Sunday, August 28, 2011

Hurricane Irene

I've been through two hurricanes now; Isabella and Irene, both while living near the coast in Virginia.

Isabella was far worse where I live. Besides the flooding and fallen trees, many folks (including me) went without power for over a week. Irene did not even taken my power out at all, and I have not looked around too far, but I have not seen any downed trees.

There is a sure sign when the hurricane has past. The crickets and cicadas begin chirping again. It is good to hear to them.

Good luck to the folks up north who are meeting the storm as it leaves our area. Stay hunkered in, and be patient.

Saturday, August 13, 2011

Iowa straw poll results: Bachmann and Paul win

Bachmann and Paul win.

Michele Bachmann wins with 4,823 votes.
Ron Paul 2nd with 4,671.
Tim Pawlenty 3rd with 2,293.
Rick Santorum 4th with 1,657.
Herman Cain 5th with 1,456.
Rick Perry (write-in) 6th with 718.
Mitt Romney 7th with 567.
Newt Gingrich 8th with 385.
Jon Huntsman 9th with 69.
And Thaddeus McCotter had 35 votes.

Michelle Malkin » Iowa Straw Poll Winner Announced
Sun, 14 Aug 2011 00:44:38 UTC

First, a great deal of broohaha for an event that produces less than 20,000 votes. And as the native born Iowan, Bachmann would be dismayed not to win.

But in the months ahead, both sides of the political aisle will marginalize Paul and Bachmann. Why? Because the elites are absolutely terrified that either one would actually do something.

And I suspect more than a few of them are deathly afraid that their actions would produce such fantastic results that it would forever change the comfy but impotent dynamics upon which their success depends.

Despite all the media diatribe, no one thinks Paul is 'kooky.' On the contrary, they fear that he is right.

Mr. Perry goes to Washington

Well. We kind of knew it was coming.

A Christian conservative who said he felt "called" to a presidential run, Perry also touts a strong job-creation record in Texas. This could allow him to bridge the gaps between Republicans more focused on social issues such as opposition to gay marriage and abortion, the new activist Tea Party fiscal conservatives and the party's more centrist pro-business wing.

His formal announcement will come a week after Perry led a religious rally that drew tens of thousands of people to a stadium in Houston last Saturday. Religious conservatives play a big role in the Republican nominating race.

Texas Governor Perry to run for president - Yahoo! News
Sat, 13 Aug 2011 22:55:52 UTC

Mr. Dalrymple describes pernicious degeneration

Theodore Dalrymple is a British writer and retired prison doctor and psychiatrist. He worked in places including a number of Sub-Saharan African countries and the east end of London. He has been commenting on the London riots.

The riots are the apotheosis of the welfare state and popular culture in their British form. A population thinks (because it has often been told so by intellectuals and the political class) that it is entitled to a high standard of consumption, irrespective of its personal efforts; and therefore it regards the fact that it does not receive that high standard, by comparison with the rest of society, as a sign of injustice. It believes itself deprived (because it has often been told so by intellectuals and the political class), even though each member of it has received an education costing $80,000, toward which neither he nor—quite likely—any member of his family has made much of a contribution; indeed, he may well have lived his entire life at others’ expense, such that every mouthful of food he has ever eaten, every shirt he has ever worn, every television he has ever watched, has been provided by others. Even if he were to recognize this, he would not be grateful, for dependency does not promote gratitude. On the contrary, he would simply feel that the subventions were not sufficient to allow him to live as he would have liked.

British Degeneracy on Parade by Theodore Dalrymple - City Journal
Sat, 13 Aug 2011 22:19:39 UTC

The diagnosis he describes is of course the dependency created by a welfare state. It is irrelevant whether the motives were for humanitarian or darker reasons. Although practically speaking, the persistent question is always that since we would never dream of raising our children in such a manner if actualization is the goal, why do we think it is appropriate for the state to do so, especially after they become adults?

And sociologically and psychologically, the welfare state ignores so many constructs that we know to be true. We are aware that local decentralized systems are more reactive and knowledgable than centralized bureaucracies. We know that people learn and improve in a variety of engaged environments, yet our education and welfare systems isolate and force passive stances. Surely we must ignore a great deal of what we know in order to enforce the mysogenies of the class warfare meme.

Unfortunately by now the prescription to the failing and bankrupt welfare state is bureaucratic. And there Tainter and Olson are our masters.

In his book titled The Collapse of Complex Societies, Tainter argues that complex societies collapse because devolving becomes impossible. Those layers of bureaucracy and stratifications of professionals and regulation become such an inflexible warren that unwinding them becomes impossible. Like large bankrupt firms, orderly downsizing is often 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.

And of course there is a cultural component here as well. Can British culture demonstrate the will and determination to withstand the pain that devolvement must entail? Sadly, the riots do not give us much hope.

For Britain in the last decades iconically adopted the post-modernist and Malthusian global warming and class warfare stories of a beseiged planet. How else can one adopt government policies that restrict virtually all construction, job creation and the punishing standard of living costs of alternative energy?

Unfortunately, none of these cultural memes buttress a culture to fight their own decline or bankruptcy. On the contrary, they prepare for it.

More thoughts at the Belmont Club on Darwinism, lead by Mr. Fernandez

Friday, August 12, 2011

You cannot negate risk. You just move it. Do bankers know that?

From a beautifully written article at Bloomberg:

The only objective test of the accuracy of the model is how well the theoretical value matches market prices for traded instruments. And in a calibrated model it does that perfectly, but only at that one instant in time. Next week, or even tomorrow, or just an hour later, theory and practice will inevitably diverge. But if you are forever recalibrating, you never see this. Recalibration means that risk managers remain in blissful ignorance of the errors in their model and hence the risk. If anything ever gave a false sense of security, this is it. All that risk management has done is to hide the risk, making it harder to spot, to estimate and to hedge.

Bankers Can’t Avoid Risk by Hiding It - Bloomberg
Fri, 12 Aug 2011 16:25:24 UTC
We live in a complex world. It changes every day, sometimes drastically, and it is inter-causal, especially when the lion's share of an industry are all buttressing a practice that inherently increases risk like say, reducing mortgage requirements.

And there is another issue that finance models have not adequately addressed; the structural exposure caused by the warren of incestuous wholesale relationships between the large banks. The model might treat the risk as arm's length, but when the whole industry becomes shaky, we find you didn't diversify your risk really at all.

Canadian banks did not need bail-outs. The principal reason may have been that they avoided mortgage back securities. But the best predictor of their health was their proportion of retail deposits; a regulative requirement. The large American banks, not so much.

The federal regulation machine wants to control your tractor

The real question is why are they doing this? And why now? Because the reasons given just do not make sense.

Tractors lumbering down country roads are as common as deer in rural Montana, but the federal government wants to place new driving regulations on farmers and ranchers.

"It's a huge deal for us," said John Youngberg of the Montana Farm Bureau. After years of allowing state governments to waive commercial driver's license requirements for farmers hauling crops or driving farm equipment on public roads, the Federal Motor Carrier Safety Administration is poised to do away with the exceptions.

Regulators are suggesting that all wheat shipments be considered interstate, even when farmers making short hauls to local grain elevators aren't crossing state lines. The change would make commercial driver's licenses — and all the log books and medical requirements that go with them — a necessity for farmers. Some might not qualify.

Proposed road rules for farmers anger some
Mon, 25 Jul 2011 18:40:09 UTC

So why now? The Federal Motor Carrier Safety Administration says it wants to make sure federal safety regulations are being carried out uniformly across the nation. But that argument was true 50 years ago. And do they really wish to impose commercial licenses on hundreds of thousands of farmers who haul their grain and hay across a highway?

Something smells. And it ain't the cow droppings.

Thursday, August 11, 2011

Too big to fail

I am absolutely astounded, given the anemic state of our economy, that free market proponents are not making more of the Too Big to Fail (TBTF) regulation.

Financial companies and their critics will get another chance to comment on the criteria U.S. regulators will use to decide which large firms are so risky as to need stricter policing...

In a letter to a top House Republican Wednesday, a Treasury official assured the lawmaker that the updated guidance, when it’s finished, will be open to an additional public comment period, probably 60 days.

The criteria for determining which firms pose a risk to the financial system “will not be finalized until the Council has reviewed and considered those comments,” Amias Gerety, deputy assistant secretary for Treasury’s office of the Financial Stability Oversight Council, wrote to Rep. Randy Neugebauer (R., Texas), chairman of an investigative subcommittee the House Financial Services Committee. The council, known in Washington as FSOC, is a group of U.S. financial regulators charged with, among other things, picking out the riskiest financial firms. Treasury Secretary Timothy Geithner leads the council.

Finance Firms Can Argue Again That They’re Not Too-Big-To-Fail - Real Time Economics - WSJ
Thu, 11 Aug 2011 21:24:48 UTC

Playing favorites inevitably produces negative externalities we can not even imagine. And one of them must surely be cultural perception of corruption.

TBTF incents all manner of harmful behavior, along with the debt preservation and money printing required to solve it. These are direct regressive money transfers from taxpayers to investors and their managers, since both result in dollar devaluation.

But the most fundamental issue with TBTF is that it dissuades innovation and learning, especially from past mistakes. Maybe most importantly, it is a moral issue. If we believe markets are our source of innovation, efficiency and self-determinism, why would we give tenure to some of it, regardless of its merits or costs? There is no evidence that taking one's medicine now (bankruptcy) costs any more in the long run than delaying it. In fact, the reverse is most often true.

Tuesday, August 9, 2011

Obama reaction to downgrade

Given the gravity of the situtation, I am surprised the President showed up late to such an important conference.

He was a half hour late. His head turned from side to side as if he were attending a tennis match. He practically never looked in the camera, as if he were averting our gaze. And those were the strong parts of President Obama’s disastrous speech...

We have a tumbling stock market, over 9 percent unemployment and a flight to gold (some investment advisers say it will be at $2,500 per ounce by year’s end). All he can do is promise to raise taxes.

Obama’s horrifyingly bad speech - Right Turn - The Washington Post
Tue, 9 Aug 2011 04:43:48 UTC

Fixing grade degradation in education

Arnold Kling proposes a solution for education's grade degradation which has seen the preponderence of A's rise through the years, with less C's and D's.

A Means A solves the problem of credibility and comparability of grades in courses taught at different institutions of higher education. The innovation is to separate the grading process from other aspects of higher education. For any college-level course, A Means A will devise an appropriate exam and use independent professionals to grade the exam, according to transparent, standard criteria.

A Means A, a bit more fleshed out, Arnold Kling | EconLog | Library of Economics and Liberty
Tue, 9 Aug 2011 04:06:07 UTC
While it is an idea to solve the problem, the whole education system is broken. Drop-out rates have soared along with prices, even while critical thinking and English are in short supply. In that light, fixing the grading system is like re-arranging the deck chairs on the Titanic.

As an employer I am not particularly interested in looking at grades. I will look at courses if the perspective employee shows them to me, but I am much more interested in understanding the person's emotional and ethical IQ, which are a much better gauge of success.

Tuesday, August 2, 2011

Bulldozing houses

I wondered when the government would begin considering this slope-headed idea:

If you can't sell 'em, demolish 'em. This appears to be a new strategy adopted by some big banks struggling with a glut of foreclosed homes on their books. A new report indicates that some houses are being leveled by bulldozers, rather than revitalized and sold. Is this really a smart strategy?

Lindsey Rupp from Bloomberg reports on the phenomenon. The idea is that a bank donates a foreclosed home and possibly even pays for its demolition. One recent example is Bank of America donating 100 foreclosed homes to a Cleveland-area agency that will revitalize the property for other uses.

Source: Why Are Banks Bulldozing Foreclosures? - Daniel Indiviglio - Business - The Atlantic

First, the government institutes TARP which prevents debt write-downs, which would have assuredly allowed real estate prices to decline. Lower prices means more affordable housing; you know, that supply and demand thing.

Unsurprisingly, having spent billions pumping up the market, then spending billions trying to preserve it, we are now going to bull doze the supply because well, we've been propping up demand so long.

So banks and governments will now spend more money solving a problem they created and prolonged.

And you wonder why we are in trouble? With friends like these, who needs enemies?

Monday, August 1, 2011

The Debt Deal is done

Here is the low-down of all that negotiating:

Sen. Lindsey Graham had it right Sunday. “It’s a $3 trillion package that will allow $7 trillion to be added to the deficit over the next decade,” he said, instead of $10 trillion. “We’re no longer running toward oblivion, we’re walking toward it.”

Source: The debt deal:  Disaster averted, decline straight ahead - The Washington Post

It took all that work to do that? If you believe that government spending can ignite an economy, this deal is the wrong move, albeit cutting 6% from federal spending is more like a rounding error.

If you believe the government spending is in any way an unproductive endeavor, or that our debt is threatening to swallow us whole, this deal is akin to lipstick on a pig. By now the debt interest consumes more money than the Defense Department. We didn't cut, we just slowed down the increased borrowing a little.

Egads, we are in trouble.