The Great Compression and Its Aftermath

Paul Krugman referred to the period between 1930 and 1980 as the Great Compression, referring to a flattening of the incomes from the very rich and the very poor of the Gilded Age and the growing income inequality from the Reagan era onward.

In “the Conscience of a Liberal” he credits this compression to FDR’ New Deal and its higher taxes on the wealthy and on the rise of unions in the American workplace.
He further notes that the higher wages and benefits had no negative consequence for the auto and steel industries. While that seems foolish in light of GM and Chrysler being bankrupts wards of the government it is correct for the period between 1930 and 1980.

But that economic environment was also very different. The stock market crash like our recent collapse brought the rich down much faster and further than the poor. And while the unions were able to bargain better conditions and wages they were bolstered by the wartime demand stimulation and more so because all of American industry’s overseas competition was destroyed by the war.

The growth of global completion changed everything as we tended to import low wage jobs and export high wage jobs, increasing the wage spread. The growth of the technology sector added to the spread.

Like the Crash of 1929 we are seeing a replay of a flattening of incomes but it should not be compared to a period stimulated by war and protected by the destruction of its trading partners.

There has been outrageous bonuses and pay on the high end, but the market will likely correct it without government interference.

Higher taxes and union pressure should not be expected to yield the same result as it did in very different time. Without the protections enjoyed during the Great Compression it would have just been call a longer Greater Depression.

Heebs of the Revolution

Our trip to Cuba was sponsored by the United Jewish Communities as an outreach to the Jewish community there. We visited three congregations in Havana and a small community in Santa Clara, about a four hour ride from Havana.

There are about 1500 Jews in Cuba. Before the Revolution there were closer to 15,000. Many left when the getting was good between 1959 and 1965. Because of Castro’s compression of incomes many professionals departed until the brain drain caused such a problem that Castro called a halt to emigration. Many more Jews were assimilated into the ultimate of western egalitarian societies.

The first Jews probably landed in Cuba during the initial European explorations. Some moved to Cuba during our colonial phase to manage sugar cane fields and other enterprises. But the majority of the Jews ended up in Cuba leaving Europe and Russia before World War II.

There were restrictions on Jews coming into the United States, and the British kept immigration to Palestine very low to appease Arab terrorists in their mandate. Havana became an immigrant hotel for those hoping to get to America later. Havana, before the revolution, was a spectacular city, the Paris of the Caribbean. Only Buenos Aires compared. It was nice enough to stay.

The underbelly of Cuba before Castro was that while industrious it was also corrupt and many of the poor in the countryside were terribly neglected for the lucrative franchises in Havana. Organized crime was welcomed as were large corporations as long as they stuffed the dictator’s coffers. You may recall the scenes in the Godfather II as Michael Corleone struggled with his indecision to invest in Havana with fellow gangster Hyman Rothstein (the character was modeled after Meyer Lansky, a Polish born Jew). Corleone left just ahead of the advancing coup with his money intact. The overthrown dictator Batista, escaped with all the cash he could carry, one estimate was $300 million, and lived the rest of his life off the coast of Spain
But liberation is far from synonymous with liberty and Cuba merely exchanged one dictator for another, even if it was one with a drastically different social and political view.

We saw no signs of anti-Semitism and this was emphasized by several community leaders including one who spoke of Castro’s visit to their congregation with pride. During the rise of the Cuban Utopian Revolution the Communist Party frowned on all religion, and it was hard to rise far if in the party if you openly expressed your faith of any sort. But the Cuban revolution lasted initially only because of the Russian largess and support in search of a base so close to their number one enemy.
During the early 1990’s, Russia pulled their financial support from the Cubans and it caused tremendous hardship on the island. Maybe coincidentally (maybe not) Castro and the party at that time relaxed their stance on religious affiliation and even created a ministry of religious affairs. Perhaps since he could not give them prosperity, he elected to give them religion, the “opiate of the masses”. Religious observance started a rebirth.

With help from the American Jews and others, the Jews in Cuba starting searching for those who had Jewish connections and synagogues started to attract observers. We went to small Jewish cemeteries in Havana and Santa Clara and they both had Holocaust memorials which were small (like a monument) but beautiful and shown with a great sense of pride. The cemeteries were being repaired and were carefully manicured.

An Israeli entrepreneur has partnered with the government to develop orange groves, and it furnishes much of the orange juice served on the island, for tourists like us and a few others than can afford it.

The Jews in Cuba face the same problems as anyone else on the large island. The Communist utopia turned the Paris of the Caribbean to a third world country. Average income is $15 a month, but the state provides health care, education, housing and transportation for free to everyone. The magnificent buildings are commonly in terrible decay, except for public buildings like government offices and museums.
Cuba is a common tourist spot for Canadians and Europeans and sports beaches on the north part of the island. It seems foreign to us because of the embargo, yet it is only 90 miles away. They do not have a free press and there are few news outlets, but there are art galleries- Castro is a big supporter of the arts and art school is also free. I can only assume that most of their knowledge of Americans and world affairs comes from interaction with the tourists and government propaganda.

Yet what strikes any Jew visiting a synagogue in a foreign country is the nearly identical Hebrew prayers and even the melodies to chant them. It’s the same in Mexico, Australia, China, Europe, Africa and … Cuba as it is in Israel. There have been changes but the services would likely be recognizable with prayers in Israel over a thousand years ago. Conversations are peppered with Yiddish expressions that could be heard in any Jewish family gathering.

The Roman enforced Diaspora scattered Jews all over the world to squelch repeated attempts at revolution against the Roman Empire. It is an historical oddity that for 2,000 years the Diaspora would so still define the homeland that Moses led them to after he came down from Mt. Sinai and….

… started a revolution.

New Location for Rebel Yid

I have moved - to continue viewing posts of Rebel Yid go here.

Thanks for reading.

Understandable Vandalism

At the Kroger gas station there is the little machine attached to the pump that dispenses engine additives as an upsale to your gasoline purchase. As you go about your normal fueling the machine introduces itself with the annoying four notes and then the irritating digital voice tries to sell you the various products that will get better gas mileage and extend the life of your car.

At the bottom right of the machine is a button that you can push to stop the message in the event you just want to pump gas in peace and quiet. I have noticed that the button to shut up the message has been damaged beyond use on most of the machines I encounter; like someone has stabbed it with a knife or a pen.

I am assuming that this act of vandalism is triggered by the annoying intrusion of the message, and the refusal of the machine to shut up immediately when the consumer pushes the button to end the message. One friend avoids these pumps because he finds them so annoying.

I don’t encourage vandalism but I certainly understand it in this case.

Nassim Taleb on The Best Way to Deleverage

I have been a fan of Nassim Taleb since I read "Fooled by Randomness". I remember stumbling in it the bookstore at Columbia University in New York. I quickly grabbed his most noted book, "The Black Swan" which continued his philosophy of human behavior and our poor understanding of risk and statistics. His warning of the fragility of our financial system was prescient.

On MSNBC (read and view the interview here) Taleb recommended that the banks convert mortgage loans to partial equity in an effort to drastically deleverage the economy, which he sees and our main problem and very little is being done to address.

I thought it was a great idea. It helps the homeowner get a fresh start. The most debt is not in the Wall Street firms but in mortgage debt to the consumers. Instead of bailing out failing organizations we could reduce crippling bank debt and help consumers at the same time.

Taleb is a great intellect with an uncommon depth on the subject. He may a bit of a hard read for some and many consider him too far out of mainstream to be credible, but look where mainstream thinking got us. I found him insightful and claryfing.

If you are not inclined to read such material for fun, check out his many interviews on YouTube.

Tips to Douglass Ott.

The Twitter World

I have been blogging for two years and well over a thousand entries. I started Twittering as a means of expanding the number of readers and as an accessory to the blog. I use Twitter to share articles and sources with other readers and gain access to material others send. It has become and extension of my blog.

It seemed initially that you would follow someone who seemed to have an interest that would mesh with your estimated reader profile and then hope that they would reciprocate and then follow you. Then if you actually posted something worthwhile they would forward it around and then you would pick up even more followers.

Twitter is one of those things that if you try to figure it out beforehand you will never do it.

I loaded up a few quotes I collect on a Twitter timing device called Tweetlater. One of the quotes struck a small nerve and was retweeted by several readers (they copied my tweet and sent it the people on their list. The quote was from Edward Murrow, “A nation of sheep will beget a government of wolves.”)

A mother of soldiers in Israel liked the tweet especially in light of the recent Yom Hashoah holocaust memorial. I sent her a copy of one of my original blogs “The Three Most Important Points to Understand about the Holocaust”. It was also an article published in the local newspaper a few years ago.

She complimented the article forwarded it and another Jewish Blogger/ Twitterer in Jerusalem who forwarded it to a Jewish guy in Anchorage, Alaska who also forwarded it with his praises.
The point of this story is trying to understand how these new social networks changes things. The right wingers post their right wing stuff, and the left wing posts their left wing stuff, and somewhere in there are people who just think for themselves and share interesting perspectives and common interests.

But in the course of a few hours I was able to share a perspective with fellow yids and non yids from Anchorage to Jerusalem.

I am not sure what the total significance of this is but I realize it is amazing. The entire internet universe is a virtual magazine with thousands of people with similar interests editing and sending articles and blogs to people with similar interests. The consumers produce and forward content.
The walls between producers and consumers of content are gone.

A different post on the Zayela episode in Honduras is picked up by Twitterers there and pictures and opinions are relayed back as I now quickly connect with eye witnesses and opinion first hand. I now have Facebook postings from new 'friends' in Honduras as a result, though I now need to brush up on my spanish.

The Lost Party ?

The Republican Party is most assuredly going through an identity struggle, and the pundits obfuscate the issues by speaking in only the most general terms. The controversy within the party is whether it should become more conservative, faulting moderation for its losses, or whether to become more “centrist”, adapting its message for the new demographics and polls.

It is fine to call for free markets, but that does not mean unregulated markets, and their message must contain a realistic measure of freedom and oversight. Financial institutions central to our well being should no more be totally unrestricted than our civil institutions. Even our most precious freedoms do have limits. Every town has courts and jails.

The party could start with an honest discussion of foreign policy- what has worked and what has not. Realism is a good word to bring to bear. We must address the relationship between a profligate economy and our place in the world. It is time for Johnny to cut up his credit cards and live within his means.

It is time to realize that promised benefits must be paid for. Sacrifice is sellable if it is shared.

It is time to realize that America’s strength is in its ideas, not wealth nor military power. It is not coincidence that America has originated so many inventions that have been a source of wealth and power. But our ideas did not originate here because of the soil and water content. We struggle to provide better and better safety nets without destroying the human power that has created our nation.

But the Republican Party’s message of freedom must be consistent. We can not ask our soldiers to die for the freedoms of others and then refuse to sell them liquor on Sundays.

It will be harder to justify some choice but not others. Individual freedom means allowing others to make choices that you may not approve of. The tent must be widened to include pro choice and pro life candidates, acknowledging the legitimate concerns of each. Republicans suffer from disparate groups who each have a litmus test.

Democrats have their divisions but they generally disappear for a few weeks in early November.

The perfect is the enemy of the good and suicide is a poor growth strategy.

Yet .....

All who wander are not lost.

Are We As Smart as We Think We Are

In a very thoughtful reply to a Rebelyid posting about how intellectuals and academics miss seemingly obvious points that ordinary people with common sense seem to readily get, Roy Fickling sent this Marylin Savant math problem.

I have to confess that it took, some thought even after seeing her correct answer to understand why she was right.

I guess the point is that some things are not as obviously right as we may think they are.

from Roy's e-mail. See if you get it.

The question is this: Monty Hall gives you three doors to chose from. Behind one of the three is a bright shiny new car. You chose door #1. Monty opens door #3, which is empty. He give you the choice: do you want to change to door #2, or stay with your first choice?

The question posed to Marilyn was, “should I change my answer?” Marilyn’s response was “of course, change to door #2. Your chances of winning will double if you switch doors.”

Marilyn was publically berated by hundreds of mathematicians and academics. They said that even a grade school math student knows that your chances go from 1/3 to 1/2 when one door is opened. The debate even made it to the front page of the New York Times. Marilyn stood fast and wouldn’t budge. It wasn’t until the results of thousands of experiments and hundreds of computer simulations were revealed that the” math geniuses” finally capitulated. The problem was that the foundations of their training were flawed. Although Marilyn had no formal training in mathematics, she did poses the highest IQ ever scored.

Just for grins, the explanation is as follows:

There are two scenarios on the first guess. There is the right answer scenario (1 in 3 chance) and the wrong answer scenario (2 in 3 chance). The odds of a successful outcome are the same at the first guess, i.e., 1/3 that you get a car, or said differently, 2/3 chance you will get encyclopedias.
Now, Monty Hall opens one of the doors that he for a fact knows contains no car.

If you chose correctly the first time (the right answer scenario) and switch your answer, there is a 100% probability that you will lose. If you chose wrong the first time (the wrong answer scenario) and switch your answer, there is a 100% chance that you will win. Since the chances that you chose wrong in the first place are still 2/3 and the chances that you chose right in the first place are still 1/3, you are twice as likely to be driving away in a shiny new car if you switch your answer.

To see it more clearly, use larger numbers. Say there were 100 doors. Your chances of choosing correctly are 1/100. Then, Monty hall opens all but 2 doors, including the one you chose. The chances are still 1/100 that you initially chose correctly and 99/100 that you chose incorrectly. So, the chances are 99/100 that the car is behind the remaining door that you didn’t initially chose. Switch your answer.

Economic Demorilization

Larry Kudlow in National Review

July 10, 2009 4:49 PM

The Road to Economic Demoralization
Washington is going the wrong way.

read the whole article here.

excerpts

And China has no capital-gains tax. It only has a 15-to-20 percent corporate tax. The U.S., on the other hand, is raising its cap-gains tax rate to 20 percent.

Fortune magazine recently reported that the number of U.S. companies in the world’s top 500 fell to the lowest level ever, while more Chinese firms than ever made the list. Thirty-seven Chinese companies now rank in the top 500, including nine new entries. Meanwhile, the number of U.S. firms has fallen to 140, the lowest total since Fortune began the list in 1995.

our 40 percent corporate tax rate is already almost 15 percentage points higher than the corporate rates in most of Europe.

Here’s the clincher: Year-to-date, Dow Jones stocks are off 8 percent, while China stocks are up 71 percent. The world index is up 4 percent. Emerging markets are up 25 percent. They’re all beating us. None of this is good.

The Missing Ingredient for the Economy

A friend involved in investment market research believes the stock market is bullish for several reasons one of them being the overwhelming bearish market sentiment. Experienced investors understand that bottoms happen when sellers are exhausted and when bears rule the roost. Tops happen when everyone is bullish- usually.

This time may be different and he was curious what I see on the street. My business is down severely both in unit volume and the margin contribution per unit. This means I am selling less and making less money on everything I sell. I have laid off some workers, ceased matching 401k contributions, frozen wages, reduced uncritical property insurance, changed carriers for cost reductions, and looked at other cost reductions. I would consider this a successful year if I could break even.

From conversations I am the rule and not the exception. This means that the taxes I bitched about paying last year will not be paid this year. It is clear from the street that tax revenues will drop sharply.

Because of the mass of uncertainty we have no plans for expansion, equipment purchases including rolling stock such as vehicles. We keep inventory low which kills output at the steel mills that serve us. Most are running at less than 50% capacity. It also kills rail traffic which transport industrial commodities.
I am more likely to lay off 5 people than I am to hire one. Almost a fourth of corporations have instituted across the board wage cuts. In my 30 years in the business world I have never seen this.

Fewer people will be working and they will be making less.

There is much money sloshing around from money supply growth and the stimulus but people do not invest and risk because money is cheap, they invest because they expect to get a commensurate return and nothing kills the incentive to invest like uncertainty. And there is little certainty in this administration’s policies.

No one knows how this stimulus bill will affect their future interest rates, their inventory requirements, and the return on their investments. If the card check bill comes to pass small business people who are able will shut down and move to the beach; not for calculation of real costs but for fear of losing their autonomy that drove them to open their own business.

And this cap and trade has every business wondering how it will affect their product and costs. How will it affect trade if the same ‘carbon reduction goals’ are forced on other nations who sell to us? Will it cause a trade and affect their exports? Should we delay buying trucks until we know the impact of cap and trade on their fuel costs?

Obama’s ambitious and expensive programs enacted in a severely wounded economy has most business people frozen and I see very little in the future ready to thaw their fear. The mere discussion of these issues is enough to stall employment and investment decisions.

I would not be surprised to see a short uptick in auto sales as the fleets age, and some may be motivated by a combination of low current prices and the possibility of avoiding higher prices later as cap and trade policies raise the future prices. With low returns on cash such a decision is even less costly.

But if this is the only buying motivation it will not last. We will drive less and buy less.

There is some uptick in scrap metal prices and this is usually bullish, but we could be at a ‘dead cat bounce’ that will soon exhaust itself.

We have seen signals in the past that indicated that a bottom was in, but this time we are seeing these signals in the midst of the most dramatic change in the structure of our economy every undertaken.

There is plenty of cash floating around (over 3 trillion in money market funds) out there but if it is going to be spent and invested, we will need confidence the future is sound. That is sorely missing from Obama’s economic policy.

US Foreign Debt

Obama's Czars

1. AIDS Czar: Jeffrey Crowley
2. Bailout Czar: Herbert Allison Jr.
3. Border Czar: Alan Bersin
4. Car Czar: Steve Rattner
5. Counterterrorism Czar: John Brennan
6. Cyber-Security Czar: Melissa Hathaway
7. Drug Czar: Gil Kerlikowske
8. Economic Czar: Larry Summers
9. Deputy Economic Czar: Paul Volcker
10. Energy Czar: Carol Browner
11. Green Jobs Czar: Van Jones
12. Guantanamo Closure Czar: Daniel Fried
13. Health Czar: Nancy-Ann DeParle
14. Info-Tech Czar: Vivek Kundra:
15. Intelligence Czar: Dennis Blair
16. Regulatory Czar: Cass Sunstein
17. Religion Czar or Faith-Based Czar: Joshua DuBois
18. Science Czar: John Holdren
19. Stimulus Oversight Czar: Earl Devaney
20. Trade Czar: Ron Kirk
21. Urban Affairs Czar: Adolfo Carrion
22. Weapons of Mass Destruction Czar: Gary Samore


Appointed, not subject to confirmation hearings, unaccountable, yet wielding immense power.

Transparency

Chavez's Tyranny Drives Away Venezuela's Future

In the recent Newsweek Mac Margolis notes the brain drain in Venezuela.

Venezuela's Brain Drain

read the whole article here.

Excerpts:

And now after a decade of the so-called Bolivarian revolution, tens of thousands of disillusioned Venezuelan professionals have had enough. Artists, lawyers, physicians, managers and engineers are leaving the country by droves, while those already abroad are scrapping plans to return. The wealthiest among them are buying condos in Miami and Panama City. Cashiered oil engineers are working rigs in the North Sea and sifting the tar sands of western Canada. Those of European descent have applied for passports from their native lands. Academic scholarships are lifeboats. An estimated million Venezuelans have moved abroad in the decade since Chávez took power.

HKO comment- Once realization of Castro's oppression was clear Cuba experienced the same talent drain and never recovered. No amount of oil or resources will overcome the loss of your most talented and productive citizens.

You may rob Peter to pay Paul and get Paul's approval, but count on Peter leaving town.

A "Climate Change" Time Line

The earth's overall temperature in the last several years has either remained steady or slightly decreased -- depending on which side of the issue is interpreting the data. No one is maintaining that the world is getting warmer and warmer every single year, which was the initial prediction.[i]

Nevertheless, the current administration is risking America's economic future on "green" energy in an effort to solve an unproven crisis. The cap and trade legislation is moving ahead in spite of the fact that the United States is already one of the leading nations in curtailing CO₂ output.

from American Thinker

June 24, 2009

After Global Warming
by Larrey Anderson
see whole article here.

A Republic vs a Democracy

Pilmer on Climate Change

Read Article here

Self Reliance is a Matter of Choice

We are in the middle of a deflating credit bubble. Easy money in the form of easy credit created a condition where neither individuals and families nor government policy makers had to make choices. With enough credit you could have the new kitchen with the marble counters, the more expensive car, and the vacation, without sacrificing the darlings’ college fund.... which you could still get someone else to pay for if you were lucky enough to live in a state like Georgia with a lottery to secure your children’s future.

The government could fight an expensive war, fund unnecessary and expensive subsidies for farmers, pay for an expensive prescription drug benefit, and still ignore the ballooning liabilities of Social Security and Medicare. And this was with the Republicans in office.

We all have to say no to worthwhile choices we can not afford. Politician or parent, we make choices. We can accomplish just about anything, but we can not accomplish everything – at least not at once.

This "have it all" perversion in our culture has permeated our homes and our seats of government. When you reach the point where you are borrowing on one credit card to pay off the debts of another, you pretty much know the game is nearly over.

We have to return to the point where we live within our means. Growth in the money supply that outstrips our growth in productivity is not sustainable. It is considered sane for a short period to soften the blow from shocks such as 9/11 or the current meltdown, but if we are unable to make choices then there will seem to be an endless sequence of urgencies that will prevent us ever getting back on track.

At a time when we need to be borrowing less, both at home and in DC, our solution seems to be to encourage even more credit and borrowing. We are criticizing banks for not lending more money when that was the crux of our problem to begin with. We are now speaking loudly and publicly to get better terms for credit cards. During her campaign Hillary Clinton argued for directing the March 2008 stimulus payment to the poor people because they would spend it, whereas the wealthier citizens would just ‘save’ it or reduce debt.

Well that is largely the reason so many of them are poor to begin with.

But here are a few hard truths about debt.

When you are in debt your life is not your own. You are working to pay financial institutions for your house, your cars, and your business. In business half the game is just staying in the game. In a world filled with random and largely unpredictable events too much debt at the wrong time can take you out of the game just when opportunities to acquire assets and business on the cheap are the greatest.

Debt is addictive. Our whole economy is based on credit and deflating this credit bubble will have serious consequences and may even delay recovery. Yet attempts to reinflate this credit balloon will only shift the pain into future years, and make it worse then. But the inability to take our medicine now will only increase the dosage later, if medicine is even an option.

Economic observers have noted that “nobody wants sound money.” Sound money is a by-product of living within your means which requires those annoying choices that adults used to be required to make.

‘Living within our means’ is the modern expression of the self reliance that used to be a universal American value before being a community organizer became a qualification to be president, and before it took a village to run a household.

I never see ‘community interests’ used as a motive for fiscal prudence; it is more commonly used to justify more expenses that we can not afford. It becomes another reason not to have to make choices.

John Kennedy’s most memorable words were “Ask not what your country can do for you, but what you can do for your country.”

Forty Five years later the best thing you can do is to live within your means and then require that your elected leaders do the same.

Balls!

Nobody is greater than the RULE of LAW. Someone has to communicate this to Mr. Obama. You must remember, the president is just a citizen of his or her country. Here’s the Communiqué concerning the ousting of president Zelaya from the Honduran congress, this explains it all. This is the main reason why Constitutions are written, they protect the citizens from their elected president.

His sign reads: “We don’t have oil. We don’t have dollars. But we have balls!”

Tips to Lester Cohen

Hate Crime Laws - Explained

Reagan and Obama's Deficits

Kevin Hassert at Bloomberg

California’s Nightmare Will Kill Obamanomics

read the whole article here:

excerpt-

The Obama administration has no shame, and is willing to abandon reason altogether to achieve its short-term political goals. Ronald Reagan ran up big deficits in part because he believed that his tax cuts would produce economic growth, and ultimately pay for themselves. He may well have been excessively optimistic about the merits of tax cuts, but at least he had a story.

Obama has no story. Nobody believes that his unprecedented expansion of the welfare state will lead to enough economic growth. Nobody believes that it will pay for itself. Everyone understands that higher spending today begets higher spending tomorrow. That means that his economic strategy simply doesn’t add up.

Musings on the Celebrity of Jackson and Palin

I thought a lot of Michael Jackson’s musical contribution. His talent was not thwarted in my mind by his lifestyle and accusations, real or otherwise, against him. He was stellar and I understand putting him in a category with Elvis and Diana. Yet I do not understand the obsession with celebrity to an almost religious importance. Perhaps I just answered my own question.

There is a different kind of obsession with Sarah Palin. Personally I do not think she was presidential timber and her duration on the stage may have been one of those political hiccups soon forgotten. Time will tell. But the obsession against her by the wicked tongues of the likes of Maureen Dowd and so many others seems obsessed with trite and the joy of cynicism. Eric Hoffer noted “It is easier to hate an enemy with much good in them than one who is all bad.” He also suggested that some movements need a belief in a devil more than a belief in a god.

But the other obsession with Palin was from her supporters and she served an even more valuable purpose for them. For a brief moment she showed a regular person could have a voice and it gave many a hope that I do not believe those who vetted her expected. To her followers Palin was real in a way none of the other candidates were, not only despite her faults and problems, but because of them. The political wall gets higher by the day and each side seems to have less understanding of the other.

The leader we need can bridge that wall.

Waiting for the Doctor

Catching up With History

In an article in the Washington Post Economist Robert Samuelson postulates why the economists missed forecasting the enormous crash we are in.

Samuelson draws three conclusions:

1. It was not political bias. It was missed by liberal and conservative economists, Democrats as well as Republicans.

2. Modern economics focuses too much on theories about transactions of goods and services and pays relatively little attention to financial markets, which was the decisive factor in this crash.

3. The biggest blunder may have been ignoring history.


Read the entire article (brief) here.

Economists Out to Lunch
by Robert Samuelson
July 6, 2009


Excerpt:

History is messy and constantly changing, as Ferguson reminds us. It flows from institutions, technologies, laws, cultural and religious values, governments, popular beliefs, and much more. Model-building and theorizing can sometimes simplify the real world in ways that provide insights. But often, the models' assumptions depart so radically from reality that the conclusions become useless. Someone who studies history becomes humble in the face of the ceaseless changes and capricious mixing of motives.

Economists thought they had solved the problem of economic stability. Their tools sufficed to prevent widespread economic collapse, even if they couldn't control every twist in the business cycle. This conceit may have once been true. No more. Markets became more complex; more money crossed national borders; people became complacent. History moved on, but economists didn't.

Fifty Reasons to Stop Waxman-Markey

This is one of the best and certainly most complete critiques of the Cap and Trade bill you will find. It can not be distributed enough. Send it to your elected officials.

from National Review

A Garden of Piggish Delights
Waxman-Markey is part power-grab, part enviro-fantasy. Here are 50 reasons to stop it.

By Stephen Spruiell & Kevin Williamson

read the entire article here

nothing less would do it justice

The Problem is the Solution

There are those who insist the government can manage health care better because the government does not have to make a profit.

Before addressing how small the profits of many corporations can be, and thus how irrelevant that point is; the bigger question is "does that justify government interference into any market for essential goods and services" ..... such as ...

food, energy, transportation....media

It is precisely the pursuit of profit that drives availability, quality and improvement. And if we remove the profit we will have .....

less availability, quality, and improvement.

There is much to admire in our health care system, and when arrogant bureaucrats meddle in complicated markets they tend to destroy the good while they fix the bad.

Much of what has driven health care costs higher are government mandated coverages, litigation (which Canada has limited) and the shifting of underpaid costs from government programs.

There are some changes that need to be made, but profit is not one of the problems. In fact it is one of the solutions.

Palin Helps Clear the Deck

I realize that a lot of readers are, or were, enthralled by the candidacy of Sarah Palin, but her resignation and probable removal from the potential Republican presidential hopefuls is probably a good thing for the party.

I was initially impressed with her presence, poise and he willingness to take action in her state- but it became quickly clear that a short stint as governor of Alaska was far short of the organizational and political savvy and experience needed to qualify for the highest office. Perhaps if she served in the Senate and expanded her experience for a decade beyond her state and our national borders she could be a contender. She spoke well but showed little depth beyond the talking points. Without a sound understanding of her beliefs, and having them tested beyond her state, she stands to easily get sidetracked when the gloves come off in a national debate on issues when every pundit is gunning for you. Katy Couric and David Letterman would seem like child’s play.

She may not be getting a fair shake in the press, but who does? This is an adult game and the big league. She even acknowledged in one of her more salient speeches that we must take the game as it is and not complain about the rules.

The party’s success depends on the middle third without strong party affiliation, and the ability to attract them is the key. Sure a lot of Republican loyalists love her but those votes are a given even if they should not be taken for granted.

The party needs a candidate who can communicate well, across party lines; is clear and decisive; shows depth and competence as well as popular appeal; and has a strong grasp of the principles and issues. Personally I think the party should return to a consistent focus on individual rights, and that includes putting religion back in the church where it belongs.

The party needs to reaffirm the commitment to freedom and capitalism, but with enough depth to understand their limits. Capitalism requires adult supervision. Ideology must be seasoned with reality.

The demise of Sanford and Palin should serve to start clearing the deck for a leader to emerge; and perhaps it is a name that is new to us. But the danger in either party is that the hard core committed pick a candidate that so appeals to their political tastes, but neglects to appeal to that middle third that must be persuaded. It seems clear that the radical changes being imposed on us are starting to crumble Obama and his party’s support from that essential non partisan middle third. The GOP only needs to offer something better.

That should be easy.

Intrade Unemployment

US Unemployment Rate in Dec 2009 to be greater than 10.00%

Betting on Intrade is that there is an 85.9% chance of unemployment hitting 10% in December of '09. Since we are already at 9.5% that seems like a pretty timid bet.

I would like to see the odds on the rate topping out at 12%.

The Tyranny of Moral Supremacy

From C.S. Lewis:

“Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive. It would be better to live under robber barons than under omnipotent moral busybodies. The robber baron’s cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.”

Honduras Twitters

I have been posting about the Honduras situation and how they have exercised their law and constitution and removed Mel Zayela for trying to hold an illegal referendum and defying the courts in order to acquire unlimited powers.

Yet Zayela is getting support from Chavez in Venezuela and our own President and Secretary of State. The UN has sided in his favor and the OAS is pressuring the government to reinstate him.

I have started receiving tweets from Twitterers in Honduras in response to some of my blogs and tweets. They are showing rallies AGAINST Zelaya, and resent the interference into their rule of law. One noted pro Zayela demonstrators from Nicaragua seemingly supported by Chavez. Unlike Iran their government is not restricting their access to media because they are free.

The productive are leaving Venezuela in droves and Cuba remains a third world country 50 years after Castro's 'liberation'.

Zayela wants to joint this realm of dictatorial thugs and Honduras is using the rule of law to stop the descent into totalitarianism that Venezuela and Cuba experienced.

We should be ashamed of our government that supports the ambitions of dictators over the rule of law and a legally elected government.

The Dangers of Articfial Currency Valuations

Blogger Doug Ott in 'Yes and Not Yes' notes in the annual report of Alleghany Insurance, their thought of the cause of the financial mess.

an excerpt

Over the following decade and a half, this currency policy contributed to stagnant U.S. household incomes (real median U.S. household income is lower today than it was in 1998), as U.S. labor could not compete with a massive, artificially priced Chinese labor pool due to the currency devaluation. The mechanism with which China (and other countries with pegged currencies) kept its currency artificially depressed was to recycle dollars into U.S. treasury securities and agency securities, thereby keeping U.S. interest rates artificially low, exporting deflation, and importing inflation. The prime beneficiary of this policy in the United States and other OECD (Organization for Economic Cooperation and Development) countries was the financial services industry, which took advantage of excessively easy money and low interest rates to fund credit expansion to middle class households, who sought to improve their standard of living despite stagnant incomes by borrowing to fund consumption.

see the whole excerpt and article here.

HKO comment- Greenspan also notice the impact foreign currency policy on our monetary and credit growth. There were many warnings about our failure to address the Chinese currency policy during the 1990's, but few probably saw the disastrous outcome. It is our inability to accept short term pain that ultimately leads to such large corrections.

Did Krugman Recommend a Housing Bubble in 2001?

I have been a critic of Paul Krugman after reading his book, "The Conscious of a Liberal". he just seems to belive that there is no government program that can ever get too big and no problem a government program can't solve. Hi s greatest praise for government is when it compresses income variations to his acceptable norm.

It was noted that he actually called for a credit induced housing boom in 2001. He has denied it but the Von Mises site (here) noted the following transcripts and dates- from an interview with Krugman

There is another interview with Lou Dobbs here with similar recommendations (may be part of the same archive).

August 14, 2001

http://www.pkarchive.org/column/81401.html

"Consumers, who already have low savings and high debt, probably can't contribute much. But housing, which is highly sensitive to interest rates, could help lead a recovery.... But there has been a peculiar disconnect between Fed policy and the financial variables that affect housing and trade. Housing demand depends on long-term rather than short-term interest rates -- and though the Fed has cut short rates from 6.5 to 3.75 percent since the beginning of the year, the 10-year rate is slightly higher than it was on Jan. 1.... Sooner or later, of course, investors will realize that 2001 isn't 1998. When they do, mortgage rates and the dollar will come way down, and the conditions for a recovery led by housing and exports will be in place.

October 7, 2001

http://www.pkarchive.org/economy/ML071801.html

"Post-terror nerves aside, what mainly ails the U.S. economy is too much of a good thing. During the bubble years businesses overspent on capital equipment; the resulting overhang of excess capacity is a drag on investment, and hence a drag on the economy as a whole.

In time this overhang will be worked off. Meanwhile, economic policy should encourage other spending to offset the temporary slump in business investment. Low interest rates, which promote spending on housing and other durable goods, are the main answer. But it seems inevitable that there will also be a fiscal stimulus package"

Dec 28, 2001

http://www.pkarchive.org/column/122801.html

"The good news about the U.S. economy is that it fell into recession, but it didn't fall off a cliff. Most of the credit probably goes to the dogged optimism of American consumers, but the Fed's dramatic interest rate cuts helped keep housing strong even as business investment plunged."

Furthermore in his own column in 2002 in the New York Times- read here

To fight this recession the Fed needs more than a snapback; it needs soaring household spending to offset moribund business investment. And to do that, as Paul McCulley of Pimco put it, Alan Greenspan needs to create a housing bubble to replace the Nasdaq bubble.

This does not seem to be out of context.

HKO comments- personally I believe that our big recessions are the result of not letting the market adjust to the small recessions. We expect our government, regardless of who is in power, to avoid any short term pain. It is like building taller buildings on weakening foundations.

tips to Ayn Rand Center

Obama Notes the Cost of Energy Efficiency

James Taranto notes in the Wall Street Journal

In his speech on "energy" yesterday, President Obama chose an especially odd example:

"In the late 1970s, the state of California enacted tougher energy-efficiency policies. Over the next three decades, those policies helped create almost 1.5 million jobs. And today, Californians consume 40 percent less energy per person than the national average--which, over time, has prevented the need to build at least 24 new power plants. Think about that. California--producing jobs, their economy keeping pace with the rest of the country, and yet they have been able to maintain their energy usage at a much lower level than the rest of the country."

We seem to remember hearing stories of "rolling blackouts" in California a few years ago. Today, with unemployment approaching 12%, California's economy is hardly "keeping pace," and the state's fiscal affairs are such a wreck that they almost give New Yorkers reason to feel good about their state's government.

further noted by James Taranto in the WSJ

Obama also claimed that California's paucity of power plants is evidence of its success. But California uses more electricity than it generates--some 53 terawatt-hours more in 2007, or just over 20% of total consumption, according to the federal Energy Information Administration--which means it has to import power from other states not subject to California's environmental restrictions.

Zelaya and Obama

Time to Re- examine Your Assumptions

Our Gangster Government

Contempt for the Rule of Law

I had not paid much attention to the reported ‘coup’ in Honduras, until I heard Neal Boortz summarize the situation, apparently based on the Wall Street Journal article by Mary Anastasia O’Grady, “Honduras Defends Its Democracy”. Read the whole article here.

In summary, President Mel Zelaya, wanted to amend the constitution of Honduras to allow him to be president for life as Hugo Chavez in Venezuela did. In Honduras this requires a referendum which only the Congress can authorize.

Manuel Zelaya attempted to hold the referendum without Congressional approval and the courts forbid it, refusing to allow the ballots to be printed. Zelaya had the ballots printed in Venezuela by his model totalitarian dictator Hugo Chavez and delivered to Honduras. The Supreme Court ruled the referendum unconstitutional, because …. it was, and ordered the military not to carry out the election as it normally would do in the country.

The attorney general announced he would prosecute anyone trying to carry out the election, and arrested Zelaya and exiled him to Costa Rica.

Zelaya tried to put aside the rule of law and seize lifetime control. The rule of law won. It was not a coup in any common sense of the word. Yes he was removed from office by the military, but it was at the order of the courts and the attorney general and congress for openly violating the law, and trying to ursurp power while there was legal election to be held just a few months away

The most disturbing aspect is that Obama and Hillary Clinton openly supported Zelaya, insisting that he was ousted by an illegal coup. They clearly have no respect for the rule of law.

It is no secret that I have opposed most of Obama’s policies. I think card check was a job killer and that Cap and Trade is the most destructive economic act ever for absolutely no improvement in the environment. I have been stunned at the size of the so called “stimulus” package, the interference into our bankruptcy laws in the case of GM and Chrysler, and the misguided aim of his health insurance reforms. I doubt any of the supporters for these ludicrous expansions of government have any realistic possible idea how they will be paid for it.

But for our President and Secretary of State to openly support an illegal attempt by a Latin dictator to openly trounce his country’s constitution in order to establish a totalitarian rule may be the most worrisome act of this administration’s brief period in office. It clearly shows their contempt for the rule of law in favor of the rule of man.

Even my most liberal friends should be deeply concerned.