Barney Frank running for office in 2010

New Agency Proposed to Oversee Freddie Mac and Fannie Mae

Sept. 2003 NYT

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Regulation Insidiousness

There is a common perception that low wages are the driver for outsourcing.  I do not agree.  It is the death by a thousand cuts of regulation.

Regulations rise and VCs exit health care:

As many as three-quarters of venture capitalists are exiting the health care field as the total pool of venture capital decreases and regulatory hurdles increase, said Kevin Wasserstein, managing director of Versant Ventures (Menlo Park, Calif.) which focuses on health care.

Proposition: Only Capitalism can save the Planet

Recently the St James Ethics Centre in Australia hosted an event named, Only Capitalism can save the Planet, where the full debate can be viewed.  Their old style Oxford style debates are an interesting exercise.

I first provide commentary on Steven Keens, who I believe provided the most articulate defense against the proposition.  He is Associate Professor of Economics & Finance at the University of Western Sydney, and author of the popular book Debunking Economics.  He has also done very interesting work on debt for which he is famous.  He describes himself as an 'anti-economist' and perhaps because of this perspective, has less emotional investment in the Left's narrative.

Einstein, the scientific method, and the bounds of global warming

Einstein and the scientific method

We are all familiar with Einstein by now, but less so of his years in early adulthood. He despised the rote method of learning as taught in schools and universities, preferring to follow his curiosity under mentors. Perhaps because of that attitude, his teachers described him as a lazy dog, stubborn and unwilling to listen.

Perhaps partly because of his recalcitrance, Einstein ascribed at least some of the blame for his inability to find a teaching job in any institution after his graduation to one of his teachers.  For two years he subsisted on tutoring before finally procuring a position as a patent clerk.

The Jacobins and the Republican tradition.

Regardless of one's political or economic bent, one must applaud the writing of Iowahawk in his piece titled, If It Is a Fight These Jacobins Want, Then It Is a Fight They Shall Have.

Some of my favorite bits:

Contrary to what you may assume, the gift of intellectual acuity and foresight can in times like these prove to be an almost unbearable cross; I shall not use this space to recount the many unheeded warnings I have issued to fellow Republicans regarding the growing menace of the soi dissant "Tea Party" faction, other than to note that as a Cassandra I have, if anything, proven to be insufficiently alarmist.

Bank Reform: Simplify

This article is part of a series:
Part  I:  Banking Reform: The Debate is the Message
Part II: Banking Reform: Simplify    You are here.

One argument for banking reform is that the growing complexity of financial instruments and the inherent difficulty of valuation makes it impossible to securely measure capital and therefore bank Balance Sheets.  Therefore we must simplify their mandates.

Bank reform: the debate is the message

This article is part of a series:
Part I: Banking Reform: The Debate is the Message You are here.
Part II: Banking Reform: Simplify


What would banking reform look like? Following is a synopsis of opinion and alternatives. It does not really matter where we begin.

Simplify Banking

Let's begin with the assertion that Lehman's Balance Sheet, like all bank Balance Sheets, can not be measured.

“Large complex financial institutions” report leverage ratios and “tier one” capital and all kinds of aromatic stuff. But those numbers are meaningless. For any large complex financial institution levered at the House-proposed limit of 15×, a reasonable confidence interval surrounding its estimate of bank capital would be greater than 100% of the reported value. In English, we cannot distinguish “well capitalized” from insolvent banks, even in good times, and regardless of their formal statements...

... On September 10, 2008, Lehman reported 11% “tier one” capital and very conservative “net leverage“. On September 25 15, 2008, Lehman declared bankruptcy. Despite reported shareholder’s equity of $28.4B just prior to the bankruptcy, the net worth of the holding company in liquidation is estimated to be anywhere from negative $20B to $130B, implying a swing in value of between $50B and $160B.

Subsequent investigations by examiners found no illegality in Lehman's original valuations. Waldman's solution is to simplify bank structure so we can understand them and minimize the risk.

Keys to shrinking the federal government

Keys to shrinking the federal government:

1. The moral and economic narrative for shrinking the government must be written clearly and plainly so that the message can not be distorted.  This is one of the largest issues for free marketers.  Since education will not provide the ethical merits of a free society, the media must fill this role.  Fox is not doing this job either, leaving an opportunity for entrepreneurs.  I believe it is a large one, as large as Fox's market.
2. A very determined Congress.
3. A very strong Speaker.  This point is not self-sustaining, since the pressure to say, 'yes' is immense.
4. A President that will veto bills.  The Congress will not do it alone.  It will produce stupid bills.
5. The Congress must be ready to impeach Supreme court judges.  The case law from the Supreme Court has subjugated the intent of the Republic and destroyed the Constitution.  Regardless of one's position on abortion, everyone must agree that the Supreme Court's ability to see abortion in the Constitution robbed the American people of a debate and discussion that it deserved and continues to attempt to debate.  The very purpose of the Supreme Court is to uphold the Constitution as ratified by the people's proxy in Congress.  It long ago replaced the Constitution with its own case law.
6. There must be a plan.  That plan must involve city, state and federal components.
7. The 17th Amendment must be repealed.  States must have representatives which protect their role in government.  They have none at the federal level.

The Obama, Pelosi, Reid government is perhaps the most historical since the 1800's.


The definition of a Progressive: A person that wakes up every morning knowing that the answer is more government.  They just don't know what the question is yet.

Are we really a Center Right Nation? Why there really is no squishy middle

In post on Murkowski and the GOP, I explain why I believe the country is actually must further right than popular opinion asserts.

I use the example of Fox to show that there is a huge silent majority out there that has been ignored.

But there is much evidence to support the idea that free markets have been so misrepresented and maligned for decades, mentioned only in education as an example of what is wrong in society, that a more aware population would find the ideas of markets a very appealing philosophical coat to wear.

Murkowski and the GOP

Glenn Reynolds on Murkowski:

The Murkowski story embodies what’s wrong with the traditional GOP: Self-centered, dynastic, and looking to lobbyists as primary allies.

Actually, it's worse than that, since the GOP is funding people in the primaries.  Who are losing by the way.

Pricing clearing to restart the Economy

In my previous post, I left out the most urgent mistake we must somehow fix to clear the markets.

Bryan Caplan explains the issue in his post regarding the auctioneer.

I give my two cents worth in the comments:

How to Jump start the economy

Now that the collective wisdom has firmly rejected the uselessness of Keynesian economic policy, it is time to turn to the Republicans, whose most often mentioned strategy is to roll back federal spending to 2008 levels.  That isn't going to get it done either.

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Kimball Oil Field, 06/1972 by The U.S. National Archives, on Flickr

GDP has returned to 2007 numbers, but we still have 10% unemployment and closer to 20% underemployment. These numbers are the simplest refutation of the Keynesian thinking that we have a demand problem which 'stimulus' will somehow prime or fix. The problem is not aggregate demand; GDP has returned to pre-recession levels. It is investment and adaptation to a new economy.

Educational Dyslexia

I attended Grade 1 with my Sunday school friend I'll name Kevin.  Since both of us lived out in the country, and I presume because we were strangers of an alien religion, the other boys promptly took to beating us up at recess on a fairly dependable schedule.  It never occurred to me to complain, although it did affect our movements.

Financial regulation, Basel and free markets

One of the essential ingredients of efficient, productive free markets is information. Ineffective suppliers of any service can not long survive if their value offering is public and comparable. This is a simple reason that retail and food industries work so well; prices and availability are eminently comparable, signaling and inducing market position and ultimately profitability.

The unfortunate structural issue with Mitt Romney

Being at heart a business man myself, there is much to like about Mitt Romney.  He's articulate, smart as hell, and knows how to sell.  His resume is of course, perfect.  He returned to Bain and saved the elite consulting company when it was staring at bankruptcy.  His successful track record has much to recommend him.

Voters have been asking for smaller government since Jimmy Carter

Henninger and Rasmussen make a great point that seems lost inside the Beltway and the media, both right and left, for decades; voters have been asking for smaller federal government since Jimmy Carter. Here is the latest polling:

Look at the astonishing numbers in the Rasmussen poll released last week. Nearly seven in 10 respondents (68%) want a smaller government, lower taxes and fewer services. The party breakdown: GOP, 88%; Democrats, 44%; and Other, 74%. In short, the independent voters who decide national elections have moved into the anti-spending column. I don't think they'll leave any time soon.
It's the Spending Stupid

The disassembling of the Weekly Standard

Is the Weekly Standard really a good representation of free markets or conservative thinking?  Most of the writers over there couldn't define and defend a free market if they wandered into one.  Neither could they do so on theoretical or moral grounds.  They are big government conservatives, whatever in the hell that means.  In my book that is a left of center Democrat.

Jay Cost writes that Castle is a middle of the road Republican and perfect for the Northeast.  Let's counter that 'strategic' rhetoric so favored by armchair academics and so resoundingly rejected if practical excellence in the real world is the goal.

Leader of the Pack: Reaction

Leader of the Pack: Reaction

Paul Mirengoff wrote a well reasoned article on Power Line regarding the Republican presidential race. This post adds a dimension to that thinking.

Mirengoff's postulation is that the nomination is Sarah Palin's to lose, assuming she wishes to run and the Tea Parties endorse her. The second assumption is not a home run.  But it is anything but a safe bet that Palin will win the Primaries.

The cost of the Bail-out and the Federal Reserve

One of the challenges of the daily news cycle is that it tends to be the tail wagging the dog.  In the big picture, it is itself a statement of the fundamental and structural issues with so much power aggregated in the federal government and its most powerful enabler, and that is Wall Street and the Federal Reserve.

Will bailing out the large banks and enabling the Federal Reserve bankrupt the nation?

Retreading Classical Liberalism

Capitalism, defended only partially by the Right by now, needs some help.  If Republicans are to stand for the free market, then there is a huge opportunity to reframe many platform discussions and provide for political success.  The answer is a relatively simple one of strategy, channel management and marketing.

First, the Right has abdicated the role of morality to the Left.  It has done so on many fronts, but nowhere so obviously than with the poor.  Perhaps it is because the Right does not itself understand capitalism.  Even when the Right reformed welfare, all the public heard was how it saved money.

The strawman Mosque argument

The discussion of the proposed construction of a Mosque at Ground Zero is a testament to our time.  And once again the press and Progressives have erected a vulgar straw man in which to insult the American public; anyone who stands against the mosque is a bigot who does not understand property rights.  That makes roughly 70% of the population on the wrong side of intelligent conversation.  Really?

But the logical argument against the Mosque, voiced by many, has nothing to do with religious freedom or property rights.

Effective property rights and markets imply a constructive, open, honest and empathetic emotional and spiritual stance to others. One does not bully one's way into business, relationships, sales, or lives.  As the saying goes, "Screw me once, shame on you.  Screw me twice, shame on me." Any effective entrepreneur or employee in a free market understands the importance of good will and value in business dealings.  

Especially in free markets where trust and respect define goodwill and constructive dealings, one goes out of one's way to avoid ANY sense of impropriety. It's not only good manners, it's good business.  It is purely a sense of humble respect and decorum. 

Like any market transaction, the Imam has every right to build the mosque wherever he pleases.  Building the mosque has nothing to do with property rights.  But like any action in a society based on good will, he must be fully aware that his neighbors will remember that decision midst the atmosphere in which he made it.

Neither do objections to building the mosque have anything to do with suborning religious opinion.  There are thousands of Mosques across the nation with hundreds in New York alone.  But suggestions that 9/11 had nothing to do with Islam are willfully obtuse.  It is not that objectors to the mosque equate Islam with terrorism.  It is that no reminder, however slim, should invade the sensitivities, whatever they are, of people of goodwill and memory.  It matters not what the Imam believes, or the principle of the matter.  It is the perceptions of the neighbors that matter.

Let them build the mosque. They have every right. But it does not make it appropriate. I for one would never take the contract on the material, or agree to help build it, just as I would not help Catholic nuns build a prayer building near Auschwitz (the Pope stopped them).  Insisting on the mosque is a boorish and insensitive move.  Period.

Obama: America's version of Bob Rae

In 1990 Ontario experimented with a hard drive left and its own version of Keynes. It did nothing for the economy and required a decade to unwind the debt.

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Bob Rae: the poster child for Keynes gone wrong

Canada’s last two recessions before The Great Recession were in 1982 (-6.7% GDP over 18 months) and 1990 (-3.2% GDP over 12 months).  But the disruption to the Ontario economy was much more acute in 1990.

Keynesian economists blame high interest rates meant to fight inflation and tight fiscal policy from federal debt burdens as the cause of the recession in 1990.  Others suspect that a global recession, oil shock, a newly instituted Value Added Tax which threw national pricing for a loop, and structural economic adjustments to NAFTA as more likely causes.

In 1990 the NDP party led by Bob Rae swept into office in Ontario, surprising the pollsters and the electorate.  Ontario's economic forecast was not optimistic; economists projected a $1.5B deficit from a $1B surplus a year earlier.  Rae, armed with his mandate, quickly went to work.

Pillering Beck

I often end up running Beck's TV show in the background while I work, not least because of the deplorable alternatives of TV programming in general.  As a strong proponent of free markets,  I believe I understand his general proposition.  More often then not I'm enthralled at the ability of a person to provide 4 hours of public programming a day, and I can only imagine the number and structure of the staff required to research and provide content while remaining current.

Once a week he reviews one of the Constitution founders.  He has a penchant for reviewing famous historical Americans and placing them in context with current landscapes.  I marvel at his ability to give history lessons and hold such a large audience.

It is equally fascinating to see pundits from both the right and left generally give him a failing grade.  The left is especially motivated in this regard since the self-described libertarian views progressivism as an insidious philosophy that ultimately leads to societal ruin.  That I whole heartedly agree gives me a sympathetic ear.

Albert Hunt at Bloomburg offers a typical bashing of Beck.  It is by any account a purposefully negative caricature, pretending to be rational journalism.  Hunt, like Georgetown (that bastion of free market thought) professor Michael Kazin,  favors comparing Beck to the Jew hating Charles E. Coughlin, the Catholic priest who led a populist-right crusade against President Franklin Roosevelt in the 1930s:

Beck, 46, dismisses these comparisons, citing their differences. Yet substitute Coughlin’s animus for Jews, communists and Franklin Roosevelt for Beck’s toward Muslims, socialists and Barack Obama and the similarities seem greater.

Never mind that Coughlin was a priest, eventually silenced by the Catholic church.  Beck is bound by neither.  But Hunt is just getting started.  It seems Beck is a conspiracy theorist:

With Beck, conspiracies abound. The Democratic Party is “slowly but surely,” he charges, moving the U.S. “into a system of fascism.”

It is of course true that fascism is only one small step the political spectrum from socialism / communism, as Stalin and Hitler and Mao teach us.  And it is troubling that Progressives fail to appreciate that fact even as they nurture elitist bureaucratic control and world governments.  And it is true that any bureaucracy's power is directly inverse to citizen freedom, and that many Americans and historians view elitist control of the economy as remarkably similar to fascism.  Further, there is an ever growing alarm as every succeeding President, including Bush and now Obama, trample over the Constitution in ever more imperious fashion.  Surely no conspiracy theories need to be ascribed to grant these observations.  But never mind.

Hunt then goes on to describe Beck as a Muslim hating, anti-immigrant extremist obsessed with race who as a Mormon should not dare to question Obama's version of Christianity as personified by Jeremiah Wright.  Let us parse these accusations. 

In a world of sound bites, it is probably moot to mention that anyone who talks publically for 4 hours a day for almost a decade can be mis-represented by pulling random quotes.  In fact Beck rather tirelessly voices the right of anyone, including Muslims, to practice whatever religion or philosophy they wish.  He encourages people not to depend on his interpretations, but develop their own ideas regarding the principles upon which we govern our society.  He does have a particular aversion to violence, as most people do, and he does favor repeating the fact that it is the Left, not the Right, that in recent history has resorted to violence, and in many cases 'preaches' it.

And it is true that he has spent a great deal of time reviewing Obama's version of Christianity, devoting more than one program to liberation theology by inviting pastors, rabbis and priests to debate its origin, history and reconciliation with their particular religious thoughts.  And it can not be surprising that they find liberation theology has more in common with communism (in fact finds its origins there) than the precepts of traditional Judeo-Hellenic thought.  After all, that is the overwhelming opinion of secular historians as well.

Regarding the border with Mexico, Beck's reasoning is simple and arguably mirrors most border proponents; the country is made up of immigrants and forms the backbone of the country.  We desperately need immigration reform.  But there are millions of people illegally entering the country.  This is unfair to the folks who are entering the country legally to pursue the American dream.  We should therefore secure the border and then review our immigration policy.  The two steps must be accomplished in that order since any other combination incents more illegality, and have all failed.

It is a pretty simple argument that can only be viewed as racist or anti-immigrant through a very jaundiced eye.  One may disagree with pro-border proponents.  But surely they make a reasonable argument given the violence, kidnapping, drugs and weapons confiscated in the border states, and the potential for national security issues.  Equating secure borders with anti-immigration seems a logical fallacy which renders an irreconcilable divide in the language between Left and Right.  But painting the Right as racist or anti-immigration hardly makes it true no matter how often it is stated.

Beck's general position on race is that we ultimately do no good by continuing to view politics and society through the lens of majority and minority; it only extends animosities.  His 'obsession' with race is much derived by what he considers the Left's insistence on viewing and profiting from dividing the population into such sub-groups in order to hold and wield power.  His argument again is simple; we should govern by our principles and be judged by our character, not the color of our skin.  It is also his opinion that that was Martin Luther King's central message.  But Beck very audibly feels unworthy to presume so, and has invited MLK's followers, including his niece, on his program to give their opinion.  If that is an obsession with race, then it could be argued that it is a healthy one.

Lastly, it is popular for the Left to dismiss Beck by saying he is in favor of turning the country into a theocracy.  This assertion also illuminates the cultural gulf between the Left and many conservatives.  For Beck's central tenet is that the country, any country, must adhere to Judeo-Hellenic principles or face ultimate collapse.  He makes no apology for utilizing religious language to say it.  He reserves the right to intone his God on the principles of freedom of speech, and makes the point that society has been urged to keep their faith behind closed doors when there is no reason for it.

Only by equating our current society with 16th century Europe can Beck's oratory be equated with proposing theocracy.  It is purposeful misrepresentation of what he is saying.  Those in disagreement with Beck must debate the centrality of Judeo-Hellenic thought in the success of western societies, not whether we nominate a new version of the Pope.  One is a very legitimate discussion.  One is a straw man.

Hunt begins his smarmy article by saying:

Beck and King, the erudite civil-rights legend, share little in common. Beck and Coughlin share a great deal: as mesmerizing broadcasters able to articulate the anger and frustration of a flock frightened by economic hard times. 

I end my own Beck article by objecting to another favorite caricature by the Left voiced by Obama on several occasions;  the populace as a frightened, angry flock.  First, these words are straight out of Marx and Engels.  They are also elitist and arrogant.

Further, to many of us King was far more than a civil-rights legend.  His message of hope and love and respect based on spirituality was a clarion call not only to reconciliation and redemption, but in politics to a return to the basic precepts of honor and dignity of the human race.  King's civil rights message is a product of these views.  He was a preacher first, and a civil rights leader second.  He was an icon and to many of us, black or white, remains the most inspiring American of the twentieth century.  Beck very obviously sees the message behind King's marches and intuitively sees one cannot have one without the other.  It cannot be coincidence that the Left leaves King's niece, Dr. Alveda King, out of narratives of the "Restoring Honor" rally just as it prefers to leave King's religiosity out of his civil rights message.

In summary, Hunt and others like him are saying nothing smart.  They are also saying nothing that adds to any discussion.  If Beck intones religious language that makes some people uncomfortable, Hunt could at least acknowledge that the left intones much language that 'frightens' free market proponents.  Unfortunately, they've had to put up with that language from the MSM for decades now.

A more sympathetic ear must acknowledge that Beck approaches his topics and audience with sincerity, humbleness and heart-felt emotion.  Would that we could  expect the same from self-righteous elites like Hunt.

UPDATE: As illustration of the general point, What if he were a Tea-Partier?   If James Lee were a tea-partier, he would be page 1 news from now until November.  As it is, he's an Al Gore / Margaret Sanger violent eco-nut, so nothing to see there.  Move along. 

One does not need to be on either end of the political spectrum to see that the MSM is highly inconsistent.  It is not the most unimportant reason they are in financial trouble.

The Rise and Fall of Nations

Joseph Tainter wrote a book called The Collapse of Complex Societies in 1988.  It was his postulation that societies collapse as they are inevitably over run by their own complexity.  In Clay Shirkey's blog post, he writes:

Tainter’s thesis is that when society’s elite members add one layer of bureaucracy or demand one tribute too many, they end up extracting all the value from their environment it is possible to extract and then some.

Shirkey: The collapse of complex business models

The idea is that bureaucracy eventually extracts all value from the society, but since the societal organism is so inter-woven (i.e., complex) there is no way to simplify it.  Attempts to unravel it result in the whole thing collapsing.  But there is a more fundamental issue at work.

Cycles and the Economy

A great deal has been said and spent in favor of one or another economic theory in an effort to control the economy, and in recent years to mend it. But I'm not sure how any of them explain natural cycles.

There is no doubt a tendency for 7 year cycles, used from biblical times to rotate crops and allow the soil to heal.  Renewal is a form of cycling back to freshness, as are periods of self-reflection. What about humility induced by spirituality or religion? Then there's zero based budgeting despite its spotty track record, but also the reason we need ABC accounting.

But unfortunately for taxpayers, bureaucracy never finds a good reason for the renewal of spring cleaning.