Wednesday, October 29, 2008

Obama Wins at Reason Magazine

Here is a very interesting article in Reason Magazine, which undoubtedly is the best known libertarian publication. They asked various people who have appeared in their pages some questions about how they plan to vote this time around and these are their answers. They are often very interesting indeed.

These are the bottom line results for each:
Peter Bagge: Barr; Obama if close
Ronald Bailey: Obama
Radley Balko: Barr
Gregory Benford: Barr
David Brin: Obama
Drew Carey: "Anybody but McCain/Palin"
Tim Cavanaugh: Obama
Steve Chapman: Obama
Shikha Dalmia: Nobody
Brian Doherty: Never votes
Nick Gillespie: Barr, if he votes
David Harsanyi: Not saying
Rob Kampia: Barr
Katherine Mangu-Ward: Never votes
Michael McMenamin: Undecided
Michael Moynihan: Won't vote
Craig Newmark: Obama
Grover Norquist: McCain
Charles Oliver: Won't vote
Steven Pinker: Obama
Bob Poole: McCain
Damon Root: Probably nobody, maybe Barr
Ryan Sager: Obama
Julian Sanchez: Obama
John Scalzi: Obama
Jack Shafer: Barr
Michael Shermer: ?? (Answer amusing but ambiguous)
RU Sirius: Obama
Tim Slagle: McCain
Doug Stanhope: Obama
Bill Steigerwald: No one
Roger Stone: McCain
Jacob Sullum: Barr
Jesse Walker: Barr
David Weigel: Obama
Matt Welch: Probably Barr
Cathy Young: Probably Barr
Which I add up thus:

Obama 13
Barr 10
McCain 4
Nobody 7

I find this fascinating for several reasons. I've been connected with Reason in various ways since I helped Marilyn Walther Machan assemble and staple pages fresh from the printer for an issue circa 1971. In those days, it looked home-made (see above) -- and it was! I also wrote for it long before it was fashionable to do so.

But there is also a non-egocentric reason to find this interesting -- Obama wins! Even if you subtract the three authors who are obviously not libertarians (Newmark, Sirius, and Pinker) he still ties with the Libertarian candidate. The reason for this is very clear in the answers almost half of the libertarian writers give. These people want to see the Republicans punished, punished painfully, publicly, humiliatingly. And then punished some more.

As Boaz and Kirby point out, studies find that between 10 and 20 per cent of voters are neither liberal nor conservative but libertarian, where this means "tending to agree with conservatives on economic issues and with liberals on personal freedom." By the standards of these voters, the Bush administration has clearly been very bad. If you add that most libertarians favor a military policy that is limited to national self-defense against imminent attack, the picture becomes many, many times worse. For these voters (and I speak as one of them) six years of united Republican rule was pure screaming horror.

As for me, I've already given my endorsement. I would like to add that, though rage against the Republican machine is perfectly understandable, I think voting on the basis of emotion alone is an irresponsible thing to do. My mother once told me that she voted for Governor Reagan because she loved his movies. Voting for one major party because you are mad at the other makes about as much rational sense as what Mom did.

By the way, I'm voting for the only candidate who wears a moustache.
Later: Hey, Alex Cockburn swiped my idea! Just kidding of course. It's really one of those great-minds-think-alike things.

Tuesday, October 28, 2008

Obama a Socialist?

If we are talking about the Joe the Plumber issue, the more accurate term is of course "redistributionist," someone who believes the state using its power to tax in order to spread the wealth. That means taking wealth, not merely from the venal and corrupt rich, but from the hard-w0rking and successful as well, simply in order to give it to the less successful.

Some people have argued that The One is not advocating redistribution at all, on the grounds that he is merely going to raise taxes on the top 5% in order to cut taxes for the bottom 95%.

This seems like sophistry to me. After all, it is admitted that the state would be coercively taking from someone who has more for the sole purpose of benefitting someone who has less. The act of taking is what raises all the moral and economic issues. If we are indeed taking from Peter in order to give to Paul, the taking from Peter is the part that looks an awful lot like Robin Hood robbery. No one has any ethical objections to the other part -- the giving to Paul. Giving something away, if we bracket the issue of where it came from, is generally a nice thing to do. Also, it is the taking from Peter -- and thus raising the taxes on productivity -- that lowers the incentive to produce. So who cares whether the actual, physical dollars we are taking from Peter end up in Paul's pocket, or whether they are going into the government's coffers in order to increase Paul's wealth in some other way? All the issues are the same. [Of course, all this is based on the absurdly charitable assumption that Obama's policies will be carried out in exactly the way he promises.]

Greg Mankiw links to an interesting story reporting a poll done recently on whether the government should use its power to tax to spread the wealth. The results:

Americans are evenly divided on the idea: 45 percent think it is a good idea and 46 percent a bad idea to use some of the money government collects in taxes to "spread the wealth" to others who are less well off. Most Democrats think spreading the wealth is a good idea (66 percent) and most Republicans think it is a bad idea (72 percent).

In another poll
57 percent of undecided voters said they disagreed [with redistributionism] and 24 percent said they agreed. Nearly 20 percent were not sure. Among independents, 52 percent disagreed and 39 percent agreed.
Obviously, so far McCain has failed utterly to pick up all the anti-redistributionist votes. By all accounts, the American people are about to elect a President who represents a position that they do not support. I wonder what could account for that?

Sunday, October 26, 2008

Greenspan's Betrayal

A commenter points out that Bill Moyers has said that Allan Greenspan's contribution to the recent crash and the coming depression/recession can be blamed on the fact that he was once an friend and follower of Ayn Rand.

This is almost the exact opposite of the truth. Greenspan's conduct as Fed Chair was a betrayal of his earlier expressed views, a betrayal that libertarians and Randians have complained about many, many times over the decades.

The truth has been explained very by Richard Spencer here. In the early sixties, Greenspan wrote an excellent essay, believe it or not, defending the gold standard, on the grounds that it would prevent precisely those policies that he did pursue years later, after he had become our monetary dictator.

In that essay, he criticized a fateful move on the part of the Fed in 1927, when it decided
to assist Great Britain, who had been losing gold to us because the Bank of England refused to allow interest rates to rise when market forces dictated (it was politically unpalatable). The reasoning of the authorities involved was as follows: if the Federal Reserve pumped excessive paper reserves into American banks, interest rates in the United States would fall to a level comparable with those in Great Britain; this would act to stop Britain’s gold loss and avoid the political embarrassment of having to raise interest rates.

The ‘Fed’ succeeded; it stopped the gold loss, but it nearly destroyed the economies of the world in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result, the American economy collapsed.
Greenspan's essay is still in print and still well worth reading.

What I find seriously spooky about it is that in it he is quite explicitly saying that policies substantially similar to the ones he later enacted eventually lead to speculative booms, crashes, and depressions. As Spencer points out, after Fed interest rates reached an all-time high of 19 % under Greenspan's predecessor, he eventually hammered them down to as low as 1 %. This is just the sort of speculation-triggering inflationism he warned about back when he was a Randian. Of course he was right the first time. These policies have indeed lead to disaster, and will continue to do so.

Moyers' comments are one more example of the often-repeated myth that these events were caused by laissez-faire caplitalism, whereas they were caused by government intervention. In fact, critics of interventionism predicted it would do so, including even the Arch Intervener himself, in a earlier lifetime.

(Notice that the people who were suprised when the catastrophe struck were proponents of intervention, like Ben Stein and Paul Krugman. We on the other side had been warning it was coming for a while now, and were in large part well prepared for it.)

The story of Allan Greenspan is a very sad one and a very old one. Once upon a time he believed in freedom and the market, and in the principle that working and saving are virtues. Then one day Ronald Reagan offered him absolute power over the US money supply, and it corrupted him. He went over to the great Keynesian transvaluation, in which working and saving are less virtuous than consuming and spending.

As Ellsworth Toohey, villain of The Fountainhead, says to one of his victims, "Ever read Faust, Peter?" Political power is indeed a deal with the Devil.
Added Later: On related themes see Harvard (!?) economist Jeffrey Miron. Also see the always-excellent George Reisman. Also check out this audio of Ron Paul commenting on the Greenspan betrayal. Finally, my friend the estimable Richard Epstein has weighed in.

Friday, October 24, 2008

Greenspan's Paltry Mea Culpa

Of all the public sector people who bear responsibility for the recent wave of failing financial institutions, and of course the coming depression, Allan Greenspan two days ago became the first one to admit some responsibility. (Among the many others who owe us an apology is Barack Obama, but don't hold your breath while waiting to hear it.)

As Ron Paul points out in this video, Greenspan is confessing to the wrong sin. Instead of saying that he should not have spent decades pumping money into the economy, fueling illusory pricing booms in the the stock market and housing market -- he says he should have proposed a regulation or two that would have enabled this system to go on forever.

Greenspan's regulatory proposal is to require institutions that repackage mortgages for sale to others to retain some of these mortgages themselves, giving them a little more incentive to know the level of risk these instruments involve. Don't the people to whom they sell these mortgages already have incentives to do that?

This sounds to me like putting a bandaid on a compound fracture. And the Democrats are no better. Their attitude is: You fool! You fool! The patient needs ten bandaids!! What the patient needs is surgery. The problem is -- and this is where we libertarians start sounding like Marxists -- that the system is fundamentally flawed. As long as the doctor is only going to reach for another bandaid, the patient is doomed.

The theory all these doctors agree on is this: We in the public sector create incentive structures that push the private sector to go where we want it to go. If that doesn't work, it's because some bad people in the private sector failed to make our structure work. At most, we are only responsible for not slapping on some new rules to stop them from failing to do the right things. Or maybe, worse yet, we took off some of these magic rules. Mea maxima culpa!

This is the mindset that says that the cause of all our troubles was deregulation. The last deregulation we did in this country was the Gramm Leach Bliley Act of 1999, which allowed the mortgage repackaging that Greenspan was talking about. That must have caused the banking crisis! It was all due to the guys who ripped off one of the bandaids!

If you think so, consider this: Ron Paul voted against that bill. Joe Biden and John McCain voted for it. That's the difference between someone who sees the system as a system, and people who are thinking about bandaids.

Wednesday, October 22, 2008

Proof that the Bailout Was a Swindle

Today (Wednesday) a paper was released from three economists at the Minneapolis Fed that ought to have everyone hopping mad. It appears to show conclusively that four statements that were made to justify the recent massive Wall Street bailout are, quite simply, false:

1. Bank lending to non-financial corporations and individuals has declined sharply.

2. Interbank lending is essentially nonexistent.

3. Commercial paper (ie., bond) issuance by non-financial corporations has declined sharply and rates have risen to unprecedented levels.

4. Banks play a large role in channeling funds from savers to borrowers.
This is the measure that the Republican administration proposed and the Democrats in the Congress enthusiastically made their own -- the one supported by both McCain and Obama.

It looks like we have been played for suckers, to the tune of over a trillion bucks. What really gets me is that all four of these claims were repeatedly made during the awful week in which our masters were screaming at us to accept this thing -- and never a shred of evidence, that I ever saw, was ever offered for any of them. Why did we fall for it?*

By the way, do you think they are going to give us our trillion back? Will they back off from nationalizing banks? Well sure, just like Bush called off the war when the WMDs failed to materialize.
* Etienne de la Boetie wrote a book about it: Discourse on Voluntary Servitude: "I should like merely to understand how it happens that so many men, so many villages, so many cities, so many nations, sometimes suffer under a single tyrant who has no other power than the power they give him; who is able to harm them only to the extent to which they have the willingness to bear with him; who could do them absolutely no injury unless they preferred to put up with him rather than contradict him?"

Tuesday, October 21, 2008

My Endorsement: Divided Government

Supposing you can bring yourself to vote for either wing of the two-party duopoly, which side should it be? My answer: vote for divided government and pray for gridlock.

I just saw a news item that I think is very relevant here. Congress is beginning the first of its hearings on the causes of the current crisis. It will be headed by Barney Frank. Yes, the Barney Frank who is probably as responsible for this crisis as any other person in government, with the probable exception of Ben Bernanke. In a just world, Frank and Chris Dodd would be crawling under a rock right now, leaving glistening trails of slime behind them. Instead, Frank will be officially in charge of proving it was all the fault of someone else.

He also made an interesting statement on TV. What the country needs right now, and what he intends to give us, is even more deficit spending than we have already got. Later on, when we are ready to raise taxes, there are "plenty of rich people out there" that we can tax to pay for the huge deficits he is planning. (By the way, note that, as Stephen Moore has pointed out, the wealthiest 1 percent of the population earn 19 percent of the income but already pay 37 percent of the Federal income tax. The top 10 percent pay 68 percent. Meanwhile, the bottom 50 percent now earn 13 percent of the income but pay only 3 percent of the taxes.)

Obviously, Frank's words are not election rhetoric. The election won't be held for another two weeks, and the Demos are already talking as if they have won the goal they covet: the Presidency and filibuster-proof super-majorities in both houses of Congress.

As far as I can tell, this has only happened twice in history.

The first gave us Woodrow Wilson's ironically named "New Freedom," which brought massive "reforms" such as graduated income tax, the Federal Trade Commission, the Clayton Antitrust Act, popular election of U.S. senators, and most important of all, the Federal Reserve Act, which created a European-style central bank, a move that the Jacksonian Democrats had earlier fought tooth and nail. Like many others, I have argued that this bank was an unregulated eight hundred pound gorilla that contributed mightily to the present economic crisis.

The second gave us the New Deal, an abandoned orgy of deficit spending, new bureaus, new controls and rules, and (for the productive and successful few) new and confiscatory taxes, an array of new programs too vast to summarize here. Suffice it to say that the New Deal dwarfed the New Freedom.

These were the two biggest peacetime moves toward bigger and more powerful government in the US since the ratification of the Constitution.

Now, at this point you may be thinking, "Well, fine, we need more government today, to reign in the greedy people in the private sector who caused this economic crisis!" If you think that you are, first of all, horribly and dangerously wrong. But consider, aside from that, what else these two Democratic trifectas brought us. The first brought US entry into World War I, withWilson throwing critics of the war into prison. With the second, FDR almost got away with "packing" the Supreme Court, which he attempted because he didn't like the way they were providing a check on legislative and executive power. To save their jobs, the Court radically shifted their position to please the President. Thus the largest earthquake in twentieth century constitutional law was forced by threats from the executive branch of government.

By any sane standard, these were the two worst moments for liberty and the rule of law in this country since the Civil War. Divided government always has certain benefits, and super-unified government, virtual one-party rule, is bad for everyone in the long run.

That is why everyone who votes for either of the two major parties should hold their noses and vote for the Republicans in this Presidential election.

... if, that is, you can bring youself to vote for either of these tickets. Personally, I cannot. I'm voting for Libertarian Bob Barr.
Later: I note that Veronique de Rugy has a divided-government-based argument for Obama.

Saturday, October 18, 2008

Ron Paul Explains it All

This little video explains why I am still an unrepentant Paulista. He's getting better and better at packing his entire Weltanschauung into six minutes. Practice makes perfect, I suppose. (Hat-tip to Lew Rockwell.)

BTW, if you are too busy to read Prof. Liebowitz's excellent but elaborate account of the cause of the current crisis, as I earlier urged you to do, Tom DiLorenzo just posted an elegant short version of the story here. In fact, if you are too busy to read anything at all, Mark Thornton has an audio account, here.

Thursday, October 16, 2008

Obama's Amazing Trickle Up Theory

"It's not that I want to punish your success. I just want to make sure that everybody who is behind you, that they've got a chance for success too. My attitude is that if the economy's good for folks from the bottom up, it's gonna be good for everybody. I think when you spread the wealth around, it's good for everybody."

I find this very odd. Obama is on record as blaming the current economic meltdown on the "trickle down economics" of the Bush administration.

Trickle-down economics, as you probably know, is the idea that if the government allows the relatively wealthy to keep what they earn, this will result in job-creation and thus will benefit the relatively poor.

Here Obama puts forth the theory that if the government takes money from the rich and gives it to the poor, it will benefit the rich.

I guess there would be some sort of gonzo multiplier effect, which would not occur if Joe the Plumber spent his own earnings himself. Why don't we just take all of Joe's earnings from him, so he'll become stinking rich?

BTW, I love Joe's conduct throughout this discussion. Though courteous and unassuming, he is not at all cowed by the Great Man's presence. More important, he firmly insists that his question be answered. This is America at its best, an America that may soon come to an end.

Wednesday, October 15, 2008

It's Nietzsche's Birthday!

Today was Nietzsche's 164th birthday, and in my Nietzsche class we celebrated with a cake. This is UW student (and Nietzsche enthusiast) Andy Dibble cutting the cake. The picture on it represents Munch's great 1906 portrait of him. Two years ago I commented here on why people are still reading Fritz after all these years:

Surely there are many reasons. One is that he is one of the very few major philosophers who is just plain out-and-out fun to read. The only ones who even come close in this respect, in the whole history of philosophy, are Robert Nozick and Jose Ortega y Gasset.

Then there are the substantive reasons. Ortega says somewhere that, for most of us, the pleasure of reading is simply the pleasure of agreeing with someone. This is clearly not true of Nietsche. Whatever your views are, you will eventually see Nietzsche not merely disagreeing with you but actually ridiculing things you hold sacred. And making you laugh in spite of yourself.

Partly for that reason, I think that reading Nietzsche is actually good for your character. It's hard to imagine someone who has studied Nietzsche getting all shocked and huffy because someone disagrees with them. Students of Nietzsche are used to it. And more than that, they understand that it is actually good that there are radically different views out there. It creates space in which we can grow.

Tuesday, October 14, 2008

What Will Obocracy be Like?

Given the ideology-free cluelessness of the McCain campaign, conservative and libertarian intellectuals (I guess that includes me) are now talking about what America will be like under Obama and how much or how little damage he will do. Here are my predictions:

1. Get ready for four years of grovelling leader-worship on the part of a significant part of the population. Note how Rolling Stone literally gave him a halo.

2. Get ready for an orgy of political correctness. People have claimed that Sarah Palin’s use of the expression “hockey mom” is racist (I didn’t know this, but apparently black people don’t play hockey). Similar things have been said about the expression “Joe Sixpack” (I guess they don’t drink beer either). These accusations have not by any means been limited to insignificant chunkheads here in the blogosphere. Notoriously, Congressman John Lewis compared John McCain to George Wallace and suggested that he might cause people to murder innocent little girls. I hope you don’t mind this sort of thing because you will be hearing a lot more of it. As an inmate of a typical, solidly liberal university, I am used to it, but you may find it annoying. More importantly, now it will tend to insulate the most powerful man on Earth from criticism. People who criticize Obama will feel that they have to couch their remarks in language that can give no offense. It will be like boxing with handcuffs on.

3. Get ready for a divided and angry country. Obama's party will not only control the White House but both houses of Congress. I don't expect them to be magnanimous in victory. They have suffered (how they have suffered) eight years of not getting their way, and they won't have to take it any more. This will make a lot of others feel helpless and unrepresented by the system. The last time the Democrats were in this kind of lockdown position was the first two years of the Clinton administration. The result was anti-government rage over the incidents at Ruby Ridge and Waco, which festered in a dangerous segment of the political right. Some of it was rational, but much of it was just crazy. It finally peaked out when a certain nut-job bombed the Murrah Building in Oklahoma City. I don't know what will happen this time, but I am very sorry to say that I would not be surprised to see more bloodshed.

4. Get ready to watch at least a year of OJT. Once before we elected a Senator with a rather skimpy legislative record who nonetheless gave lovely speeches and had written two pretty-good books. He was charming, but it was unclear what he stood for, if anything. Of course I'm referring to JFK. Well, you may be thinking, finally you are saying something positive. JFK was a great President! Actually, the first half of his term in office, at least, was dangerously inept. In April of his first year there was the tragically incompetent Bay of Pigs invasion. Then, in June, he met in Vienna with Khrushchev, who we now know sized him up as a lightweight who could be easily managed. Eventually, concerned that Kennedy would invade Cuba in earnest (an idiotic move that The Boy President actually was considering) Khrushchev moved missiles into Cuba. Finally, Kennedy showed signs of eptitude: his handling of that crisis was effective. But note that (like his earlier courageous response to his PT boat being run over by an enemy ship) it was a solution to a horrific problem that he himself (probably) had brought on himself.

Of course, none of this really speaks to matters of substance. What will he actually do? What will his policies by like? I have no idea. I know he says he will cut the taxes on 95% of Americans, but no sane person believes he will do anything like that. He will inherit a crumbling economy and a government that is racing toward insolvency. His announced policy views, such as they are, are clearly not adapted to that sort of situation. As far as we know, he has never been in any sort of leadership position during any sort of crisis, as JFK had been with the destruction of PT 109. How he will adapt, no one knows. What we must hope and pray for is that he will not do what Hoover and Roosevelt did: turn a bad economic situation into a great depression. It will be well within his power to do so.
Added later: During the week of October 24, Joe Biden's mouth became famous all over again for saying something similar to what I said in point 4 above: "“Mark my words,” the Democratic vice presidential nominee warned at the second of his two Seattle fundraisers Sunday. “It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking. We’re about to elect a brilliant 47-year-old senator president of the United States of America. Remember I said it standing here if you don’t remember anything else I said. Watch, we’re gonna have an international crisis, a generated crisis, to test the mettle of this guy.” The difference is of course that Joe doesn't seem to think this is a bad thing.

Saturday, October 11, 2008

Causes of the Present Crisis

This is the great Jim Rogers, legendary investor (and Ron Paul supporter) talking about our current economic mess a year ago. Think of him as a libertarian George Soros. Notice he saw it all coming, and explained why (in part) it would happen. If you know the cause, you can predict the effect.

As to the cause of the banking crisis, please find the time to read this paper, "Anatomy of a Train Wreck: Causes of the Mortgage Meltdown," but Stan J. Liebowitz. Prof. Liebowitz has been doing research on subjects like regulation and the economics of property rights for almost three decades. (Hat tip to Thomas DiLorenzo.) The tale he tells so methodically will make you very angry, once you grasp what he is saying. At least it should.

He points out two extraordinary features of the mortgage meldown. As in the Great Depression, we suddenly had an extraordinary number of mortgage defaults. But the Depression wave of defaults happened in an environment of horrific unemployment and falling profits. This time, these other things were not happening. Why the sudden plague of defaults, sufficiently awful to ruin banks and begin to pull the rest of the economy down with it? Why did this happen?

The other feature is at least as remarkable as this, and at least as worthy of an explanation. The plague of defaults wasn't (at least, not yet) poor people who were suckered into sub-prime loans that they couldn't afford the pay. The sub-prime borrowers did not default any more often than the prime ones. The real problem was elsewhere: believe it or not, the mortgages that defaulted at disproportionate rates were the variable rate ones, both sub-prime and prime ones. And this happened in spite of the fact that variable rate loans have lower interest rates than fixed rate loans. (They have to, or borrowers would not accept the greater uncertainty of variable rates. That's how markets work.) Again, this is weird. Why did it happen?

The original cause of it all, Liebowitz argues, was a collection of regulators, bureaucrats, and politicians who decided in the early nineties that a lot more Americans should own their own homes. Renting bad, owning good. Soon, every branch of the government aggressively pursued policies designed to pressure banks to designing "innovative" and "flexible" (their words) underwriting standards, designed to change Mr. Potter into George Bailey by means of various sorts of threats and intimidation (we are talking about the government, after all).

The new policy was a spectacular success: rates of ownership versus renting increased dramatically. But there was a further result as well. Every Econ 101 student knows that increases in demand ceteris paribus result in -- what, class? That's right: higher prices. Housing prices rose, and continued to rise. This brought in the speculators. "Flipping" became so common it was the subject of more than one TV series. In 2005, speculation accounted for almost one third of all home purchases. That was not a good thing.

Price bubbles inflated by government and speculation cannot inflate forever, and when this one exploded, speculators were left with houses they could no longer unload at a price higher than they paid for it. There was only one thing to do. Default.

This explains, Liebowitz argues, the oddity of the variable rate mortgages being the ones that melted down. The variability of those interest rates is scary to someone who intends to live in their house for decades. But to a speculator it makes no difference, because they intended to unload the property before rates can rise very much, and the fact that these mortgages had lower interest rates than ones with fixed rates makes them very attractive. When the inevitable happened these mortgages melted down at such massive numbers they threatened all of us.

The cause of this disaster was not "greed," except in the Pickwickian sense in which the cause of plane crashes is gravity. The question, is why did gravity cause this housing market to go insane and crash into a wall, and not the others?

Nor, as Liebowitz tells it, was the cause the disaster the "predatory lenders" who lured poor people in over their heads. Those borrowers are so far not part of the problem. And the problem certainly was not, as Obama keeps claiming, deregulation. It was reregulation.

All of the talk I've heard out there by non-economists is based on the assumption that the problem absolutely must be that there weren't more regulations on private, market agents. They must be thinking that regulations are rules that prevent guys from putting carcinogens in your orange juice. If some harm was done, it must have been some private citzen who did it, and some clever person should have thought up a rule against that particular sort of harm. We see here that, unfortunately, there are plenty of regulations that are not like that at all. Some regulations create powerful entities like Fannie Mae, Freddie Mac, and the Federal Reserve Bank, and direct them to bring about Utopia.

The "failed economic policy," to use another of Obama's tropes, that caused this crisis was the idea that we can use government coercion, not to stop people from violating the rights of others, but to force the market to produce some positive result we want, and only the result that we want. This is true arrogance, the hybris that the gods punish with madness and destruction.

Actually, there is a sort of regulation that we probably do need. These would be regulations that restrict the powers of these government-created entities. These entities were among the tools the government was using to force the market to produce home ownership Utopia. Today there are few real limits to their power. The Chair of the Fed is a monetary dictator. There were probably more checks and balances on the Tsar of All the Russias than there are on Ben Bernanke. But the people who are talking today about reregulating are not talking about reigning these people in. They are talking about giving them, and others who caused this disaster, even more unchecked power.

Thursday, October 09, 2008

Censored Video

I can't figure out how to embed it, but there is a marvelous skit in which SNL lampoons the Democrats. Unlike their skits lampooning Sarah Palin, this one has been systematically yanked from Youtube, HULU, and every web site that has featured it, together with comments asking what happened to it. Here is a link to a blogger who managed to repost it. (Hat tip to Anthony Gregory and Geofrey Alan Plauche.)

Why has this one been yanked? One possible explanation: among its deserving targets are two real people, Herbert and Marion Sandler, powerful and (of course) super-wealthy lefties. The line flashed on the screen, "People who should be shot" might have something to do with it as well. SNL could say things like that about you or me with impunity, but not about the Sandlers. I urge you to go to the above link and view it right away, before the Sandlers, NBC, the Sandlers their hired help, or whoever is doing this get to this blogger.

Added ten minutes later: Wow. In the few minutes it took me to write this post, the above link stopped working. Wow. Here is another link to it. Let's see how long it keeps working.

Still later
I finally found an embedding code for the video. Here it is. Yank this!

The next day: This is the first time I've ever quoted Bill O'Reilly as a source, but so far he is the only one outside the blogosphere who has talked about this story. (Gee, I wonder why?) Anyway, he reported that, yes, the Sandlers called NBC and complained about the skit. It is evidently NBC that keeps yanking copies of it. He quoted an NBC spokeperson saying that the skit, or some portion thereof, "was not up to our standards." Obviously, if this person meant it was not funny, they were lying.

Wednesday, October 08, 2008

Blame the Voters

I had work to do and couldn't watch last night's Presidential debate in real time, so I recorded it to watch later. Then, when it came time to watch the darn thing, I just didn't have the heart to do it. It had been a stressful and sometimes painful day, why should I end it by spending an hour and a half in the company of two people I am actually starting to despise? I took the relatively painless option of watching clips from it as the talking heads discussed the debate.

That is when I found out that instead of defending market institutions against Obama's Big Lie that our current mess was caused by the Bush administration's (non-existent) orgy of deregulation, John McCain offered another $300 billion in government handouts -- this time to people with foreclosed mortgages.

From my point of view, one of the things Republicans sometimes offer that has real value is a somewhat more free-market, non-interventionist point of view than the Democrats. McCain is obviously not serving that purpose at all. Nor does he have the elementary good sense to take up one of the many okay-pal-you-asked-for-it opportunities, repeatedly offered by Obama's Big Lie tactic, to point out that it was the regulatory policies backed by Obama's Democratic colleagues, especially their stroking and pampering of their beloved Fannie Mae and Freddie Mac, that did as much as any other single factor to cause the housing meltdown and the banking mess.

How did we end up with two such lousy major party candidates? The glaring problem with Obama, in my opinion, is just the one that has been pointed out so many times already. Though a legislator, he did not write any laws you had ever heard of before you sat down and read an article the proved that, well, he did write some.

We could quibble forever about the details, but one thing seems pretty clear: it is difficult, if not impossible, to think of a major party candidate from past elections who was as light on experience and achievements as Obama. In the past, someone with that profile of characteristics would simply not have been nominated. What has changed? McCain was also an odd choice. Here we are after six years of a massively unpopular war, and the party responsible for it chose to nominate the most imperialistic and warlike of all its potential candidates. How do we explain this weird behavior?

Actually, I think there is a simple explanation: the process by which candidates are chosen has changed. When I was a kid, the candidate was chosen at a party convention by party workers and professional politicians, and the president was chosen by the voters. Now, because of widespread primary elections, both choices are made by voters.

What we have now is a more purely democratic system, whereas it formerly represented a balanced combination of democracy and, in effect, oligarchy. It did not work very well, but at least it gave us candidates like Eisenhower and Stevenson. Now we get candidates like McCain and Obama. We have moved from candidates chosen by professionals to ones chosen by amateurs. Notice that of the two most recent Presidents, one had no brain and the other had no spine. Obviously, this sort of thing will keep happening unless the system changes (which it won't). Like they say, if you keep doing what you do, you'll keep getting what you get. Look for more candidates who satisfy the hankerings, biases, flawed information, and cognitive limitations of plain folk. Look forward to a stream of demogogues, incompetents, suave con artists, moral idiots, and charming phonies. Don't expect things to get any better. In fact, as government becomes a more and more important part of our lives, do expect things in general to get worse.

Saturday, October 04, 2008

Invasion of the Pod Children: A Nightmare

For a brief while, this video was linked and discussed on Obama's own web site. Then, we noticed that many people found it seriously creepy. Chinese who are old enough to remember the Cultural Revolution found it especially unpleasant to watch. Without warning, it disappeared from the Obama site, which was scrubbed clean of every single reference to it. It also disappeared from Youtube, and from every other site within reach of the Oboctopus.

But a blogger found a copy of it and reposted it. On the internet, nothing ever goes completely down that Orwellian memory hole. Not yet. And I think you should watch it. It's like watching Triumph of the Will: unpleasant, but enlightening. One work of art is worth thousands of words. It doesn't have to be good art, and this one has much to tell you. Just watch it, led your mind wander, and you will experience ...

... a dream of your future. Children in uniform singing a hymnlike song in praise of their all-wise and benevolent leader. He will bring them all a beautiful new life. Through his leadership, they will change the world. And by "the world," we mean you and your puny little life.

In the future, the only art permitted will be choral singing, the art at which Sparta excelled. It is time to end two and a half thousand years of Athenian individualism, two and a half thousand years of failed policies. Two and a half thousand years of shredding needed social controls. Now we understand.

In the future, all children will be girls. Masculinity is what brought us the bad old days, the days of greed, fighting, and competition, the days before The Change.

Soon we will control both houses of Congress and the White House. Resistance will be pointless. Tomorrow, already, untold numbers of Americans will be making their house payments, not to an old fashioned capitalistic bank, but to the state. We have learned our lesson. No more half-way measures like Fannie Mae and Freddie Mac. They didn't quite work the way we had planned anyway. The new state is all.

As you slide into the well-lubricated mouth of the new, kindly Leviathan, just remember one thing: you have no choice.

It's better this way, Miles. Just close your eyes and go to sleep. It's so simple. There will be no more tears. He's in here! Get him! Get him!!


Added later: The above is one of many parodies of the Obama video posted on Youtube. Below is Reason Hit and Run's version, The Pyongyang Remix:

Thursday, October 02, 2008

Why are Both Parties in Love with Regulation?

In the vice presidential debate this evening, Joe Biden repeated the Big Lie that the current economic mess was caused by eight years of deregulation and, disgracefully, Sarah Palin did absolutely nothing to counter that statement. Instead, she insisted the she and that running mate of hers are as eager as anyone to reign in greed on Wall Street.

The last deregulation to occur at the Federal level in this country was during the Clinton administration: the Financial Services Modernization Act of 1999. As far as I can determine, although it was about banking, it was probably completely irrelevant to what is happening now. And, by the way, Senator Gassbag voted for it. Why couldn't Sarah say any of this? Unless the McCain campaign is run by democrats and socialists, it should have been in her prep book.

As to what did cause this mess and the coming hard times, I don't think you can get a grip on this issue without a theory. The facts in this case do not speak for themselves, or all informed people would be saying the same thing -- which they obviously are not. My own preferred theory in this sort of case is the so-called Austrian Theory of the Trade Cycle. Today I saw an elegant little account, by Matt Kibbe at Reason, of how the Austrian theory applies to here :
Our current financial crisis has all the characteristics of a classic government boom-and-bust cycle generated by easy money and credit as described by [Ludwig von] Mises in The Theory of Money and Credit, Human Action, and Interventionism. Easy money from the Federal Reserve, coupled with easy credit provided indirectly via the Community Reinvestment Act and directly via government-sponsored-enterprises Fannie Mae and Freddie Mac created an unsustainable housing bubble. By corrupting the standard of value and bullying financial institutions into giving loans to the unqualified, these government actions distorted relative prices and caused generalized errors in economic calculations and investment decisions. “True,” says Mises, “governments can reduce the rate of interest in the short run. They can issue additional paper money. They can open the way to credit expansion by the banks. They can thus create an artificial boom and the appearance of prosperity. But such a boom is bound to collapse soon or late.”
By this account, the problem was caused by government intervention in the economy, not by deregulation.

Into this situation comes the bailout package, the main feature of which consists in the government directly bailing out private businesses by purchasing low-value assets at inflated prices.

If it passes, it will mean that $700,000,000,000 from people who have made good economic decisions -- how do we know this? because they have the money to me taken, that's how -- and give it to people who have made bad decisions, and because they have made bad decisions. This immediately creates "moral risk," meaning that people have less motive for making good decisions that affect others.

This, once again according to the Austrian theory, is the opposite of what we should be doing. Hard times are coming no matter what we do, and we will desperately need that seven hundred billion for new projects that correct or compensate for the mistakes made during the credit expansion boom, instead they will be disposed of to reward the people who made those mistakes. If tonight's debate is any sign, this country is going to a bad place. No matter which of the major candidates wins, it will be somebody who is about to march resolutely off in the wrong direction.

[Incidentally, find another excellent article at Reason on the bailout hogwallow here.]
Added later: Well today Congress basically nationalized a portion of the financial industry, at your expense. It was, as someone said at the Mises Blog, a day that ought to live in infamy. Except that what is more likely to happen is that when it turns out there is no "credit famine" the proponents will say, "See, it worked!" And when the depression spreads and deepens and we lost $700 billion before it fairly got started, they'll say, "Well it wasn't supposed to prevent a depression, only solve the credit famine. Now we need to nationalize the so-and-so industry." One state intervention always leads to others, each seen as needed to fix the unintended consequences of the previous one. ... Well, at least the stock market rallied because we finally did what it wanted. What? It didn't? Well, now, that's a kick in the head.

Wednesday, October 01, 2008

166 Economists: No to Bailout

A week ago, one hundred sixty six economists*, including three Nobel laureates and many at distinguished institutions, sent a letter to Congress insisting that Congress not bail out troubled financial institutions. With few exceptions, the MSM have more or less ignored it. (Economists! What would they know about this?)

They gave three reasons to sink the plan. It's hard to be sure whether the Senate version has all three features objected to, because the Senate is keeping their plan a secret until they are ready to spring it on us. (So much for transparency!) But I suspect strongly that it does have all three. Here are their objections:
1) Its fairness. The plan is a subsidy to investors at taxpayers’ expense. Investors who took risks to earn profits must also bear the losses. Not every business failure carries systemic risk. The government can ensure a well-functioning financial industry, able to make new loans to creditworthy borrowers, without bailing out particular investors and institutions whose choices proved unwise.

2) Its ambiguity. Neither the mission of the new agency nor its oversight are clear. If taxpayers are to buy illiquid and opaque assets from troubled sellers, the terms, occasions, and methods of such purchases must be crystal clear ahead of time and carefully monitored afterwards.

3) Its long-term effects. If the plan is enacted, its effects will be with us for a generation. For all their recent troubles, America's dynamic and innovative private capital markets have brought the nation unparalleled prosperity. Fundamentally weakening those markets in order to calm short-run disruptions is desperately short-sighted.

For these reasons we ask Congress not to rush, to hold appropriate hearings, and to carefully consider the right course of action, and to wisely determine the future of the financial industry and the U.S. economy for years to come
Note, especially, the part about appropriate hearings. The only hearings I have heard about that have happened so far consisted of Paulson and Bernanke telling the Senate Banking Committee why their bailout plan is a great idea. These 166 people are the sorts voices that have not been heard in this process. Congress is acting as if this were the first one hundred days of the New Deal, when their predecessors enacted unprecedented measures to deal with a national emergency that had already dragged on for three years. It is nothing of the sort. They are also acting as if a deep economic problem is merely a political one, like the size of the Pentagon's budget, to be solved entirely by politicians. It is not.

I urge you to email your Senators immediately and beg them to vote no and hold hearings, public hearings on this issue, which will affect your children and grandchildren in potentially very serious ways. [Added later: For the obvious reasons, I am now changing this to a plea that you write to your Representative. Come November, I hope you will use this handy list of the Senators and how they voted. I am very happy to report that one of "my" Senators, maverick Democrat Russ Feingold, voted no. ]
* Ann in the comments section points out that the number of signers has now risen to around 230.
Added later: It's Wednesday evening, waiting for the Senate vote, and I see that the Senate version of the bailout bill contains an extra one hundred billion dollars worth of "Christmas tree" items -- including items having to do with wool production, wind power, and mental health. These are all "sweeteners," added to make the package more attractive to members of Congress. In other words, in order to entice Congress to take $700,000,000,000 from us to reward people for making bad decisions, they are being offered, as an incentive, an opportunity to take another $100,000,000,000 from us to support their pet causes or give to their friends.