I like long walks,
especially when they are taken by people who annoy me.
Fred Allen
Give and You Shall Receive:
The Federal Reserve
(The Dems' Idea of "Financial Reform":
Double-down Responsibility on the Fed)
From RT via the Daily Bell:
A report just released by the US Government Accountability Office explains how the Federal Reserve divvied up more than $4 trillion in low-interest loans after the fiscal crisis of 2008, and the news shouldn't be all that surprising. When the Federal Reserve looked towards bailing out some of the biggest banks in the country, more than one dozen of the financial institutions that benefited from the Fed's Hail Mary were members of the central bank's own board, reports the GAO. At least 18 current and former directors of the Fed's regional branches saw to it that their own banks were awarded loans with often next-to-no interest by the country's central bank during the height of the financial crisis that crippled the American economy and spurred rampant unemployment and home foreclosures for those unable to receive assistance.(As aside to RT: don't Russians already have more than their own share of blue funk? MYOB. It's bad enough that the press in the US and Russia have been arguing over whose middle-aged President looks better topless... Can you imagine Russian politicos pointing and laughing at former Congressman William Jefferson, caught with $90K in his freezer and convicted of bribery, money laundering, fraud, and racketeering? What an amateur! At least the FBI didn't find the money in his washer...)
I've already discussed the GAO audit in a couple of posts (in more detail, here, with a plug for up-for-a-vote-soon Ron Paul's HR-459 with 238 co-sponsors).
Let's recall a bit how we got the first audit. Former Democratic Congressman Alan Grayson, who I have criticized in other contexts (think healthcare), was interrogating Inspector General of the Fed Elizabeth Coleman; it is astonishing that the head of the internal audit function of the Fed can't answer basic questions on the status of over $9T in Fed funds in off-balance sheet transactions--that's probably more than all the federal revenues that Obama will pull in his first term. The Daily Bell comments here on the hearing excerpt I've embedded below.
Let's recall how "Helicopter Ben" responded in the aftermath, and the final outcome (cf here):
The first ever GAO(Government Accountability Office) audit of the Federal Reserve was carried out in the past few months due to the Ron Paul, Alan Grayson Amendment to the Dodd-Frank bill, which passed last year. Jim DeMint, a Republican Senator, and Bernie Sanders, an independent Senator, led the charge for a Federal Reserve audit in the Senate, but watered down the original language of the house bill(HR1207), so that a complete audit would not be carried out. Ben Bernanke(pictured to the left), Alan Greenspan, and various other bankers vehemently opposed the audit and lied to Congress about the effects an audit would have on markets....What was revealed in the audit was startling: $16,000,000,000,000.00 had been secretly given out to US banks and corporations and foreign banks everywhere from France to Scotland. To place $16 trillion into perspective, remember that GDP of the United States is only $14.12 trillion. The entire national debt of the United States government spanning its 200+ year history is “only” $14.5 trillion. The budget that is being debated so heavily in Congress and the Senate is “only” $3.5 trillion. In late 2008, the TARP Bailout bill was passed and loans of $800 billion were given to failing banks and companies.The GDP and national debt numbers are dated, and of course there's a distinction between fiscal and monetary policy. I wouldn't use the term "lie"; it can be difficult to predict how the markets will respond. But it's clear that there was a material bait-and-switch, and there's no doubt that there's no such thing as a "free lunch": all things being equal, in the long run, more money chasing the same amount of goods and services means inflation, which eviscerates savings and is an indirect form of taxation, lowering the standard of living.
The Daily Bell's current post continues:
One of the biggest memes of the elite is that the economy needs the ministrations of good, gray bankers to fix the price and volume of money. Price fixing, in fact, never works and only redistributes wealth from those who created it to those who didn't and may not utilize as efficiently.Low interest rates have fed the bond bubble (just like there was a stock market bubble and a real estate bubble). Peter Schiff and other Austrian School economists warn that a bond sell-off could be explosive.
I don't want to speculate, but there was a violent sell-off a quarter back: the market felt it needed Fed bond purchases to maintain prices. But, among other things, the currency markets are aware of a glut of dollars, rates are BELOW the inflation rate (implying real losses in bond holdings), there are bonds in other currencies offering higher interest rates, and foreigners, who hold half of US Treasuries, may be reluctant to risk holding or adding to bond holdings given currency fluctuations and US bond prices at an unsustainable high peak. A declining dollar puts US manufacturers at risk from import resource or component prices (eroding margins in competitive markets), and under tough market conditions, banks, businesses or individuals may need to sell bonds (lowering prices / increasing interest rates).
On the Reading List
Bob Boudreaux seconds Todd Seavey's post comment assessment that Deidre McCloskey's post "Factual Free-Market Fairness" is "the greatest blog entry ever written".
I have made a few back-of-the-envelope logical arguments against "modern progressivism" or social liberalism, e.g., redistributive policies inevitably result in the moral corruption of a large number of target recipients; redistribution transfers from the productive to the nonproductive; any government must be bound by resources, and since the law is fixed, non-innovative, and since rights and responsibilities are diffuse, inefficient.
To provide some context, McCloskey is writing an essay reflecting on a recently published book by John Tomasi, "Free Market Fairness". Tomasi attempts to establish a third way between F.A. Hayek's economics liberty focus and John Rawls' social justice.
One of Tomasi's collaborators (on other projects) is Jason Brennan. Brennan distinguishes among libertarians, classical liberals, high liberals, and neoclassical liberals. [Tomasi and Brennan classify themselves as neoclassical.] Brennan's typology focuses on two principal dimensions: economic liberty and social justice:
[Libertarians are classified as rejecting positive liberty.] Classical liberals who (somewhat begrudgingly) accept some welfarist principles, thus making their theory of justice a little more humane than libertarians’, if not quite as humane as high liberals’. Instead, neoclassical liberals go “all in” in accepting strong principles of social justice, but at the same time has a broader, more expansive conception of personal liberty than high liberals do.
High liberals have a thin conception of economic liberty. They think that freedom of occupation and freedom to own personal property are among the basic liberties. In contrast, classical liberals, libertarians, and neoclassical liberals think that the basic liberties also include strong rights to freedom of contract, freedom to own and use productive property, freedom to buy and sell on voluntary terms, and so on. They regard these rights as on par with civil liberties, while high liberals regard them as lesser rights, or in some cases, not rights at all.McCloskey, an economics historian, fleshes out high liberalism, I think quite well:
The High-Liberal political philosophers such as Anderson and Freeman and Dworkin and Nussbaum rely, against Kant, on a factual story which they take to be so obvious as to not require defense. The story is, in a few brief mottos to stand for a rich intellectual tradition since the 1880s: Modern life is complicated, and so we need government to regulate. Government can do so well, and will not be regularly corrupted. Since markets fail very frequently the government should step in to fix them. Without a big government ee cannot do certain noble things (Hoover Dam, the Interstates, NASA). Antitrust works. Businesses will exploit workers if government regulation and union contracts do not intervene. Unions got us the 40-hour week. Poor people are better off chiefly because of big government and unions. The USA was never laissez faire. Internal improvements were a good idea, and governmental from the start. Profit is not a good guide. Consumers are usually misled. Advertising is bad.McCloskey then sets the record straight:
No. The master narrative of High Liberalism is mistaken factually. Externalities do not imply that a government can do better. Publicity does better than inspectors in restraining the alleged desire of businesspeople to poison their customers. Efficiency is not the chief merit of a market economy: innovation is. Rules arose in merchant courts and Quaker fixed prices long before governments started enforcing them.
How do I know that my narrative is better than yours? The experiments of the 20th century told me so. But anyone who after the 20th century still thinks that thoroughgoing socialism, nationalism, imperialism, mobilization, central planning, regulation, zoning, price controls, tax policy, labor unions, business cartels, government spending, intrusive policing, adventurism in foreign policy, faith in entangling religion and politics, or most of the other thoroughgoing 19th-century proposals for governmental action are still neat, harmless ideas for improving our lives is not paying attention.As an aside: I find it particularly interesting that as my political perspective has transitioned, I have organically adopted concepts like "innovation" and "publicity (versus statist regulation)" independently of the literature.
If you want a typical social liberal (or high liberal) greatest hits, you can find Elizabeth Anderson's referenced essay here; you will wonder how how we would have ever gotten past rat feces in sausages without government (it's not like, say, the free press uncovered the scandal, and customers lined up at the door for sausages with a double dose of rat feces! And heaven knows how orthodox Jews ever had confidence in the food they ate before government food inspectors came along...) I would have preferred that McCloskey had also dispatched the propaganda about NASA, the Hoover Dam and the Interstates. (Hint: it may surprise the reader to know that the government did NOT build the first airplane, over half the dams in the United States are privately-owned, and thousands of miles of privately-operated US toll roads existed before the twentieth century.) My personal opinion is that the private sector would have done things better, faster, and cheaper across the board...
But McCloskey does an excellent job comprehensively and relentlessly refuting the high liberal case, showing how high-cost high liberal programs and policies (e.g., minimum wages) have had unintended, devastating consequences on the people they were designed to help. Highly recommended essay.
Notable Quotes/Excerpts on Politicians
Plus ça change, plus c’est la même chose. Mencken and Hayek had passed away long before Obama ever rose to power...
- "His business is never what it pretends to be. Ostensibly he is an altruist devoted whole-heartedly to the service of his fellow-men, and so abjectly public-spirited that his private interest is nothing to him. Actually he is a sturdy rogue whose principal, and often sole aim in life is to butter his parsnips. His technical equipment consists simply of an armamentarium of deceits. It is his business to get and hold his job at all costs. If he can hold it by lying he will hold it by lying; if lying peters out he will try to hold it by embracing new truths." - H.L. Mencken
- "No matter who wins the government gets elected." - Alex Tabarrok
- "F.A. Hayek famously argued in The Road to Serfdom, that in politics, the worst get on top, and outlined three reasons this is so. First, Hayek makes the point that people of higher intelligence have different tastes and views. So, as Hayek writes, “we have to descend to the regions of lower moral and intellectual standards where the more primitive instincts prevail,” to have uniformity of opinion.
Second, those on top must “gain the support of the docile and gullible,” who are ready to accept whatever values and ideology is drummed into them. Totalitarians depend upon those who are guided by their passions and emotions rather than by critical thinking.
Finally, leaders don’t promote a positive agenda, but a negative one of hating an enemy and envy of the wealthy. To appeal to the masses, leaders preach an “us” against “them” program."
- Douglas French, "The worst rise to the top" (writing on the GOP field, not Obama)
- "[Psychopathic criminals] do possess certain personality traits that can be exploited, particularly their inherent narcissism, selfishness, and vanity. Specific themes in past successful interviews focused on praising their intelligence, cleverness, and skill in evading capture. Interpersonal traits include glibness, superficial charm, a grandiose sense of self-worth, pathological lying, and the manipulation of others. The affective traits include a lack of remorse and/or guilt, shallow affect, a lack of empathy, and failure to accept responsibility.
Some of [these] character traits may be observed in many within the political arena. [Except for violence], many political leaders display varying degrees of anger, feigned outrage and other behaviors. They also lack what most consider a "shame" mechanism. Quite simply, many professional politicians must mimic what they believe, are appropriate responses to situations they face such as sadness, empathy, sympathy, and other human responses to outside stimuli." - Jim Kouri, "Serial killers and politicians share traits" (my edits)This segment is NOT intended to bash politicians so much as to analyze related phenomenon. Obama is an interesting case; there is no way anyone can legitimately argue that his political positions, nominally different than his much more experienced, accomplished Democratic competitors, were the reason that he got the nomination. He won the nomination in the caucuses; it had more to do with his charisma, oratorical skills, and idealism, novelty and style.
But ironically Obama has always had an Achilles heel: he had an almost professorial air about him and tended to be long-winded in a Democratic debate format that favored sound bites versus overly long explanations. The interesting point is that by the time it came to the general Presidential debates, I think that Senator McCain was overly confident, while Obama was well-prepared, concise and clearly anticipated McCain's predictable talking points. However, if you ever listen to or read his speeches, they are typically poorly organized, meandering, defensive, abstract professorial messes replete with trite observations, logical fallacies and political sound bites.
Now Romney had started the 2012 campaign as the man to beat: he had paid his dues since his 2008 race. But he found himself with stiff challenges from contenders whom had never held a public sector administrative position, including two 2008 supporters, Herman Cain and Rick Santorum. (Huntsman and Johnson were also former governors, but they were obscure and barely registered at the polls.)
On paper, Romney was the obvious choice: he had 25 years as a phenomenally successful business executive dealing with startups and troubled companies; he had won a statewide election in the bluest of states; he had helped saving the Salt Lake City Olympics. He looks the part as President, he's an able, excellent debater.
But he found himself being battered silly on the question of RomneyCare, as if somehow he was responsible for highly unpopular ObamaCare, toxic among party activists. He was fending off populist attacks from Newt Gingrich and Rick Santorum. He was being dogged by policy shifts made since running in a very socially liberal state like Massachusetts. He was finding himself defending a nearly 38 point economic plan while the former CEO of Godfather's Pizza went around to wild applause simply saying, "9! 9! 9!" He lost a primary to a former House Speaker whom had been rebuked by Congress in an ethics probe and had lost almost every poll by double-digits to Obama; he lost caucuses and primaries to a former GOP senator whom had lost reelection by an almost unprecedented landslide in a purple state to a less charismatic politician than Obama.
Romney found himself being hit hard by populists; many primary voters were voting on totally meaningless red meat sound bites, not whether their candidate ran better against Obama (they didn't) or the fact that they had no chance of enacting their agenda over a Democratic Senate minority or majority with the power to filibuster.
There are notorious moments when Romney was seen to be "out of touch" with middle-class voters, e.g., the $10,000 bet with Governor Perry, multiple cars, car elevators, liking to fire people or joking about closing a plant, etc. There are some of these things I would have handled with my sense of humor. For example, there was the kerfuffle over driving on a family vacation with his family dog housed on the vehicle's roof. I probably would have joked something like, "There have been times I've been in the doghouse with Ann... It was cold up there; thank goodness I had that windshield."
I have already written several things I would do in Romney's case. I suggest that Romney focus on traditional virtues (thrift, hard work), marriage and family and bringing those same values to the White House. I"m not suggesting that he talk down to people, but he doesn't want to come across as a policy wonk and go over the head of his audience; he wants to convey Reagan-like confidence, humor and optimistic attitude. (Oh, and going into the debates, if I was Romney, I would find a way of delivering sound bite tweaks of Obama. For example, Obama is forever talking about "saving" the auto industry; I would remind voters that GM already had a negative net worth in 2006 and counter with "saving the taxpayer from UAW bailouts".
I have written about Obama's narcissism on multiple occasions (see my blog tags); anyone who doesn't see the obvious connection to the above quotes is simply in a state of denial: his self-graded report card very high, the Bush bashing, etc.
Finally, a brief criticism of Hayek's analysis: I think, at least in the American experience, there have been some very strong, erudite leaders, like Thomas Jefferson, Abraham Lincoln and William Taft (however, the latter was a poor politician). I do think that strong administrators or very bright people may lack suitable political or communication skills or focus on long-term versus short-term expectations.
Word Games
From the Hill:
On Friday, Obama said the DHS would immediately allow people who don't pose a national security risk to ask for temporary relief from deportation proceedings and apply for work authorization. While Schweikert's bill would prevent DHS from enforcing executive orders on immigration, Obama's policy change came only in the form of a memo on prosecutorial discretion from Homeland Security Secretary Janet Napolitano, not an executive order.
Musical Interlude: My Favorite Groups
Tom Petty and the Heartbreakers, "Don't Come Around Here No More"
