Thursday, April 29, 2010
Those who visit the blog homepage will notice a new gadget in the right column containing items from my Google Reader that I mark as share. I will try to share stories that i think are interesting but that I don't have the time, intelligence, or further comment required to turn the item into a blog post. For those of you that subscribe to the "other WSJ" via reader, you may be interested to know that you can also subscribe to these new shared items. Also, my understanding is that comments can be left within the shared items, so this will give us another forum for discussion.
Give it a try and let me know what you think, and let me know if you have any further suggestions.
Wednesday, April 28, 2010
It is time for the governors of college athletics -- and the officials who control the BCS -- to expand their postseason ban. Arizona should be next, immediately.I would love to see this. After all, organized sports aside, Arizona will now have a much bigger spectacle to deal with - the unfolding of chaos throughout the entire public safety system as it tries to simultaneously reign in the inevitable abuses of this new power, while scrambling to defend itself against lawsuits from angry citizens not happy the bill isn't ridding Arizona of illegal immigrants fast enough.
The University of Phoenix Stadium in Glendale, Ariz., should lose the BCS National Championship Game scheduled to be played there next January unless Arizona legislators rescind soon and for good an anti-immigration law they just passed that gives police the right to stop and search for documents anyone police suspect of being in the country illegally.
The NFL should toss out a bid it received recently from Arizona to host the Super Bowl in 2015. The PGA Tour, which held two events in Arizona in February, should scratch any Arizona stops from its 2011 calendar to prove it is more inclusive than it appears.
And Major League Baseball -- out of respect to the 29 percent of its players, four managers, one general manager and one owner who are Hispanic or from Latin America -- should certainly heed the call of an embryonic protest movement in Arizona and pull its 2011 All-Star Game from the Diamondbacks' stadium in Phoenix.
Tuesday, April 27, 2010
Let me say that I sure hope so. Let me also say that I frankly doubt it. Two charts from Nathan's Economic Edge help explain my lingering pessimism.
While the economic collapse of the last two years was predicated on several problems (Investment Banks, Fannie/Freddie, MBSs, CDOs, CDSs, etc.) well upstream of the American home buyer, the dominoes did not fall until people stopped being able to afford and/or re-finance their mortgages. For well over a year now, we have been in a payshock lull, but the latter half of this year and much of next year will present a tough challenge, as a great number of homeowners need to sell their homes, re-finance their mortgages, or suddenly start earning a lot more money in order for the country to avoid another shockwave of delinquencies and defaults. Are there enough buyers, is there enough liquidity in the mortgage market, and will the jobs come back in time?
If we look to what staved off Great Depression II in 2009 and 2010, it was debt. The U.S. Government took on record amounts of debt and bailed out corporations, homeowners, and the general economy with record amounts of federal stimulus spending. Yay, so the government and debt can save us again, right?
For detailed discussion, debate, and variations of this chart, you can read this post on Economic Edge. The chart is not perfect, but the main conclusion that can reasonably be drawn remains. An increased debt load has diminishing returns.
In the short term, debt functions like money, as it can be used to buy stuff, bailout companies, hand out tax credits, whatever. This is why Keynesian economic theory advocates aggressive debt-spending in response to financial crisis, it is seen as an investment into the future, with the government being the investor of last resort. Monetarists also use debt as a positive tool, targeting interest rates on debt as a way to contract or expand economic activity and "regulate" the free market. (Think about that for a while.) That is why the monetarist response to financial difficulty is to lower interest rate, making debt cheaper. Both approaches were used very aggressively under both the Bush and Obama administration. However, both the Keynesian and Monetarist theories fail to account for the effect of both public and private debt in the long run. The chart above proposes that there are real diminishing returns on debt. This makes common sense, but has largely been ignored by modern economic theory. Instead of any reliable "multiplier effect" models, the chart posits that while in the past $1 of debt did indeed result in positive marginal productivity, the long trend line show diminishing returns. Furthermore, given our current debt load, any future debt spending may likely result in break even or even negative returns. We are potentially at the brink of debt saturation. And as the chart implies, a debt-saturated economy incurring additional debt would not stimulate any beneficial activity, and may even cause additional harm.
On the more hopeful side, and the title of this post aside, economics can not be reduced to two simple charts. There are countless factors that will determine the future of our incredibly complex economy. Still, it will be interesting to watch the mortgage market over the next two years. Not only would another round of bailouts and stimulus be politically difficult, they could also be economically crippling.
Tuesday, April 20, 2010
We live in an age of regulation. But surprisingly, there are very few principles of regulation. As Karl Polyanyi said, “Laissez-faire was planned; planning was not.” Planning always seems to be something that arises ad hoc, to address a particular situation, but hangs on and acquires a life (and a bureaucracy) of its own, even after the situation changes. The result is that we are simultaneously over-regulated and under-regulated; we have thousands of pages of regulations that deal with situations that don’t require any, and no regulation in areas that need to be closely watched. The regs raise formidable barriers to competition, as the small businessman often finds that the cost and trouble of dealing with them is an insurmountable barrier to entering a given business. This leaves only the large players, for whom such regulation is a mere nuisance, a cost of doing business that brings a benefit of reduced competition. And since there are fewer competitors, they tend to be more politically powerful, and proceed to capture the very regulatory bodies that are intended to curb them. The government becomes, in effect, the protector of the oligarchs rather than their regulator.Now, on to Aristotle:
And yet, what we have is the exact opposite. Our regulatory system demands stay at home mothers must test their home-made baby bibs and hair bows for lead before sale, but leaves the massive and complex financial institutions that can imperil our economy and country to their own devices, allowing them to issue countless “Liar Loans” and NINJA loans (“No-income, no job or assets”), and limiting them only by their ability to "innovate" new abstract investments and speculative bets.
Aristotle, and the Scholastics who adopted his approach to economics, were surprisingly sophisticated on these topics, while so many Prominent Economists are surprisingly naive. Indeed, Aristotle left us a principle of commerce that serves very well as a principle of regulation. This principle is the distinction he makes between natural and unnatural exchange. Modern commentators, who make no distinctions, have viewed this as a mere primitive hostility to business; actually, it was a shrewd appreciation of commerce. For Aristotle, natural exchange was that which was necessary for the provisioning of the family (the true meaning of economics.) Unnatural exchange that which had only money as it object.
The former is “natural” because it limits itself; that later unnatural because is has no natural limits. For example, a man wishing to buy bread for his family will buy only as much as he needs; this is a natural exchange. But a man wishing only to make money in the bread biz may wish to buy up all the bread and corner the market so as to raise prices and make a fortune on others’ necessities; this is an unnatural exchange. When applied to finance, a transaction is natural when it is when it is firmly and directly tied to the production of some actual product; it is unnatural the more abstract and derivative it becomes, and when its only object is to make money rather than profit from production. Thus, we may say that banks directly financing home purchases or construction are natural transactions, and less natural when they become “securitized,” bundled together and sold in packages to remote investors who will have no contact with the actual homes, banks, or borrowers. The situation becomes even more abstract when you speak of securitizing the securities (“CDO-Squared” or even “CDO-Cubed”) or with CDSs, which become pure speculative bets on the market. The more abstract the instrument, the more closely it should be scrutinized.
Somewhat related, somewhat unrelated - Simon Johnson of Baseline Scenario states in a separate post that "there are simply no social benefits to having banks with over $100 billion in total assets. Think clearly about this – and if you dispute this point, read 13 Bankers; it was written for you." I have not read the book, maybe because I am inclined to agree, but still thought it a challenging statement.
Tuesday, April 13, 2010
The proper response to a gift, even a gift of charity, is gratitude. People who feel gratitude also wish to express it. The easiest way is to give in one's turn. By giving you pass on and amplify the goodwill that you received. Thus it is that, in America, where the tradition of giving is very much alive, and the state has not yet extinguished the desire or the need for it, people give to their old school, to their university, to the hospital that cured them, to the local rescue service that saved them, and to the veterans who fought for them. They give without seeking or expecting recognition, but simply because gratitude is expressed through giving.
However, the state is taking over many of the functions that were previously performed by charities -- not least education, health care, and the relief of poverty. And the state deals on impersonal and equal terms with its citizens. It has no favorites, and it is governed by the rules -- anything else is received by the citizens as an injustice. Hence charity is replaced by justice as the ruling principle upon which social benefits are distributed. But while charity deals in gifts, justice deals in rights. And when you receive what is yours by right you don't feel grateful. Hence people who receive their education and health care from the state are less inclined to give to schools and hospitals in their turn -- something that is borne out vividly by the figures concerning charitable giving. The spirit of gratitude retreats from the social experience, and in countries like France and Germany, where civil society is penetrated at every level by the state, people give little or nothing to charity, and regard gifts with suspicion, as attempts to privatize what should be a matter of public and impartial concern.
When gifts are replaced by rights, so is gratitude replaced by claims. And claims breed resentment. Since you are queuing on equal terms with the competition, you will begin to think of the special conditions that entitle you to a greater, a speedier, or a more effective share. You will be always one step from the official complaint, the court action, the press interview, and the snarling reproach against Them, the ones who owed you this right and also withheld it. That is the way European society is going, and American society may one day follow it. Agape, the contagious gentleness between people, survives only where there is a habit of giving. Take away gift, and agape gives way to the attitude that Nietzsche called ressentiment, the vigilant envy of others, and the desire to take from them what I but not they have a right to.
Scruton is correct in may ways. I am in favor of private, interpersonal charity whenever possible, and certainly don't want to go the way of a European welfare state. My view is that we are to act and give first as individuals and families, and then through the communities and institutions we participate in visibly and regularly. Only as a last resort should charity be replaced with centralized government (tax, legal) policies.
Without a visible connection between the giver and the recipient, there is an incredibly important breakdown in human relationships. The giver loses the ability to see the benefits of their the gifts to others and also loses the ability to receive (perhaps selfish) satisfaction for their action. Likewise, the recipient loses the ability to see that their gifts come from the hands of fellow humans, the goodwill and/or sacrifice that entails, and the responsibility and "do right" action it inspires. Diminishing the tangible nature of charity and gratitude produce not only the mistrust and resentment the author outlines, but perhaps most importantly, personal accountability, which can give way to abuse and mismanagement not imaginable on a more personal scale.
Having voiced my agreement with Scruton's writing, I will now try to clarify my position and maybe make a case for the other side of the coin so to speak, lest I be confused for agreeing with everything his essay may imply.
Charity and grace are incredibly important because inequality is a part of the human condition, and countless individuals find themselves in tragic and unfortunate situations through no choice of their own, be it an earthquake, or cancer, or being born in a deplorable environment or to less than ideal parents. This is where the role of charity is so vital, as those more fortunate act out of empathy and concern for the well-being of others, and for their community/society/humanity as a whole, in order to give others the gift of hope, care, or opportunity.
On the flip side of the equation, there are many who find themselves the beneficiary of (at least relatively) wealthy families, advanced economic societies, social institutions, even abundant natural resources that they had no role in creating or determining. Of course, we all make choices as to how we respond and/or take advantage of the situations we find our selves in, but there is no denying that the "playing field" is anything but level. This is important in the Christian worldview, as we are instructed to recognize that all a person's circumstances, abilities, and possessions are gifts from God.
That brings me to my main "BUT" to Scrotun's essay. It is not a rebuttal, but a recognition of a point of tension that the author does not address.
Our society is not only filled with wide diversity and inequality, it is also inextricably interconnected. At least part of the pay Bank CEOs receive come from the overdraft fees of their poorest customers struggling to put food on their tables. At least part of the money made by the management and shareholders of energy companies come from cutting corners on things such as environmental and worker safety (see W. Virginia, water quality, and the recent mine accident). In these cases, it is the poor, the unfortunate, and the environment who are unwittingly or unwillingly the givers to the more privileged, and once again, due to the diminishment of interpersonal relationships, the result is same: ingratitude, entitlement, resentment, false claims, and lack of personal accountability.
Justice is very important.
Those with money and power have a much easier time in making their interests heard and acted upon than those on the opposite end of the socio-political spectrum. In this respect I disagree with the author that "the state deals on impersonal and equal terms with its citizens. It has no favorites, and it is governed by the rules." It is the role of justice, and this includes but is not limited to the government variety, to make account where trust, accountability, and reciprocity fail, especially with respect to those without the voice, means, or ability to do so for themselves.
Thursday, April 8, 2010
Unfortunately, the little watched Olbermann seems to be about the only mainstream television journalist shedding light on the horrible decision to allow the President to order the assassination of a United States Citizen. Justin Kuznicki of CATO notes that this goes directly against the grain of what America founders struggled to create, A Government of Laws, Not Men:
Consider today’s news:
The Obama administration has taken the extraordinary step of authorizing the targeted killing of an American citizen, the radical Muslim cleric Anwar al-Awlaki, who is believed to have shifted from encouraging attacks on the United States to directly participating in them, intelligence and counterterrorism officials said Tuesday.
Americans, this is what arbitrary government looks like. As a simple matter of fact, even George III was never this arbitrary. Even he didn’t make individual colonists’ lives depend merely on an act of his own will.
Indeed, if I wanted a perfect example of what a government of men, not laws, looked like, I could just glance at the newspapers today and see what our government is doing right at this moment.
Do not respond that this power will only be used wisely and sparingly. Doing so just admits my basic point, namely that we now depend purely on the wisdom and restraint of our individual leaders. We depend on their wisdom and restraint — to check their own worst impulses. All power, both for and against, is contained in one individual. No legal processes, and no guarantees, separate us from them. And the stakes are life or death.
Likewise, do not respond that this power will only be used against very bad people. Again, doing so just admits that we now depend on an unreviewable judgment of character, not on a legal system with formal procedures and safeguards. Even in the dark days of the Cold War — even during the Revolution itself — we never ceded so much power to so few.
Glenn Greenwald, perhaps the most civil liberties oriented journalist in our country, expounds on this decision in great detail at Salon.com:
Today, both The New York Times and The Washington Post confirm that the Obama White House has now expressly authorized the CIA to kill al-Alwaki no matter where he is found, no matter his distance from a battlefield. I wrote at length about the extreme dangers and lawlessness of allowing the Executive Branch the power to murder U.S. citizens far away from a battlefield (i.e., while they're sleeping, at home, with their children, etc.) and with no due process of any kind. I won't repeat those arguments -- they're here and here -- but I do want to highlight how unbelievably Orwellian and tyrannical this is in light of these new articles today.
No due process is accorded. No charges or trials are necessary. No evidence is offered, nor any opportunity for him to deny these accusations (which he has done vehemently through his family). None of that.Instead, in Barack Obama's America, the way guilt is determined for American citizens -- and a death penalty imposed -- is that the President, like the King he thinks he is, secretly decrees someone's guilt as a Terrorist. He then dispatches his aides to run to America's newspapers -- cowardly hiding behind the shield of anonymity which they're granted -- to proclaim that the Guilty One shall be killed on sight because the Leader has decreed him to be a Terrorist.
Just to get a sense for how extreme this behavior is, consider -- as the NYT reported -- that not even George Bush targeted American citizens for this type of extra-judicial killing (though a 2002 drone attack in Yemen did result in the death of an American citizen). Even more strikingly, Antonin Scalia, in the 2004 case of Hamdi v. Rumsfeld, wrote an Opinion (joined by Justice Stevens) arguing that it was unconstitutional for the U.S. Government merely to imprison (let alone kill) American citizens as "enemy combatants"; instead, they argued, the Constitution required that Americans be charged with crimes (such as treason) and be given a trial before being punished. The full Hamdi Court held that at least some due process was required before Americans could be imprisoned as "enemy combatants." Yet now, Barack Obama is claiming the right not merely to imprison, but to assassinate far from any battlefield, American citizens with no due process of any kind. Even GOP Congressman Pete Hoekstra, when questioning Adm. Blair, recognized the severe dangers raised by this asserted power.
And what about all the progressives who screamed for years about the Bush administration's tyrannical treatment of Jose Padilla? Bush merely imprisoned Padilla for years without a trial. If that's a vicious, tyrannical assault on the Constitution -- and it was -- what should they be saying about the Nobel Peace Prize winner's assassination of American citizens without any due process?
Why are so few people worried about laws, checks & balances, due process, and all those other pesky principles that keep governments from descending into tyranny? Does the cult of personality towards Obama have no limits?
Friday, April 2, 2010
The decisions made by those in power to affect societal change in these important areas have far ranging impacts, potentially including the relative choices, freedoms, and opportunities available to me and those I know and love. So the ramblings and rage will continue, and maybe it will help in some small degree, but I'll try to keep perspective and will be happy when comments veer to the topic of college football.
Speaking of happiness and college football, how many would rather have their team win the national championship than their candidate win political office?
Thursday, April 1, 2010
The "science" of human politics (and economics for that matter) is a great temptation, since the idea that organizing people in a certain way can make life easier, more secure, more fair, or more personally satisfying is enticing. But while they can be an interesting and even useful topic of discussion, political theories (especially those that claim to be consistent or universal) lead to false visions of society. Actually, I like the analogy of a mirage, a vision supported by little other than hot air.
Human government takes this one step further by exercising its authority on the basis of those flawed political/economic theories. Particularly, the role of government has shifted quite a bit along the spectrum from an authority which governs the actions of the governed to an authority which acts on behalf of the governed. Collective government action is enticing for the same reasons that politics in general are, but it is another mirage, and a dangerous one. I hold that the increased collective action of government into society can negatively impact individual identity and action, both practically and spiritually.
Beyond the debate over public versus private action, and their relative efficiencies and strengths, consideration of the impact of policy on the individual, their purpose, responsibility, and even freedom, is to a regrettable degree neglected.
The right question to ask is not always what can government do, but what should government do?