Archive for the ‘economics’ Category

Atlas did not shrug

Tuesday, August 24th, 2010

The cathedral has pursued a policy of compromising with and absorbing competing elites – thus it both allowed the big banks to capture the regulators (resulting in financial crisis, but consolidating the elite’s power over ordinary Americans) and allowed the Soviet Union to infiltrate the US government (thus causing wars and communist victories, but consolidating the elite’s power over ordinary Americans).

As Dusk tells us:

look at how much regulation the banking industry came under during the 1990s and 2000s to serve the interests of social justice by giving out more mortgages to poor and Non-Asian Minority home-buyers. Rather than bankers individually growing weary and ultimately withdrawing from their calling, they as collective corporations dove into coerced self-sacrifice headfirst and for years swam around in big bucks. And if somehow the pool’s drain opened up, someone else would keep them afloat – I mean, people aren’t just going to let saints go under for serving the cause of social justice, right?

Researchers, inventors, and artists too resent having to comply with state regulations such as meeting affirmative action targets – e.g., when appealing to the government for grant money, having to detail how some expensive piece of equipment will be used in equal measure by men and women, as well as by whites / Asians and NAMs. Or having to detail how some community arts outreach project will target all demographic groups equally, if a financially strapped arts group wants state funding for it. Nevertheless, as annoyed as they may be, on the whole the members of these professions are not in revolt, do not even give off the smell of stewing in resentment, and don’t suffer from the high burn-out rates that Rand would’ve predicted.

What Rand fundamentally miscalculated was the ability of inventors, businessmen, etc. to not just slip out of their regulatory fetters but to then form them into lashes with which to whip their competitors, a phenomenon known as “regulatory capture.”

Anti anti communism, the repudiation of McCarthyism, is the same phenomenon: We now know that McCarthy was correct, but politically inconvenient.

McCarthy named Fred Fisher on television as a hostile communist infiltrator within the American government – as indeed he was.

Let us not assassinate this lad further, Senator. You’ve done enough. Have you no sense of decency, sir? At long last, have you left no sense of decency?

Fred Fisher never denied being a communist. No one has ever said he was not a communist He was a member of the National Lawyers Guild, which we knew then to be a communist front organization, and subsequent intercepts has confirmed to be a communist front organization – therefore, a hostile infiltrator, sabotaging the US government from within.

The reason communist infiltration was tolerated and encouraged was that the Cathedral perceived itself to be using the Soviet Union, rather than being used by the Soviet Union.

Similarly, the Cathedral likes to import Muslims precisely because of their anti western attitudes.

To say that it was outrageous to criticize Fisher,was to say it was outrageous to worry about hostile people
exercising power in sensitive positions within the US government.

On the evidence revealed in the Venona intercepts, there is compelling evidence that the Lawyers Guild was a communist front organization.

The evidence presented by the House Unamerican activities committee also seem to me to be quite convincing, but someone might reasonably disagree – the evidence could plausibly be interpreted as evidence of anti anti communism, rather than evidence of communism, plus evidence that the benevolent and helpful soviet union
was benevolently assisting the benevolent and helpful Lawyer’s guild to engage in helpful benevolence.

And that is precisely why anti communism came to be demonized – because the Lawyer’s guild, with the direct and substantial support and assistance of the Soviet Union, was in fact assisting the Cathedral in its war against ordinary Americans, and was not directly assisting the Soviet Union in its efforts to conquer the world – so the Cathedral quite reasonably and realistically perceived themselves as using Stalin, rather than being used by Stalin.

The Lawyer’s guild were doing what the Cathedral perceived as good – at the instigation and with the assistance of Stalin and the Soviet Union, and were not obviously doing anything the Cathedral might perceive as bad, like arranging for the Soviet army to shoot Cathedral members and bury them.

Thus the Cathedral could plausibly view the Lawyer’s guild as the Cathedral infiltrating and manipulating the communists, rather than the communists infiltrating and manipulating the Cathedral.

The activities of the Lawyer’s guild are evidence that the Cathedral was soft on communism and allowed themselves to be infiltrated. It is also evidence that the Cathedral strategy of being nice and doing favors was working, that infiltration was a two way street.

Remember when Khrushchev said “we will bury you” they immediately proceeded to reinterpret him as proposing a
relatively peaceful takeover that leaves the existing cathedral in place as Soviet apparatchicks, rather than shipping them off the gulag – revealing what they really wanted and hoped for.

They hoped for and expected the kind of Soviet takeover that was the implied backstory of those “Startrek the Next Generation” episodes created before the fall of the Soviet Union – though I am pretty sure the Soviet Union had a very different kind of takeover in mind, intended to deal with the Cathedral with hot lead and shovels, rather than giving Cathedral members cushy jobs as Soviet Apparatchiks.

The Cathedral realistically believed that communists could and would promote their ideal of a greater, more powerful, and more benevolent state, just as they realistically believe that Muslim voters will vote for more government. They were unrealistic in believing that the Russians shared progressivism or could be persuaded to share it.

They realistically hope to use the enemies of America against their American enemies, and unrealistically hope to convert the enemies of America to progressivism.

It is even less realistic to suppose that Muslims will be converted to progressivism, but observe the strident response of progressives when we ridicule this delusion:  “Raaaaacist!

The Cathedral sets a very high value on being reasonable and nice and civilized. I recall that when a warmist scientist addressed skeptical scientists, he urged them that if they took a more conciliatory position they would have “more influence” I don’t remember his exact words, and they matter little because the message was primarily in the way his body language commented upon his words, the unspoken but gestured message being “accept a lot of warmist beliefs, and warmists will accept a little of skeptic beliefs, and we will see to it that you get grants.”

And thus, contrary to what was predicted in “Atlas Shrugs”, scientists have come on board with the Cathedral and abandoned science, rather than retreating to Galt’s Gulch.

A similar tendency towards shear niceness was evident in the financial collapse. It was quite unthinkable that financiers who has pissed away billions of their clients money in nice behavior, should thereby become unemployed, or even have their wealth and power seriously diminished, or even have their control over other people’s money diminished, or be asked to make any substantial changes in the way they managed other people’s money. And so the bankers are not heading off to Galt’s Gulch either.

The Cathedral, though quick to accuse its American enemies of being extreme, uncompromising, and violent, is paralytically incapable of dealing with enemies that actually are extreme, uncompromising, and violent. It likes to ally with them against its American enemies, but even absent that inclination and strategy, is just generally incompetent and incapable at dealing with them, so in desperation ascribes its own niceness and willingness to compromise, to them.

Its tendency to compromise, to distribute power in tiny little bite sized chunks, means that stuff just does not get done – as for example, the fact that the buildings damaged and destroyed in 9/11 are still damaged and destroyed nine years later.

To repair or replace any of these buildings, needs a hundred approvals from a hundred Brahmins, which no normal American businessman is ever going receive for anything (hence our European levels of unemployment).  Islamists, however, can achieve it, because of their ability and willingness to apply negative incentives to roadblock bureaucrats. Being nice to each of one hundred Brahmins, good members of the establishment, unfortunately precludes being nice to one businessmen. When, however, the businessman is a dangerously non nice Muslim, such obstacles can be readily overcome.

The Cathedral approach to coalition building means it has no ready answer to those that spit upon its coalition and murder its members, other to welcome them inside, as it welcomed Ward Churchill inside.

Anti anti communism was not necessarily crazy, since they perceived themselves to be using Stalin to make war on evil Americans, even though Stalin thought he was using them, but the mortgage disaster, which is still under way, was definitely crazy, dismantling technological civilization to avoid possible slight warming is seriously crazy, and the Muslim takeover of Europe is really seriously crazy.

Treasury committed to supporting too big to fail

Monday, August 23rd, 2010

Government lacks the will to allow to big to fail firms to fail, and the will and competence to regulate them. If a firm is too big to fail, it will take advantage of that fact, leading to crisis and massive tax payer losses.

Intefluidity reports that Treasury is not willing to deal with this problem.
Interfluidity tells us:

I believe these policymakers conflate, in full sincerity, incumbent financial institutions with “the system”, “the economy”, and “ordinary Americans”.

Ultimately, this “minimalist” approach to managing the GSEs amounts to nothing more or less than keeping the existing system and proposing that it be better regulated, including specific regulatory suggestions that are foreseeably unlikely to withstand industry pressure. No offense to its very smart proponent, but this was a non-idea dressed up as reform.

Large, complex, leveraged and interconnected financial firms simply cannot be regulated, by the private or public sector. Without regulation they quite rationally maximize stakeholder wealth in a manner that happens to be socially and economically destructive. The only way around this is to change the incentives of all stakeholders, and that could only happen by placing them in a different kind of firm. We have to limit the size and composition of firms’ creditor base, so we can be sure losses to creditors would be socially and politically tolerable. (We do this already, or try to, with hedge funds.)

Seventy percent taxes coming eventually.

Sunday, August 15th, 2010

In Greece, payroll tax, value added tax, and income tax adds up to around seventy percent.  It is perfectly clear that this is far above the Laffer limit – the private sector in Greece is largely underground and not quite cash, like a third world country.  If someone is employed by the state he pays taxes on his income because employed by the state, but does not actually do any work, because employed by the state.  If someone is not employed by the state, he usually finds a way to make a living that does not exactly involve taxable income as such, so he seldom actually does any taxable work.

But the Cathedral is not much affected by contact with reality.  Dylan Matthews took a survey of  the elite, to ask them where the Laffer curve maxed, and all of them that were among our masters answered 69% or 70%, or refused to answer. Such a high value is improbable, but what is really improbable is such perfect agreement on such an uncertain number. You cannot get perfect agreement on anything unless it is official Cathedral doctrine. And if a high Laffer maximum is Cathedral doctrine, then actions that would be insane unless you believe in a high Laffer maximum are the Cathedral program

The cost of government

Thursday, August 12th, 2010

Fleischer explains why he is not hiring. He must spend $74,000 to provide Sally with an $59,000 salary, of which after tax she gets $44,000 plus $12,000 in benefits. Plus he faces large uncertainty that these costs may be arbitrarily and unpredictably increased.

The recent substantial increases in the cost of employing people have not been reflected in substantial reductions in people’s wages, thus wages are substantially above market clearing levels.  The Fed could, I suppose, inflate their way out of this problem, using inflation to sneak the real value of wages down, thus causing employment to recover.  Government could then point out that the bloated capitalists are increasing their oppression of the victimized proletarians, and use that as justification to make employing people even more expensive.  Never let a good crisis go to waste.

Rush Limbaugh – smarter than ten thousand ecology PhDs

Sunday, August 8th, 2010

Back when BP’s oil was spouting into the gulf of Mexico, Rush told us:

“The beach will fix itself”

“More oil spilled every year in Africa, in Nigeria, than so far in the Gulf, so it’s not unique. It’s not exceptional. It’s not the largest. Mexico had a spill that larger than this, nobody talks about except apparently me”

And behold:  The beach has fixed itself.

The reason that BP was drilling there in the first place is that giant oil plumes occur naturally from time to time in that location– not as big as this one, but comparable. There is an entire ancient oil eating ecology naturally present in the gulf

This supposed crisis is akin to the supposedly horrifying crisis of the radioactive boy scout – any man made radiation is deemed ten gazillion times worse than naturally occurring sources of radiation, and any man released oil is deemed ten gazillion times worse than naturally occurring sources of oil.

Just as the soil is full of living creatures things that turn dead leaves into compost, the Gulf of Mexico is full of living creatures that turn oil into asphalt. The asphalt sinks to the bottom, and eventually gets buried in mud. It appears that sea creatures ate most of the released oil, and cleanup crews collected only a tiny portion. No doubt it was rough on those sea creatures that cannot eat oil, which all the cute charismatic creatures from seagulls to crabs cannot, but nature is rough whether humans meddle or not.

And while the cute charismatic creatures had a hard time for a while, now the oil is gone.

Palin Power

Thursday, August 5th, 2010

According to polls, Palin’s Support for a Candidate Doesn’t Matter or Is Mostly Negative, yet we observe that  in practice that when Palin endorses a candidate that is way behind, that candidate shoots up in the polls, and quite often wins.

There are several possible explanations of this

  1. People tend to give politically correct replies to polls, rather than what they genuinely believe.
  2. Republican party activists do what Palin tells them to do, and republican party voters do what republican party activists tell them to do.
  3. A nobody cannot beat a somebody. Get Palin’s endorsement, you are no longer a nobody, you are a serious candidate, the one to beat.

I suspect all of these explanations are true.

If you are not at the government’s table, you are on the government’s menu

Tuesday, July 20th, 2010

Vox Populi:

While the economic value of anything depends on sellers and buyers agreeing on that value as civil equals in the absence of force, modern government is about nothing if not tampering with civil equality. By endowing some in society with power to force others to sell cheaper than they would, and forcing others yet to buy at higher prices — even to buy in the first place — modern government makes valuable some things that are not, and devalues others that are. Thus if you are not among the favored guests at the table where officials make detailed lists of who is to receive what at whose expense, you are on the menu.

The revolving door:

This is an administration that almost employs more Goldman Sachs officials in financial and regulatory positions than Goldman Sachs itself does.  One of the first acts of Interior Secretary Ken Salazar was to hire a BP executive to serve as a deputy administrator for land and minerals management.  And now they’ve just hired to implement the new healthcare law someone who was just recently in charge of the lobbying and government activities of the nation’s largest private insurer.

If someone genuinely opposed big business, he would opposed all government regulation and all taxes.

The ruling class

Sunday, July 18th, 2010

Roissy links to an insightful article on the growing divide between rulers and ruled

Never has there been so little diversity within America’s upper crust. Always, in America as elsewhere, some people have been wealthier and more powerful than others. But until our own time America’s upper crust was a mixture of people who had gained prominence in a variety of ways, who drew their money and status from different sources and were not predictably of one mind on any given matter. The Boston Brahmins, the New York financiers, the land barons of California, Texas, and Florida, the industrialists of Pittsburgh, the Southern aristocracy, and the hardscrabble politicians who made it big in Chicago or Memphis had little contact with one another. Few had much contact with government, and “bureaucrat” was a dirty word for all. So was “social engineering.” Nor had the schools and universities that formed yesterday’s upper crust imposed a single orthodoxy about the origins of man, about American history, and about how America should be governed. All that has changed.

Today’s ruling class, from Boston to San Diego, was formed by an educational system that exposed them to the same ideas and gave them remarkably uniform guidance, as well as tastes and habits. These amount to a social canon of judgments about good and evil, complete with secular sacred history, sins (against minorities and the environment), and saints. Using the right words and avoiding the wrong ones when referring to such matters – speaking the “in” language – serves as a badge of identity. Regardless of what business or profession they are in, their road up included government channels and government money because, as government has grown, its boundary with the rest of American life has become indistinct. Many began their careers in government and leveraged their way into the private sector. Some, e.g., Secretary of the Treasury Timothy Geithner, never held a non-government job. Hence whether formally in government, out of it, or halfway, America’s ruling class speaks the language and has the tastes, habits, and tools of bureaucrats.

It is in the nature of government to grow, and so it swallows up everything. The parasite eventually destroys the host. Government has seized upon a multitude of justifications, the most recent justification being the welfare state, the coming justification being saving the earth. Insolvency approaches. Trees do not grow to the sky. That which cannot continue, will stop.

The left is astroturf, it is the voice of the state. But we have already reached the point where persuading people to vote for more government, or interpreting their vote as a vote for more government no matter how they vote has become ineffectual, depriving the left of any reason for existence, depriving democracy itself of the reason for its existence.

Real GDP growth

Monday, July 12th, 2010

GDP is an ill defined quantity, for it counts cars produced, official credit ratings produced, and regulators producing regulation.  With the best will in the world, it is hard to say how it is changing, and lately we have been seeing some pretty bad will.  Attempting to calculate GDP is worse than adding apples to oranges, it is adding apples to moonbeams.

Supposedly GDP is growing, and growing fast – despite the fact that everyone is feeling poorer, and private sector jobs are declining.  An amazing productivity increase, largely reflecting amazing productivity improvements by government and quasi governmental employees.

So let us look for a different measure:  Taxable retail sales.  Which are stagnant or down.  Population keeps growing, but they are buying less stuff, in part because they are being taxed more.

Financial Reform

Thursday, July 8th, 2010

TheMoneyIllusion nicely summarizes the financial reform legislation

I can’t see how it addressed ANY of the major causes of the 2008 fiasco. But easily the most inexcusable aspect of the bill was that it didn’t even address Fannie and Freddie. People excuse that on the basis that there is a lot of political support for F&F. But if you can’t reform them right after a $165 billion taxpayer bailout, when will they be unpopular enough that we can address their flaws? …

And no ban on sub-prime mortgages? I thought that was the cause of the crisis.

He misses, however, the biggest failure of the financial reform legislation – that the NRSROs are still in business, rather than in jail.

The government has decided to not reform the NRSROs – because any reform, we are quite truthfully told, would put them out of business.

In other words, their business is completely dependent on corruption and gross improprieties that have cost the taxpayer a trillion, possibly trillions.

Indeed, the regulations that Lawrence White complains about look very much as if they were passed to keep the NRSROs in
business.

As Lawrence White tells us (from behind a paywall):

By means of the high ratings that they awarded to subprime mortgage-backed bonds, the three major rating agencies—Moody’s, Standard & Poor’s, and Fitch—played a central role in the current financial crisis. Without these ratings, it is doubtful that subprime mortgages would have been issued in such huge amounts, since a major reason for the subprime lending boom was investor demand for high-rated bonds—much of it generated by regulations that made such bonds mandatory for large institutional investors. And it is even less likely that such bonds would have become concentrated on the balance sheets of the banks, for which they were rewarded by capital regulations that tilted toward high-rated securities. Why, then, were the agencies excessively optimistic in their ratings of subprime mortgage-backed securities? A combination of their fee structure, the complexity of the bonds that they were rating, insufficient historical data, some carelessness, and market pressures proved to be a potent brew. This combination was enabled, however, by seven decades of financial regulation that, beginning in the 1930s, had conferred the force of law upon these agencies’ judgments about the creditworthiness of bonds and that, since 1975, had protected the three agencies from competition.