Glenn Beck's New Posters
Courtesy of Jason Wit
We Are Doomed (If We Listen to Paul Krugman)
Paul Krugman, Economist Emeritus of the Enron Consultant Alumni Association, titled his February 10 blog post on Obama "Clueless". As Krugman recites from Obama's recent interview with Bloomberg Business Week (mentioned in an earlier post) where Obama, after setting up a pay czar to review compensation in bailed-out private sector companies and countless demagogic attacks against financial sector executive bonuses and "Wall Street greed", said that he doesn't oppose rewards for private sector success, e.g., Goldman Sachs and JP Morgan Chase CEO's pulling in healthy bonuses, noting that elite professional athletes (and/or entertainers), with fewer responsibilities and payroll obligations, have comparable or greater compensation packages. You can almost see Paul Krugman's eyes roll and hear his condescending tone as he writes "Oh.My.God", and then essentially describes the financial services sector as "lemon socialism" where private sector profits are kept privitized and losses are made public. (Of course, banks and their employees and investors don't pay taxes or fees, and private-sector banks don't absorb risks of loans versus the government, isn't that right, Paul Krugman?)
First of all, Krugman, it's never a good idea to paint an entire sector with broad strokes. For instance, Ford did not go through bankruptcy like GM and Chrysler. If you look at the sector, JP Morgan Chase was much more risk-averse in its own loans, and Goldman Sachs hedged its own holdings in mortgage backed securities with credit default swaps.
Second, the financial services sector is hardly the "Wild West" but is heavily regulated. There was nothing inherently wrong in principle for AIG to sell swaps to Goldman Sachs and other companies; the problem was that it did not establish sufficient reserves to hedge against the swaps it was writing (never mind inadequately pricing its swaps to reflect its risks). It seems to me that there was a failure in government to deal with the "too-big-to-fail" problem even in the aftermath of the conceptually relevant S&L crisis, not to mention the implications of housing market corrections (e.g., around 1990 in California).
Here is an interesting prescient Libertarian post written in August 2005:
We’ve been there before. A real estate cycle has existed in the USA since the early 1800s, with a period of about 18 years. Prices and construction peak and plateau, followed by a major depression. Real estate peaks preceded the depressions of 1837, 1857, 1873, 1893, 1929, 1973, 1980, and 1990 (www.foldvary.net/works/cycle.html)
The last real estate bottom was in 1990, so if this is another 18-year cycle, the next depression will be around 2008. So far, the economy is tracking the cycle right on schedule. In my judgment, the economy is entering the plateau stage.
We can see the multiple government interventions that create the boom-bust cycle: the manipulation of money and interest rates, the public works subsidy to landowners, the federal insurance of deposits, and government’s stepchildren, Fannie and Freddie. Since any major policy changes would require a crisis, we will just have to ride this real estate tsunami wave and then plunge down the financial waterfall that lies ahead.
This pattern is happening throughout the world. The subsequent crash will therefore be global. The cause is the same all over: government financial and fiscal interventions. So please, when the crash comes, don’t blame the market!
Krugman has it precisely backwards. The issue is not in questioning why bankers made reckless decisions using government guarantees: the question has to do with the intrinsic moral hazards of the government guarantees themselves. If bankers couldn't sell nontraditional mortgage notes to the GSE's, or if foreign investors wouldn't have purchased mortgage-backed securities, without the implicit guarantee of the government, or if the Fed had started raising rates more towards historical norms earlier, the bust wouldn't have been as traumatic. Also, it was the function of regulators and national legislators to ensure that salient risks were being assessed and priced given the government's own risk exposure (not to mention the government raising its own reserves accordingly).
Third, it is not true that the private sector has not paid a price; many of the banks accepting/required to take TARP funds have repaid the loans in full with interest; the primary exposures are the two auto companies, the GSE's, and AIG. Shareholders in many banks have been all but wiped out. For example, I was in one DRIP plan for almost 20 years (a minor investment, but still...); at one point a couple of years back, the stock was selling in the mid-30's range. It has since been acquired at multiple levels, essentially leaving me with literally pennies on the dollar.
But in fact, what is truly astonishing (while I am greatly amused at seeing progressives bash fellow progressives with the same elitist, condescending nonsense usually reserved for conservatives) is the fact that Paul Krugman seems to be taking Obama's rhetoric at face value. It's a work, Krugman. Obama is just telling the business community and investors what he thinks they want to hear. The proof is in the pudding: have we seen any broad-based business tax cut initiative from Obama? Have we heard him attempt to lessen the regulatory footprint on business? Have we seen him extend Bush's tax cuts for the job creators after this year?
Clash of the VP's: Cheney vs. Biden
This past Sunday's war of the talk shows (Biden on Meet the Press and Cheney on ABC's This Week) was entertaining, but I have to object to some of Biden's nonsense, which have become routine liberal talking points: the acquittals under just 3 military tribunals, and the "hundreds" of terrorist civilian trials under the Bush Administration. The hypocrisy and intentionally misleading discussion of Joe Biden are morally unacceptable.
First of all, we now have a constitutionally-validated military tribunal system which took YEARS after Bush's initial executive order in the immediate aftermath of 9/11. There is no doubt, without liberal/progressive challenges to the military tribunal system, we would have moved earlier on military tribunals.
Second, Biden is comparing apples and oranges. There's a big difference between a high-value target like KSM and other targets.
Third, Biden seems to be implying that the military tribunal system is defective because acquittals have happened, while he's claiming that there have been no releases as a result of civilian trial. So let me get this straight: Biden is not poisoning the well by promising convictions and non-release under civil law, and he's claiming that granting Miranda rights, barring hearsay, disallowing evidence gained by, say, enhanced interrogation techniques, not to mention possible compromises of national security in terms of things like identifying sources, etc., make it easier to get a conviction and high-value intelligence? Not to mention the unnecessary act of trying KSM (and giving him a soapbox) is better than allowing him earlier to plead guilty? Is a finding of guilt under a civilian court more equal than KSM pleading guilty under his own initiative? The whole idea of Attorney General Eric Holder wanting to try KSM in a criminal trial is supposedly to underscore the superiority of our domestic justice system, while, of course, the liberals don't see acquittals under military tribunals as indicative of substantive due process under the military tribunal system?
Quote of the Day
None but a fool worries about things he cannot influence. - Samuel Johnson
Political Cartoon
Scott Stantis shows Obama wearing what must be his attire for the next White House Correspondents dinner.
Musical Interlude: Country Crossover Artists
This is the final segment in this limited series on country music. My next series will focus on pop/soft rock acts.
Crystal Gayle, "Don't It Make My Brown Eyes Blue"
Glen Campbell, "Southern Nights"
Faith Hill, "Breathe"
John Denver, "Take Me Home, Country Roads"
Bobby Goldsboro, "Honey"
