Doc Zero explains the perverse incentives that make collapse inevitable.
Americans are already bailing out Greece, so will be bailing out California. Add the unfunded state liabilities to the unfunded federal liability, there is no way the Federal government can make good on its debts. We are not just up for the federal deficit. We are up for the Greek and Californian deficit.
People are starting to realize wonder where all the money was pissed away to. The answer, of course, is that most of it was pissed away on affirmative action loans to members of protected minorities. Whose fault is this?
Steve Sailer blames primarily Karl Rove and George Bush
There is much truth in this, but I would primarily blame Basel II.
Under Basel II, what matters to a financial institution is not whether its assets are safely invested, but whether they are officially declared to be safely invested. The people in charge of deciding what is officially safe have no incentive to make their estimates accurate, but powerful incentives to make their estimates politically correct.
Don’t take a knife to a gunfight.
Israel is blockading Gaza. Activists attempted to force the blockade with pathetically inadequate weapons. Perhaps the intent was to suffer some pathetic casualties, that they could then whine about, or perhaps they were just stupid.
If you are going to engage soldiers and marines, you should either take no weapons at all other than moral force, which may not be all that effective, but will not get you killed, or else weapons capable of doing some good. Hamas tried weapons that should have been capable of doing some good, but the Israeli Defense Forces proved otherwise. This leaves moral force only. If you take a knife to a gunfight, as these activists did, the appropriate response is to laugh at them and piss on their graves.
Only the future is certain. The past is always changing.
The Congo was the poster child for the dreadful evils of colonialism. We were supposed to look at how cruelly the Belgians treat the poor natives, look at how many natives colonialism has murdered to maintain its savage rule. In 1961, it got independence. The whites fled rape and murder. Two or three weeks after independence, the Congo became a savage hell hole, and has remained that way ever since, Zimbabwe in fast forward. The whites fled the Congo faster than they have fled Zimbabwe, so the descent into savagery was faster. Yet now, the outcome of decolonization has been forgotten, and the Congo is back to being the poster child of the evils of colonialism, and we repeat the same disaster over and over again: Haiti foreshadowed the Congo, the Congo foreshadowed Zimbabwe and South Africa.
Until the Soviets collapsed, 99% of Academia enthusiastically agreed that the Soviet Union’s command economy was growing much faster than the US’s old fashioned semi market economy, and the remaining 1% agreed that it was growing at least as fast – or at least that is what they said when anyone was listening. Since the general consensus outside of Academia was that the Soviet Union was a festering economic basket case whose central plan existed only on paper, collapsing into disorderly pillage in actual practice, one wonders what happened to any academic inclined to say that the Soviet Union was a festering economic basket case, whose plans and statistics were utterly disconnected from the chaotic and destructive reality.
Before 1972, every historian of science agreed that Darwin’s big idea was natural selection, and those of them that addressed the issue of Lamarck and common descent agreed that Lamarck proposed common descent.
Natural selection, however tends to lead to disturbing thoughts and disturbing words, for example “Once the superiority of races with a prevailing aversion to incest had been established by their survival …” Superior races! Oh the horror, the horror. Natural selection suggests endangered species have it coming to them, that women are not naturally equal to men, that genocide is, if regrettable, nonetheless natural and in the long run frequently inevitable, and lots of similarly horrifying stuff like that, and I have left out the really shocking stuff to avoid offending the readers too much. So it was progressively de-emphasized to students in the textbooks. But if you de-emphasize natural selection, this leaves a mysterious gap. What was Darwin famous for?
So in 1972, history was corrected, Winston Smith style. Darwin got common descent to fill the gap left by the de-emphasis of natural selection, just as Winston Smith invented comrade Ogilvy to replace the vaporized unperson Comrade Withers, and common descent was taken away from Lamarck. The textbook “Biology today” page 638
… in the Origin of Species. The central claim of that book can be fairly simply stated. According to the Darwinian theory, any natural group of similar species-all the mammal species, for instance-owe their common mammalian characteristics to a common descent from a single ancestral mammalian species.
And as for Lamarck, he got the shaft. Page 641
Lamarck’s theory is not a hypothesis of common descent, which ascribes the common characteristics of a particular species to their common descent from a single species. … He claims that … although all mammals are descended from reptiles, they are not descended from the same reptiles
Somehow, after 1972, no one in Academia was able to mention that before 1972 everyone thought that Lamarckism is the doctrine “that all plants and animals are descended from a common primitive form of life.” (Century Cyclopedia)
Just as one wonders what happened to academics before 1980 who were inclined to doubt the great success of central planning, one wonders what happens to academics after 1972 who remember that before 1972, the history of science was different.
We have always been at war with Eastasia
Someone in Academia received an order like that given to Comrade Winston Smith, and all of Academia fell into line, and remains in line to this day, a thousand megaphones attached to one microphone.
The reporting of Big Brother’s Order for the Day in The Times of December 3rd 1983 is extremely unsatisfactory and makes references to non-existent persons. Rewrite it in full and submit your draft to higher authority before filing.
…
… Withers, however, was already an unperson. He did not exist: he had never existed. …
… To-day he should commemorate Comrade Ogilvy. It was true that there was no such person as Comrade Ogilvy, but a few lines of print and a couple of faked photographs would soon bring him into existence.
But has everything goes to hell in a handbasket, it will all be blamed on free markets, despite what Brutally Honest calls “change some continue to believe in”.
The fundamental political strategy is that the more moochers, the more votes there will be for mooching.
With these tactics, Obama should be able to win in 2012 And 2016, and …
Of course, winning by such tactics may well result in a victory as useless as that which Patrice Lumumba won when the Congo became independent. Two or three weeks after independence, the government of the Congo had largely vanished from underneath Premier Patrice Lumumba, even though parliament continued to meet and vote him ever greater powers and additional titles for several months.
Proposed reforms, both left and right, are unlikely to have any effect on the continuing massive misappropriation from the financial system. It is absurd that people are discussing obscure details of the credit swap market.
To fix the financial crisis, we have to revoke, or at least denounce and denigrate, Marie Curie’s Nobel prize.
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. Each lie required a new and bigger lie. We need to start by acknowledging that genders and races tend to have different abilities – that if you are looking for people that are the best at something, whether the fastest runners or the greatest mathematicians, they will almost all be of one particular race and gender, and some races will be completely absent, and if you are merely looking for people that are acceptably good at something, for example accountants, basketball players, or donut makers, they will be mostly of one particular race and gender.
We cannot end the crisis unless we admit who is defaulting on their mortgages, we cannot admit who is defaulting without admitting that they cannot perform their jobs either, we cannot admit they cannot perform their jobs without admitting that their degrees are phony, and we cannot admit their degrees are phony without admitting that many Nobel prizes, starting with Marie Curie, were phony.
After the collapse of socialism, the elite support free enterprise – they support it the way they support free speech.
If anyone is allowed to disagree with the orthodoxy taught at Yale and Harvard, or even doubt it, this endangers the free speech of people from Harvard and Yale, and similarly if any enterprise run by people from Harvard or Yale could go bust, this endangers the free enterprise of people from Harvard and Yale.
Basel II is tens of thousands of pages of regulations, no one knows how vast it is, because not all the regulations can be found in any one place, but it could all be replaced by two simple rules: Politically correct victim groups shall always find it easy to borrow money, regardless of their ability or intention to pay it back, and politically well connected businesses shall always make money, regardless of whether they are competently run or not.
The seeds of the crisis were the CRA and the ratings agencies. I have discussed the CRA at length, but the CRA would have been resisted had it not been for other changes in the system that insulated the players against the consequences of making bad loans. These changes, guaranteeing that badly run businesses would succeed, started with the bailout of the ratings agencies in the seventies, forty years ago.
Back then, the ratings agencies were in trouble, because they had made a lot of bad calls. It seemed that whenever an institution was going under, the guys at the credit rating agencies were the last to know about it. Back then, they sold their assessments of credit risk to subscribers. So no one wanted to subscribe.
So in the seventies, the regulators stepped in to make people use the credit rating services. In 1975 the SEC created the Nationally Recognized Statistical Rating Organization (NRSRO) designation. Credit rating agencies so designated received what was in effect a grant of governmental power. The SEC then relied on the NRSRO’s credit risk assessment in establishing capital requirements on SEC-regulated financial institutions – which meant that for SEC-regulated financial institutions to borrow and lend, they had to get rated. A cascade of regulatory decisions followed over the years, each decision forcing more and more reliance on the risk assessments issued by these demonstrably incompetent institutions – and less and less reliance on other people’s risk assessment. For more and more organizations, it became illegal for them to make their own judgments about risk.
By the 1990s, as Levine and Partnoy tell us, the NRSROs were not selling assessments of credit risks, but licenses to issue securities. The rating agencies did not genuinely assess risk, nor did anyone really expect them to. Nor could repeatedly demonstrated incompetence reduce demand for their services, so the ratings agencies had no incentive to provide correct credit ratings. Since their income was entirely dependent on the state granting them power, they did, however, have an incentive to make politically correct credit ratings. If you lend to the poor, the oppressed, etc, and you are run by good old boys from Yale and Harvard, and you make donations to the right politicians, the NRSROs have a very powerful incentive to give you a good credit rating. And if you have a good credit rating, you can borrow as much as you like – and if you go bust, the government will bail you out.
Badly run companies that had been empowered to borrow as much as they pleased got in trouble – and were bailed out for the same reasons as they had been empowered to borrow as much as they pleased.
In addition to corruptly favorably rating the politically correct, the NRSROs corruptly favorably rated those who simply gave them money, which is perhaps what those who complain about “deregulation” have in mind. The banks creating structured financial products would first pay the rating agencies for “guidance” on how to package the securities to get high ratings and then pay the rating agencies to rate the resultant products – a glaring conflict of interest, though one less apt to lead to bailouts when the proverbial hits the fan.
Now since all this dirty dealing has cost the taxpayer trillions, you may well ask what measures have been taken to punish the NRSROs for bad conduct, or give them incentives for better conduct in future, or indeed restrain them from continuing to do this stuff?
All the strengthened regulation is regulation to make people continue to treat NRSRO ratings as true, even though it has become horrifyingly apparent that the ratings are generally false. All the strengthened regulation is more of what caused this mess in the first place. Any real reform would necessarily start by abolishing the legal privilege of NRSROs, would have to start by rolling back regulations to what they were in 1974. Instead, compulsion and bailouts are being applied to make NRSRO ratings true, or to enable people to continue pretend that they are true. Their power has been increased, their misconduct unpunished, and their incentives have become even worse.
Whenever one sees supposedly insurrectionary leftism, one usually detects a government official sponsoring it, as for example in the recent suppression of US flags on Cinco de Mayo.
Observe the recent firebombings in the Greek riots, where the “rioters” murdered three people.
Here are a couple of videos of the “rioters” firebombing police.
The “rioters” charge the police, and bang on their shields with light sticks, making no attempt to jab through the gaps at the actual bodies of the cops, nor using sticks heavy enough to even shake the shields. No axe handles or baseball bats.
Hey guys, if you want to bang on armored cops, I have a sledgehammer that would make a pretty good mace. It goes through concrete mighty fast.
They then fall back, and hurl firebombs – but they do not hurl firebombs at the police, but at the ground in front of the police. One cop gets one of his boots splashed with burning petrol. He rolls around, and a couple of other cops put him out. In the second video, same scene shot from a different angle, we observe that the cops make not the slightest attempt to arrest the firebombers for attempted murder, and the rest of the mob for assault and as accessories to attempted murder. It is all theater. When they see that one of the firebombs has actually hit, the theater pauses.
When right wing militia listens politely to an FBI provocateur at a meeting proposing that they bomb someone, they all go to jail for plotting crimes. The “rioters” firebomb a cop, and everyone acts like it is an unfortunate accident – which of course is exactly what it is.
The “rioters” in the Greek riots are government employees put on the streets by government sponsored unions that are themselves as much part of the government as the police were – and predictably, in a supposed riot supposedly between police and government employees, the only people actually murdered were neither police nor government employees.
Mandel points out that there is something mighty funny about official US economic statistics.