professional class and denying entrepreneurial activity by the poor

In his book titled The Collapse of Complex Societies (New Studies in Archaeology), Tainter argues that complex societies collapse because devolving becomes impossible. Those layers of bureaucracy and stratification of professionals and regulation become such an inflexible warren that unwinding them becomes impossible. Like large failing firms, orderly downsizing is impossible. The bureaucracy and overhead has devoured the last marginal value and the increased complexity just adds cost. Collapse eventually becomes the only possible avenue to simplify.

Complex societies collapse because they become too inflexible to respond. They fail to downsize not because they do not want to, but because they can not do so.

The topic of license provides real world examples of this phenomenon. Licensing does not just add cost to would be entrepreneurs while providing protective barriers for existing providers. It forces providers to incur extra overhead costs for government inspection and paperwork. But it also forces overhead from the professional class in the form of tax accountants and legal fees and the like, all supposedly meant to protect the customer. But what is the exposure to the customer in the overwhelming majority of these industries? What is the exposure to an unlicensed tax driver or hair stylist? A decrepit car ride to the wrong place? A bad hair cut? A terrible meal?

Remember that the provider has significant incentive to provide value for their service. If they do not, their customers will go away. Do we really believe that significant orders of magnitude of overhead adds an equal measure of security?

So we are left with the question of whether the professional class is actually adding any marginal value to the transaction between provider and customer. Especially as the regulation increases in complexity, most often to protect the professional from their own version of liability, the supposition is easily made that a great portion of the professional class long ago became a non-value added tax to the society in which it thrives. It owes its existence to the complexity of government regulation and licensing, without which the entrepreneur would fill out their taxes on the back of a post card, and perhaps never speak to a lawyer in their entire life time.

As in the earlier article regarding a class society, we see that after we get past the fallacious argument of worker vs. capital, that it is a plodding and bureaucratic state that perpetuates the poor and their ability to produce and climb the ladder to financial security. And while the smartest people in the room continue to debate how it was possible for the auditors and the SEC not to have noticed that Lehman was bankrupt, the more practical question to our ongoing welfare as a nation must be whether we need such professionals to enter into virtually every transaction between provider and customer on the planet. Surely we are approaching Tainter's inflexible societal paradigm when even a haircut requires a government official and a lawyer. Where is the marginal value in that?

More: CARPE DIEM: IJ Challenges Atlanta's Street Vending Monopoly

Declaration of Independents

I could not have said it any better myself.

“Declaration of Independents” is suitable reading for this summer of debt-ceiling debate, which has been a proxy for a bigger debate, which is about nothing less than this: What should be the nature of the American regime? America is moving in the libertarians’ direction not because they have won an argument but because government and the sectors it dominates have made themselves ludicrous. This has, however, opened minds to the libertarians’ argument.

Source: George Will Declaration of independents - The Washington Post

Refreshing book well written, from a perspective one step back from the normal journalistic myopia.

The Declaration of Independents: How Libertarian Politics Can Fix What's Wrong with America

Obama and the class society

Mr. Victor Davis Hanson writes an article on class warfare, concluding:

Quite simply, Barack Obama will be remembered not so much for being the nation’s first African-American president, or even the man who ordered the killing of Osama bin Laden, or even for his Obamacare, but as the president who grew government the largest, ran up the largest deficits during any presidential tenure, and laid out most candidly and confidently the argument of why the United States is an intrinsically unfair society and how that must be remedied by government.

Source: Behind the D.C. Slugfest - By Victor Davis Hanson - The Corner - National Review Online

Mr. Hanson's thesis is correct; the progressive meme is primarily built on the Marxian notion of class struggle; that the worker is forever pitted against capital and the bourgeoisie. Of course, this meme is attractive, prominent and utterly and totally incorrect.

For history is the story of freedom. It is the story of individuals' ever growing liberty to choose their vocations and follow their dreams as a worker or entrepreneur, against the ever present danger of state and bureaucratic encroachment which always threatens our freedom and impoverishes us. Capital will follow any good idea. It is not against the worker; it is for any idea, and in free societies anyone is free to have one.

America's economy according to the Economist

I used to like the Economist magazine. I liked how it was smart, energetic and thoughtful. But since its change in management, what a piece of tripe it turned into.

Of course, the previous underuse of countercyclical policy suggests that it's more important than ever to get policy right now. Unfortunately, Washington is failing miserably on this score. Policy stances that were inadequate before now look dangerously tight. The Federal Reserve should have all the excuse it needs to reconsider its decision to halt purchases of government assets. Despite all the warnings about inflation, the core Personal Consumption Expenditures price index, which the Fed follows closely, rose just 1.3% in the year to the second quarter. That's far too low.

Meanwhile, Congress' behaviour looks incredibly reckless in light of new figures. This publication has argued consistently that while America needs to address its medium- and long-run fiscal challenges, immediate austerity would be a mistake. The dire economic situation undergirds this point: Washington should delay immediate fiscal cuts. Indeed, it ought to be spending more now and revisiting the possibility of a payroll tax cut.

Source: America's economy: Distress signal | The Economist

That may be the last article in the Economist I ever read. Someday I will tear the old Keynesian measurement of GDP apart. There is no such thing as macroeconomics as long as economists think like witch doctors.

Friday, July 29, 2011

New NASA Data Blow Gaping Hole In Global Warming Alarmism - Yahoo! News

New NASA Data Blow Gaping Hole In Global Warming Alarmism - Yahoo! News:

"NASA satellite data from the years 2000 through 2011 show the Earth's atmosphere is allowing far more heat to be released into space than alarmist computer models have predicted, reports a new study in the peer-reviewed science journal Remote Sensing. The study indicates far less future global warming will occur than United Nations computer models have predicted, and supports prior studies indicating increases in atmospheric carbon dioxide trap far less heat than alarmists have claimed."

Well, well, well. How surprising is that?

Not so much.

Saturday, July 23, 2011

The Art of the Deal or How to negotiate a rise in the debt ceiling

The AP writer calls these negotiation tactics 'shifts.' I would call them something else.

WASHINGTON (AP) -- The roller-coaster debate over raising the nation's debt limit has forced the White House to explain away, brush aside or even ignore declarations by President Barack Obama and aides that no longer served much purpose in the unpredictable negotiations.

Source: News from The Associated Press

How do you negotiate? I suggest any negotiator would tell you that if a deal is the goal, then erratically changing one's position is counter-productive; irrationality does not allow the other party to predict where you are signalling you are headed or anticipate what you might be ready to accept.

First, the White House wanted a congressional vote separated from spending cuts. Now the administration likes them linked.

Obama said he would reject any short-term deal to raise the borrowing limit. Now the White House says he could make an exception.

He pledged to meet with congressional leaders every day until a deal was reached. But the daily meetings stopped or at least disappeared from his schedule. He did summon lawmakers to the White House for talks Saturday after the top House Republican walked out Friday night.

The AP goes out of its way to ascribe Obama's tactics as an intelligent sign of flexibility. To anyone who has successfully negotiated a deal of any importance, I say poppycock.

Thursday, July 21, 2011

Exit Interview with Elizabeth Warren

Exit Interview: Elizabeth Warren: 'I’m Not Through Throwing Rocks' - Political Punch:

President Obama today nominated former Ohio Attorney General Richard Cordray to be director of the Consumer Financial Protection Bureau. We caught up with Elizabeth Warren – the woman whose idea the bureau was, and who has helped set up the agency – to get her thoughts in something of an exit interview (though she isn’t leaving immediately).

Money quote:

WARREN: I think the part I’m most proud of is that we took an idea that said there’s a system out there that’s broken –- there are 19 federal statutes administered by seven different agencies; everybody’s responsible and therefore nobody is responsible to the American consumer, no one is looking out for American families. And we took an idea and said, "You know what we can do? We can be more efficient, we can be cheaper, we can be more effective if we put this into one agency and then hold them accountable for getting the job done." We’ve started that. We’re under way.

Efficient markets depend on simple, clear signals and information. Convolution only increases bureaucracy and makes room for fraud. At the outset, I applaud Warren's goals.

But then I wonder how she resolves what I consider to be the cognitive dissonance of her writing about the middle class:

The upshot is that two-income families often have even less income left over today than did an equivalent single-income family 30 years ago, even when they make almost twice as much. And they go deeper in debt. The authors find that it is not the free-spending young or the incapacitated elderly who are declaring bankruptcy so much as families with children. ... their main thesis is undeniable. Typical families often cannot afford the high-quality education, health care and neighborhoods required to be middle class today. More clearly than anyone else, I think, Ms. Warren and Ms. Tyagi have shown how little attention the nation and our government have paid to the way Americans really live.

Source: Economic Scene; Necessities, not luxuries, are driving Americans into debt, a new book says. - New York Times

For surely it could not have escaped a person of Ms. Warren's talents that all of the sky-rocketing costs she cites are entirely controlled or directly delivered by a large government which is by any measurement growing faster than society can afford.

The dissonance is compounded by the fact that the private sector has produced lower prices in everything else. Perhaps most importantly, the mess she is determined to clean up is absolutely the product of meddling politicians.

I would love to hear her thoughts on the matter.

CARPE DIEM: ECON 101: Protectionism for Dummies

CARPE DIEM: ECON 101: Protectionism for Dummies: "In his latest article 'The Social Snobbery of Free Trade' Ian Fletcher goes on yet another of his trademark anti-trade, protectionist tirades, claiming now that free trade advocates are snobs who look down on protectionists as 'dummies, losers, incompetents, hippies, rednecks, dinosaurs, closet socialists, or crypto-fascists.'"

Euro Zone bureaucracy proposes more power will rescue Greece

Euro Zone Leaders Clinch Rescue Plan for Greece

BRUSSELS — After weeks of uncertainty that revived fears about the foundations of the euro, European leaders on Thursday clinched a new rescue plan for Greece that could push the country into default on some of its debt for a short period but would give Europe’s bailout fund sweeping new powers to shore up struggling economies...

More significant, the euro zone leaders gave wide-ranging new powers to the bailout fund, the European Financial Stability Facility, by allowing it to buy government bonds on the secondary market and to help recapitalize banks where necessary.

That would effectively turn it into a prototype European version of the International Monetary Fund. The bailout fund would even be able to help shore up countries that had not requested a rescue.

Germany rejected such ideas only months ago...
And of course the money sentence:

Diplomats said that going forward with the proposals would require a change in the fund’s rules, which in turn would require approval by national parliaments.

Of course, not even Germany can survive its own demographics in the next 40 years barring fundamental government reform.

In his book titled The Collapse of Complex Societies, Tainter argues that complex societies collapse because devolving becomes impossible. Those layers of bureaucracy and stratification of professionals and regulation become such an inflexible warren that unwinding them becomes impossible. Like large firms, orderly downsizing is impossible. The bureaucracy and overhead has devoured all marginal value. Collapse eventually becomes the only possible avenue to simplify.

In that sense, it is not just spending that must be reduced, but the miles of paper of regulation that prevents flexibility and protects activity that does not add value. The debt is just the measurement of the real problem, and regressive policy changes to social nets in order to 'save' them only feathers over the fundamental problem.

Saturday, July 9, 2011

Democrats Urge Justice Department to Investigate... Democrats? | The Weekly Standard

What better sign that a bureaucracy will give up virtually all common sense in favor of self-preservation, than comparing requirements for identification at voting booths to Jim Crow laws?
Democrats Urge Justice Department to Investigate... Democrats? | The Weekly Standard: "The Rhode Island legislature, which has a majority of Democrats, passed voter ID legislation. Yesterday, Governor Lincoln Chafee, an independent and one of your former colleagues, signed the bill into law. This law requires voters to show identification at the polls in 2012 and a photo before casting a ballot in 2014.

Senator Harold Metts (D – District 6, Providence), a minority and member of your political party [Harry Reid], was the sponsor of this voter ID bill in the Rhode Island Senate. Confronted with communications about fraud at several Providence polling locations, he proposed a voter ID bill in Rhode Island. He has said, “Fraud has gone unchallenged and ignored, and it must be stopped.”"
 It is by now difficult to refute that the world's largest economy can not run an honest election. And no, there is no argument which justifies it, even to redress past prejudice.