Freedom Is the Solution

I HAVE MOVED

2011-07-07T15:31:00.001-05:00

My interests started to veer away from the original current politics and economics angle of this blog. The title was becoming less and less appropriate for what I wanted to talk about.

theChristianRebellion.wordpress.com

Greek Crisis Update

2010-06-26T09:19:00.000-05:00

I go on vacation for a couple weeks and things change quickly in Greece.

Greek bond rates shoot past 10% almost to 11%. CMA datavision now shows a probability of default of 68% (highest in the world), up from 34% a month and a half ago.

Interesting note - California and Illinois probabilities of default have shot up considerably recently as well.

Greek Crisis Over? No

2010-06-11T14:05:00.000-05:00

For links and explanations on the current economic scene, go here.

A few weeks back, Greek bond rates soared and the EU rushed in with a bailout. Crisis averted, story over, right? Not exactly.

Before rates started to skyrocket they were on a steady upward march. After the panic, however, government bond rates returned to that upward trend. This crisis can not be considered over until Greek government bond rates stop going up. They are now north of 8% and are on trend to cross 10% by the end of the year.

Furthermore, I captured CMA Datavision's estimate of the cumulative probability of default back on May 12th. At the time it was 33.92%. That number has now risen to 45.31% a month later.

I see no sign yet that Greece is going to recover without a default or leaving the Euro and printing money.

Propaganda Revisited

2010-06-09T23:48:00.000-05:00

In this column, I want to establish that the mature Christian mind is best protected against propaganda.

Last year, as I watched in disgust as so many Americans were mesmerized by Obama's frighteningly dark drivel, I read Jacques Ellul's 'Propaganda'. Much rang true, but I didn't have much background to question his evidence.

As I've mulled over how people choose to believe what they believe, I was reminded of some passages in his book. He describes modern man as such:

Above all he is a victim of emptiness-he is a man devoid of meaning. He is very busy, but he is emotionally empty, open to all entreaties and in search of only one thing - something to fill his inner void.

The main point to my four part series on rationality was that people choose to believe the most emotionally satisfying answers. Furthermore, I believe that our ability to ascertain the true nature of reality is when we have little emotional stake in the answer. If we emotionally need an answer to be true we will rationalize and even lie to ourselves to satisfy those emotional needs. In general, if we are emotionally needy people, our ability to adhere to reality is diminished.

What I propose, and it will be left unproved until later posts, is that Christianity provides the ultimate path to emotional satisfaction because it prescribes optimal human behavior.  This optimal human behavior is what I call morality. Reality, as described by Christianity, I will call the Truth.

If one rejects the Truth, one must be accepting a disreality, a non-truth, or more simply, a set of lies. By pursuing a path that is suboptimal, one will inevitably suffer.  The pain we suffer because we have chosen to believe a disreality while living in reality wounds us emotionally. The inevitability of pursuing a disreality is emotional emptiness. This emptiness, as Ellul points out, leads one to believe more lies and more propaganda.

Empty people will fall prey to propaganda. Inevitably they will be ruled by the propagandizers. The emptier they are, the more brutal the rule over them will be.  They will be imprisoned by the lies they have told themselves to assuage their emptiness. It truly is a hell of their own making.

Only the emotionally satisfied mind can see reality as it is. And, as I propose, only the Christian mind can be fully emotionally satisfied.

A Series on Rational Thought - Part IV

2010-06-01T14:21:00.001-05:00

Rationality was born as a tool to satiate our wants and desires. Ideas, as units of rationality, are tools within the whole. Ideas are like any object. We grab ahold of those ideas that satisfy our wants and needs, and discard those that do not. When we choose to believe something, it is because it satisfies an emotional need.

I explicitly reject the notion that we can limit our beliefs to rationality. Rationality is why we choose to believe some things, but it is not how we have come to believe most things. We only stick to rationality when the subject major has no emotional incumbrances. In some areas of human though, rationality can reign, such as physics, but in economics, psychology, and sociology, emotions prevent us from more objective analysis.

The final implication is religious. I recently had an interaction with a very smart atheist friend of mine who told me that he thought that a belief in the after life was ridiculous. I got him to concede that the evidence provides no light on its existence. He asked why then I did believe, to which I replied, "Given the lack of evidence, it's the most emotionally satisfying answer." He was unsatisfied with this reponse, still wedded to rationalism. We left the discussion at that point.

I returned a few days later to continue the discussion after concluding the ideas in this series I blogged. He followed my reasoning that all beliefs are emotionally born, and that rationalism is merely a particular method of choosing beliefs. He conceded my point and admitted that my choice was justifiable. The discussion was obviously much longer, but this was the final outcome.

A Series on Rational Thought - Part III

2010-05-29T14:08:00.001-05:00

Where does rational thought come from? Somewhere between ape and man, child and adult, our thinking went from wholly irrational to mostly rationality. We don't see any other animals exhibit the same ability to grasp the world around them like humans. Perhaps glimpses, but nothing quite to our scale.

Rational thought had to have been developed. If anything like language, this was not a biological event, but a cultural one. Having had two children, I am a first hand witness to the slow growth out of instinctual infancy to the budding rationality of childhood. Rationality has to be learned.

Rationality is a tool to understand the outside world, which ultimately leads to our desire to satisfy our wants. Our emotions create these desires, and it is our rationality that allows us to satiate those desires. That is to say, our emotions tell us that we want the apple, but our rationality tells us how to get it. At the core, our emotions are driving everything we do.

A Series on Rational Thought - Part II

2010-05-26T12:32:00.000-05:00

Having concluded that language is the expression and communication of emotion, the total sphere of communication needs to be added to complete this discussion. Verbal (oral and written) communication is only one of the ways that we communicate our emotions. The two other major forms are through music and aesthetics.

Certain music conjures up very similar emotional experiences in us. An ominous song comes across as such to most listeners. Whether there is some objective trait or subjectively created cultural understanding in music that makes it sound dark and ominous we seem to understand the intent for the most part. We match happy lyrics with happy tunes, and angry lyrics to angry tunes. Music is an additional layer of emotional communication. In Celine Dion’s “My Heart Will Go On”, the feelings of longing are significantly heightened by the melody of the music. We like those sounds that resonate with our own feelings and emotions. We like love songs, we like soaring anthems, but we can’t stand a tune that doesn’t match our emotional experiences (She thinks my tractor’s sexy, ugh).

The same goes for aesthetics. An American flag conjures up much more emotion in the patriotic individual than another piece of colored cloth. The image means something more. It is a communication of ideas, and it conjures a whole litany of emotions and memories. A swastika can cause repulsion. A rose can fill us with romance. We have learned that certain images mean more than the photons hitting our retina.

Neither language, music, or aesthetics is rational. It’s all emotional.

A Series on Rational Thought - Part I

2010-05-26T12:12:00.001-05:00

In this series I want to display how rational thought is a mirage. How we actually make decisions in mostly rational ways, but not truly. What we believe is decided by those ideas that most fit our emotional needs.

First, let me explore language itself. A baby’s first words usually correlate to its most pressing needs. “Mama”, “Dada” or “my”. It learns to communicate its emotion by use of these first simple words. If it experiences desire for an object, the child says, “my.” If it experiences desire for physical comfort, the child says, “mama.” A child first learns to express themselves, and slowly learns words to describe the emotions they are experiencing.

Later on, the child begins to cross another threshold of language. Children have to learn that other people have emotions and respect those emotions. A child wants a toy and asks, “Can I play with your toy?” In this, the child expresses their own emotion, but they are also communicating to the other child that they realize that the other child may have an emotional attachment to that object (toy) as well. Realizing that the asking child recognizes that the owning child does in deed “own” the object and that the object will be returned allows the owning child to share with more comfort and addresses its emotional connection to the toy.

Of course, children will also learn less admirable uses of language. They will learn how to say things to manipulate and to emotionally injure those around them to achieve their own ends. They recognize the emotional needs of others and exploit that knowledge.

In total, all language is the expression and communication of emotion.

Why I Don't Believe in the Recovery

2010-05-20T14:35:00.001-05:00

I was quite surprised last month by the announcement that 290K jobs had been added over the last month. The number is a little sketchy given that 66K were temporary census hires, but 224K is still a very solid number. The problem I have with this number is two fold.

1) The ADP employment number usually tracks well with the BLS report. Scott Grannis has a nice chart:

Strangely, though, the gap last month between the BLS and the ADP grew wider than anything visible in this chart (last month is not shown). ADP showed 32K jobs, and the BLS showed 290K. That's a 260K gap.

2) The weekly initial jobless claims numbers just aren't revealing much growth. During the last few years before this recession, weekly initial jobless claims ran in the 300-340K range. Now, we are hovering in the 460K range. We need a 140K average drop to be at a "normal" rate of layoffs. Chart from Bloomberg below.

Obama's Poll Numbers Tanking Again

2010-05-19T10:10:00.000-05:00

When the poll analysts for the Democrats claimed that passing the Health Care expansion would help them in November I thought they were crazy. Well, I was wrong, and they were mostly wrong. Right after the Health bill passed, support amongst Democrats increased. Support amongst Republicans went nowhere. However, that boost that Obama received for a few weeks seems to have evaporated in recent days. The Rasmussen Presidential Index shows a rapidly widening gap between strongly disapprove and strongly approve. My guess for the drop off in strong support is due in part to both the BP oil fiasco in the Gulf of Mexico and the turbelent economic conditions of the last couple weeks.

Funny Math with Unemployment

2010-05-13T07:47:00.000-05:00

Weekly initial jobless claims came out this morning. According to the title of Foxnews article: on May 13th:

Weekly Jobless Claims Drop 4,000 to 444,000

Interestingly enough, I found another Foxnews article issued on May 6th detailing last week's initial jobless claims with this title:

New Weekly Jobless Claims drop 7,000 to 444,000

This is not a misprint. Foxnews has the numbers right as reported by the government.

Given this math, I want to make a bold prediction. Jobless claims will continue to drop throughout the year, and could reach as low as 444,000 by Christmas.

California is a Worse Credit Risk than Iraq

2010-05-12T12:18:00.000-05:00

According to CMA Datavision today:

California's Cumulative Probability of Default now surpasses Iraq's. You know, that country with questionable elections and frequent mass fatality bombings.

Following the Greek Crisis

2010-05-09T19:19:00.001-05:00

Here are a few links to help you follow the Greek Crisis:

To see what the market thinks of Greece's ability to pay back it's loans, you can use the change in interest rates on Greek governments bonds. If you look at the chart, it's bad news. All from Bloomberg:

Two-year bonds
Five-year bonds
Ten-year bonds

To check on "contagion", the only free site that I have found that follows government bonds worldwide is CMA Datavision. At this link there are three lists. The 1st list is comprised of countries with the highest probability of default. The 2nd group is comprised of countries whose CDS spread (a measure of the probability of default and bankruptcy) are shrinking. This is good for those countries. The 3rd group is comporised of countries whose CDS spreads are increasing. This is bad. Unfortunately, it doesn't give history or list every country every time it is updated (I think twice a day).

CMA Datavision, Sovereign Debt Credit Spreads

Bloomberg lists the rates for a few major countries around the world, but it leaves much to be desired. That link is here:

Gilts, Bunds, and other Government Bond rates

To see the effects in the United States, you can check out a few links as well. The market price of risk is the VIX. Traditionally, the VIX runs about 15-20 in a calm market. On Friday, May 7th, the VIX hit 40, which is not good. It hit 80 back in the 2008 panic. It will soar during a market panic, and is a good indicator as to the nervousness of professional traders.

VIX

To see if American banks might be in trouble you can check out the TED spread. This is a measure of the credit risk seen within American banks. If banks are going to melt down this measure will spike. It was running in the teens and has now jumped to 30 bps. During the last market panic this number his 300, I think, so don't sweat this little jump too much just yet.

TED Spread

For the economy as a whole, I love Consumer Metrics Institute. They measure internet purchases, which seem to have an uncanny ability to predict future GDP reports. Right now, their data suggests a double dip recession. The 2Q GDP report (out August ~25th) may show negative growth.

Consumer Metrics Institute

That's all for now. If anyone has any good links or a request for a link, let me know. I have a few more, but I suspect that none of you would want to get that deep into the data.

I'm Psychic

2010-05-06T17:05:00.000-05:00

Back in March of 2009 I said:

U.S. Govt Crowding Out International Borrowing

A while back I brought up the idea that the U.S. government was borrowing so much money that some other governments might begin to have trouble borrowing for their own purposes. The world has a finite amount of cheap capital, and with the amount of money that our government and several others are...borrowing to prop up financial firms and wager on Keynesian stimulus that the supply of those funds might dry up.

Now, the credit spreads for numerous European countries are widening. The world is running out of money.

Best Column Yet Written on Obama

2010-04-05T12:13:00.000-05:00

Victor Davis Hanson of Pajamas Media nails it. Titled the Postmodern Presidency

It's brilliant. No snippets. Every paragraph is worth the time.

Is the U.S. Slowly Going Bankrupt?

2010-03-22T07:19:00.000-05:00

At bloomberg today:

The bond market is saying that it’s safer to lend to Warren Buffett than Barack Obama.

Two-year notes sold by the billionaire’s Berkshire Hathaway Inc. in February yield 3.5 basis points less than Treasuries of similar maturity, according to data compiled by Bloomberg. Procter & Gamble Co., Johnson & Johnson and Lowe’s Cos. debt also traded at lower yields in recent weeks, a situation former Lehman Brothers Holdings Inc. chief fixed-income strategist Jack Malvey calls an “exceedingly rare” event in the history of the bond market.

If you know anything about financial mathematics, this really screw things up. Many calculations are based on the underlying premise that the risk free rate is the U.S. Treasury rate. By definition corporate bond rates are higher than Treasuries.

What is actually happening is that people no longer believe that the default risk for U.S. bonds is zero. We are seen by the market increasingly as a credit risk.

If/when the "Obamacare" Health Bill becomes law, tack on another $500B in deficits over the next ten years. The Medicare cuts alleged in the bill are politically unfeasible and will never happen. One more heap of straw on the camel's back.

Status and Esteem, Old Enemies

2010-03-16T20:29:00.000-05:00

In this post, I mentioned the link between status and depression. That is, low status leads to depression. After observing my own feelings, watching films, and watching other people, this link seems very strong and very common. I had a brief e-mail exchange with Alvin Plantinga, a noted Christian philosopher at Notre Dame. After his responses I fleshed out some of my thinking on this subject.

There is a dichotomy to status in regards to relationships. One side is power and the other I call esteem. A perfect power relationship would be sociopathic, having no value in the person, only in what the person can do for them. A perfect esteem relationship, would be one of perfect love, where the object is valued without regard to the power the relationship affords. Neither exists for man in a pure form, only in tendencies.

"Real Friends" as they are referred to are those of esteem. A friend, who is still your friend when you've lost your ability to provide status and power to those around you. You lose your fortune, the power relationships end, the esteem relationships remain. You lose your public image, the power relationships end, the esteem relationships remain.

The world of power relationships is unstable. The vicissitudes of style, hipness, and good fortune, put us at the whim of forces outside of our control. There can only be one "it-girl". There can only be one alpha male. There's only one Megan Fox, and only one Robert Pattison. That is, until next week. It is a zero sum game, where every win presupposes that someone else loses.

The world of esteem relationships is unbounded. Choosing to trust, to value, appreciate, to love, is a game of mutual advantage. Every win presupposes that someone else wins. Our esteem, our status, is a function of our ability to create and maintain genuine relationships.

In that old post, I asked this question:

Are Christians susceptible to depression by avoiding status symbols, personal glory and power? Or is there some other route that supplants these losses with something more?

Choosing to eschew power and embrace esteem is the pathway for the Christian away from depression. Love your neighbor as yourself.

Why We Fear Obama and the Left

2010-03-01T06:38:00.000-06:00

From Stan Isaacs at the Philadelphia Inquirer today, speaking on Obama:

He should forget bipartisanship and work with congressional Democrats to name three new justices to the court to meet the challenges he faces.

The whole piece is dedicated to justifying Obama naming three new Supreme Court justices, to lift the total to 12. Does this man not smell the brimstone on his own breath? Isaacs even thinks that FDR got a raw deal when public opinion turned against him while trying to pack the court in the 1930's. This is Hugo Chavez style thinking. Checks and balances be damned, we need to pass our agenda.

Why are we afraid of Obama and the Left? Is he a socialist, maybe not. Is he a communist, maybe not. The problem with the Left, though, is that they have no logical barriers between themselves and totalitarianism. Hayek's Road to Serfdom is the logical flow of their beliefs.

If God Does Not Exist, We Would Need to Invent Him

2010-02-20T13:21:00.000-06:00

This morning I had a good conversation with a friend who reads my blog. He helped me come to this conclusion:

If all reason is a tool for power, and therefore we should be skeptical of all reasoning because its origin can be corrupt and self-serving, then no human philosophy can produce objective truth. However, if a mind, unaffected by the evolutionary process (or any other process leading to status seeking), produced objective truth claims, those claims could be believed.

Who fits this definition? Only a supernatural being.

Could this supernatural being, be one of many gods? Well, if it was, then we might be suspect of its motivations. Greek mythology tells us of the constant warring in the heavens. However, if there is one all-powerful, all-knowing God, status could never come into play because there can be no competition. This God is the only one that can produce objective truth that can be believed.

Towards Liberty

2010-02-10T12:31:00.001-06:00

Over the last year I’ve become more and more persuaded by the likes of Nietzsche, Foucault, and the Post-Modernists that there is no ultimate truth. All presuppositions are fallible and subject to doubt. This affected my zeal for politics, and left me without a strong anchor for my political inclinations. My time adrift, though, is over.

No free society can be achieved because those who desire power will slowly undermine the logical presuppositions that liberty rests upon. Of course, tyranny too must rest on logical presuppositions. It is a battle of ideas and presuppositions between those who want power and those who want liberty. It is a battle that will never end, and I suspect will always ebb and flow.

In this battle, both sides are using the flawed techniques of social science and utilitarianism. Both suffer inescapably from the impossibility of calculation, and the perversion of status seeking agendas. Without spending countless hours of study and analysis, how can we resist the “science” of tyranny and thwart it with the “science” of liberty?

We don’t have to.

Then how can we help our fellow man avoid propaganda and the manipulation of self-serving reason? Without looking at the reasoning, we can merely look at the conclusions. Do the conclusions of their arguments gather more power into the hands of a small set of individuals? If so, then their argument is likely false and motivated by the “will to power”.

Recall, though, how I explained how an academic can be corrupted by secondhand status. That is, those with power reward the academic because his arguments give them power. The academic can maintain the pretense of disinterested research because he appears not to directly benefit from his conclusions. His mind has been bent to reinforce the status he has achieved. He will doggedly defend his “science”.

Am I immune to the desire for status? Not at all. I am, however, humble enough to realize that I will not be one of the select few who get to rule. My best alternative is to undermine the power lust of others. To avoid tyranny, I must pursue liberty, and not just for myself, but for everyone. The accumulation of power anywhere is a threat to me.

We must be skeptics. Our liberty depends on it.

Pragmatism is the Vessel of Propaganda, Thankfully Obama is an Idealogue

2010-02-03T07:50:00.000-06:00

Jonah Goldberg writes a nice column mocking Obama's pragmatic above-the-fray arrogance. He also elucidates the virtues of ideology.

The philosopher Bertrand Russell wrote in 1909 that if everyone becomes a pragmatist, then "ironclads and Maxim guns must be the ultimate arbiters of metaphysical truth." Russell's point was that there's nothing within pragmatism to delineate the proper and just limits of pragmatism. We must look outside pragmatism for that.

Our values, customs, traditions and principles provide the insulation against the corrosive acid of undiluted pragmatism. When you bundle these things together, it's often called an ideology, and there's no reason to apologize for having one.

Also recall from an old post of mine on propaganda:

...the educated, and especially the intellectual, are most susceptible to propaganda. Once you realize that people with little education tend to just follow what their parents and community tell them, you realize that only the educated are truly open to new ideas, many of which are poorly supported.

A President must be a jack-of-all-trades. His biases will lead him to listen to "experts" with those biases. A pragmatic mind is one that is most easily shaped by the limited voices he hears, and thus is the most susceptable to propaganda. However, this President appears to be unwavering in his ideas, agenda set in stone, unshaped by public opinion. Ironically, as Goldberg points out, the President's claims of pragmatism are just the self-delusioned arrogance of a blatant ideologue.

Debra Medina Rising

2010-02-02T20:05:00.000-06:00

A few weeks ago, Debra Medina, my choice for Texas Governor was at 4% of the Republican primary vote. Then, it was 12%, and now it's 16% according to RasmussenReports.

Why Do We Need Meaning?

2010-01-31T21:23:00.000-06:00

A few days ago I was listening to a podcast of a theological debate between a Calvinist and a Christian of a different persuasion which I did not catch. In the end it was pointless so I won't harm the world by linking to it. However, there was an interesting exchange that got me thinking about the human desire for meaning.

The two men used a theoretical event where a fictional man rapes and murders a small girl. Both of them were explaining their view of God's nature by suggesting how God might have allowed this to happen for the greater good of the world.

Why? Why do we suppose that God is some sort of utilitarian? Why do we presuppose some sort of cosmic justice or karma surrounds every negative that befalls us? As if good and evil were like double entry accounting where everything zeroes out in the end.

When I say, "we", I need to exclude myself. For whatever reason it is a phenomenon that I do not identify with at all. This is not to brag, but I do not ever recall having gotten angry at God. Never have I struggled with the lack of meaning in events. I don't know if I'm missing a gene or if I simply never began to believe that God needed to justify the world that he created and we altered.

Even the greatly reveered Christian author C.S. Lewis struggles through anger and doubt towards God upon the death of his wife. I've been reading his "A Grief Observed".

This is not a criticism of anyone. Where did this idea come from? Why do we believe this?

Anyone?

Raw Political Power

2010-01-24T13:50:00.000-06:00

Several days ago I endorsed Debra Medina for Governor of Texas. I also exercised my enormous political clout and shot an e-mail over to Robert Wenzel, blogger of EconomicPolicyJournal extolling her virtues. He gets about a thousand times as many hits as I do every day, and he told me he would keep an eye on her campaign. Lo and behold, he links to an article on her today extolling her virtues.

Now that I'm drunk on power, I'll have to start ordering you little people around. Someone get me some coffee!

Alien in the Gaps Fallacy

2010-01-22T11:24:00.000-06:00

Those in the intelligent design camp propose there are proofs that God exists in nature. An example being the irreducible complexity in the anatomy of the eye or bacterial flagella. The common retort to these claims is to cite the God of the Gaps fallacy.
The God of the Gaps fallacy can be defined as - a tendency to postulate acts of God to explain phenomena for which science has yet to give a satisfactory account.

This intelligent design line of thinking is, of course, a rather weak position. As soon as a scientific explanation is able to find an answer, the argument dies an embarrassing death. If one’s faith is built on one of these, it could be shattered in an instant. I’m not a microbiologist, so there may yet be a reason to be confident, but from a spectator’s viewpoint it seems rather tenuous.

The age old claim against God is the lack of evidence. Most people have some sort of mystical experiences, but these aren’t reproducible as required by science.

What shocked me, though, was the end of Ben Stein’s Expelled. When questioned by Mr. Stein, noted atheist scholar, Richard Dawkins, said that he thought it was possible that life had been brought to earth from another planet. This is the same person who believes that a belief in God is completely irrational.

I am agnostic on the subject of aliens, but his line of thinking seems a bit preposterous. We have been to the moon, we have been to Mars. We thought we found life on Mars, but we didn’t. We photographed the planets and their moons, and no visible life has been found. We have sundry instruments listening for rays and waves coming from outer space in hopes that there might be life on other planets. Yet, nothing. Absolutely nothing. The universe is deafeningly silent.

There is no evidence, yet many intelligent people assert that there is a probability. Surely, in all the universe, with billions of stars and planets, life exists somewhere else. Yet we haven’t seen a thing.

Even with this utter lack of evidence, Dawkins believes that it is a possibility that a race of super intelligent aliens, that we have never seen, nor have any evidence, went flying through the universe 5 billion years ago and dropped off some bacteria that evolved into us. Really? This is rational, but a supernatural being is not? We have barely scraped the universe which is why we haven’t found alien life, but by the same limited measure we can with certainty exclude a God. Really?

I dub this the Alien in the Gaps fallacy.

Debra Medina for Governor of Texas

2010-01-21T12:17:00.001-06:00

I have been a fan of my Texas Governor Rick Perry for a long time. I have voted for him every time, and do not regret any of those votes. In this coming primary election, I was planning to vote for him again, because Kay Bailey Hutchison has never impressed me beyond having a likeable personality.

However, I looked up Debra Medina, a lesser known candidate, last night after seeing a Rasmussen poll giving her 12%. I looked at the Issues tab on her website and swooned. She quotes Frederick Bastiat! Beyond the self apparent awesomeness of that, it means she reads real books.

In her bio I find that she was a leader in the Ron Paul for President campaign in Texas, and she was also one of those early home school rebels. That means she's got chutzpah (that means "cajones" to you English speakers).

I'm down with Debra Medina.

Tonight's Gonna Be a Good Night

2010-01-19T08:58:00.000-06:00

"I got a feelin'. That tonight's gonna be a big big night." -- Black Eyed Peas

I predicted on my facebook page Sunday that Scott Brown would win against Martha Coakley by 7 points in the Senate Race in Massachusetts. With more polling data coming out on Monday showing Brown up by 9 or 10 points, I am pretty confident that Brown's margin of victory will be large.

As many of you are well aware this could mean the death of Obamacare. Brown has pledged that he will join a Republican filibuster against that bill when it comes out of the reconciliation committee.

However, libertarian economist Bob Murphy had this to say in the comments at EPJ.

I don't mean to be a party pooper, but I would caution everyone about getting real excited for Republicans to step up to the plate and defend our liberties. I still cringe when I remember staying up late election night 2000 because I was so so worried that that "socialist Al Gore" would wreck the US economy...

I respectfully disagree, but not because I have faith in Republican leaders. The incentives for Congressmen to spend money and expand government are still there, so they won't change that much. However, what can change is the ideological mix of the country.

History is written in simple narratives, and this election tonight will be part of that narrative. President Obama is a symbol. He is big government writ large. He is Keynesianism writ large. He is elitist arrogance. We don't need him to be defeated and humiliated as a person, but we need it as a symbol. We need this brand of soft-socialism to become a punchline; a mythology of errors so engrained in our collective consciousness that economic intervention will be conflated with disaster.

The White House has already decided what their strategy will be after defeat. According to Politico:

President Barack Obama plans a combative response if, as White House aides fear, Democrats lose Tuesday’s special Senate election in Massachusetts, close advisers say.

He's doubling down. Like Pharoah after the plagues he plans to be even more provocative.

Did the Hebrews in Egypt recognize the importance of symbolism and historical narratives?

Exodus 9:13 Then the LORD said to Moses, "Get up early in the morning, confront Pharaoh and say to him, 'This is what the LORD, the God of the Hebrews, says: Let my people go, so that they may worship me, 14 or this time I will send the full force of my plagues against you and against your officials and your people, so you may know that there is no one like me in all the earth. 15 For by now I could have stretched out my hand and struck you and your people with a plague that would have wiped you off the earth. 16 But I have raised you up for this very purpose, that I might show you my power and that my name might be proclaimed in all the earth.

Not to put word's in God's mouth or assume he has an opinion on this election, but if we value freedom for ourselves and for our fellow Americans, we should be giddy about a likely victory tonight. Never in my lifetime has an opportunity for big government to be so thoroughly disgraced as it is right now.

The Mystical Mind

2010-01-13T19:58:00.002-06:00

We all have a certain lack of self-knowledge. We experience ephemeral emotions and events that we can not repeat, can not define, and can not fully grasp. There is a hole in our minds, and we all know it. We can’t put a label on it, but it’s there. Something is missing. Something is supposed to be there.

I recently listened to a podcast entitled “What Can Science Tell Us About God”. My flippant response is “nothing”, but I don’t hold that against theism, it’s more a condemnation of science.

Apologetics315 describes the podcast as:

Lewis Wolpert (Emeritus Professor of Biology, University College London) says there is no evidence for God whatsoever and religion finds its origin in tool-making. Russell Cowburn (professor of nano-technology, Imperial College London) is a scientist defending the Christian position.

Prof. Wolpert, the atheist, makes a comment at the 13:14 mark:

I want to tell you, you all, myself included, have a mystical aspect to our minds. We all have it. All people have it.

I’ve taken this a bit out of context so don’t think that he is admitted anything supernatural (he is actually arguing the opposite; that evolution created this aspect).

This got me thinking about the human experience. The lives we live inside of our minds and body are not well defined. Slowly, over the course of our lives we come to understand how the soup of chemicals effect us. What is joy? What is angst? We struggle at times to wrap our logic around the incoherence of our emotions.

My grandma died a few months ago and it was really the first time I had ever experienced loss. I was never terribly attached to our pets or to other family members who passed away. I empathized with others experiencing loss, but I had never felt it myself. I was surprised how vivid memories would sadden me abruptly weeks afterwards (even now as I write this I feel it again). Even with this recent experience I couldn’t think of anything to write in a condolence card today for someone I used to work with. It was his grandmother too, but I didn’t know what to say, and I hate being the 9th person to write, “Sorry for your loss.”

Science can tell me nothing about this. I can not sit and experiment with my emotions until I’ve codified every nuance. I can’t apply logic to feelings that have never occurred before. The gaps in my self-knowledge are immense. Why do I chew on pens? Why am I compulsive about some things and lax about others? What is the purpose of my life?

There is a great deal that I will never know, nor can ever know about myself. There is a great gulf in my mind. A great sea of the unknown. Something is supposed to be there.

Where is this God, you ask? He's right there.

Status and Depression

2010-01-05T07:44:00.000-06:00

Arnold Kling at EconLog posted this article recently written by two evolutionary psychologists. Many years ago I was really excited by evolutionary psychology, but I've slowly soured on it. Nonetheless, the article is really interesting. A snippet:

depression is an adaptive response to losing rank and conceiving of oneself as a loser. The adaptive function of the depression, according to rank theory, is to facilitate losing and to promote accommodation to the fact that one has lost. In other words, the depressive state evolved to promote the acceptance of the subordinate role...

and

an internal inhibitory process comes into operation which causes the individual to cease competing and reduce his level of aspiration. This inhibitory process is involuntary and results in the loss of energy, depressed mood, sleep disturbance, poor appetite, retarded movements, and loss of confidence which are typical characteristics of depression.

This linkage between low status and depression got me thinking about some of the Christian ethos of humility. Are Christians susceptible to depression by avoiding status symbols, personal glory and power? Or is there some other route that supplants these losses with something more? (The last sentence not just being a rhetoric statement, it really is a question in my mind.) When I read Paul, he seems to be overflowing with passion, which clearly does not fit under "loss of energy...loss of confidence". There is something he has tapped in to, but explicitly grasping and defining that is eluding me at the moment

Lessons from Rome

2009-12-26T17:20:00.000-06:00

For Christmas I received a couple books on the rise of the Roman Empire. I wanted to make a couple notes:

The Good News: Rome's first political personality cult (Tiberius Gracchus) seems to have been in 132 BC, a full 86 years before Rome's first dictator Julius Caesar. So all this fear mongering about Obama's power grabs may be a little premature ;)

The Bad News: In between, revolts and government overthrowing riots were pretty common. One purportedly ending with so many bodies in the Tiber river it had to be unclogged to get them to float away.

But, history doesn't repeat does it?

A Side Note on Immigration

2009-12-07T21:14:00.002-06:00

I got wrapped up into a lengthy debate today on immigration at the blog of my friend and illustrious economist Bob Murphy. I thought it was a good conversation, so I'm going to post of my comments and some other responses.

Bob's post and my thoughts are in response to a Cato Institute web video that included a question answer session with famous libertarian economist and blogger Tyler Cowen. [He notes these comments here] His comments set off a firestorm of anger amongst some of the intellectual libertarians, but I'm not concerned with those issues. Among them were some sharp rebukes of those who are anti-immigrant. While I have no time for xenophobic anger or violence, I am becoming increasingly aware that the nativist argument is actually fairly sound.

Def. Nativist - someone who wants to maintain the purity of ones own culture.

Def. Minarchist - referring to minimal or very small government

I am pro-immigration. I believe in open borders. The best way to ensure freedom is to allow people to choose their government. Competition will shrink the size of the state.

However, I have seen noone make a good argument against nativism. Not that I subscribe to the argument, but I don't have a slam dunk reason against it.

My basic nativist argument is this:

You have a democratic minarchist state. The country flourishes economically. Millions of people around the world want to come and enjoy the economic benefits. The minarchist state opens its borders, letting in millions of hard working people who happen to be statists. The minarchist state slowly disappears as the statist immigrants become an increasing part of the voting population.

Blackadder adds:

The issue isn't whether every immigrant will be highly statist, but whether immigrants are likely to be more statist on average. That immigrants are likely to be more statist (and that this effect can last generations) is, I think, amply demonstrated by history.

Then Taylor:

"Is it also possible that these statists, once they arrive and are saturated by a non-statist society, will begin to adopt different principles, rather than the other way around?"

Then Me Again:

Sure, that's possible, but I lean towards Tyler Cowen's comment that culture is "sticky". Voting patterns amongst certain demographics tend to change very slowly over time.

While I am still not a nativist, I can understand their viewpoint. I won't agree with bigotry anyone who disrespects immigrants as individuals, but for now, I can't really tear down the arguments as I have presented it.

How Paul Krugman Became an Idiot

2009-12-04T14:08:00.000-06:00

Recently, my viewpoint of human behavior has been radically expanded by seeing the ubiquitous influence of status. This line of thinking finally lifted the vale of mystery from a question I've had for so long. Namely, how can someone be so smart, but believe something that is so ridiculous.

Paul Krugman, Nobel Laureate in economics, and NY Times columnist is the patron saint of the left wing economics. If the Obama started selling our babies to pay off debt to China, Krugman would be complaining that it wasn't toddlers too. He's so dedicated to giving power to the state that nothing seems beyond reproach.

How did he get that way?

The problem is that we learn and believe what we are motivated to learn and believe. The primary factor, I believe, is status. I break down how this happens into 3 types.

First, we like to believe things about ourselves make us better than others. You have book smarts, but I have the all important common sense. It's standard ego defense. If someone tells a child with red hair that red hair is the best, he's likely to believe it because it makes him feel better. Politically this would be someone who is highly educated who thinks that only highly educated people should be allowed to vote. Their ideas would give them more power and status.

Secondly, is indirect status. If I come up with an argument that brown eyes are the best, and you have brown eyes you will reward me with agreement. If people around me tell me that they agree with me, then I'm more likely to believe that I'm right. It's not that my ideas are self-serving, they serve the status of others. This reinforces my line of thinking. The better my line of thinking the more my own status will be raised by those who these ideas serve. I can whole heartedly believe that brown eyes are better, even though my own eyes are blue. This apparent lack of self-interest gives more creedance to my ideas and all the more fuels my own status indirectly.

Politically, we see this all the time. Paul Krugman is surely heavily influenced byt his. He gives cover to power grabs by politicians. His ideas are reinforced by indirect self-interest.

Thirdly, is groupthink. If you put ten Paul Krugmans in a room they will aid and assist each other. When one academic makes a good argument that supports the main argument he will be rewarded by his peers. They reward him because he has assisted the cause that indirectly gives them status.

When thinking this way, this adds to my own beliefs that "scientific" inquiries into the social sciences is fraught with inevitable problems.

Great Comments at Forum on Education

2009-11-10T16:52:00.004-06:00

I've been gone on vacation for a while, sorry for the break.

I love economists. There is no Hollywood actor, pop-star, comedian, or celebrity who so regularly blasphemes the mythologies of our times than economists.

This short forum which includes several economists and a few other "prestigious" people at the Chronicle on higher education should be read. Economist Bryan Caplan, makes a clinical, but very non-PC comment. Two excerpts:

"For whom is college attendance socially beneficial?" My answer: no more than 5 percent of high-school graduates, because college is mostly what economists call a "signaling game." Most college courses teach few useful job skills; their main function is to signal to employers that students are smart, hard-working, and conformist.

And another...

College attendance, in my view, is usually a drain on our economy and society. Encouraging talented people to spend many years in wasteful status contests deprives the economy of millions of man-years of output. If this were really an "investment," of course, it might be worth it. But I see little connection between the skills that students acquire in college and the skills they'll need later in life.

The whole article is filled with anti-college thoughts. The non-economists basically parrot myths and pablum. I generally agree that most of college is a status game where learning is secondary to "winning".

HT: Econlog

Altruism, A Few More Comments

2009-10-26T21:24:00.003-05:00

Storm Jingram requested that I expound on my criticism of Altruism in my last post.

Inherent to calling any act an "altruistic" one, is the belief that the act has no value to the actor. It is easy to conceive that many "atruistic" acts are indirectly beneficial, such as building a good reputation or interpersonal trust, but I've helped people out before in secret and still felt a rush of joy. Our minds may simply be hardwired to enjoy simple acts of kindness.

The problem with Altruism and other forms of morality is that there is an implicit compulsion to do those acts. It's not that you simply enjoy doing them, it's that you MUST do them if you are to be a "good" person. People will cast shame on people who don't practice "altruism". Isn't it a little ironic to use manipulation to coerce acts that produce happiness? This compulsion, this guilt, drains the joy out of the act. In the end, we are left with less kindness and less joy.

Replace "You Must" with "You Can" and it will make all the difference.

Altruism, Why Is This a Virtue?

2009-10-24T09:55:00.003-05:00

Why is altruism a virtue? Defined as the act of doing for others when no reward is apparent. This idea is not just silly, it's damaging. Its effect on us all is recidivistic.

Inherent to the definition is that altruistic acts have no reward. If an elderly woman drops an object and I help her pick it up, have I suffered loss? Have I lost value to myself only to help her out? Can I not be motivated by joy? Can I love my neighbor, not out of moral compulsion, but because the act itself is inextricably linked to the reward of joy? If we continue to obsess that there is no reward then we kill the motivation to love. Altruism is a cancer.

What about heroism? Can we not be devoted to people, to a cause, with such euphoric passion that danger fades as a pressing concern? An idea can be more valuable than our lives. Why have we deified death as the ultimate arbiter of our actions? Remember that great man from history who changed the world because he made certain of his safety at all times? Of course not. The opposite of danger is not safety, it's boredom. Why would we discourage heroism by claiming it has no reward?

Altruism is a sham, and it blinds us to the possibilities of the human experience.

Another Nice Example of Moral Manipulation

2009-10-23T07:39:00.002-05:00

Sam Kiley of the British paper The Times, illustrates in this article an example of moral manipulation when it comes to procuring aid for Africa.

Aid organisations and the media have inflated the scale of subsequent horror, regardless of the truth. This year the International Rescue Committee released data from its Democratic Republic of the Congo mortality survey. “Congo’s war and aftermath have killed 5.4 million,” The Washington Post yelled, quoting the IRC. Humbug.

The IRC isn’t deliberately lying, neither was the Post. But the idea that 5.4 million people have died as a result of war in Congo is nonsense. It needs to be peddled to help to generate funds to relieve the real and hideous suffering of Congo’s population, but nonsense it remains. As the IRC admits: “Less than 10 per cent of all deaths were due to violence, with most attributed to easily preventable and treatable conditions such as malaria, diarrhoea, pneumonia and malnutrition.”

The IRC is saying, really, that the Congolese are dying because they are poor. Recent work by André Lambert and Louis Lohlé-Tart shows that the rising mortality rate predates the wars there. But combine “war’’ with “millions dead’’ and you have a donation-winning headline We all do it. We use statistics to highlight the horrors in Africa to drive home the unbelievable scale of the continent’s problems. But that’s the problem: the scale has become unbelievable. Twenty-three million? From my experience of two decades’ reporting from Africa, I can say with absolute confidence that this is humbug. Did anyone count them? No.

Here in lies the problem with making a moral plea. If at first you don't succeed at sufficiently manipulating people's behavior, exaggerate. Employ some shock and awe. The flip side, as he states is that the numbers become unbelievable. When we exaggerate a moral claim, we risk that our audience rejects us carte blanche. Instead of realizing that we are exaggerating they will think we are wrong. So lunacy becomes acceptable and the truth becomes offensive.

P.S. Go back and read the article, because he does make some solid points about the use of food aid in Africa.

Spinning our Wheels

2009-10-19T21:40:00.003-05:00

After a good talk with a good friend last night, I was convinced to break down my comments on morality and manipulation a little more. Hopefully, a few concise posts will help more understand.

Conclusion: Any concept that we are making moral progress or that humanity is moving towards some more perfect moral existence is false.

First, all morality is based on presuppositions. Thanks to some of our diligent atheist friends we know that there is no ultimate truth. All of these presuppositions are subject to doubt. None, are self-evident. These moral truths are only true because we choose to believe the presuppositions. These moral truths are only as true as we want them to be.

Secondly, the selection process of morals is endemically corrupted by the desire for power and status. Either the moral behavior serves the interest of the one making the argument, or the very act of making a successful moral argument serves to give status to the talented orator. Moral truths are not chosen through an altruistic search for truth, but to serve the interests of individuals. How can they be finding truth, when there is no truth?

No utopia, based on moral enlightenment, can ever come. Our human experience is becoming more comfortable, but it is not becoming more moral.

George Will Sees the Manipulation

2009-10-13T21:23:00.003-05:00

In his Sunday column, columnist George Will takes note of the poor discourse on health care/insurance in this country. Its a clash of rights claims and moral claims. "We have a right to...and if you don't see this self-evident truth then you are a..." Insert expletive here.

The use of moral absolutes has become so diluted and abused that it's not working anymore. What once held significant manipulative sway, just doesn't pack the same punch. We can see their manipulations from a mile away and we're having none of it. Morality is manipulation.

Here's Mr. Will,

If our vocabulary is composed exclusively of references to rights, aka entitlements, we are condemned to endless jostling among elbow-throwing individuals irritably determined to protect, or enlarge, the boundaries of their rights. Among such people, all political discourse tends to be distilled to what Mary Ann Glendon of Harvard Law School calls "rights talk."

Witness the inability of people nowadays to recommend this or that health care policy as merely wise or just. Each proposal must be invested with the dignity of a right. And since not all proposals are compatible, you have not merely differences of opinion but apocalyptic clashes of rights.

Rights talk is inherently aggressive, even imperial; it tends toward moral inflation and militates against accommodation. Rights talkers, with their inner monologues of pre-emptive resentments, work themselves into a simmering state of annoyed vigilance against any limits on their willfulness. To rights talkers, life -- always and everywhere -- is unbearably congested with insufferable people impertinently rights talking, and behaving, the way you and I of course have a real right to.

Hmmm..I wonder why would people throw elbows to expand their rights? It couldn't be that they are using morality as a tool of manipulation to gain more power and status?

Calm Down About Biblical Inerrancy

2009-10-11T19:40:00.003-05:00

This week I glanced through a column critiquing the Bible and Christianity, mostly silly, but the comments at the bottom revealed the unfortunate consequence of Evangelical Christianity's exaggeration of biblical inerrancy. Minor quibbles with certain passages had led several people to abandon their faith. The abuse of what should be a matter for faith has set up Christianity in a continual battle with scientists and secular historians. To prove biblical inerrancy is an extraordinary task, and cracks in this sweeping assumption lead thousands to shattered faiths.

Is the Bible inerrant? That is, are there errors? I have no idea because I'm not a biblical historian or theologian. My faith is that the message that God intended for us to receive has not been mangled. The key word being faith. I believe in a benevolent God who communicates with mankind first and foremost. My faith in the scriptures flows from that initial assumption secondly. Any minor discrepancy with historic records is no threat to my faith in the intent of scripture.

The problem with many evangelicals is flipping this equation around. Their faith in a benevolent God flows from their belief in inerrant scriptures. They live their lives as if the Bible were scientifically provable, and only out of that proof can they then believe in God. The Bible is true, therefore God exists. This proof relies on scientists, theologians, historians, interpreters, anthropologists, and literary analysis. It's a complex web of assumptions that exposes the faith of a biblical "primacist" to attack on thousands of points. It's unstable.

My view can be represented as such:

1. Assume God
2. If God, then A, B, C,....

The view of the biblical premacist can be represented as such:

1. Assume A, B, C, D, E,...Z...
2. If A through Z are all true, then God.

If doubt is cast on any of the assumptions by the biblical premacist, their belief in God would logically fail. To maintain their faith in God, the biblical premacist is placed in the untenable position of being anti-science or anti-historian. I believe this is why so many Christians consider evolution as an existential threat to Christianity. Because if page 1 is proved false, then pages 2-1000 are false as well and God himself is a fraud.

Placing God at the beginning of the equation makes attacks on historical accuracy or the literal interpretation of the Genesis account, meaningless. The simple beginning "God is" is infallible. What about science? Poppycock. Prove to me that the universe can be objectively ascertained. Prove to me a materialist universe. More simply, prove to me that what I see is all there is. These are workable assumptions for living, but they are silent on the existence of God.

Go one step further and believe that God is loving and communicates with us. What better way than to send the very essence of himself to live and die an insuperably heroic, passionate, and compassionate life to let us know that we can indeed warm ourselves in the glow of his perfect love.

"But the geneology on pg. 213 doesn't really work out if you assume..." blah, blah, blah, yawn.

Where Have All the Cowboys Gone?

2009-10-08T21:12:00.005-05:00

Mark Regnerus, a sociologist from the University of Texas, wrote this piece in Christianity Today a few months back titled "The Case for Early Marriage". In it he points out the absurdity of promoting abstinence and delayed marriage for young Christians. This is something that I have felt for quite some time.

There are consequences to our current culture of wait, and as an economist I look for incentives. The incentives in delayed marriage not only make abstinence or chastity a longer burden, but it also changes the thought processes of young people.

If a young Christian woman believes that marriage is many years off, why would she limit her dating life to stable and pious men? Dating, without the expectation of marriage, is simply fun. Girls will be attracted to young men who are simply fun.

Unfortunately, what we are training young Christian men to be is anything but fun for young Christian women. We teach them to control their passions, making them dull. When marriage is many years off, what incentive do they have to grow up? Why put down the Playstation to study or get a job? Why have a girlfriend if you don't plan to have sex and don't plan to marry her?

Of course, these are generalities, and I don't want to focus merely on the deleterious effects of these incentives. There is the issue of passion and the human experience.

For thousands of years, most every society (any historians please correct me if I'm wrong) had young marriage. It was either young arranged marriage or young romantic marriage. Either way, they were young. Not only is it apparent from our physical urges and the lower birth complications for younger women, but the romantic notions in youth seem to imply we were meant for young love, young marriage, and young reproduction.

While the Evangelical Christian world is telling kids to wait for sex, the secular world is telling them to wait for love. Either way, the message is clear: Squelch your passions, and give into the dullness of sensibility.

These most powerful human sentiments can be the most wonderful and beautiful things. but we are told to crush them, subdue them, wait, wait, wait, and then wait some more. Wait until your heart is jaded and the love you find is pleasant but modest. Deny those sexual urges, and when you fail, feel horrible, feel guilty. Wait until you've established a career, because who needs love and passion when you can afford a comfortable lifestyle?

Where have all the real men gone? Where have all the true ladies gone? We bury them with wait.

C.S. Lewis in his book "The Abolition of Man" has a great passage that relates:

"And all the time--such is the tragi-comedy of our situation--we continue to clamour for those very qualities we are rendering impossible. You can hardly open a periodical without coming across the statement that what our civilization needs is more 'drive', or dynamism, or self-sacrifice, or 'creativity'. In a sort of ghastly simplicity we remove the organ and demand the function. We make men without chests and expect of them virtue and enterprise. We laugh at honour and are shocked to find traitors in our midst. We castrate and bid the geldings be fruitful."

Update: A reader has a blog mostly dedicated to the subject - The Unorthodox Marriage

Understanding Paul

2009-10-05T21:01:00.003-05:00

I've written a few posts now about Christianity without much mention of scripture, so here it is. My favorite book in the Bible, being Romans, is often difficult to understand, but I have found it extremely enjoyable to reread over and over again. Every time I'm exposed to a new philosophy I go back and find it even more compelling than the last time.

First, let me provide a couple definitions - "the law" - the moral system passed down in the Jewish tradition - "sin" - error as a result of man's inherent naivete/hubris

In Romans 7: 7-11, Paul captures the points I've been making about the failure of morality:

"What shall we say, then? Is the law sin? Certainly not! Indeed I would not have known what sin was except through the law. For I would not have known what coveting really was if the law had not said, 'Do not covet.' But sin, seizing the opportunity afforded by the commandment, produced in me every kind of covetous desire."

Paul is stating that the focus on the law took his eyes off of understanding what is beneficial and instead focused it on the law itself. The moral law itself was leading him to do that which is not beneficial. He continues...

"For apart from law, sin is dead. Once I was alive apart from law; but when the commandment came, sin sprang to life and I died. I found that the very commandment that was intended to bring life actually brought death. For sin, seizing the opportunity afforded by the commandment, deceived me, and through the commandment put me to death."

He goes on in verses 14-24 to speak how he struggles in a tug of war between the good that he can see and sense, but he is bound by the slavery to the law.

14 "We know that the law is spiritual; but I am unspiritual, sold as a slave to sin. 15I do not understand what I do. 16For what I want to do I do not do, but what I hate I do. And if I do what I do not want to do, I agree that the law is good." [He struggles to do the good that he can sense]...18.."For I have the desire to do what is good, but I cannot carry it out."

23 "but I see another law at work in the members of my body, waging war against the law of my mind and making me a prisoner of the law of sin at work within my members." [He can see what is beneficial, but morality works against that.]

and finally, in verses 24 through 8:1-4, he begins to show us the way out.

What a wretched man I am! Who will rescue me from this body of death? Thanks be to God - through Jesus Christ our Lord! So then, I myself in my mind am a slave to God's law, but in the sinful nature a slave to the law of sin.

Therefore, there is now no condemnation for those who are in Christ Jesus [no longer bound by morality], because through Christ Jesus the law of the Spirit of life set me free from the law of sin and death. For what the law was powerless to do in that it was weakened by the sinful nature, God did by sending his own Son in the likeness of sinful man to be a sin offering. And so he condemned sin in sinful man, in order that the righteous requirements of the law might be fully met in us, who do not live according to the sinful nature but according to the Spirit"

The law, or morality, is no longer necessary because Christ has demostrated that everything the law has tried to manipulate us into doing could be done without it. Perfect goodness, doesn't need morality, only humility.

A Christian Should be a Skeptic

2009-10-03T09:49:00.002-05:00

It has been ingrained in the minds of many anti-intellectual Christians to fear the words doubt and skepticism, but we are damaging ourselves by not employing them more often. Not only do we fail to deepen our own faith, but we hurt our desire for intimacy with God by not being suspicious of what "the world" as it is called, teaches us.

The renowned skeptic, Neitzsche, says in his "Beyond Good and Evil":

"All the moralities that address themselves to the individual, for the sake of his "happiness", as one says - what are they but counsels for behavior in relation to the degree of dangerousness in which the individual lives with himself; recipes against his passions, his good and bad inclinations...little and great prudences and artifices that exude the nook odor of old nostrums and of the wisdom of old women"

Modern Evangelical Christian culture teaches us to nudge each other, especially our kids, towards a higher "morality" by appealing to self interest. The underlying premise being that achieving Christian morality leads to a higher level of happiness. Don't look at girls that way or you will ruin your future marriage. Don't dress like that or all the dregs and perverts will fool you and seduce you. I think that Neitzsche captures this situation pretty well.

I have met plenty of Christians, and experienced personally for myself, who wondered why they were not that happy even though they had managed to quell many of their passions and were living according to much of the Christian code of morality. The problem is simple, and I will use the moral formula from an earlier post again.

A is true, and B is true, so action C is a moral behavior.

The underlying assumption that the Christian has made is that obeying the moral constraint leads to happiness. This is the folly. The Christian must believe that behavior C is beneficial on it's own. While many Christians will claim that they believe that C is indeed beneficial, they also simultaneously believe that NOT C is also beneficial. This belief that C and NOT C are both beneficial is the real problem. It is not a lack of faith in A and B, but a lack of skepticism on NOT C.

As an example:

I hate cauliflower and I love steak. Do I need will power to choose steak over cauliflower? Not at all. I know that I like steak more than cauliflower in every possible situation. I also like Dr. Pepper. I like it too much and drink it too often. In fact, I'm on a no Dr.Pepper diet currently. I like the weight I lose when I quit drinking Dr. Pepper, but I also really like the taste of it. I've gone on and off Dr. Pepper several times over the last ten years, but I've obviously never quit forever.

My problem is that both drinking it and not drinking provides happiness (or utility), but the rewards are mutually exclusive. As long as Dr. Pepper remains my indulgence of choice and my remedy for tiredness, its grip will stay tight. Does it really wake me up? Is it really as refreshing as I think or has clever marketing made me believe this? Is it a placebo effect? I'm not sure, but I know that skepticism is my way out.

Now to the main point. In my lifetime the presentation of consequence-free and unbridled sexual activity has been one of the most pervasive points of contention. Is it true? We are presented with information that as long as we use protection it's only our moral hangups that prevent us from enjoying this unequaled pleasure. How can we know that the self interest of the "authorities" isn't clouding their analysis? Does it give them power and status for us to believe them?

Much like the Christian will at times get a rush of euphoria from conquering a sinful behavior, is it also possible that the status and ego boost given to us through a sexual conquest really mask a growing emptiness. Much like the Christian who is purging sinful desires in hopes of recapturing that temporary bliss, is the sexual conquistador on the same path, hoping that the next conquest will satiate that growing sense of purposelessness? Is it an endless path of constantly chasing the next temporary high?

The rest of the world is skeptical of Christian ideals, but are we skeptical of theirs? Do we actively tear down what they preach? Do we demand proof? Should we hide our children from "the world" or should we mock its self serving manipulation?

Morality is Manipulation, Part II

2009-10-01T20:41:00.003-05:00

In part I, discussed how an individual can break down moral boundaries by casting doubt on the underlying presuppositions. Now for the manipulation. Not only are morals susceptible from within a person, they are suspectible to attack from outside as well.

Using the same formula as before:

A is true, and B is true, so action C is a moral behavior.

Not every person has the same mental capacity or the same zeal for rigorous intellectual pursuit of consistent logical behavior. Because of this, some are better at changing minds and others are more likely to have their minds changed. Those who are better I will call "authorities" and those who have their minds changed I will call "followers".

The problem is that authorities are not altruistic, and in regards to spreading the one objectively true morality (A and B) they may balk because it doesn't serve their interests or preferences. If it is in the interest of authority figure X that follower Y not practice behavior C, X will use its authority power to persuade Y not to practice behavior C. Moral laws break down because they do not serve the interest of the authorities. Follower Y is not aware that they are serving the interest of authority figure X, only that the authority figures makes sense.

Jesus saves his anger for authority figures alone. The Pharisees and the "Teachers of the Law" lord their expertise over their people and coerce them to beleive and practice things that serve to maintain the status, power, and wealth of the authority figures. Jesus eviscerates them on several occassions. As for today we have "name it and claim it" preachers, media propagandists, and Global Warming theorists :)

Other forms of blatant manipulation come to mind, but we all, in subtle ways practice this. Parenting is the profession of this practice. How do I get my son not to hit the other son? Moral imperitive. How do I keep them out of the street? A car WILL hit you (with high probability). It's exaggeration, manipulation, and a whole menagerie of half-truths and cliches. If anyone has any better ideas please let me know.

Morality breaks down because talents are dispersed. If we assume that the strong will accumulate more resources by the sweat of their brow, and that the smart and industrious will join them by focusing their faculties, then we must accept that the crafty and surreptitious will do it by changing our morals through manipulation.

Morality is Manipulation, Part I

2009-09-29T20:19:00.008-05:00

This is the second in my basic fundamentals of Christianity. Whereas the previous post was benign, this one should exasperate you if you really understand what I'm saying. Morality and moral laws, as humans use it, is nothing more than manipulation. First, however, let me criticize moral laws in general.

Moral logic, in general, follows this pattern:

A is true, and B is true, so action C is a moral behavior.

A traditional Christian moralist would like say it like this:

God gave us his law, God is the ultimate judge, so actions prescribed in that law are moral behaviors.

If this were an immutable truth there would be little room sin. Traditional Christianity paints any rejection of this as mere rebellion, but there are other more fundamental problems.

What if someone doubts that God exists? What if the Bible isn't perfectly clear on defining action C? The moral compulsion breaks down. Sprinkle a little skepticism on A, B, and C, and the moral law fails.

More universally, any set of A, B, and C is subject to doubt. If someone doesn't want to do action C, know that they will dedicate their energies to casting doubt on A and B.

A more experienced logician will claim that A and B are axioms. That they are self-evident truths. Skepticism, however, is not bound by anything. The skeptic will find a way. They always do.

Doesn't this imply an ethical nihilism that nothing is moral or immoral? Yes it does, and I'm not afraid, and you shouldn't be either.

The Fatal Conceit, We Are Not Gods

2009-09-28T19:51:00.005-05:00

To start off, I want to establish a few basic ideas to build from. This first one is to establish that humans vastly overestimate their intelligence, and suffer greatly by assuming that our feeble reckoning can guide our lives. To embrace "moral relativity" as it is called or attempting to "do what is right for me" is no more helpful than slamming ones face into a door.

Your boss comes by and asks if you have started that report. Do you lie and say "Yes" or do you tell the truth and incur his criticism? What if you lie? Will he believe you or will he ask to see what you have not accomplished? Is this a 40% chance of getting caught or a 10% chance? Can you even calculate this? In a split second? How many contingencies do you have to cover? 10? 100? 1,000,000? Quick, you have 2 seconds.

Why do we lie? Because it often "works". Usually we can maintain our bloated reputation, so we do it. We lie over and over again to hide our flaws and weaknesses and present an image that exaggerates reality. But when it doesn't work, it can really blow up. Fundamental to this behavior is an assumption. We are gods and others are fools.

Not too long ago I read through Frederick Hayek's "The Fatal Conceit" and a portion of "The Counter-Revolution of Science" These two books have had a great impact on my religious views. (I was hoping to find a killer quote, but none of my flagged pages yielded any)

Hayek criticizes the use of empiricism on the social sciences. His main criticism of socialism boils down to a lack of information problem and violations of the basic principles of science. An economy is infinitely complex and no controlled experiment can ever be performed.

Socialism, or any form of government planning, is not just impossible in practice, it is ridiculous in theory. No one is smart enough. Not even close. What we get from our intellectuals are elaborate rationalizations for mistakes.

The same narcissism that infects many of our academic elites and political leaders infects us as well. Why can we lie and get away with it? Because we are smart and they aren't. Why can we steal and get away with it? Because we are more clever. Why can we gossip and talk behind their back? Because we are more righteous and not quite as trashy. We are either book smart or street smart, but we are definitely smarter.

Being ignorant to the full depth of other minds, we kid ourselves that we are little better. In our heads, we are gods. Awareness of this natural inclination was captured all the way back in the Genesis account:

Genesis 3:4-5 "You will not surely die," the serpent said to the woman. "For God knows that when you eat of it your eyes will be opened, and you will be like God, knowing good and evil."

The first sin was, and I believe all sin is, born from pride. We want to be the god in our little worlds.

Side note: Christians should be wary of sociological studies that prove that a moral behavior is objectively beneficial or harmful regardless of the source. These kinds of studies have rampant uncontrolled variables and other biases. In my experience, children might find this kind of information persuasive, but most adults have built up walls of skepticism to defend their egos.

Hello Again

2009-09-26T19:58:00.003-05:00

Several of you have e-mailed and complained over the last several months that I haven't blogged in a long time. What started out as a short break turned into these 4 months. I started down a philosophical rabbit trail that kept going and going.

More specifically, my religious beliefs and my economic beliefs, which had been mostly separate, began to converge. When push came to shove, it was my politics that failed. Not the accuracy or my general embrace of libertarianism and Austrian economics, but my zeal failed. It failed because I realized I believed in a utopia that could never be. Human nature simply will not allow it.

I am hoping to blog more regularly, but there will be a significant change in direction. My writings will mostly deal with Christianity and philosophies that surround it, although I'm likely to dabble in politics and economics as well. I have recently been greatly influenced by Nobel Laureate economist Frederick Hayek, philosopher and author C.S. Lewis, and the theologian Francis Shaeffer.

Do not be mistaken that this will be a blog that defends the Christian status quo. Some will find it irreverent, blasphemous, shocking and appalling. Serious problems exist within modern Christian culture and plenty of traditions need to be wrecked. Don't worry, I'll also hammer a few silly atheists along the way.

Paul Krugman doubts Inflation

2009-05-29T06:33:00.002-05:00

Paul Krugman, who constantly congratulates himself on predicted the housing collapse, is putting his reputation on the line in his belief that the U.S. is living out the Keynesian model.

He writes:

First things first. It’s important to realize that there’s no hint of inflationary pressures in the economy right now. Consumer prices are lower now than they were a year ago, and wage increases have stalled in the face of high unemployment. Deflation, not inflation, is the clear and present danger.

Hmmm...deflation?

Oil has gone from $32/barrel to $66/barrel (WTI morning of 5/29). The dollar keeps dropping. The 5yr TIPS-Treasury spread (a market indicator of inflation) has risen from -0.7% to +1.4% over the last few months and its growth shows no signs of abating.

Then, in his standard style he throws up a straw man:

But it’s hard to escape the sense that the current inflation fear-mongering is partly political, coming largely from economists who had no problem with deficits caused by tax cuts but suddenly became fiscal scolds when the government started spending money to rescue the economy. And their goal seems to be to bully the Obama administration into abandoning those rescue efforts.

Find me one libertarian economist who had no problem with Bush's profligate spending. Right now, it's the libertarians making the most noise about inflation, not the middling "conservatives" like Greg Mankiw who is all for massive money printing.

Someone is going to be gloating over the next few months, we'll just have to wait and see.

Moderates are Opening Their Eyes

2009-05-26T12:11:00.003-05:00

David Brooks, who can only weakly be considered a conservative in my opinion, pinned a nice column at the New York Times today on Obama's recent forays into fascism-lite.

An excerpt (note his sarcastic tone):

These events have heralded a new era of partnership between the White House and private companies, one that calls to mind the wonderful partnership Germany formed with France and the Low Countries at the start of World War II. The press conferences and events marking this new spirit of cooperation have been the emotional highlights of the administration so far.

Wow. He likens Obama's relationship to corporations to Nazi Germany's relationship to Vichy France. Didn't expect to see the day where I thought David Brooks would use stronger terms than I.

At this, the C.E.O.’s behind him don frozen smiles, exuding the sort of spontaneous enthusiasm often seen at North Korean pep rallies.

Double Wow. Now it's a comparison to Kim Jung Il's North Korea.

David, you need to leave some hyperbole on the plate for the blogosphere. That's our niche, you're treading on our turf.

Great Column

2009-05-19T06:41:00.002-05:00

This column by David Limbaugh iterates the things I loathe most about President Obama. His overuse of straw man arguments and other blatant distortions that stretch my ability to consider him something short of pathological.

An excerpt:

I'm sorry, but I believe Obama calculatingly employs this approach mainly as a smoke screen to hide his real agenda, which resides anywhere but on common ground. He specializes in paying superficial respect to his opponents' arguments while proceeding to bury them. The examples are endless.

He calls forced union membership "free choice." He masquerades as a fiscal disciplinarian while authoring nationally bankrupting budgets in perpetuity.

He endorses capitalism as a superior economic system while undermining it with other words and actions. He condemns it as "unfair" and decries achievers as "selfish" and "greedy." He's set on restructuring our economy away from the free market and toward government control, from taking over private businesses to setting executive salaries to subsidizing mortgages to nationalizing health care. But he knows better than to condemn capitalism outright, because if he did, the American people finally would wise up to his endgame.

On the Origins of Political Bias

2009-05-16T16:13:00.003-05:00

I am not an anthropologist, but I’ve been mulling over some thoughts that came to me after watching a show on gorilla behavior. It has changed my thinking about society rather dramatically.

I have thought for a number of years that proper education and enlightenment would lead to the inevitable adoption of free market principles. If we are truly rational beings, how could society, over time, not accept what is true and beneficial. In chemistry, physics, and biology, we seem to be progressing all the time. However, I have now come to reject this concept as it applies to politics and propose that we are in never-ending oscillations between shades of freedom and tyranny.

Underlying many of our motivations, as is the case for gorillas, is the desire for status. It is not just a desire to be rich, but to be richer than our friends and neighbors. Wealth and status can be gained through virtuous means like hard work, through immoral ways such as theft and murder, but also through manipulation. The homeless man on the street is not stealing from passersby, he is merely manipulating people to give him money.

This manipulation is a constant force around us. A pretty girl will get a boy to do favors for her. A slick salesman will sell an item for far more than the going market rate. A politician will tell tear jerking stories to get votes. For those who seek power, but live in a civil society, manipulation is the most powerful tool at their disposal because violence is rarely tolerated.

At given points in time, societies around the world endeavor to pursue a new course. Much like England and it’s Magna Carta, and the U.S. with it’s Constitution, weak societies decide to try something different that improves on previous frameworks that don’t seem to be working anymore. If these new frameworks are truly better, the society will flourish and thrive. Clearly, America’s framework has worked spectacularly by growing a small group of colonies into a singular world power.

What works for societies are limits on individual power. There is no mistaking the strong correlation between free markets and high growth/high incomes around the world. Individual freedom to calculate one’s own actions leads to the best outcomes. However, this framework of individual freedom does not allow for the kind of power that certain individuals wish to wield. Manipulation is the pathway back to that power.

When one individual is able to successfully manipulate others to give them power, still others who desire power or status will adopt these techniques and employ it themselves. The manipulators, over time, must destroy the logic and tenets of the framework of individual freedom. Slowly, but surely, these manipulations begin to weave together a narrative that does reject freedom and offers some “more perfect” alternative. Successful manipulators use these narratives to get elected to office in a democracy.

Young and old, smart and dull, all start to fall sway to the romance and the Utopian possibilities promised in the narrative. A whole army of intellectuals will dutifully build a "science" around it, unknowing that they are greater victims of manipulation than the dullards they pity. The masses begin to reject old traditions and the fundamentals of individual liberty. The manipulators compete endlessly to perfect the power of the narrative and raise their status.

Finally, the day arrives when the old ways appear to fail (usually because it has been corrupted by a weaker narrative) and the new way is given a chance. It’s not that the narrative is invincible, but all that needs to happen is the appearance that it “works.” Under Mussolini, the crippling strikes by communist labor organizations ended and things “worked” much better. Under Hitler, the hyperinflation and sky-high unemployment of the Weimar Republic ended and things “worked” again. Under Hugo Chavez, oil prices soared and more than mitigated the horrible economic policies he has instituted.

The narrative that gave credence to government power does fail eventually because an oversized government is the downfall of a civilization. Communism failed. Monarchies failed. Jimmy Carter’s Statism failed. All led the pendulum to swing back to something different, and often times the manipulators got their just desserts.

Hopefully, our current leaders get stuck holding the bag when the music stops.

Obama Defines Audacity

2009-05-14T15:45:00.003-05:00

Audacity - Propose and pass a "stimulus" spending bill over $700 Billion. Propose a budget that will push the deficit to over $1.8 Trillion next year, with years of deficits over the $1 Trillion mark. Then after you have single-handedly muscled through this incomprehensibly huge spending bonanza you have the gall to say this:

From Bloomberg:

President Barack Obama, calling current deficit spending “unsustainable,” warned of skyrocketing interest rates for consumers if the U.S. continues to finance government by borrowing from other countries.

“We can’t keep on just borrowing from China,” Obama said at a town-hall meeting in Rio Rancho, New Mexico, outside Albuquerque. “We have to pay interest on that debt, and that means we are mortgaging our children’s future with more and more debt.”

Are you kidding me? How can you stand up there and claim that "WE" can't keep borrowing when it is "YOU" who are using every possible avenue to spend TRILLIONS of dollars and drive us into these wretched levels of debt.

This is like a man beating his wife to a pulp and then lecturing her that "WE" need to stop fighting like this.

Deflation is Dead

2009-05-08T22:52:00.005-05:00

In recent months I have seen two sets of forecasts cross my desk from the chief corporate economist from two of the largest financial companies in the world. Both predicted deflation or near zero inflation. Both predicted falling long term interest rates. Both were noticeably Keynesian in their viewpoints of the economy. Both are quickly getting egg on their faces.

Unfortunately, their materials were copyrighted so I don't know if I can give you many specifics.

First, let's look at long-term interest rates.

Prediction by the first: Long term rates sliding down to 2.75% by year's end.
Prediction by the second: 30-yr rates falling to 3.5% during 2Q09

Let's go to the chart:

Hmmm...30-yr rates seems to have climbed to 4.3% as of 5/8 closing. These rates are almost up to the pre-crash rates of early 2008. 30-yr Treasuries tend to be an implication of the market's beliefs of long-term inflation.

Now, let's examine the whole deflation thing. How about the price of oil? Sorry for the ugly chart, but it gets the point across. Data here, along with Friday's close from Bloomberg.

Or perhaps the fact that the dollar is now at a 4-month low? If we're stuck in a liquidity trap like the Keynesians believe, then why is the world beginning to not hoard dollars?

Since, I am mocking their predictions, I will make some predictions of my own. And, since my ego is still drunk on my previous success, I'm going to make some bold ones.

1. 30-yr Treasury yields break 5.00% by year's end. 10-yr Treasuries break 4.00%.

2. WTI Oil Price will break $80/barrel before year's end.

3. Bloomberg's Dollar Index, will drop below 70 before year's end. (Currently 82.53)

So remember, buy some eggs on December 31st. My face is ready!

ABCNews Picks Up Story on White House Threats

2009-05-04T12:05:00.001-05:00

Click here.

Vulgar Threats from the White House

2009-05-02T20:20:00.004-05:00

In this interview, (HT EPJ)at radio station WSJ in Detroit, Frank Beckmann interviews Tom Lauria, an attorney who represents a group of lenders that object to the term of the White House deal with Chrysler. The White House is bullying these bond holders to give up their contractual rights and take far less money than traditional law would give them in bankruptcy court. The bond holders also object to the UAW being handed ownership of Chrysler.

I am transcribing the words of this attorney, so forgive me any errors starting at around the 1:30 mark.

"...cause let me tell you, it's no fun standing on this side of the fence, opposing the President of the United States. Uh, in fact, let me just say, you know, people have asked me who I represent..and that's a moving target. I can tell you for sure that I represent one less investor today than I represented yesterday. Uh, one of my clients was directly threatened by the White House, uh and, in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight..."

I guess what der leader wants, der leader gets. Hail Victory!

UPDATE: A nice article from the Financial Times explains how dangerous this behavior by the White House is to financial markets. Likening it to Machiavelli.

"More importantly, the Chrysler saga sets a dangerous precedent for US capital markets. For once, the law is unambiguous: senior secured creditors should be paid before junior unsecured creditors and employees (the words “senior” and “junior” are a bit of a give-away on this point). By turning legal wisdom on its head – and vilifying investors that opposed the move – the administration is signalling the principle is no longer sacred.

While that, in itself, will not cause a massive capital flight away from the US, it will have some serious repercussions."

Housing Boom and Bust in France

2009-05-01T07:15:00.002-05:00

The amicable Vincent Benard has posted his presentation from the American Dream Coalition conference in Seattle, Washington. This post is in English! (No cutting a pasting into translators required!!).

Housing booms and busts are nothing new to Europe. If you want to understand the seeds, read his post. He boils it down to two necessary ingredients: Credit expansion by a central bank and too much land use regulation. On these points I completely agree.

Steve Forbes on Health Care

2009-04-29T07:34:00.002-05:00

Read this article on Health Care by Steve Forbes.

It succinctly describes the problems with Obama's socialized medical scheme. It also explains the vastly superior free market alternatives to his plans. I agree with his sentiments to the word.

I Will Never Buy a GM or Chrysler Again

2009-04-28T12:20:00.005-05:00

Today, Chrysler announced a deal with the U.S. Treasury to avoid bankruptcy. The deal gives the United Auto Workers' union 55% ownership of the firm. The federal government would own 10%, and Fiat would take 35%.

What does this mean? The UAW and the federal government will run the firm....into the ground. Chrysler, which has almost zero chance of being profitable now that they are run by two organizations that hold profitability last on their list of priorities, will be a function of the government. The UAW is too interconnected with the White House and the Democratic party and will owe its allegiance to them. Make no mistake, you and I will now have to subsidize Chrysler for years to come. These taxpayer dollars will then be turned around in the form of multi-million dollar donations to the Democratic Party.

General Motors is also on the same path. They are now entertaining a deal with the government that Larry Kudlow details this way: (HT EPJ)

What is going on in this country? The government is about to take over GM in a plan that completely screws private bondholders and favors the unions. Get this: The GM bondholders own $27 billion and they’re getting 10 percent of the common stock in an expected exchange. And the UAW owns $10 billion of the bonds and they’re getting 40 percent of the stock. Huh? Did I miss something here? And Uncle Sam will have a controlling share of the stock with something close to 50 percent ownership. And no bankruptcy judge. So this is a political restructuring run by the White House, not a rule-of-law bankruptcy-court reorganization.

That's right. The U.S. Federal Government will own 50% of the company. The UAW will own 40%. Political interference by the White House, the Democratic congress, and the UAW will prevent GM from ever becoming profitable again without government subsidies. Billions of your tax dollars will go to a company that will turn right around and give tens of millions to Democratic party candidates and our current President to help them stay in power.

If you believe in a truly free America you will do the same. Never buy any of their cars ever again.

4 out of 5 Ain't Bad - My Housing Predictions

2009-04-28T10:29:00.002-05:00

In February of 2008 I made some predictions on 5 major housing markets as to their price falls from the then most recent data on the S&P Case Shiller.

Now, using the most recent data I've been able to check those predictions. Four out of five are spooky accurate, so I just had to brag.

Predictions for total price drop:

Miami – 32% drop
Los Angeles – 31%
Tampa, FL – 28%
Las Vegas – 28%
Washington – 24%

Actual

Miami - 33% drop
Los Angeles - 30%
Tampa, FL - 27%
Las Vegas - 38%
Washington - 23%

Note: For a fee I will send you lottery number predictions and perform Taroh card readings as well.

The Fed's Quantitative Easing is Having a Curious Effect

2009-04-25T08:40:00.005-05:00

On March 18th, the Federal Reserve announced that it was going to perform 'Quantitative Easing'. The plan is to buy treasury bonds on the open market. This would have two effects. First, it should increase the money supply which does provide, in fact, a temporary boost to output (although a misallocation of resources that reduces long term growth). Second, it should lower interest rates, obstensibly to lower mortgage rates and induce consumers to purchase some of these unwanted houses around the country.

Well, an interesting thing has happened since this announcement. 30-yr Treasury yields have been rising and are now at their highest point so far this year. Is this a trend? Is this the beginning of the dramatic and inevitable rise I expect in borrowing costs? We'll see...

Source

Why is This Happening?

China is selling long-term U.S. Treasury Bonds in favor of short term t-bills. This has driven yield on short term t-bills down while putting upward pressure on yields for treasury bonds.

According to Bloomberg:

Rates on three-month bills turned negative in December for the first time since the government began selling them in 1929 as investors sacrificed returns to preserve principal. After increasing at the start of the year, rates have dropped 0.20 percentage point since the beginning of February to 0.13 percent.

Demand for bills is rising again because investors including foreign central banks are snapping up the shortest- term U.S. securities as the Federal Reserve buys Treasuries to drive down borrowing costs in a policy of so-called quantitative easing. China, the largest U.S. creditor, with $744 billion of debt, has questioned the practice and shifted purchases to bills from longer-maturity securities.

“There’s a group of investors out there who are looking at what the Fed is doing and the policy action they’ve taken and the asset purchases, and saying ultimately this is inflationary,” said Stuart Spodek, co-head of U.S. bonds in New York at BlackRock Inc., which manages $483 billion in debt. “You’re going to invest in very short-term bills because you absolutely need not just the quality but also the absolute liquidity.”

China bought $5.6 billion in bills and sold $964 million in U.S. notes and bonds in February, according to Treasury data released April 15. It was first time since November that China purchased more bills than longer-maturity debt.

There is Something Terribly Wrong in this Article

2009-04-24T09:45:00.002-05:00

An Article from the New York Post entitled "CEO Stressed Out" opens with this sentence:

Citigroup CEO Vikram Pandit's job security is increasingly in jeopardy as momentum grows in Washington to oust him.

I love how someone like Tim Geithner who has never worked for, much less run, a private firm in his professional life now chooses CEOs for major American companies.

There's also a word for this kind of government behavior: Fascism.

Mises Conference on the Great Depression

2009-04-22T07:15:00.003-05:00

On Saturday, May 30th, the Ludwig Von Mises Institute is hosting an event in Fort Worth, Texas dubbed "The Great Depression: Then and Now". A good friend of mine is planning to go, so I thought I would invite my readers to attend as well. (All 20 of you!)

There are several great speakers, including my friend* Bob Murphy, author of the new The Politically Incorrect Guide to the Great Depression and the New Deal. Bob seems to be a laugh riot from the youtube videos I've seen of his other speaking engagements.

Others Speakers are:

Walter Block
Thomas DiLorenzo
Jeffrey Tucker
Thomas E Woods, Jr. (author of the NYT bestseller Meltdown)

What's great about this conference?

First, it's only $75, which is a bargain. Second, if it's anything like the similar Mises Circle in Houston the crowds are usually small so if you wanted to get a book signed or ask some questions that is available. Third, I'll be there! If you let me know that you are going I may get a group together the night before to have dinner where you'll get to meet my darling wife and kids.

Reservations

To register, you can go here, and if enough of you mention my name in the comments I may be able to negotiate a reserved table closer to the front.

* I'm not sure how you refer to someone with whom you have exchanged a number of e-mails and debated on a blog. My bar for internet "friend" is whether they consistently respond to my e-mails, which he does.

I Need a Balanced Budget, Stat!

2009-04-20T21:32:00.004-05:00

Dr. Alan Parks, MD, is the founder of Americans for a Balanced Budget Amendment. He sent me an e-mail notifying me of his new website. I perused for a bit, and found it worth mentioning. He's already gathered an endorsement from noted personal finance guru Dave Ramsey.

Dr. Parks ran across this post of mine in support of a balanced budget amendment. I tend to channel William Buckley when I'm emotional, as my vocabulary soars above my standard typo ridden fare. Looking back at it, I'm still pleased with it.

At any rate, check out Americans for a Balanced Budget Amendment, and lend your support.

Update on My Paranoia Front

2009-04-20T10:55:00.002-05:00

Before I took my two week break, I wrote a post about my increasing concerns that the Left was trying to build a case to demonize the non-Left.

I wrote about this post where the young man in Pittsburg, PA, shot to death three police officers. I predicted it would show up in op-eds as further "proof" that those opposing Obama were dangerous. Refreshingly, it didn't reach any of the major papers that I peruse. It did however reach some left wing bloggers. Such as author David Neiwert who tries to link the shooter to conservative commentator Glenn Beck and also FoxNews.

This guy is a nobody, but I started reading the now infamous assessment from the Department of Homeland Security, where they list people who are pro-life, anti gun control, military veterans, and those who are generally anti big government as potential terrorists.

This is what it says on page 3:

A recent example of the potential violence associated with a rise in right wing extremism may be found in the shooting deaths of three police officers in Pittsburgh, Pennsylvania, on 4 April 2009.

So much for "weaving a narrative" to demonize, now it is explicitly linked by official government documents.

Texas is the Future

2009-04-19T14:28:00.005-05:00

Fortune Magazine put out its annual list - The Fortune 500.

Last year, the state of Texas pulled out into the lead against New York by having 58 of the 500 largest companies in the U.S. New York fell to second with 55. This year, New York actually gained one, surprising given their financial problems extending well back into 2008. Texas, however, placed 6 additional companies on the list, for a total of 64.

Within Texas, the major metropolitan regions had these totals:

Houston 29
Dallas/Fort Worth 25
San Antonio 5
Austin 3
Pittsburg, El Paso 1 each

Here's a chart with a little historic data:

Bad News

2009-04-04T18:13:00.003-05:00

Two articles from Saturday have raised the hairs on the back of my neck.

First, is the incident of three police officers being shot in Pittsburgh. The piece of information headlined at Drudgereport added that he, the gunman, "feared the Obama administration was posed to ban guns. "

I wrote here, that I was beginning to feel that the Left was beginning to weave a narrative to demonize conservatives and anyone not supporting Obama. Robert Reich's freightening mischaracterazation was this:

Make no mistake: Angry right-wing populism lurks just below the surface of the terrible American economy, ready to be launched not only at Obama but also at liberals, intellectuals, gays, blacks, Jews, the mainstream media, coastal elites, crypto socialists, and any other potential target of paranoid opportunity.

This story just broke on Saturday night. If someone doesn't write an op-ed linking these killings to a demonization this coming week, I'll be surprised. If you see one, let me know. Not on this blog, but privately I have expressed some concern to friends that a mass shooting or domestic terrorist event commited by a crazed anti-government type will lead to a broad demonization of the non-Left in the U.S.

Second, is this one at the WSJ:

I must be naive. I really thought the administration would welcome the return of bank bailout money. Some $340 million in TARP cash flowed back this week from four small banks in Louisiana, New York, Indiana and California. This isn't much when we routinely talk in trillions, but clearly that money has not been wasted or otherwise sunk down Wall Street's black hole. So why no cheering as the cash comes back?

My answer: The government wants to control the banks, just as it now controls GM and Chrysler, and will surely control the health industry in the not-too-distant future. Keeping them TARP-stuffed is the key to control. And for this intensely political president, mere influence is not enough. The White House wants to tell 'em what to do. Control. Direct. Command.

That's right. The government is not allowing banks to pay back the TARP money. The firm grip that Obama and his Congress have on Wall Street is not going to be relinquished.

The author, who is English goes on:

After 35 years in America, I never thought I would see this. I still can't quite believe we will sit by as this crisis is used to hand control of our economy over to government. But here we are, on the brink. Clearly, I have been naive.

Pat Buchanan becomes an Austrian

2009-04-03T08:01:00.002-05:00

Pat Buchanan has a great column today at Human Events. He has apparently just read Tom Woods' Meltdown. A little secret: Tom Woods is an Austrian economist. Pat Buchanan seems to have discovered the Austrian Business Cycle Theory for the first time. The fact that the book has made the New York Times Best Sellers list (#18), and the fact that mainstream Republican thinkers are embracing it, is a good sign.

He seems most taken with Woods' account of the severe 1920-21 depression, where the U.S. quickly got out of it by doing what? NOTHING!

The "forgotten depression" of 1920-21 was caused by a huge increase in the money supply for President Wilson's war. When the Fed started to tighten at war's end, production fell 20 percent from mid-1920 to mid-1921, far more than today.

Why did we not read about that depression?

Because the much-maligned Warren Harding refused to intervene. He let businesses and banks fail and prices fall. Hence, the fever quickly broke, and we were off into "the Roaring Twenties."

He also rebuts the myth that Herbert Hoover was a laissez faire ideologue who refused to intervene as the economy began to tank

Herbert Hoover, contrary to the myth that he was a small-government conservative, renounced laissez-faire, raised taxes, launched public works projects, extended emergency loans to failing businesses and lent money to the states for relief programs.

Hoover did what Obama is doing.

Indeed, in 1932, FDR lacerated Hoover for having presided over the "greatest spending administration in peacetime in all of history." His running mate, John Nance Garner, accused Hoover of "leading the country down the path to socialism." And "Cactus Jack" was right.

Finally, he gets to the myth that World War II ended the great depression:

But how can an economy be truly growing 13 percent a year, as the economists claim, when there is rationing, shortages everywhere, declining product quality, an inability to buy homes and cars, and a longer work week? When the cream of the labor force is in boot camps or military bases, or storming beaches, sailing ships, flying planes and marching with rifles, how can your real economy be booming?

It was 1946, a year economists predicted would result in a postwar depression because government spending fell by two-thirds, that proved the biggest boom year in all of American history.

With this finale:

Should not this creature from Jekyl Island [The Federal Reserve], for all its manifold crimes and sins against the republic, also be summarily put to death?

Yes Pat, let's end the Fed.

Germans Persecuting Religious Minorities Again

2009-04-01T07:28:00.002-05:00

As I have stated before, my wife and I plan to homeschool our children. Our motivation is only partially religious, but I err on the side of religious freedom for those whom it is the primary or sole motivating factor. I also do not believe that the government has any business running any schools. The temptation for the majority to purposefully suppress ideas of minorities is too great. I support the devolution of public schools through vouchers, and I recently wrote how public universities should be privatized.

From Foxnews:

Romeike, his wife Hannelore, and their children live in a modest duplex about 40 miles northeast of Knoxville while they seek political asylum here. They say they were persecuted for their evangelical Christian beliefs and homeschooling their children in Germany, where school attendance is compulsory.

When the Romeikes wouldn't comply with repeated orders to send the children to school, police came to their home one October morning in 2006 and took the children, crying and upset, to school.
...
He had to pay fines equivalent to hundreds of dollars for his decision, and he's afraid that if he returns to Germany, police will arrest him and government authorities will take away his children, who range in age from 11 to 3.
...
Lutz Gorgens, German consul general for the Southeast U.S., said he's not familiar with the Romeikes' specific situation but believes the claim of persecution is "far-fetched." He defended Germany's requirements for public education.

"For reasons deeply rooted in history and our belief that only schools properly can ensure the desired level of excellent education, we (Germany) go a little bit beyond that path which other countries have chosen," Gorgens said.

Germany's approach to homeschooling is starkly different to the U.S. and other European countries. Homeschool students have been growing by an estimated 8 percent annually in the U.S. and as of 2007 totaled about 1.5 million.

If you read between the lines in the article, what is apparent is that Herr Gorgens believes, along with much of Germany presumably, that it is the role of the state to properly engineer good citizens. They don't like minority viewpoints or value, so they actively seek to crush those viewpoints. If you resist, they will take your money and your children.

I support the Romeikes, and the United States should rebuke this kind of thuggery by granting them asylum.

Social Security Runs a Deficit 8 Years Early

2009-03-30T20:36:00.003-05:00

In recent years, America's social security plan has been predicted to start running deficits by the end of the next decade. This 2004 publication from Cato predicted 2018. The Heritage foundation quoted the Trustees Report in 2008 that predicted 2017.

Now, Kevin Hassett of the American Enterprise Institute, summarizes in a piece at Bloomberg, the latest Congressional Budget Office Report. The Bad News: The yearly surplus effectively hits ZERO next year. He also argues that deficits will be here from now on.

Some excerpts:

We have all been so busy whining about bonuses at American International Group Inc. and arguing about the so-called card- check legislation that we forgot to watch the Social Security surplus. While we were looking away, that surplus disappeared, eight years ahead of schedule.
...
According to the latest Congressional Budget Office estimate, the Social Security surplus will be only $3 billion in 2010. That number is almost surely too rosy, and the actual realization next year will be a big deficit. In February, according to data from the Social Security Office of the Actuary, the program paid out more in benefits than it collected in taxes and interest combined. There will be many more months like that before we are through.
...
Opponents of Social Security reform have tried for years to underplay the problem by stating that the program’s finances are fine. Social Security was, in the most recent report by its trustees, expected to run surpluses all the way to 2017. Why bother to reform something now if the crisis is so far off?

Who wants to bet that the entire surplus (which is a silly notion anyway) will no longer survive until 2041 in the next Trustee Summary?

Video of a British Evisceration

2009-03-27T07:21:00.004-05:00

Whenever I happen to watch members of the British Parliament I am embarrassed by the lack of comparative eloquence of American politicians. It is little wonder that England birthed so much literature and poetry. You may have seen this video clip already (it was on Sean Hannity's show last night), but just in case you haven't, it's brilliant. Daniel Hannan simply eviscerates British P.M. Gordon Brown.

U.K. Having Trouble Borrowing Money

2009-03-25T10:23:00.003-05:00

I have mentioned before that we may see some countries around the world run into difficulty borrowing money because of the massive amount of borrowing the United States has committed to.

Another piece adding fuel to that theory from Bloomberg.

The U.K. failed to find enough buyers for 1.75 billion pounds ($2.55 billion) of bonds for the first time in almost seven years as debt investors repudiated Prime Minister Gordon Brown’s plan to stem the worst economic crisis in three decades.
...
Brown’s government aims to sell a record 146.4 billion pounds of debt this fiscal year and as much as 147.9 billion pounds in 2010 as he tries to pull Europe’s second-largest economy out of its worst recession since 1980. The prime minister’s plan drew criticism yesterday when Bank of England Governor Mervyn King told lawmakers in Parliament in London the government should be “cautious” about spending and deficits.
...
“This sinks Brown below the waterline,” said Bill Jones, professor of politics at Liverpool Hope University. Brown’s “whole strategy is based on borrowing and now he can’t get anyone to buy his gilts. This means the prospect of going cap in hand to the IMF hovers increasingly into view.”

This isn't a watershed moment for England, but it should raise some eyebrows given other evidence.

A Great Column on AIG

2009-03-25T07:31:00.003-05:00

Wendy Milling is a new contributor to Real Clear Markets. I believe this is her first article there. It is good, and accurate. Read it.

Update - Here's a great "I Quit" letter from an AIG employee published in the NY Times. (HT: Club for Growth)

Inflation in the U.K.

2009-03-24T07:12:00.004-05:00

From what I have read, the U.K. has been as profligate with their money supply as the U.S. In this recent article from The Australian, one of their Bank of England Governors (Mervyn King)stated in reference to the money supply:

"There is no limit to how much we can do, which is why, in the end, this policy will work"

They are now considering to begin "printing money".

Then this article at Bloomberg today:

Consumer prices climbed 3.2 percent from a year earlier, the Office for National Statistics said today in London. The median forecast of 28 economists was for 2.6 percent. Bank of England Governor Mervyn King wrote in a letter to the Treasury explaining the increase from the 3 percent limit that a “sharp decline” in the inflation rate is likely to resume.
...
“It’s a big surprise,” said Stewart Robertson, an economist at Aviva Investors in London

How shocking, Mr. King, that you hold no upper bound on the money supply, yet your country experiences surprisingly higher inflation.

The article goes on to blame the drop in the value of the Pound as a reason for price hikes by foreign companies like Ford Motors. You print money and your currency loses value? What? That can't be right.

Another Day, Another Trillion

2009-03-23T07:00:00.003-05:00

The U.S. government debt continues to skyrocket as the Obama Administration burns through cash. The probability of eventual U.S. default increases by they day. Now, Treasury Secretary Tim Geithner throws a potential $1 Trillion of gasoline on the fire.

Paul Krugman writes:

The likely cost to taxpayers aside, there’s something strange going on here. By my count, this is the third time Obama administration officials have floated a scheme that is essentially a rehash of the Paulson plan, each time adding a new set of bells and whistles and claiming that they’re doing something completely different. This is starting to look obsessive.

But the real problem with this plan is that it won’t work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact.

I repeat my suggestion to the President: Ask Geithner to resign.
Furthermore: Get some conservative economic advisors for balance. Your people are taking us towards the brink.

How to Think About the AIG Bonuses

2009-03-22T15:33:00.003-05:00

As a member of the financial services industry, I just want to make a few disclaimers:

I have never received any bonus from my employer. I own no stock in any particular financial firm outside of shares included in general mutual funds. I know few specific details beyond what you can read in a newspaper.

Having said that, I think that the bill that passed the House is absolutely hurrendous. If this doesn't fall under Bill of Attainder, I don't know what does. From the outside looking in, many activities within a company or industry can seem idiotic, immoral, etc... Sometimes they are, and sometimes they aren't.

Bonuses are paid as compensation so that managment level employees care about the future of the company. If not for this kind of mechanism, an employee will often view the employer as merely a means to a paycheck. If the company fails they only face the nuisance of finding another job. Without paying some kind of retention bonus, employees would be leaving by the droves. This would leave the mess to a skeleton crew comprised of individuals who are less attractive to other potential employers. Banning retention bonuses would not have fixed anything, only made them worse. Many financial firms will fail without some of this high priced talent.

Why do they get paid so much? I don't know. I've never understood why they were paid so much. But, I also don't understand why someone would buy a $1,000 Louis Vuitton purse. Clearly someone thinks it's worth a lot or they wouldn't pay for it. Their pay may be excessive, but the general concept is a sound one that is not often understood outside of the financial services sector.

The precendent that this sort of legislation creates is an awful one. No company is safe that has any deals with the federal government. Any company can face confiscation of property based merely on political theater and not the tradition of the rule of law.

As an illustration to my brother, I used his particular industry. He works as a manager of a fast food restaurant in Oklahoma. From the outside looking in, there are certain routine acts that could be manufactured into an outrage.

I can see the headline now: "Burger company throws out thousands of pounds of food every week!" This food could go to feed the homeless, or to charge the customer less. What a bunch of wasteful and lazy people who work there!

At the company everyone is perplexed. Of course we have to throw food away. Sometimes it goes bad. Sometimes French fries get stale and burgers get burned. No one would eat them. Someone returns a burger because we missed that they requested no onions. Who wants a burger that's been rifled through by another customer. We have to throw it away. We work tirelessly to keep costs down by not throwing out food.

Our politicians and media personalities refuse to dig deeper than superficially to consider the consequences of their over-reactions. Facts don't matter, only rage in the New America. Once we cower to the mob once, the mob expects blood everymore. Let us not devolve into Jacobins.

A Note to All My Readers

2009-03-20T08:01:00.002-05:00

FYI - There seems to be some unwritten rules about self-promotion on blogs, and I want to dispel some of them for my blog.

If you have written something on your blog that relates to the topic of my post (for or against), feel free to write a short blurb and post a link to your post in the comments. If you see an article that relates to my post (for or against), feel free to write a short blurb and post a link to that article.

Federal Reserve Cranks It Up a Notch

2009-03-19T05:57:00.003-05:00

The Federal Reserve announced yesterday that it was going to buy some assets worth north of $1 Trillion yesterday to pump money into the ailing economy. It will have a temporary expansive effect on the economy, but it also increases the chances of runaway inflation.

The dollar tanked yesterday and gold soared. Oil took a jump as well. These aren't definitive signs of impending inflation, but they will put upward pressure on prices. Everyone should carve out time to think about how to position themselves financially for the possibility that inflation may become a serious problem.

Also note that the metric I often use to look at inflation expectations is the spread between the TIPS and Treasury yields. If you happen to have bookmarked it, you should pay much less attention to it in the near future as the Fed is going to be directly manipulating those rates through Treasury purchases. For now, it is a bogus metric.

A Closer Look at Propaganda

2009-03-17T19:49:00.006-05:00

Jacques Ellul, was a French philosopher and Christian anarchist (which makes him interesting unto itself). Not an anarchist in the violent anti-government sense, but rather apathetic towards any government.

He published a book in 1965 called "Propaganda". I haven't read this cover to cover, but I thought there were a few excerpts worth mentioning already. As news reports start to come in about fears about the resurgence of fascism in Germany and Austria, and the surge towards Statism and socialism in various countries, I thought it was worth knowing more about propaganda.

First, in the foreword, written by Konrad Kellen

"A related point, central in Ellul's thesis, is that modern propaganda cannot work without 'education'; he thus reverses the widespread notion that education is the best prophylactic against propaganda. On the contrary, he says, education, or what usually goes by that word in the modern world, is the absolute prerequisite for propaganda."

You can read the first few pages for free here. He goes on to suggest that the educated, and especially the intellectual, are most susceptible to propaganda. Once you realize that people with little education tend to just follow what their parents and community tell them, you realize that only the educated are truly open to new ideas, many of which are poorly supported.

On who falls for propaganda and why, Ellul writes (p.147-8):

"Above all he is a victim of emptiness-he is a man devoid of meaning. He is very busy, but he is emotionally empty, open to all entreaties and in search of only one thing-something to fill his inner void. To fill this void he goes tot he movies-only a very temporary remedy. He seeks some deeper and more fulfilling attraction. He is available, and ready to listen to propaganda. He is the lonely man...

He feels the most violent need to be re-integrated into a community, to have a setting, to experience ideological and affective communication. That loneliness inside the crowd is perhaps the most terrible ordeal of modern man; that loneliness in which he can share nothing, talk to nobody, and expect nothing from anybody, leads to severe personality disturbances. For it, propaganda, encompassing Human Relations, is an incomparable remedy. It corresponds to the need to share, to be a member of a community to lose oneself in a group, to embrace a collective ideology that will end loneliness. Propaganda is the true remedy for loneliness."

Is it any wonder why so many seem emotionally attached to Obama? They are psychologically driven by the story. To reject him for many is to reject meaning in their lives. How pathetic.

Let's Privatize our Universities

2009-03-15T19:57:00.003-05:00

A few years ago the Texas legislature decided to allow state Universities to set their own tuition rates. The idea was to introduce market based tuition rates to induce students to make better choices on the college they attend and the major they pursue. Previously, tuition applied to all majors equally and tuition increases had to be approved by the legislature.

However, tuition rates have been rising at a rate unpopular with many citizens. Some groups are now demanding a tuition rate cut.

This puts state universities in a tough position. The state has not increased funding commensurate with costs, and without the ability to raise revenue through tuition costs, they feel that they are not going to maintain the quality education desired. Texas A&M University, in its Vision 2020 plan, explicitly states their desire to raise revenue to enhance the stature of the university along with lip service towards better use of existing resources.

The question most legislators are looking at is whether we should allow state universities to gather more revenue, or should we try to offer a more affordable college education. The question I want to ask is – Should the state be in the university business to begin with?

The fundamental problem that prevents universities from providing a high quality education at a low cost, is the lack of the profit incentive. From top to bottom, state university officials lack the incentives to pursue an efficient allocation of resources. Their incentives are more likely aligned with expanding their budget and increasing the prestige of their individual departments.

There is also an inherent unfairness in government funding of universities in Texas. Generally speaking, Texas heavily subsidizes students who are going to be wealthy and come from homes with above average incomes. Taxes from low-income individuals are going to subsidize the education and income potential of other people’s children. The best and brightest, which are already likely to make substantial incomes, are more likely to graduate, and pursue degrees with the most associated costs as well, such as engineering.

Since our society is probably not ready to do away with all school subsidies, I'm willing to propose that Texas switch to a system of scholarships for high performing and disadvantaged students. Each university would be required through competition to attract the students and their scholarship money to their respective schools.

Going further, to assure that the universities will be forced to economize their resources, I suggest that we begin to privatize public universities across the state. Furthermore, I nominate my own alma mater, Texas A&M, to be the first. It's time to get the state out of education.

China Is Getting Wary of Lending to the U.S.

2009-03-13T09:08:00.003-05:00

This Bloomberg article is a bit of disconcerting news.

China’s Premier Wen ‘Worried’ on Safety of Treasuries

“We have lent a huge amount of money to the United States,” Wen said at a press briefing in Beijing today after the annual meeting of the legislature. “I request the U.S. to maintain its good credit, to honor its promises and to guarantee the safety of China’s assets.”

U.S. President Barack Obama is relying on China to sustain buying of Treasuries as his administration sells record amounts of debt to fund a $787 billion economic-stimulus package. Chinese investors have lost money on the securities so far this year, after increasing their holdings 46 percent to $696 billion in 2008, according to Treasury Department data.

“China’s purchases of American debt have been one of the few bolts keeping the wheels on the global economy,” said Phil Deans, a professor of international affairs at Temple University in Tokyo. “If China stops buying where does Obama’s borrowing to fund his stimulus come from?”
…
“China is worried that the U.S. may solve its problems by printing money, which will stoke inflation,” said Zhao Qingming, a Beijing-based analyst at China Construction Bank Corp., the country’s second-biggest lender. “If the U.S. can make sure this won’t happen, then China will continue to invest.”

Comparing Atrocities

2009-03-10T18:09:00.003-05:00

Off the top of your head, which atrocity was worse:

Spanish Inquisition - perpetrated by a mainly Catholic country
Rape of Nanking - perpetrated by a mainly Taoist country

I suspect that you've heard much more about the Spanish Inquisition in school, but the "Rape" makes you think that maybe it was pretty bad too.

The Spanish Inquisition lasted from 1478 to 1834. Total Deaths: 3000-5000. Maximum average per year = 14.

Rape of Nanking lasted 2 months from late 1937 to early 1938. Total Deaths: 200,000 to 300,000. Other atrocities include the fact that "80,000 women were raped, including infants and the elderly". The savagery surpasses the worst torture in modern horror films where "The women were often then killed immediately after the rape, often through mutilation, including breasts being cut off; or stabbing by bamboo (usually very long sticks), bayonet, butcher's knife and other objects into the vagina."

Glad to see that our history education in America prioritizes atrocities by scale, and not by vendetta against a particular religion.

More on Mark-to-Market

2009-03-10T10:31:00.002-05:00

First, a couple links.

My friend John Tamny has an article today at RealClearMarkets in defense of mark-to-market. He seems to be saying that it isn't mark-to-market that failed, but government intervention in the mortgage market that has made those assets impossible to price.

Bob Murphy linked to this blogpost that seems to agree with my position, but gets deeper into the details. Bob calls it the "definitive" post on the issue. He exaggerates, but it's still worth reading.

Second, is the fact that suspending or rescending MTM has virtually no chance of happening. Barack Obama and the Democrats could not support a bill that went against their narrative of "Government Good/Wall Street Bad". Suspending MTM would be an admission that government oversight had failed and that regulation itself was a major culprit in the banking crisis.

Yes to Suspending Mark-to-Market

2009-03-08T14:53:00.002-05:00

Steve Forbes has been beating a drum over the last month, repeating his call to suspend mark-to-market accounting rules. I think that I have finally been fully convinced that this is a good idea. Not permanent suspension, but perhaps a two year holiday from these requirements.

As an employee of one of these bailout blackholes, I have seen the damage to my firm from these kinds of rules. If it were not for them, I suspect that we would never have needed a single dime of government money. Companies with positive cashflow should not be going insolvent because the market value of assets that have not defaulted and they do not intend to sell have lost value.

Why is mark-to-market good?

It forces companies to report what the actual value of their securities are, and not just what they paid for them (like under book value accounting). As an analogy: Say Bob is applying for a new $2 million construction loan to build an apartment complex. He is using his existing complex, which he bought 3 years ago for $2 million as collateral. The problem is, that his old complex has been condemned by the city for health code violations. His collateral would only sell for $1 million on the open market as of today.

Corporations sometimes do the same thing. They buy assets at price X, those assets plummet to price Y, yet they report the value and solvency of the company based on a depreciation model or book value based on price X.

Why is mark-to-market bad?

When fears of corporate defaults are more random, it is fine. If it is feared that Company A will default, then companies B – Z write down any assets they held in company A. Fortunately, those losses are spread across a large number of companies. There is damage, but it isn’t that bad. Mind you, this can occur under the fear of defaults, and not actual default.

When fears of corporate defaults are widespread, it can cause a cascading effect of failures. If it is feared that companies A-I default, then J-Z have to write down those assets. Because of the large write downs by companies J-Z, fears of wider defaults grow. A vicious cycle develops, what we’ve dubbed “contagion”. A critical mass of write downs can lead to total meltdown like we’ve seen.

Using another analogy:

Imagine that you bought a house for $500,000. You had $100,000 down, so you borrowed $400,000. Imagine too that everyone in your city has done the same thing. Due to current market conditions the value of your homes fall by $200,000. Everyone in town now owes around $400,000, but has homes that are only worth $300,000.

As it is right now, the vast majority will just ride it out. They will keep paying their mortgages and prices will eventually rise over the coming years and you will all be back in the black some day. My parents did this during the Oil Bust here in Houston during the 80s.

Now, let’s assume that all home loans required mark-to-market accounting. That is, if your home lost value, you were required to post more collateral to cover the loans. Everyone in town now had to come up with $100,000 of assets to add as collateral. Anyone who failed to do so within 3 months would have their homes repossessed.

What do you think would happen to this town? As repossessions soared, prices would fall further, requiring even more assets to be posted. The town would be destroyed. Virtually no one would be able to keep their home.

In short, I think Mark-to-Market is good 95% of the time, but it creates a systemic risk during a financial slowdown. I agree with Steve Forbes, and I think there should be a 2-year suspension for most firms.

U.S. Govt Crowding Out International Borrowing

2009-03-06T07:27:00.003-06:00

A while back I brought up the idea that the U.S. government was borrowing so much money that some other governments might begin to have trouble borrowing for their own purposes. The world has a finite amount of cheap capital, and with the amount of money that our government and several others are trying to borrowing to prop up financial firms and wager on Keynesian stimulus that the supply of those funds might dry up.

After a conversation with Robert Wenzel of the blog EconomicPolicyJournal, I feel more confident that this may occur. I have also predicted inflation, which I also expect to see overseas first.

Then, I ran across this interesting chart (HT: Objectif Liberte)

Original image source here, and data here.

What we see here is that the required rate of interest for these EU countries compared to Germany has been skyrocketing. In late 2007, there is little difference between the worst countries and Germany (with the lowest cost of capital). What this implies is that either these countries are all becoming worse credit risks compared to Germany or that the pool of resources available to them is dwindling.

A Pretext for Oppression

2009-03-05T17:45:00.005-06:00

I've tried to express to some friends my concern of how bad Barack Obama's administration could be. I have been shocked over these last months to see the personality cult that has grown around him. I have been saddened over the massive movements he has made towards European style socialism. I have been distressed by comments he, Rahm Emmanuel, and other Democrats have made that reveal their lust for power as they drive my beloved country towards another failed experiment with statism. The question of "Where will this end?" fuels the saddest parts of my imagination.

I fight my darkest fears by trying to convince myself that this will all blow over in a few years. They will overreach and economic liberty will rise like a Phoenix from the ashes of our future years of economic malaise. I quell my worst fears because I can not see any reason that we are moving towards anything, but slightly bigger government and higher taxes.

Then, I see comments like this from Robert Reich, former U.S. Secretary of Labor under Bill Clinton:

Make no mistake: Angry right-wing populism lurks just below the surface of the terrible American economy, ready to be launched not only at Obama but also at liberals, intellectuals, gays, blacks, Jews, the mainstream media, coastal elites, crypto socialists, and any other potential target of paranoid opportunity.

If someone this powerful and this influential is building the case that the opposition is filled with Nazis, where does this end?

Even Krugman is Criticizing the White House

2009-03-03T11:12:00.004-06:00

Paul Krugman may be the person most responsible for the stimulus fiasco by using his soap box at the New York Times. He has wooed his sychophants in the broader media and the Democratic party and convinced them to hurl the country towards a new soft socialism. But now, even he is beginning to question the choices and competancy of Tim Geithner as well as the Fed.

First here,

Every plan we’ve heard from Treasury amounts to the same thing — an attempt to socialize the losses while privatizing the gains. We’re going to buy up all the bad assets at premium prices; no, we’re going to offer the banks guarantees against losses; no, we’re going to let private investors buy the stuff, but offer them de facto guarantees against losses in the form of non-recourse loans.
...
And the insistence on offering the same plan over and over again, with only cosmetic changes, is itself deeply disturbing. Does Treasury not realize that all these proposals amount to the same thing? Or does it realize that, but hope that the rest of us won’t notice? That is, are they stupid, or do they think we’re stupid?

And then some righteous anger about AIG's 4th bailout here:

AIG is in trouble because it wrote many credit default swaps, in effect guaranteeing others against losses it lacked the resources to cover. We, the taxpayers, are now covering those losses, for fear that not doing so would cause a financial catastrophe. But this means that US taxpayers have now assumed the downside risks for all of AIG’s counterparties.

In effect, then, we’ve already nationalized a large part of the financial industry’s potential losses.

So at the very least, we have a right to know who the counterparties are: who are we subsidizing, here? And beyond that, shouldn’t there be some quid pro quo? Shouldn’t the US government get something in return for taking on so much of the risk?

My advice to Obama: Fire Geithner, the markets would soar!

Will the Recession Cause a Surge in Crime?

2009-03-02T12:57:00.003-06:00

I gathered the historical murder rate from here, which may not be perfectly reliable, but it corroborates with FBI data here, but the FBI data doesn't go back quite as far as I would have liked.

Just eye-balling the data, it doesn't seem to correlate really strongly. The recession in the early 90's seems to match, but there doesn't seem to be a strong lagging correlation between a high unemployment rate followed by a rising murder rate.

Also, the R-squared on concurrent correlation is 28%. Using a one-year lag (how well does unemployment this year predict the murder rate next year), the correlation fell to 16%. It seems that a higher murder rate in the next year is only very weakly predicted by the data.

Notes
1. The unemployment rate is in percentages and was gather from http://www.bls.gov/. An average of the calender year unemployment rate was used.
2. The murder rate is murders/100,000 individuals.

Toddler Economics

2009-02-26T12:51:00.003-06:00

For years the Parent/Child relationship has been used as a metaphor for the role of government both pro and con. There is a an implicit assumption that the family is a microcosm of socialism. Even the very free market F.A. Hayek believed that we act altruistically or socialistically at the family level. This inspired me to think about my children and how I maintain order at home. I am beginning to see the virtue of running my household more like a free market.

I joined Economist Bryan Caplan’s virtual book club a few weeks ago as he analyzes Murray Rothbard’s “For a New Liberty”. I have also been influenced by my friend Brian Phillips who is an Objectivist a la Ayn Rand.

Both Rothbard and Rand believe that the path to a moral society is to establish clear property rights. I’m not certain about it being moral, but if it helps me achieve my ends, then I’ll use it.

Here are my applications to toddler economics, of which I have two:

The living areas of the house are clearly a case of “Tragedy of the Commons”. That is, no one really “owns” the space so we all abuse the space, especially my boys. Therefore, the common areas must become the property of Mom and Dad. We allow the use of these areas by our boys if they follow our rules.

To encourage them not to abuse the “common areas” we have established a rule of use for the living areas and different rules for their rooms (being their property). Possession and proximity are the rules of temporary ownership for property brought into the living areas. That is, if child A leaves a toy on the couch and is now playing in the kitchen, said toy can become the temporary property of child O on possession. Permanent ownership is still conferred on the child of original ownership. In their rooms, all toys (property) are under their complete and permanent ownership. That is, if child A leaves a toy on his own bed, child O cannot take even temporary possession without explicit permission or compensation from child A. Thus, an incentive is used to maintain toys outside of the living areas.

Another minor rule for individual rooms is the right to exclusion. Child O may prevent child A from entering his room. Child O has the right to exclude child A from taking temporary possession of any property owned by child O within child O’s room.

On the subject of noise. We are all owners of our own bodies, and thus also our ears. If Child A shouts/screams this is a violation of property rights. He has caused me pain without compensation or permission. Therefore, shouting is only allowed outside and within their rooms with the door closed. At night, shouting violates the rights of the other child who is trying to go to sleep. This again is a violation of property rights.

And finally, to running and throwing objects in the house. The objects within the living areas of the house are the possessions of Mom and Dad (mostly Mom). To subject our property to risk of destruction without permission or compensation is a violation of our property rights. Because there is an objective probability that our property may be broken, throwing balls and running in the house are forbidden.

Any other thoughts? It’s actually pretty cool how this is working out.

Be Careful Not to Exaggerate

2009-02-25T07:12:00.002-06:00

I am a believer in supply-side economics, but sometimes conservatives exaggerate its effects. There’s a little bit of this exaggeration in the criticisms I've read of the new Obama tax plan. Don’t get me wrong, it’s a bad idea and will only lead to less economic growth, but we are not going to plunge into a second recession from it alone.

From what I have read there are three major anti-growth tax changes that Obama wants to implement. First, is a hike in the marginal income tax rate for evil rich people. Not only do higher marginal provide a disincentive to work, but it also leads to less capital accumulation. The rate change, at least proposed, will move the highest marginal rate from 35% to 39.6%. If this were shooting up above 70% like under the Carter administration this would be a major concern. But, as is, it is only a slight negative effect.

Secondly, is the hike in the Capital Gains tax. This is the most moronic of all the tax hikes, as history has shown that cutting them down to 15% actually raised government revenue. This will have a more significant negative effect on capital flow into and out of the United States. However, changes in investment do not lead to immediate changes in the economy. This will be a long-term drag on the economy overall. However, the effects will be more immediate in the stock market.

Lastly, is forcing hedge funds to pay the corporate income tax rate instead of just the capital gains tax rate. Effectively what this says is that if you are an individual who invests one’s own money, you can pay the lower capital gains tax (15% soon to be 20%), but if you and your friends go into together you are now a corporation that needs to pay the higher corporate rate of 35%.

These changes are bad and they will lead to less economic growth, but the results will slowly build over time. If we were more sensitive to the tax competition they have in Europe the effects would be much bigger, but I don't think we are as sensitive to globalization as some would imagine.

Think of supply-side tax cuts this way: It’s like dieting. Cutting out the chips and sodas will lead to weight loss, but don’t expect to wake up the next morning looking like Brad Pitt.

Or the converse: It’s like me in college. I start off 5’11” and 130 lbs. As a carefree freshman, I laugh off suggestions about weight gain as I consume massive quantities of sodas, chips, and rolls of Pillsbury cookie dough. By the end of my sophomore year I’m pushing 175. Tax hikes always catch up to you, but only drastic changes show up quickly.

Good Quotes

2009-02-24T06:43:00.002-06:00

Scott Grannis at his blog, Calafia Beach Pundit has some insightful quotes from economic thinkers of the past:

J.S. Mill: “Consumption never needs encouragement.”

J.B. Say: “It is the aim of good government to stimulate production, of bad government to stimulate consumption.”

J.S. Mill: “The usual effect of attempts of government to encourage consumption, is merely to prevent savings; that is, to promote unproductive consumption at the expense of reproductive, and to diminish the national wealth by the very means which were intended to increase it.”

F. A. Hayek: "Knowledge in our field is never established by experiment, but can be acquired only by following a rather difficult process of reasoning. No knowledge can be regarded as established once and for all … you have always to convince every generation anew. In fact, knowledge once gained and spread is simply lost and forgotten.”

Note - If you are looking for a blog with really good economic data (in the form of easy to read charts and graphs, of course!) from a free market perspective I recommend Scott's blog. He's pretty easy to read as well.

How To Cure a Leftist

2009-02-23T07:03:00.003-06:00

Much to my chagrin, many Americans have become so besotted with pragmatism that the ability to decipher between freedom and socialism has been dulled by an ignorance of principles that would otherwise expose the ugly brutishness that is the logical end of even quaint collectivisms. Of course, there is no cure for an ardent leftist, or an ardent adherent to almost any ideology, much as a Red Sox fan who has tattooed “Yankees Suck” to his chest is beyond repair. The hope lies in inoculating those in the muddled middle whose personal philosophies are a grab bag of cliché’s and just-so’s.

In my attempts to persuade, I have come to realize is that if you present a principle or axiom with which someone cannot break down they will likely adopt it. Mind you, not everyone immediately cleaves from logical contradictions flowing from other assumptions they hold, but it allows a partial conversion. An added convenience is that my experience has been that people are usually open to a conversation about principles in the abstract. Instead of debating with them the most recent political headline, burrowing down to the underlying principles can avoid some hostility due to party allegiances and other sentiments attached to politics.

Another angle is to cast doubt on their assumptions. I have started to listen more intently during discussions to see if they state some imperative or “it is just so” comments. Questioning these comments can be more fruitful towards changing minds.

Don’t be confused that these are easy targets. First, you have to know what these assumptions are to hear them spoken in conversation. Secondly, you have to know how to deconstruct these arguments. And finally, be aware that people can be as passionate about certain principles as they are about politics.

Over the coming weeks I plan to detail some conversations that I have with people who will remain anonymous, but should help shed some light on what I perceive is going on in their heads when they say what they say.

Note – As you read my posts you will eventually notice that I almost never use the term “liberal” when referring to those on the Left. There is little that is liberal about the Left, and I will not confer such an exaggeration to them.

Is America Getting Angry At Obama? Exhibit A

2009-02-20T12:11:00.006-06:00

If you haven't seen this rant by Rick Santelli of CNBC, I highly recommend it. In it, he rails against Obama's new housing plan and all the stupidity coming out of the White House. Near the end he recommends a "Chicago Tea Party" in revolt against what the government is doing. The traders in the background of the Chicago Board of Trade are cheering him on.

One man's rant does not make a trend. But, if you look at the poll...

Notice the mere 221,533 responses? Wow!

Three Cheers for Ideology

2009-02-20T06:59:00.005-06:00

Seemingly for the American Left, destroying economic freedom is their raison d'etre. As pretext for their invasion of our pocketbooks, they have fabricated weak evidence that allowing "too much" freedom is to blame for our current economic problems. The alleged failures of capitalism are everywhere.

One problem: The minor exception of Texas.

Ah Texas, without a single Democrat holding a statewide office in over a decade. Texas, with a Republican majority in both houses of the legislature. Texas, with 9 of 9 Republican state Supreme Court justices. Texas, with no income tax. Texas, with light regulation and lightly planned cities. Where else in America could the economic failures of free market ideology be on greater display?

Only Texas doesn't seem to cooperate with the presuppositions of Obama's new statism. I have written about the massive budget surplus here. I have written about Texas' FALLING home foreclosure rate here and here. And how Texas has the 2nd most free economy in the U.S. here.

Today, Tory Gattis at his blog HoustonStrategies links to an article here, and a list here, that demonstrates the results of free market ideology in Texas.

The first, is an article at EcoHome Magazine that lists the 15 healthiest housing markets in the United States:

1. Houston, TX
2. Austin, TX
3. Fort Worth, TX
4. San Antonio, TX
5. Dallas, TX

Wow, Texas takes the Gold, Silver, Bronze, Honorable Mention and the Participant ribbons. Surely light land regulation had nothing to do with this at all!

The second link is a list of #1 rankings given by various publications for Houston and Texas.
Some selections are below.

Houston:

Best City to Live, Work and Play Kiplinger's Personal Finance — July 2008
Best U.S. City to Earn a Living Forbes.com — August 18, 2008
Best City for Recent College Grads Forbes.com — June 26, 2008
Fastest Job Growth (11/07 to 11/08) U.S. Bureau of Labor Statistics, Metropolitan Area Employment and Unemployment – January 4, 2009
Lowest Cost of Living Among Major Metro Areas ACCRA Cost of Living Index — Second Quarter 2008
Largest IT Service Economy Onforce, Inc. (VoIP Monitor) – December 5, 2008
Top U.S. Manufacturing Cities Manufacturers' News Inc. (as reported in the Houston Business Journal) — May 30, 2008

Texas:

America's Top State for Business CNBC.com — July 2008
Most Favorable Business Climate in the Nation Development Counsellors International (DCI) — "Winning Strategies in Economic Development Marketing" — July 2008
Best State To Do Business Chief Executive Magazine — January 2008
[Most] Fortune 500 Headquarters Fortune Magazine - April 2008
U.S.'s Top Exporting State WISERTrade — February 2008

I'm sure this is all coincidence and probably due to some evil conspiracy by George W. Bush, but I'm willing to wager (literally) that Texas' unemployment rate will be lower than in California and New York for at least the next two years.

Who Didn't See Inflation Coming?

2009-02-19T08:15:00.003-06:00

Clearly Martin should have been reading my blog.

From Yahoo News and the AP:

Wholesale inflation takes biggest jump in 6 months

Martin Crutsinger, AP Economics Writer
Thursday February 19, 2009, 8:53 am EST

WASHINGTON (AP) -- Inflation at the wholesale level surged unexpectedly in January, reflecting sharply higher prices for gasoline and other energy products.

Some States Are Getting Screwed - An Update

2009-02-18T12:27:00.005-06:00

Marginal Revolution posted the graphic below in this post.

If you recall, I blogged on the noticable fact that states with low unemployment rates seemed to be getting more stimulus spending. I picked out the most egregious examples. Alex Tabarrok plotted all of the states. As you can see from the scatterplot below, there is a negative correlation between unemployment rates and per capita infrastructure spending in the stimulus. That is, states with low unemployment are, on average, getting more money than states with higher unemployment.

I guess those kinds of mistakes happen when our illustrious President screams that the sky is falling as his party passes the largest increase in spending in the history of the world be damned a proper review.

The Liquidity Trap, I’m a Believer

2009-02-17T15:30:00.003-06:00

Paul Krugman, the influential ~~Sith Lord~~ columnist has finally convinced me that America is indeed in a Liquidity Trap. However, I have to add a few tweaks and variables to his thinking.

The traditional “Liquidity Trap” is as follows: Financial meltdown scares the public into saving money and not spending. Aggregate demand then falls, lowering prices. Companies begin to shed workers because of this fall in demand. More unemployed people spend less and discourage other consumers even more. Aggregate demand then falls, lowering prices. The cycle repeats.

Here is my “Liquidity Trap” as follows: Financial meltdown scares the public into saving money and not spending. The government does something reckless and foolish like a bank bailout, hurting future expectations of economic growth and recovery, which kills stock prices. Aggregate demand then falls, lowering prices. Aggregate demand begins to recover, and then the government does something reckless and foolish like a stimulus. Stocks fall, demand drops, inflation retreats. Recovery begins and then the government does something reckless and foolish like announcing a vague new bailout plan. Stocks fall, demand drops, inflation retreats.

Here’s the cycle more clearly in 6 easy steps:

1. Bank panic
2. Stocks crash
3. Government Panics and Screws Things Up
4. Stocks tank again, treasuries surge, inflation falls
5. Stocks begin to recover, treasuries decline, inflation starts to pick up
6. Return to step 3.

I had believed massive inflation was inevitable because the Federal Reserve is cranking out the dough like Pillsbury, but apparently, all the government has to do is slowly but surely destroy the economy to head this off. It's amazing how closely the data fits my new model. Hopefully Obama’s cabinet doesn’t run out of bad ideas anytime soon, or we’re all screwed.

Book Review - The Fatal Conceit

2009-02-12T07:13:00.005-06:00

The Fatal Conceit is one of Friedrich Hayek's most famous works, and after finally sitting down over the last few days and reading it with deliberation I see why it is so acclaimed. This book is phenomenal. I have read The Road to Serfdom and it was good, but it pales in comparison to The Fatal Conceit.

My impression had always been that in this book he laid out the case why the market, as an information gathering mechanism, is vastly superior to socialism and government planning of any stripe. This book, however, goes much further than that. It hacks away at the very philosophical roots of socialism and much of today's "Liberal" viewpoint. Revealing it to be a juvenile rebellion against human progress itself and a recidivist cycle of ignorance. After reading chapter 5, I literally put the book down and said, "Wow!" I was in awe of this man's brilliance.

A few pieces of advice on this book. First, this is not a beginner's guide to economics. I could not have appreciated the depth of this book without a basic understanding of philosophy, economics, and economic history. Not to say that it is out of the reach of a reasonably intelligent person, but you may have to reference Wikipedia about 100 times. Second, most books can usually give all you really need to know in the opening chapter, with the rest of the book being filled with back up material that reiterates the main point. This, for me, was not one of those kinds of books. Start reading on page one, and do not skip anything until at least chapter 6, as he purposefully builds his case. Overall, the book is pretty short, so it's a relatively quick read even though it often requires some thought.

This is also a book to be owned, and not just read. My copy is now filled with notes, underlines, and flagged corners. Go to Amazon. Buy this book.

Vincent Benard Writes the Complete Story on the Credit Crisis

2009-02-10T11:53:00.003-06:00

For months now I have witnessed various economists lay out their version of the housing collapse and financial crisis. For whatever reason, none seemed to be able to wrap their heads around all of the pieces that I was seeing.

However, my friend Vincent Benard, a French economist and President of the "Institut Hayek", has now done that, and this time it is in English! Link here.

A general outline:

Ignition - Fannie Mae and Freddie Mac*, Fed Reserve's Low Interest Rates**
Amplification - Land Use Regulations
Propagation - Federal Reserve system encourages banks to be highly leveraged, Derivatives were poorly priced and risk misunderstood
Punchline - "Big Government is the culprit"

* - Vincent sent me some links after I poo-pooed Fannie and Freddie here. I have since softened my stance and believe that the two government subsidized organizations have more influence than my previous impressions.
** - I railed against this theory here, but again I have softened my stance (without writing about it) that it does have a significant impact, it is just not a primary cause.

Call for a Balanced Budget Amendment

2009-02-09T12:19:00.003-06:00

Remember back in those halcyon days of 1995 when the Newt Gingrich and the Republicans were pushing for a Balanced Budget Amendment to the Constitution along with their Contract with America? Oh for those days.

A new cry for a balanced budget amendment needs to be on the lips of all who value economic freedom and loath its current erosion. This should be the central tenet to Republican efforts for 2010. By then, the deleterious effects of the $800+ Billion “stimulus”, and other extravagances, will be on full and naked display. The American people should never again be used as human experiments for economic theories of such grand scale that have so little empirical evidence.

This experimentation gathers its support through demagoguery alone, because the ideas of Keynes are far too arcane for the average voter to understand. This experimentation by our President abuses the trust of his own supporters by wagering such enormous sums on a dogmatic gamble. If it fails, the massive increase in debt will threaten the creditworthiness of the United States; a frightening scenario our economy has never had to face before. Few times, if ever, before has such reckless abandonment of deliberation and reason been eschewed for hand waving and threadbare excuses. Risking the entire economy on a moment of political expediency must never be repeated.

A Balanced Budget Amendment will force Congress and future Presidents to make tradeoffs in their priorities. Either they raise spending AND taxes, or they cut taxes AND spending. As demonstrated so clearly during the administration of George W. Bush, tax cuts with deficits do not lead to spending cuts. The old arguments against this amendment fail. With the sole exception of declared war, all future governments must be prevented from passing off financial responsibility to future generations.

Any candidate who espouses such an Amendment will have my vote and the support of this blog.

Robert Barro Slams Paul Krugman and His Stimulus

2009-02-07T12:50:00.003-06:00

I happened to see this interview of Robert Barro, linked by PoorandStupid.com

[Atlantic blog:] Do you read Paul Krugman's blog?

[Barro:] Just when he writes nasty individual comments that people forward.

Oh, well he wrote a series of posts saying he thought the World War II spending evidence was not good, for a variety of reasons, but I guess...

He said elsewhere that it was good and that it was what got us out of the depression. He just says whatever is convenient for his political argument. He doesn't behave like an economist. And the guy has never done any work in Keynesian macroeconomics, which I actually did. He has never even done any work on that. His work is in trade stuff. He did excellent work, but it has nothing to do with what he's writing about.

I'm not in a position to...

No, of course not.

I'm not in a position to know things like the degree to which Paul Krugman counts as a relevant expert on new Keynesian economics.

He hasn't done any work on that.

Robert Barro, who's credentials I mentioned here, is revealing that the President of the United States, Barack Obama, is being led around by the nose by an economist who has no professional experience examining the proper role of economic stimulus.

Inflation is Coming

2009-02-06T08:22:00.003-06:00

Contrary to what the Keynesians and their marionette in the White House believe, there is no liquidity trap and there is no threat of long-term deflation.

George Melloan has an op-ed in the Wall Street Journal (HT: EPJ) with the following excerpts:

Why 'Stimulus' Will Mean Inflation

In a global downturn the Fed will have to print money to meet our obligations.

So what is the outlook? The stimulus package is rolling through Congress like an express train packed with goodies, so an enormous deficit seems to be a given. Entitlements will go up instead of being brought under better control, auguring big future deficits. Where will the Treasury find all those trillions in a depressed world economy?

There is only one answer. The Obama administration and Congress will call on Ben Bernanke at the Fed to demand that he create more dollars -- lots and lots of them. The Fed already is talking of buying longer-term Treasurys to support the market, so it will be more of the same -- much more.

And what will be the result? Well, the product of this sort of thing is called inflation. The Fed's outpouring of dollar liquidity after the September crash replaced the liquidity lost by the financial sector and has so far caused no significant uptick in consumer prices. But the worry lies in what will happen next.

Even when the economy and the securities markets are sluggish, the Fed's financing of big federal deficits can be inflationary. We learned that in the late 1970s, when the Fed's deficit financing sent the CPI up to an annual rate of almost 15%. That confounded the Keynesian theorists who believed then, as now, that federal spending "stimulus" would restore economic health.

Adding to this analysis is recent data. Ten year Treasury rates are rebounding rapidly. From around 2% up to almost 3% in 6 weeks. The long term inflation outlook priced into the 5yr treasury/TIPS spread reveals that inflation expectations by the market have risen from almost -1% to +0.37% (at time of publish), again in about 6 weeks. Oil prices are slowly rising from low 30’s to low 40’s. Gold prices are rising as well.

Many have made a big deal about the astonishing growth in the money supply, but this has been offset by growing excess reserves held by banks. The banks were hoarding cash and not lending. However, the bi-weekly reports from the Fed show that excess reserves fell a little bit, meaning more of that massive money supply is getting into the market.

While rapid inflation isn't a sure thing from the data, I see nothing in the markets right now that predicts anything but growing doubts about deflation.