The cause of the crisis

September 13th, 2010

One of a series of posts titled “the cause of the crisis”, each discussing a different cause, but each of these causes caused or was caused by each of the other causes:

When the universal franchise was introduced a hundred years ago, people said the system would go to hell.  Now it is going to hell.

Obviously a government cannot go on forever spending much more than it collects.  For a while printing money and borrowing money will work, but eventually, it is bound to lead to trouble, and big trouble is approaching fast.

Government inexorably and rapidly gets more expensive and more intrusive.  No doubt more taxes could be collected if they went after the politically well connected, but overall taxes are close to the Laffer maximum – if they raise taxes on those whom it is easy to raise taxes on, for example a tax on luxury yachts, they will get less money, not more money.

A tax on gas, beer, and cigarettes would work, but be unpopular with the electorate.  A tax on bankers, educationists, and lawyers would work, but would be unpopular with the well connected – and even such taxes would merely postpone the day of reckoning.  Government’s existing commitments are unsustainable with any politically realistic, or even politically unrealistic, tax rise.

The welfare state is simply running out of money.

There are two related problems:  Theocracy and democracy.  The masses are stupid, the elite is theocratic.

Because the elite is theocratic, they compete for power by each being holier than the other, that is to say, more politically correct than the other – but because their religion is this-worldly, they are required to have religious beliefs about this word rather than the next, thus each member of the elite competes to be further out of contact with reality than the other.

Because the masses are stupid, they succumb to politicians promising that the voters can vote themselves rich.

A hundred years ago, progressivism was a sect of Christianity with ambitions for theocracy and world conquest.  To better pursue these goals, it discarded theism, becoming theologically indistinguishable from universalist Unitarianism, thus evading the restraints imposed by the first amendment.

Consider, for example, the doctrine that men and women are equal – therefore the same and interchangeable:  Women, supposedly, can be firemen and soldiers.  Men, supposedly, can marry other men.

The modern progressive theory of equality is in fact a variant of Christianity.

Equality of men and women, and of the races, makes no common sense or biological sense. Men and women, for example, are biologically so different, that pretty much however you decide to measure them, chances are slim that they will prove to be equal.

When I discuss the matter with leftists, the main argument is some kind of skepticism with regard to efforts to measure people (which always end up demonstrating sexual and racial differences). For example, Gould is skeptical about IQ and race.

Roissy wonders why the elites are so stuck on the obviously false idea of literal equality.  Understood as a species of Christian belief, it makes sense, because the Christians believe that the most important part of the self is immaterial. If it’s immaterial, then material differences have nothing to do with it. So Christians are free to believe pretty much anything they want about this most important part of the self, unconstrained by material evidence of any sort. They are free to believe that deep inside everyone, there is a core, an essence, that is not the slightest diminished by bodily infirmity etc. etc. I.e., the soul.

The progressives jettison God, replacing God with, presumably, Nature. So “equality before God” becomes “equality before Nature”. That is, natural equality (of some unspecified sort). And this could be how the progressives manage to believe in some unspecified “natural” (biological or whatever) equality even though no evidence backs them up. Their belief is derived, not from evidence, but from the Christian heritage of progressivism. Their belief looks superficially like a scientific hypothesis because all the terms in it could be interpreted as referring to natural things, but it doesn’t really have any empirical content, because “equality”, while it could refer to something measurable, does not actually refer to anything measurable. Any attempt to measure something to test the claim of “equality” is attacked by progressives.

Progressives are using naturalistic-sounding words to talk about equality, but they are behaving as though it didn’t make any sense to try to measure it, which is how Christians would behave with respect to attempts to rigorously test equality before God. Their reaction would range from skepticism that it could be done, to the sense that it doesn’t even make sense to try, and finally to the certainty that it is heresy to even suggest such a thing and the person suggesting it is evil and possibly a sorcerer and should be burnt at the stake.

The progressive reaction to naturalistic attempts to assess equality is exactly the same as the Christian reaction would be.

The Christian view of equality is entirely impervious to empirical evidence, and so is the progressive view. It makes sense, then, to interpret progressives, when they talk about male and female equality, and about black and white equality, as really talking about the Christian soul, even though they themselves do not realize this is what they are doing because they have forgotten why they are going through these mental motions.

The explosive expansion of the state

September 10th, 2010

Government employment is increasing relative to private employment, but only moderately, not explosively, yet the deficit is exploding.  Part of this comes from what Doc Zero calls the remora economy. Private businesses attach themselves to the state, and the state attaches nominally private businesses to itself and commands them to serve its political objectives.

The private businesses make corrupt profits from their state connection, and the state creates costs that are nominally off budget, as for example, the health crisis and the recent financial crisis which was primarily a crisis of affirmative action loans. Government regulatory intervention in the economy is exploding, creating a multitude of invisible taxes, off budget expenditures, and opportunities for corrupt profits by semi private businesses, such Al Gore becoming a billionaire from carbon credits.

Rigging the vote

September 9th, 2010

Rigging the vote seems to me to be redundant, since even the tea party supports unsustainable welfare, affirmative action, social security, and healthcare programs, yet oddly, vote rigging is under way.  Pajamas reports vote rigging in Texas and around the US

When the only people with a chance of winning are lunatic left, crazy left, and demented left, why bother? I conjecture this is because the major function of government has become handing out the gravy to true believers. This leads to everyone believing more truly than the next guy, everyone trying to be twice as holy as everyone else, but it also leads to vicious battles between the insider true believers, and those they doubt believe truly enough. As more and more government is handouts to political factions, the stakes are higher, so electoral contests are starting to use any means necessary, for although the election makes only a minute difference in what policy the US will follow (observe, for example, that Obama has been pretty much indistinguishable from Bush) the election will make a huge difference in who gets the gravy.

The number of the beast

September 8th, 2010

And he causeth all, both small and great, rich and poor, free and bond, to receive a mark in their right hand, or in their foreheads:

And that no man might buy or sell, save he that had the mark, or the name of the beast, or the number of his name.

Greece Bans Cash Transactions Over 1,500 Euros

The Italian government will ban the use of cash in transactions over 5,000 euros, lowering the ceiling from 12,500 euros

In the UK a tax evasion crackdown on middle class professionals.

After mass democracy

September 7th, 2010

A couple of hundred years ago, the conventional wisdom was that democracy with broad voter participation was unstable, violent, ruinous, and short lived.

A hundred years or so ago the world moved to mass democracy, universal franchise.  Many people predicted that this would result in the masses trying to vote themselves rich, resulting in social and economic collapse

Well guess what.  The masses have been trying to vote themselves rich, social collapse is under way, and economic collapse looms.

The success stories of governance are Singapore, Hong Kong, China, and Botswana, which would suggest the future is not democratic.

Mass democracy is visibly self destructing.  In 2005 nearly half of births in California were on medi-cal, and the disappearance of statistics after 2005 suggests the situation is rapidly deteriorating, hence the present Californian meltdown.  The world of “the Marching Morons” is now.

Clearly this is unsustainable – Liverpool and Detroit represent the future of democracy – majority underclass. Detroit is the future of California, Liverpool the future of England if the Caliphate does not take England first.

I am hoping for anarcho capitalism, but a more likely outcome is military dictatorship evolving into monarchy, or gangs evolving into feudalism.

Mencius suggests an interesting form of futuristic government:  The sovereign corporation with cryptographic control over its weapons.  The vote of the board creates a cryptographic secret that gives the CEO control over the weapons of corporation’s security forces. If there is a coup by the armed forces against the CEO or the CEO against the board, the coupists weapons stop working.

Mencius’ proposal reflects the typical nerdly assumption that guns are all powerful. In practice, the way that power works is that the elite males settle things between themselves by means that are not overtly violent, and then the outsiders find they face a united, and violent front from the elite males. Once the elite males have agreed amongst themselves, the weapons are merely an afterthought, making the cryptographic locks irrelevant – which would suggest that if Kingship revives, it will have more resemblance to traditional kingship than to Mencius’s CEO.

Switzerland’s plebiscitary democracy is also an outstanding success, though it could be argued that this  mainly because it is sufficiently unwieldy to prevent the government from actually doing much, and therefore  prevents the government from vote buying in the fashion that led to the meltdowns in California and Detroit. Switzerland is a blast from the past.  The future is more likely to be China, though I think that anarcho capitalism, or the revival of feudalism are also possibilities.

The minimum necessary reforms are to stop the financial system leaking money, and put welfare on a sound basis – but only the most extreme elements of the tea party are proposing anything approaching this, and they are clearly far too extreme for the voters.  If reforms that would actually enable the system to survive were on the table, Christine O’Donnel would be unelectable left, not the unelectable right.

To put welfare and affirmative action a sound basis means imitating Singapore’s welfare, social security healthcare, and so forth.  Pigs will fly first.

Let us consider the seemingly more achievable problem of stopping the finance system from leaking money.  All bankers are criminals, for they were all party to the grossly improper loans that led to our present crisis.  Any honest banker was fired, because any honest banker got in the way of affirmative action and got run over.

To stop the system leaking money, have to fire crooked bankers, and replace them with honest bankers.  To replace them with honest bankers, have to end affirmative action lending.  That does not seem too hard.  After all 99% of the voters oppose affirmative action lending, and a clear and substantial majority oppose all affirmative action.  But it is hard.  We have affirmative action lending for a reason:  As I said before:

When they gave a Nobel prize to Marie Curie for being female, that did not hurt anyone except more deserving potential Nobel prize winners.   But handing out phony Nobels on the basis of sex, race, and nationality necessitated handing out phony degrees on the basis of race and sex, and handing out phony degrees on the basis of race and sex necessarily led to a crisis where these phony degrees were being ignored by employers, so employers necessarily had to be forced to give out well paid phony jobs on the basis of race and sex.   But being given well paid phony jobs on the basis of race and sex failed to result in recipients living a middle class lifestyle, so lenders had to be forced to give out a middle class lifestyle on the basis of race and sex.  Which has led to our present financial crisis.  It all began with Marie Curie.

So if you roll back the most unpopular, extreme, and disastrous form of affirmative action, you then immediately face a problem with less extreme and more popular forms.  And if you roll them back … All solutions are either radical or unworkable.  Roll back affirmative action loans, and pretty soon you are going to have to restrict the franchise, or bring affirmative action loans back.

The end is in sight

September 1st, 2010

For the last hundred years or so, people have been predicting that the welfare and affirmative action state would collapse eventually.

Well, it seems that “eventually” is getting close.  Arnold Kling has a list of links showing that all the welfare state social democracies are going to hell in a handbasket, with everyone else in even worse trouble than the US.

Arnold Kling predicts a US debt crisis between 2015 and 2035.  Public sector pensions are unpayable.

The welfare state has made a pile of promises it cannot fulfill, and like a debtor in trouble, has been rapidly escalating the promises.

When the president and the most prestigious academies are out of contact with reality, then the path to advancement is to deny reality.  As the housing debacle illustrates, the elite is incurably insane.  The process is self reinforcing – any contact with reality, or tendency to engage in reality testing, disqualifies you for membership of the  elite.  Only lowly contemptible insignificant people engage in reality testing, and as everyone knows, they are boobs and disgusting racists.

In beauty contests, the contestants are asked to demonstrate allegiance to progressivism, by asking them questions on which America is divided. They must side with the Cathedral, or else they lose.  Similarly in a job interview for any important position.  If an executive doubts the Cathedral, the company is likely to be sued for a “hostile work environment”, so a precondition for employment in any substantial corporation in any important position is sincere zeal for the holy faith of the Cathedral.

The tea party is not actually all that rightwing.  They are right wing in that they support the extreme left status quo ante and oppose the even more extreme left status quo.  They want to turn the clock back to Clinton, not 1950, but to save the day, would have to turn the clock back to 1900.

People planned on social security and medicare being there for them. They see the government blowing all the money on pork barrel spending and dud mortgages for non asian minorities, and they suspect that the welfare state on which they intended to rely is going broke fast.  They want to preserve the quite left wing status quo of the Clinton years.

Hence the progressive parody of the tea party: “get the government out of my medicare”.

Only the most extreme elements of the Tea Party movement leadership (Sharon Angle) actually propose to put social security on a sound footing, propose to make it a forced saving program, where you individually and personally own your social security trust fund, rather than a welfare program.

The welfare problem is a necessary result of the universal franchise.  Singapore, and only Singapore, has a non catastrophic solution to the welfare problem.  They were able to get away with a non catastrophic solution only because of the Singaporean/Confucian attitude that the rulers have the right to rule, provided things are going OK, which rewards long term orientation by politicians.

The stupidity of the voters, and the short term orientation of politicians means that a universal franchise guarantees social, economic, and political collapse once government becomes large enough to drag everything down with it.

The least radical solution that could actually work, could make the welfare state viable,  is to implement Singaporean style welfare, social security and healthcare, and to restrict the franchise enough that such a solution wins majority support from those few entitled to vote – which solution is a lot more radical than anyone in the tea party will advocate.

We can divide the major political programs into three:

  1. The ignorant and unthinking, who are the great majority, since there is no point in knowing this stuff or thinking about it.
  2. Those who doubt the expansion of the state can go on forever, and fear the end is nigh:  these are the tea partiers, who want to stop the boat right by the edge of the waterfall.
  3. Those who believe the state can expand forever, because state expenditures are so much more productive than mere private expenditures: these are the elite, to whom thinking like the state thinks is a badge of status, and who therefore confidently believe that going over the waterfall will be fine because the boat will fly like a bird without any need for external support.

The practical solution, of course, is to back the boat away from the waterfall – a long way back from the waterfall, but it is too fiscally late to do that without blowing off most of the state’s financial obligations, and politically impossible to do that without radically restricting the franchise. A program of recognizing bankruptcy, and throwing most of the population off the voting rolls is unlikely to be very popular.

Atlas did not shrug

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

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.

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

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.