Why the Credit Crisis Is the Government's Fault

Over at Reason TV American Enterprise Institute Fellow Peter Wallison lays out the genesis of our current financial crisis. It's about 25 minutes long but a very methodical presentation of the facts.

Some like to blame Wall Street greed for the meltdown. I'm not saying that there isn't blame to be assessed there too, but I can't help but observe that Wall Street's reaction is somewhat like the HAL 9000 computer in 2001: A Space Odyssey. It became irrational because it was instructed to do something fundamentally at odds with its programming. Banks were made to lend to borrowers whom their normal underwritng standards said they should not or be fined for doing so. They were placed in a no-win situation and the ways they tried to reconcile the two competing goals of prudent lending and complying with the Community Redeveloment Act (CRA) caused them to do increasingly irrational things. It's just one more example of how political interference in free markets, well intentioned or not, produces undesireable results.

Update: History of the HAL 9000. HAL was constructed for "the accurate processing of information without distortion or concealment". However, he was asked to conceal information from the Discovery crew and the only way he could reconcile the contradictory instruction was to kill the crew, therefore leaving no one to conceal anything from.

Mark Steyn Takes on Bailouts.....

... in his unerringly to the point but humorous style.

"General Motors now has a market valuation about a third of Bed, Bath & Beyond, and no one says your Swash 700 Elongated Biscuit Toilet Seat Bidet is too big to fail. GM has a market capitalization of about $2.4 billion. For purposes of comparison, Toyota's
market cap is $100 billion and change (the change being bigger than the whole of GM). General Motors, like the other two geezers of the Old Three, is a vast retirement home with a small money-losing auto subsidiary. The UAW is AARP in an Edsel: It has three times as many retirees and widows as "workers" (I use the term loosely). GM has 96,000 employees but provides health benefits to a million people."

President Bush seems to think that it would be a mistake to let the Big 3 file for Chapter 11. His decision to go ahead and bail them out anyway, despite it failing in the Congress, will probably prove to be a bigger one and will not actually bail them out at all. Go read it all of course.

Hey, Big 3, If You Let Government Get Into Bed With You, You'll Never Get It Out Again.

I'm holding back a little in the title of this post. I'm addressing it to the Big 3 automakers, now seeking alms from the taxpayer. What I mean to say is that if you let the government in your bed, you will get screwed (still a little more polite than the word I'm actually thinking of). Todd Zywycki has an op-ed in today's Wall Street Journal in which he get it exactly right about why the automakers should prefer Chapter 11 not government "help".

Those Washington politicians who repeat the mantra that "bankruptcy is not an option" probably do so because they want to use free taxpayer money to bribe Detroit into manufacturing the green cars favored by Nancy Pelosi and Harry Reid, rather than those cars American consumers want to buy. A Chapter 11 filing would remove these politicians' leverage, [my emphasis] thus explaining their desperation to avoid a bankruptcy.

I agree with this, except that I don't think it's going to be a bribe. It's going to be naked coercion. Once you get Harry and Nancy dictating the kinds of cars they'll build, Maxine Waters dictating which dealers they may or may not close, etc., it's only a matter of time before the Big 3 really do collapse entirely. The Big 3, at least GM and Chrysler, should file now, before they completely lose control of their destinies. Chapter 11 gives the companies the opportunity to come up with a reorganization plan first and if management is smart (not demonstrated thus far) they'll take this opportunity before it's too late.

The Republicans Can't Just Play the Game, They Need to Change the Game

I just received a phone call from the Republican National Committee, asking me for a donation of $300 so "we don't just hand the Whitehouse keys over to the Democrats." It seems to me the Republican Party has already done just that. It has proven itself to be just as corruptible and every bit as spend-thrift as the Democrats and I'm not giving them a dime until I am convinced that they've done the soul-searching necessary to re-learn what it is Republicans are supposed to be about and what the Republican rank and file want from them and then they've got to start acting like Republicans again.

We want you to get Government out of our lives wherever possible. The economic mess we are in now, whether it is the housing crisis, the credit crisis, the auto industry crisis, the health insurance crisis or the energy crisis, every single one of these has its roots in government (political) interference in free markets. Every regulation, every little tweak to the tax code designed to bring about some perceived social good, distorts the markets and causes people and businesses alike to make decisions that make no sense otherwise.

The problem I see with the way the Republicans operate is that they are trying to play a game with rules that someone else has set but are not obeying themselves. The Republicans are fighting according to Marquis of Queensbury rules while the Democrats are fighting with brass knuckles and knives. This has to stop. The Republicans need to stop letting the other side frame the debate and start standing up for what it knows to be right, unapologetically and ignoring the howls of feigned outrage from the other side. Stop backing down every time someone calls you names. Recognize that you're being played and don't engage with that tactic.

The Republicans can't win under the current rules of the game because the other side is controlling the rules. Therefore, it is necessary to change the game. For example, stop quibbling about the tax code and what is just the right marginal income tax rate and talking about who is "paying their fair share". To do that is to buy into the corrosive class warfare/wealth envy rhetoric the other side likes to use to keep the voters divided against one another. The income tax is basically immoral and should be scrapped altoghether. It is also large part of why we have such a hard time competing globally. Our corporate tax burden is the highest or second highest in the world. Quibbling about the details loses sight of the basic fact that the income tax is wrong and Republicans shouldn't be afraid to say so. Yes, I'm talking about enacting the FairTax. Taxing consumption rather than income is the only truly fair way to raise tax revenues and the boost it would give to our economy is definitely something we need right now and it furthers the aim of getting government out of our lives.

A Wake-Up Call on Job Losses

The American Thinker has an article up, penned by a small business owner who is about to permanently shutter his business and "go John Galt", and he's not shy about telling us why.

"Like many business owners, we are no longer willing to take all of the financial and legal risks and put up with all of the aggravation of owning and running a business. Not with the prospects of even higher taxes, more regulation, more litigation and more emboldened bureaucrats on the horizon. Like others we know, we are getting out while the getting is, well, tolerable. Many who aren't getting out are scaling back.......

Most of the kind of people who start and run businesses are by definition trying to opt out of depending on anyone else -- be it a large corporation or government -- for their welfare. We take on tremendous risks and responsibilities. We do so expecting a better than average return. Since we require nothing from government, most of us deeply resent and resist being pestered by government.

For nearly 30 years, I have been one of these business people. It was an amazing journey and literally involved blood, sweat and tears. But now I am done. This election screams that we are going to see a deterioration of the risk-reward equation and the ability to be left alone. Apparently, any appreciation of our crucial place in the economy is lost on over 50% of the voters as well as those they elected."

Read the whole thing.
(via Instapundit)

Vodkapundit Big 3 Bailout Ad

This ad poster says all that needs to be said. The best bailout package the big 3 automakers could have is a trip through Chapter 11. Tell your Senators and Congressional rep NO!

Market Meltdowns and the Wisdom of the Crowd

Instapundit ran across an interesting set of graphs from Intrade.com, the political futures market, the other day. They track the market's fall as Obama's politcal fortunes rose. It's an interesting analysis, wich concludes as follows:

"Call it a crisis of confidence. Call it a Fannie-inspired meltdown. Call it what you will, but the markets appear to have reacted to Obama's promises of economic "fairness", "spreading the wealth" and raising taxes on the job creators of society.

This thinly disguised form of class warfare, the policies of which many have termed socialism (fairly or unfairly), has had a definite impact on the markets.

The markets represent the ultimate collective intelligence engine on the planet.

The markets have spoken on the stated policies of Barack Obama.

Sorry, folks, there are no do-overs."

Thanksgiving Is Almost Here - It's Chestnut Soup Time

I posted the recipe for Chestnut Soup a couple of years back. It is my favorite soup. I always make this for Thanksgiving and often for Christmas dinner too. Well, it's that time of year again, so it's time to roast some chestnuts!

Evidence That "Gun-Free" Zones Actually Attract Killers

Cincinnati station WCPO reporter Brendan Keefe ran this story about gun free zones and their attractiveness to "active killers," e.g., the kind of killers that go into a place like a school or a post office and kill a number of people before ultimately turning their weapons on themselves. It seems they actually seek out these designated gun-free zones for their crimes because they are pretty much assured their victims will be defenseless.

The other statistic that emerged from a study of active killers is that they almost exclusively seek out "gun free" zones for their attacks.

In most states, concealed handguns are prohibited at schools and on college campuses even for those with permits.

Many malls and workplaces also place signs at their entrances prohibiting firearms on the premises.

Now tacticians believe the signs themselves may be an invitation to the active killers. The psychological profile of a mass murderer indicates he is looking to inflict the most casualties as quickly as possible.

Also, the data show most active killers have no intention of surviving the event.

They may select schools and shopping malls because of the large number of defenseless victims and the virtual guarantee no on the scene one is armed.

As soon as they're confronted by any [my emphasis] armed resistance, the shooters typically turn the gun on themselves.

Trying to protect people by designating a place as gun-free makes sure that the only people who don't have guns are the people who are law-abiding/rules following in the first place and is no deterrent at all to someone bent on mayhem.

A couple of the commenters chided the reporter for referring to his sources in generalities. In the comments he responds by naming his experts and providing links to his data sources.

(via Instapundit and Arms & the Law)

No Bailout for the Big 3

Powerline has a post this morning arguing against the bailout of the Big 3 auto makers that puts the issue in perspective. Giving them $25 billion would be throwing good money after bad. It's time for Chapter 11. Only if the auto makers can get rid of their crushing legacy costs will they have a chance to recover. A bailout will just delay the inevitable.

The Case for Global Warming Looks Shakier All the Time

Via Tim Blair we have this latest screw-up by NASA's James Hansen.

"This was startling. Across the world there were reports of unseasonal snow and plummeting temperatures last month, from the American Great Plains to China, and from the Alps to New Zealand. China's official news agency reported that Tibet had suffered its "worst snowstorm ever". In the US, the National Oceanic and Atmospheric Administration registered 63 local snowfall records and 115 lowest-ever temperatures for the month, and ranked it as only the 70th-warmest October in 114 years.

So what explained the anomaly? GISS's computerised temperature maps seemed to show readings across a large part of Russia had been up to 10 degrees higher than normal. But when expert readers of the two leading warming-sceptic blogs, Watts Up With That and Climate Audit, began detailed analysis of the GISS data they made an astonishing discovery. The reason for the freak figures was that scores of temperature records from Russia and elsewhere were not based on October readings at all. Figures from the previous month had simply been carried over and repeated two months running.

The error was so glaring that when it was reported on the two blogs - run by the US meteorologist Anthony Watts and Steve McIntyre, the Canadian computer analyst who won fame for his expert debunking of the notorious "hockey stick" graph - GISS began hastily revising its figures. This only made the confusion worse because, to compensate for the lowered temperatures in Russia, GISS claimed to have discovered a new "hotspot" in the Arctic - in a month when satellite images were showing Arctic sea-ice recovering so fast from its summer melt that three weeks ago it was 30 per cent more extensive than at the same time last year."

Mark Steyn Is Back

Mark Steyn had been on hiatus for a while but now appears to be back with his regular weekly column in the Orange County Register. This one is about the election, of course.

"While few electorates consciously choose to leap left, a couple more steps every election, and eventually societies reach a tipping point. In much of the West, it's government health care. It changes the relationship between state and citizen into something closer to pusher and junkie."

Need I say it? Read the whole thing.

Obama is the Wrong Choice

How much more evidence does anyone need?

This guy does not have America's interests at heart.

Why Incentives Matter

The Instapundit posted a link yesterday to an article in the Wall Street Journal about younger Japanese workers refusing promotions. It's a good article but the second update to Glenn's original post is what I find most interesting. A reader wrote:

"It's not just Japan. I work for one of the big 3 aerospace/defense companies at a Los Angeles area location, and though I wouldn't say it's nearly as evident as in Japan, young workers in our industry are asking the same questions. We have no hope of achieving the same standard of living as the droves of retiring Boomers and Silents, and the 2% raise differential afforded by a promotion simply isn't enough of an incentive to work 20-30% more hours a week.

If the industry paid overtime, or offered significant bonuses to rank and file employees (bonuses are only available to upper management), a lot of young engineers would respond enthusiastically. In fact, we've asked the company to do these things in recent employee forums. We'd all like to buy homes in the area and raise families here, but the older workers own all the real estate, and most of us assume that we'll give things a few years, but get out of the area once we need to settle down. It's simply too expensive to live in a metro area like L.A. Since the incentive structure doesn't offer us hope of achieving the same lifestyle as the older employees, we don't see much reason to devote our lives to these companies. As I said, the 2% differential doesn't make a whole lot of difference, so why bother with the extra stress?"

Having once lived in LA and later the San Francisco Bay area, I know exactly what he means. I could never have hoped to buy property in either of those areas for pretty much the same reason and when the time came to leave the area, I did so with mixed feelings. I was sad about leaving behind the friends my wife and I had made but also enormously relieved by the significant decrease in the cost of living, tax burden and all the other ways California has of nickel-and-diming one to death (and don't get me started on the rampant nanny-statist tendencies).

The other point the reader/commenter made was about the reasons for lack of loyalty to the company. I have only made significant improvements to my income by being willing to change employers (and to move where the jobs are). It's not that I disliked working for some of them but a matter of pragmatism. They were looking out primarily for their own self interest. I had to be responsible for looking out for mine. That's the way it should be. Waiting for the company, or the government to notice your income isn't keeping up with the cost of living, and then actually be willing to do something about it, is a recipe for a stagnant standard of living. You make your own "luck."

Fred Thompson Summarizes the Stakes in this Election

Fred was my first choice for the Republican nomination. Alas, it was not to be but he still has something to say about it:


I hope the rumors that he will be tapped to chair the RNC are true.

(Via Little Green Footballs)

Questions the Market Has Asked - And Answered

In today's Wall Street Journal, economist and retired business executive George Newman lays out the reasons the stock market is so weak.

"To state the obvious: The valuation of an individual stock reflects the collective expectation of investors about a company's future profits, dividends and appreciation, and the same is true of the market as a whole. These profits, in turn, are greatly influenced by government policy on taxes, spending, subsidies, environmental and other regulations, labor laws, and the corporate legal climate. Investors have heard enough from both candidates in the last month or two to conclude that prospects for a flourishing, competitive, growing and reasonably free economy in a McCain administration are bad, and in an Obama administration far worse. (In fact, the market's bearish behavior over the last couple of months pretty closely tracks Barack Obama's gains.)"

He concludes with this: "The silver lining in all this is that the market has already "discounted" an Obama win, so if that happens you won't wake up on Nov. 5 to find your remaining savings down the drain. If the unexpected happens, you may be in for a pleasant surprise."

Read the whole thing.

More Delicious Irony

Apparently solar panels cause global warming. The weather gods have found yet another way to mock Al Gore.

".......a greenhouse gas emitted during the production of solar panels and HDTVs, nitrogen trifluoride (NF3) that is used for cleaning some parts of the gadgets, is about 17,000 times more potent a greenhouse gas than carbon dioxide."

Obama Talking Openly About Redistribution of Wealth

(via Boortz) This is a more than 4 minute segment from an interview Obama gave to a local Chicago public radio station when he was still an Illinois legislator. In it he talks openly and with some detail on why he thinks the courts should be used to force redistribution of wealth in the name of "political and economic justice."


Don't tell me this guy isn't a Marxist. If you're thinking of pulling the lever for 0bama, think carefully about what that means if you do.

Update: Bill Whittle analyzes the clip.

Another MSM Journalist Criticizes the Profession

Michael S. Malone, a fourth generation journalist with 30 plus years in the industry himself, comes down hard on his fellow journalists.

"But nothing, nothing I’ve seen has matched the media bias on display in the current Presidential campaign. Republicans are justifiably foaming at the mouth over the sheer one-sidedness of the press coverage of the two candidates and their running mates. But in the last few days, even Democrats, who have been gloating over the pass - no, make that shameless support - they’ve gotten from the press, are starting to get uncomfortable as they realize that no one wins in the long run when we don’t have a free and fair press. I was one of the first people in the traditional media to call for the firing of Dan Rather - not because of his phony story, but because he refused to admit his mistake - but, bless him, even Gunga Dan thinks the media is one-sided in this election.

Now, don’t get me wrong. I’m not one of those people who think the media has been too hard on, say, Gov. Palin, by rushing reportorial SWAT teams to Alaska to rifle through her garbage. This is the Big Leagues, and if she wants to suit up and take the field, then Gov. Palin better be ready to play. The few instances where I think the press has gone too far - such as the Times reporter talking to Cindy McCain’s daughter’s MySpace friends - can easily be solved with a few newsroom smackdowns and temporary repostings to the Omaha Bureau.

No, what I object to (and I think most other Americans do as well) is the lack of equivalent hardball coverage of the other side - or worse, actively serving as attack dogs for Senators Obama and Biden. If the current polls are correct, we are about to elect as President of the United States a man who is essentially a cipher, who has left almost no paper trail, seems to have few friends (that at least will talk) and has entire years missing out of his biography. That isn’t Sen. Obama’s fault: his job is to put his best face forward. No, it is the traditional media’s fault, for it alone (unlike the alternative media) has had the resources to cover this story properly, and has systematically refused to do so."

While I wish he hadn't waited so long to speak up, better now than never. Thank goodness some of them still have a conscience. If the MSM is to be saved, the profession of journalism must confront the bias that has become so obvious to so many of us and return to its ideal of reporting all the facts in as unbiased a manner as it is possible for humans to do. If they had been doing their jobs instead of cheer-leading for one side, we would not be on the verge of electing as President, a man we know very little about and what little we do know is very worrying indeed.

Confusing Glibness with Intelligence

(via Instapundit) Todd Zywicki has a post up at The Volokh Conspiracy in which he discusses the tendency among people to confuse glibness with intelligence or, put more concisely, "to confuse the ability to "bullshit" with actual intelligence" in the context of the presidential race. Some people may falter or say they don't know when asked a question they haven't been prepared for while some may spout off a ready answer. The latter person may actually have no idea what they are talking about but they can certainly make it sound good. Read the whole post but here is an excerpt:

"My sense is that Hoven is on the right track. Some thoughtful people simply have a tendency to confuse intelligence with the ability to be glib, or more precisely, to bs. And I think that is much of what it comes down to--if Palin doesn't know the answer to a question, she just isn't that good at making something up. Biden, by contrast, is a master bs'er, as his debate performance exhibited. As a general rule, the less informed he was about the answer to a question, the more assertive he was in answering it, such as his extraordinary answer about the legislative role of the Vice-President. It is clear that he had not the slightest idea what he was talking about, yet he just plowed ahead throwing out assertions with rhetorical flair. Classic bs. Even on issues that were supposedly in his area of expertise, such as the Constitution, he wasn't even in the ballpark of being correct. Hoven picks up on Biden's whopper of answer about kicking Hezbollah out of Lebanon, but it is pretty much the same thing--aggressive bs covering a complete lack of any clue what he is talking about."

A Scathing Indictment of the MSM...

.....by one of their own, Orson Scott Card.

Your job, as journalists, is to tell the truth. That's what you claim you do, when you accept people's money to buy or subscribe to your paper.

But right now, you are consenting to or actively promoting a big fat lie — that the housing crisis should somehow be blamed on Bush, McCain, and the Republicans. You have trained the American people to blame everything bad — even bad weather — on Bush, and they are responding as you have taught them to.

Read it all. And don't miss the editor's note at the top.
(via Instapundit)

More on Obama's "Tax Cuts"

Writing in the Wall Street Journal today, William McGurn walks us through the Obama tax plan and shows that not only is it essentially an income redistribution scheme but also a further disincentive to work, at both ends of the income scale.

And that leads us to the heart of this problem. If the government is going to give tax cuts to 44% of American based on their Social Security taxes -- without actually refunding to them the money they are paying into Social Security -- Mr. Obama will have to get the funds elsewhere. And this is where "general revenues" turns out to be a more agreeable way of saying "Other People's Money."

This is essentially the same point I was making in my earlier post. Cut through the Doublespeak and what you have left is a straight up confiscation and redistribution of money from people who worked for it to people who didn't. "From each according to his ability, to each according to his need." Sound familiar?

Mark Steyn on Joe the Plumber

Mark Steyn has a column up at National Review Online entitled "Joe the Plumber vs. Joe the Hair-Plugger", which is both very serious and very funny (but you expect that with Steyn, don't you?) at the same time.

"Supposedly, under the Obama tax plan, 95 per cent of the American people will get a tax cut. You’d think that at this point the natural skepticism of any sentient being other than six-week-old puppies might kick in, but apparently not. If you’re wondering why Obama didn’t simply announce that under his plan 112 per cent of the American people will get a tax cut, well, they ran it past the focus groups who said that that was all very generous but they’d really like it if he could find a way to stick it to Dick Cheney, Rush Limbaugh, Karl Rove and whatnot. So 95 per cent it is..........

.........Anyway, our Fact Check Unit ran the numbers on the Obama tax-cut plan and the number is correct: “95.” It’s the words “per cent” immediately following that are wrong: that’s a typing error accidentally left in from the first draft. It should read: Under the Obama plan, 95 of the American people will get a tax cut."

0bama's mathematically impossible tax plan should worry everyone. When 45% of the populace pay no taxes, it is not possible to give 95% a tax cut. So how does 0bama propose to pull this off? Refundable tax credits is the Doublespeak du jour mechanism he is proposing. This is just another word for welfare. You can't "refund" anything to someone who never paid anything in the first place. If they're getting a check from the Treasury, that money had to be confiscated from someone else. That someone else is probably a business owner who now won't have that money available to invest in growing his business and giving someone else the opportunity to earn some of that money. When 70% of the existing jobs in this country are provided by small businesses and 80% of the new ones, taking this money out of the productive economy and redistributing it to people who had no hand in producing it is not only insane but fundamentally wrong. Increasing tax rates will also act to decrease GDP which will decrease tax revenues. The next time you hear some smug nit-wit going on about how it's stupid to reduce tax rates when you are running a deficit, point them to that (and pray their math and reading comprehension skills are on a par with a 9th grader's).

More On Why Government Efforts to "Help" the Markets Aren't Working as Intended

A couple of days ago I posted on the $700 billion bail-out package and in a later update noted how when the government had failed to pass it the first time, the DJIA went up by 485 points. I really do think that government inaction might be the best course, for the reasons laid out in the WSJ article I linked to. Brian Micklethwait at Samizdata seems to be thinking along similar lines and also makes a pretty good case for why government actions are exacerbating rather than helping the problems due to a "crowding out" effect. No sane investor is going to want to get back into the market until the 800 pound gorilla on crack that is our government stops trying to "help".

"My take on this is that there is a crowding out effect going on here, big time. I trust we are all familiar with this idea. It says that big government plans of any kind not only do harm because the government plans fail and all the wealth it wastes on them is wasted, but, and arguably even worse, because people with better plans in the same line of business are frightened into inactivity.........

...............Well, now, exactly the same thing seems to be happening in the banking industry. Were I one of the immensely rich and immensely sensible banking people who had (a) seen this crash coming and cashed out at roughly the right time, and who now (b) has plans to gobble up failed banks and reorganise them along more sensible lines, I would now, despite all my hopes of profitable new business, be sitting on my hands, waiting for all the government plans to do their immense damage before I went wading in and god [sic] chewed up too. Only when these government plans had become an obvious failure, and the politicians had just totally given up, would I be ready to move in a[nd] sort things out. Only when the politicians lapse into inactivity, which for a brief shining moment looked as if it might happen straight away, does economic optimism, among the people willing to back their optimism with money, reassert itself."

Read the whole thing.

Why Didn't Passage of the $700 Billion Bailout Stabilize The Financial Markets?

Manuel Hinds, writing in the Wall Street Journal may just have the right answer, illustrating his point with a poker analogy. Read the whole thing of course but here's the meat of the article.

"What we are witnessing is what economists call a rise in the liquidity preference, which was the main factor leading to the Great Depression. By a rise in the liquidity preference we mean that investors aim to increase the share of liquid instruments in their total assets. For the banks it means they want to liquidate loans and transfer the proceeds to very liquid instruments, such as Treasury Bills.

This migration depresses the economy by reducing credit. In these circumstances, the solution is not to keep on throwing money at the banks, which are inclined to hoard it not lend it. Rather, what is needed is stopping the skyrocketing increase in their liquidity
preference and then lowering it. Doing that requires writing off the losses now lodged in the financial system as soon as possible.

A simple analogy will help illustrate this point. Imagine that you are playing poker with 10 people and that you learn that a minority of them is broke and would not pay you if
they lose. You don't know, however, who the ones are who won't pay. In this environment, the risk of losing would be too high even if you know that most of the players are perfectly sound financially and would pay up if they lose.

In this environment, any rational card player would stop making bets until the true solvency position of each player is revealed and the bankrupt ones are expelled from the game. Having insolvent players sitting at the table spoils the game.

This is what is happening in the banking system -- only worse, because in poker you would only fail to collect the pot if you played with an insolvent player, while in the banking system you would lose your bets if you lend to an insolvent bank. Liquidity preference will not subside until the losses are made explicit, written off and absorbed."

This sounds about right to me. I've quipped to more than one person in the last few days that it seems like every time the government tries to "do something" the market swoons again and maybe they should just stop. I may have been coincidentally closer to the mark than I thought.

Update: The day afer the first bailout bill was rejected by the House, i.e., the government failed to "do something," the dow rallied by 485 points. Yes, it dropped the day of the vote but could that be more due to the expectation of passage by some who expected the companies they invested in to benefit from the bailout and that was priced into the stocks? When the expectation didn't materialize, the market fell.

Barack Obama's Questionable Associations

I've been aware of the ties between Barack Obama and William Ayers for some time but apparently not many other people are because they get their news from the MSM, which is not doing its job and probing both candidates in depth. In fact, they have very assiduously avoided pursuing any story that has the potential to reflect badly on Obama. This McCain campaign video will give you the background.


The voice-over refers to several bombings carried out by Ayers' organization, the Weather Underground. One of those was a judge's house. The story of that incident, as told by the judge's son is here. After first trying to minimize his relationship with William Ayers as "some guy who lives in my neighborhood," Obama is now trying to justify it on the basis that he was only 8 years old when Ayers and his terrorist group were carrying out their attacks. John Murtagh, the judges son, was only 9 when the Weathermen tried to murder his entire family.

The issue with the Obama/Ayers relationship isn't, as some are trying to paint it, implying guilt by association but the fact that Obama is hanging out with someone who is proud of his terrorist acts, has never paid any meaningful price for them and has stated that he wouldn't rule out doing it again. Like it or not, we are all judged by the company we keep and Obama keeps company with some very bad people.

Update: A deleted scene from the movie "Indoctrinate U" tells more of the Ayers/Weathermen story.

Barack Obama's Socialist Roots

Still don't think Obama is a hard left socialist? Read this.

Bill Whittle on What Makes a Right

There's a new video at PJTV featuring Bill Whittle's commentary on what rights are.

"We the People" Have Lost Control of Washington

As Tom Blumer says over at Pajamas Media, "the bailout saga proves the elites don't care what we think." I certainly agree with the sentinment shared by many that it's time the entire Congress was replaced. They barely even pretend to listen to the voters anymore. Back to Tom Blumer:

"In mid-September, when it became clear to Hank Paulson, Ben Bernanke, and George Bush that extraordinary measures were needed to address the mess that had built up in the financial markets during the past decade or so, their first instincts should have been to say:

• “We need to have a complete plan to deal with this.”
• “We need to make a case to Congress and the American people that our plan will work.”
  

They did neither of these things; nor did they even seem to consider whether what they wanted was even constitutional."

Does anybody out there know whether we can sue to block implementation of this bailout plan on Constitutional grounds before it gets any worse (and it will get worse if we don't start screaming even louder about it)?

(via Instapundit)

The Bailout and "The Blob"

Pajamas TV has this interesting little video perspective, presented by Bill Whittle, on the just-passed bailout bill and its growth metastasization from 3 pages to over 400 in the course of just two short weeks.

Hey, Congress. If you really want to help, don't help! And certainly don't help your self to all the goodies.

A Chronology of the Mortgage Meltdown

(via Samizdata) Reason Online has an excellent primer on the roots of the mortgage crisis that got us to where we are today. This is the take-away I think is important:

Let's be clear: This is a Wall Street crisis, not a national economic crisis. The overall economy, while a bit weak, is still growing. Some politicians are comparing the current environment to the Great Depression. But in 1932, when the federal government last moved to bail out the banking sector, economic output had fallen 45 percent and unemployment was a staggering 24 percent. Today, economic output is actually up and unemployment is a historically modest 6.1 percent.

More on Fannie/Freddie and Graft

(via Instapundit) This is an excellent question:

"And this is why Congress is half the approval rating of President Bush (lower than third-hand used car salesmen, or lawyers). This is why I'm glad that "quick is not good" is carrying the day. Here we are, at the so called "worst financial flop since the Depression" and the long term politicians are STILL being politicians instead of leaders.

So tell me again: why should I trust my government that is out to bury me? And why do we need (or want) professional politicians?"

Ouch Indeed. Democrats Lying to Avoid Proper Oversight of Fannie/Freddie

Via Vodkapundit, More video on Fannie Mae and Freddie Mac showing Democrat lawmakers trying to claim there are no problems. Not a pretty picture at all for the dems.



Spread the word.

A Must Read (or two) at Scrappleface

"Bush: Congress Must Act to Save Stupid People".

Oh what the heck. This one is good too:

“Obama hit the right notes for these people,” the pollster said. “The way he cocks his head to the side as if perplexed, his frequent interjection of non-verbal sounds, and his ability to speak for long stretches without definitively declaring what he believes…all of this appeals to the uncommitted.”

Video - Burning Down The House: What Caused Our Economic Crisis?

Watch this. It's almost 10 minutes long but worth the time.


Update: Related Video here. Ouch Indeed.

Toyota Prissy Prius Extended Test Drive

I was traveling on business this week and when I arrived to collect my rental car what should I find waiting for me but a Toyota Prius. Now I've had my doubts about these vehicles, including whether they really are so good for the environment, so I welcomed the chance to get some first-hand experience with one.

First, I stowed my small roll-on and computer backpack in the trunk. This isn't a separate compartment from the rest of the car, just a space with a retractable cover. I found that this small amount of luggage took up most of the available space there. It isn't very long from front to back and as far as height goes, there is maybe a foot with the cargo cover in place. It would be difficult to get a couple of larger bags in and still hide them from prying eyes.

After stowing my bags, I got in and found the "key," which is really just the remote fob that fits into a slot on the dash. To actually turn the engine(s) on, you push a "Power" button on top of the dash. I pushed once and the central information screen came on. I had to push a second time to get the instrument display to come up. I then proceeded to put my foot on the brake and release the parking brake, then attempted to shift into reverse. Nothing. It shifted to neutral and wouldn't do anything else. I put it back in park by pushing the Park button then tried again. Still no go. I pushed the power button again and the car turned off so I pushed it once more to re-activate the displays and then, quite by accident, discovered that if I pushed it twice more in rapid succession, I could shift into reverse. This whole operation took me close to ten minutes (Note to self: If you ever take it into your head to rob a a bank or something, do not use one of these as a getaway car.).

Finally mobile, I drove on out of the garage. The car's acceleration is actually quite good, all that torque from the electric motor I suppose, and steering is pleasant and predictable. Over the course of four days I did a mix of freeway and local street driving, most of it the latter. The car was pleasant to drive and once I figured out the quirkiness of starting up, mostly like any other car.

The moment of truth for the Prius came when I topped off the fuel prior to returning the car. The big selling point of the Prius is its fuel efficiency when compared to a car with a conventional power plant. So, how did it do? I drove 120 miles from the time I picked up the car to the time I refueled it. I put 3.47 gallons in the tank. That works out to 34.58 miles per gallon. My conventionally powered Honda Civic gets 33 and cost roughly $5,000 less than a Prius. It also has a larger trunk. The cabin may be slightly smaller, but not really noticeably so to me. With this kind of price difference, the fuel efficiency would have to be a great deal better than what I experienced to justify the cost differential over a conventionally powered car because it will take an awful lot of high-priced gas not used to make up $5,000. The Civic also starts and is ready to go as soon as I turn the key and put it in gear. The Prius was fun for a few days but I don't think I'll be buying one for myself.

Bill Whittle Looks Like He's Becoming a Regular at NRO

Here's his latest column, "The Undefended City" . If you've never read Bill Whittle, you're really missing some incredibly inspireing , and very clear-headed writing. You can find all of his essays at his website, linked over at the right in my sidebar. He has also published them all in a book titled Silent America: Essays from a Democracy at War. From the article:

"It is the small-town virtues of self-reliance, hard work, personal responsibility, and common-sense ingenuity — and not those of the preening cosmopolitans that gape at them in mixed contempt and bafflement — that have made us the inheritors of the most magnificent, noble, decent and free society ever to appear on this earth. This Western Civilization… this American City… has earned the right to greet each sunrise with a blast of silver trumpets that can bring down mountains.

And what, really, is a Legion of Narcissists and a Confederacy of Despair against that?"

Read the whole thing.

Taxes and Patiotism

Last week VP Candidate Slow Joe Biden asserted that the rich (however that is currently defined) have a patriotic duty to pay more taxes. Judge Learned hand would disagree with him and in fact did disagree with him in the 1934 case of Gregory vs. Helvering:

"Anyone may arrange his affairs so that his taxes shall be as low as possible; he is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one's taxes. [my emphasis] Over and over again the Courts have said that there is nothing sinister in so arranging affairs as to keep taxes as low as possible. Everyone does it, rich and poor alike and all do right, for nobody owes any public duty to pay more than the law demands."

Pachelbel's Canon in D... With An Attitude

A friend forwarded this to me (thanks Bob!). This is certainly a different take on an old favorite.

Gas Prices and Economic Illiteracy

In the aftermath of Hurricane Ike, gas prices are, predictably, spiking in some places. I haven't seen it here in AZ and almost all our gas comes from a pipeline from Texas. In fact, I just came back from filling my tank at $3.41/gallon. So why are prices spiking in some places and not others? Rich Hailey provides the answer here.

"Here's how it worked. The Knoxville area has several bulk fuel storage depots. Some belong to the chain outfits, others are run by wholesalers that supply independent gas stations. In either case, they manage their storage levels to maintain a competitive retail price. When the price of gas is rising, they maintain a relatively full inventory. This means that on average the gas they store always costs less than the current spot price. On the other hand, when gas prices are dropping, they keep inventories low, so they aren't holding a lot of gas that cost them more than the market price.

It's the exact same thing you do to minimize how much you pay for gas. If the price is going up, you fill up in the morning before the price changes go into effect, and you fill the tank full. When the price is going down, you guy your gas in the afternoon, after the price changes, and you buy just what you need. The wholesalers and bulk storage facilities do exactly the same thing, except on a much larger scale. Gas prices have been plummeting lately, so all of the bulk storage facilities have been keeping their stocks low.

Then along came Gustav, which impacted the ability of refineries to deliver fuel to the regional and local bulk storage facilities. ......... "

Read the whole thing of course but don't expect the MSM to give you the real explanation like this. The economically illiterate MSM in its usual wanton disregard for the truth and apparent aversion to doing their jobs (researching a story and presenting just the facts) is going to trot out its usual line about evil oil companies and price gouging. And, unfortunately, a gullible public is going to buy it.

(via Instapundit)

Sarah Palin - She's No Neophyte When It Comes to Politics

I found this article about Sarah Palin's political rise in the UK's Daily Telegraph (and why do I have to go to a foreign news source to find out about politics in my own country?). It's a very good summary of how Sarah Palin has risen to political prominence, and why it would be unwise to discount her politcal skills and ability to get things done.

"The surprise is not that she has been in office for such a short time but that she has succeeded in each of her objectives. She has exposed corruption; given the state a bigger share in Alaska's energy wealth; and negotiated a deal involving big corporate players, the US and Canadian governments, Canadian provincial governments, and native tribes - the result of which was a £13 billion deal to launch the pipeline and increase the amount of domestic energy available to consumers. This deal makes the charge of having "no international experience" particularly absurd."

Read the whole thing.
(via Samizdata)

Barack 0bama: "no one could have anticipated the surge would work,..."

That's what Barack 0bama told Bill O'Reilly on Thursday night. What a breathtakingly stupid statement. If no one anticipated it would be successful, it would never have been tried. Some people clearly did anticipate it could work, and they were right. At least one of those people goes by the name John McCain.

Bill Whittle Makes a Rare Appearance...

....at National Review Online, and he's optimistic about the GOP's chances of retaining the Whitehouse. Two years ago, just after the 2006 election, I wrote this post and expressed some optimism that the GOP would learn its lesson and that the Democrats might just behave responsibly, having regained control of Congress. I have been disappointed on both counts. But with the nomination of Sarah Palin this week, I have reason to share Bill's optimism. The nomination sends a very strong message that John McCain does "get it" and that he is already doing something about it. Bill Whittle:

"John McCain got me to believe tonight what I never really believed about him before: he is serious about changing Washington. He is serious about getting the GOP back to basics. John McCain wants to repair the brand. Claiming to want to do something is talk. What I think will cause many to believe him is something more than talk: McCain decided to man up. It’s our fault. We lost the confidence of the American people. We said we’d be true to our principles, and we weren't. The Democrats didn't make us do it. We did it to ourselves.

That has the ring of truth to it. It is a grownup accepting responsibility for a mistake not of his making and asking for the chance to rectify it. I don’t know how much of the country will believe him. But I did."

"We did it to ourselves." They say that the first step in dealing with a problem is to recognize that you have one. John McCain gets that. He has taken that first step for the GOP. It's late in the game, but maybe not too late. "I don't know how much of the country will believe him. But I did."

I do too.

Georgia Didn't Start It.

This is must-read from Michael Totten.

"Virtually everyone believes Georgian President Mikheil Saakashvili foolishly provoked a Russian invasion on August 7, 2008, when he sent troops into the breakaway district of South Ossetia. “The warfare began Aug. 7 when Georgia launched a barrage targeting South Ossetia,” the Associated Press reported over the weekend in typical fashion.

Virtually everyone is wrong. Georgia didn't start it on August 7, nor on any other date. The South Ossetian militia started it on August 6 when its fighters fired on Georgian peacekeepers and Georgian villages with weapons banned by the agreement hammered out between the two sides in 1994. At the same time, the Russian military sent its invasion force bearing down on Georgia from the north side of the Caucasus Mountains on the Russian side of the border through the Roki tunnel and into Georgia. This happened before Saakashvili sent additional troops to South Ossetia and allegedly started the war. "

Read the whole thing.

Reason TV on the Folly of Turning Food Into Fuel

Reason TV has a video out that touches on several points I've posted on before about corn-based ethanol. If you're a glutton for punishment you can go back and look at them here, here, here, here, here and here. Or you could watch the video:

Via Instapundit)

The Case for School Choice. QED Indeed.

In six minutes and 5 seconds flat, this clip from the Britsh TV series "Yes, Prime Minister" demolishes most arguments against school choice. It even gets a dig in against socialized healthcare.

Bag Karma

Rand Simberg reports on a mis-adventure had by his baggage on a non-stop flight on American Airlines over this past weekend.

In a case of what I'm calling "Bag Karma" I had the same thing happen to me on a business trip the week before last. It was the first time I had flown on US Airways since they instituted the $15 bag check fee. On the return trip from Washington Dulles to Phoenix the bag check agent put the wrong label on my suitcase, even as she was verifying my name, destination and checking my ID. She handed me my claim check (which I still have) and promptly put another passenger's baggage label on my bag. I got home on time but my bag went to Daytona Beach via Clearwater/Tampa. What it cost them to get my bag back to me by flying it to PHX via Charlotte and then deliver it to my door has to have cost them far in excess of what they collected on the fee.

The airlines could probably go a long way towards solving their profitability problems by just getting their act together on baggage handling. If they route correctly in the first place and take a few extra minutes to do so, if that's what it takes, then they won't be inadvertently running a costly, free cargo service on the side, with all the extra fuel that burns and employee time spent running around tracking errant bags.

As if the baggage problems weren't enough; In further silliness, as of this weekend US Airways is charging for non-alcoholic drinks on its flights as well ($2 for a bottle of water). They're justifying it on the basis of fuel cost for the weight of drinks they have to carry aloft. This is going to backfire on them too. I'm flying on business again next week and I'll bring my own water bottle on board ($1.49), thank you very much. Now they will carry the weight of the water bottle they want to sell me plus the weight of the bottle I'm going to bring and they won't get the revenue. Someone is focusing on the trees and completely missing the forest.

I'm getting very tired of being nickeled and dimed at every turn by the airlines, with the notable and welcome exception being Southwest. Charge a ticket price sufficient to cover the cost of getting an adequately hydrated me and my baggage to my destination on time and I promise, I won't be complaining.

Obamadoration

This video by Mary Katharine Ham is actually a couple of months old but I just ran across it again (at Power Line) and decided to link it. It perfectly skewers the messianic, "chosen one", he-who-will-solve-all-our-problems phenomenon that is Obama.



And let's not forget this lovely quote from that motor-mouthed shrew Michelle Obama:

"Barack Obama will require you to work. He is going to demand that you shed your cynicism. That you put down your division. That you come out of your isolation. That you move out of your comfort zones. That you push yourselves to be better. And that you engage. Barack will never allow you to go back to your lives as usual; uninvolved, uninformed."

Steven Den Beste Makes a Rare Appearance..

...to weigh in on the current state of alternative energy. I've linked (indirectly) to him in the past. As Steven pointed out then, most of the forms of alternative energy aren't scalable, i.e., they can't replace the energy we produce now using fossil fuels/nuclear/hydro energy sources. He hasn't changed his opinion on that. You should read the whole post but it's worth noting the criteria he uses to evaluate whether a particular energy source is viable or not:

"In order for "alternate energy" to become feasible, it has to satisfy all of the following criteria:

1. It has to be huge (in terms of both energy and power)

2. It has to be reliable (not intermittent or unschedulable)

3. It has to be concentrated (not diffuse)

4. It has to be possible to utilize it efficiently

5. The capital investment and operating cost to utilize it has to be comparable to existing energy sources (per gigawatt, and per terajoule).

If it fails to satisfy any of those, then it can't scale enough to make any difference. Solar power fails #3, and currently it also fails #5. (It also partially fails #2, but there are ways to work around that.)

The only sources of energy available to us now that satisfy all five are petroleum, coal, hydro, and nuclear."

Like I said, read the whole thing.

American Physical Society "Reopens" Global Warming Debate

It seems the "consensus" is getting more than a little shaky on Global Warming.

The APS is opening its debate with the publication of a paper by Lord Monckton of Brenchley, which concludes that climate sensitivity -- the rate of temperature change a given amount of greenhouse gas will cause -- has been grossly overstated by IPCC modeling. A low sensitivity implies additional atmospheric CO2 will have little effect on global climate.

Larry Gould, Professor of Physics at the University of Hartford and Chairman of the New England Section of the APS, called Monckton's paper an "expose of the IPCC that details numerous exaggerations and "extensive errors"

And there's this headline too: Proved: There Is No Climate Crisis.

Christopher Monckton, who once advised Margaret Thatcher, demonstrates via 30 equations that computer models used by the UN’s climate panel (IPCC) were pre-programmed with overstated values for the three variables whose product is “climate sensitivity” (temperature increase in response to greenhouse-gas increase), resulting in a 500-2000% overstatement of CO2’s effect on temperature in the IPCC’s latest climate assessment report, published in 2007.

Take a Look at the Trend in Gas Prices

Take a look at the trend in gas prices since the Democrats took over the Congress in January 2007 (data source: Energy Information Administration).

To be sure, prices were trending upward over the first 6 years of the Bush administration with a Republican majority Congress. There was a total rise of 47%, or about 7.8% per year on average. However, in the 18 months since the Democrats took over, with a promise to deliver a comprehensive energy policy and a price per gallon of $2.22, the price of a gallon of gas has risen a further 86% to $4.13 as of the end of June. That annualizes to 57%, or about 4.8% per month on average. Meanwhile they don't want to allow recovery of known domestic reserves, won't entertain increased use of nuclear energy and instead insist on converting our food supply into biofuels which is raising the price of food for people worldwide.

The Congress certainly lost its way under the Republicans but at least they weren't Hell-bent on wrecking the economy. They need to pick up on this issue and hammer away at it if they want any hope of getting back into the majority even staying relevant.

PS: Sorry for the fuzziness of the Chart. I haven't figured out how to post an Excel chart directly to the blog.

Raising Taxes Is Not a Good Idea

I've been meaning to comment on this op-ed from the Wall Street Journal by David Ranson but haven't been able to get around to it until now. He talks about the somewhat overlooked work of San Francisco economist Kurt Hauser who noticed something about the relationship between marginal income tax rates and tax revenues. No matter what the marginal tax rate is, revenues will track very closely to 19.5% of GDP with very little deviation. It should follow that if you want to increase tax revenues you want policies that encourage GDP growth.

It is pretty well accepted that raising taxes retards GDP growth and if GDP growth is already very low, as it is right now, then you could get negative growth, i.e. shrinkage. The definition of when the economy is in recession is two consecutive quarters of negative GDP growth. Raising tax rates at this time, as the Democrats want to do, could very well tip us into a recession. If the Democrats get into the White House and increase their majority in Congress, raising taxes is what they have promised to do, telling their voters that it will only affect "the rich", however they are defining that term today as they pander to wealth-envy and promise "free" goodies. To think that it won't affect them is demonstrably wrong, as the work of another economist, Nobel prize winner Ed Prescott has shown.

"Here is a somewhat startling fact: Based on labor market statistics from the Organisation for Economic Co-operation and Development (OECD), Americans aged 15-64, on a per person basis, work 50 percent more than do the French. Comparisons between Americans and Germans or Italians are similar. What’s going on here? What can possibly account for these large differences in labor supply? It turns out that the answer is not related to cultural differences or institutional factors like unemployment
benefits, but that marginal tax rates explain nearly all of this difference. " [my emphasis]

If the Democrats follow through on their promises then we will have a recession. That is definitely a change you can believe in.

Will Al Gore Be Sued for Fraud?

The science behind Global Warming looks less and less "settled" every day.

The idea of exposing the lies behind global warmingin courtrooms is catching on in the U.S. also. John Coleman, founder of The Weather Channel, published an article in ICECAP last year in which he called global warming the greatest scam in history. Coleman added, “[S]ome dastardly scientists with environmental and political motives manipulated long-term scientific data to create in [sic] allusion of rapid global warming. Other scientists of the same environmental whacko type jumped into the circle to support and broaden the ‘research’ to further enhance the totally slanted, bogus global warming claims. Their friends in government steered huge research grants their way to keep the movement going. Soon they claimed to be a consensus.” Coleman didn’t stop there. On March 3, while attending the 2008 International Conference on Climate Change in New York he said the following: “I have a feeling this is the opening. If the lawyers will take the case – sue the people who sell carbon credits, that includes Al Gore – that lawsuit would get so much publicity, so much media attention. And as the experts went to the witness stand and testified, I feel like that could become the vehicle to finally put some light on the fraud of global warming.” Well, it worked in Britain.

The ICECAP article referred to above is here.

Warner-Lieberman Bill May Die - That's a Good Thing

I certainly hope this news is true. The Warner-Lieberman cap and trade bill for carbon is an economy killer that will raise energy prices and have no impact whatsoever on the climate. It will benefit a very few companies that have become very adept at rent-seeking.

"Businesses supporting Lieberman-Warner stand to profit from clean-energy or energy-efficiency iniatitives. GE, for instance, sells wind turbines, compact fluorescent lightbulbs, and energy-efficient locomotives and aircraft engines. Just this week, GE and the oil-field services firm Schlumberger announced plans to work together on clean-coal technology.

Utility companies Exelon, FPL Group, NRG Energy and PG&E Corp., which signed a letter supporting the bill, are developing nuclear energy, wind or solar power, or so-called clean-coal plants. They would gain as the costs of burning coal in conventional plans goes up. About 50% of electricity in the United States comes from burning coal."

They are merely trying to hobble their competitors at our expense. (Full disclosure: I am particularly upset with GE because I own stock in that company. I am what I call a refuGE, I used to work there). The media have completely bought into the faulty premise that carbon dioxide causes global warming, as evidenced by this passage from the article: " ...Companies would need permits to emit pollutants that cause global warming."

No one has even established correllation, let alone causation and global average temperature peaked a decade ago. In fact, this past Winter saw global cooling that wiped out all of the temperature gains of the last century. The most telling part of the article is this:

""I believe in cap and trade. I believe we ought to put a price on carbon," [Duke Energy CEO] Rogers says. But senators who want to auction permits, and then use the money for a variety of projects - ranging from deficit reduction to water projects to job training - threaten to turn the climate-change bill into the "ultimate in earmarking.""

Once again, this legislation is not about what's good for the Earth, or for the US economy. It's another opportunity for the Congress to pass a huge tax increase by the back door and acquire even more power by redistribution of the spoils to their favored constituencies (who are not likely to be the voters).

Update: More on correlation of CO2 and temperature here.