Monday, March 30, 2009

Organic Pesticides Fail Safety Review

Organic Pesticides Fail EU Safety Review
03/30/09 - OpenMarket by Greg Conko

The European Food Safety Authority (EFSA) has rejected 13 of 27 commonly used "organic" pesticides. That organic carrot doesn't look as good any more.

[edited] Many people buy organic food because “they’re grown without pesticides.” That is not true. Organic farmers use a variety of chemicals to control insects and plant diseases, including potentially dangerous substances such as copper sulfate, rotenone, pyrethrum, ryania, and sabadilla.

These “organic” pesticides are derived from minerals or plants, are lightly processed, and thus are considered to be “natural” for use in organic agriculture. Yet, ounce for ounce, most are at least as toxic or carcinogenic as many of the newest synthetic chemical pesticides.

According to the Farmer’s Guardian newpaper, EFSA “has approved just 14 of the 27 organic pesticides put before it … although many have received a derogation for continued use.” Because more stringent rules are due to be promulgated next year, the European pesticide industry expects that more of the organic pesticides will be found unsafe.

Plants Make Natural Pesticides
To confuse the issue, plants produce their own carcinogenic pesticides in amounts that far exceed any residues from the pesticides applied by farmers. Fortunately, they have no significant affect on us. Broccoli, anyone?

Is There a Future for Business Schools?

Is there a future for Business Schools?
03/24/09 - Mises.org by Tim Swanson
This short post supplied the links below.

- - - -

The End of Business Schools?
09/01/02 - AOM Online by Jeffrey Pfeffer and Christina T. Fong

This study has a scholarly approach. They find that it took about one month to convert professionals from other fields into business consultants.

[edited] Available data suggests that business schools are not very effective. Career success does not correlate with having an MBA degree or grades earned in courses. There is little evidence that business school research influences management practice. These results question the relevance of management scholarship.

Consulting firms in the late 1990s found it difficult to compete with high-technology start-ups for talent. They had always hired some people without MBA degrees, but they increased the numbers, to include lawyers, doctors, and philosophers.

Consulting firms had to provide training so these individuals could give advice to companies using business knowledge and language. Many started or expanded 3-week programs to teach new hires the basics. Apparently, it took only 3-4 weeks for people to cover what business schools take 2 years to teach.

Internal studies found that the non-MBAs did no worse and sometimes better than their business school counterparts.

- - - -

MBA Schools Have Nothing to Offer in Our New World
03/25/09 - Bloomberg by Matthew Lynn

A general complaint against business schools. What could they have been teaching?

[edited] The MBA factories took a pseudo-scientific approach to finance. They promoted a mechanistic management style, and they taught a managerial elite more interested in rewards than producing lasting wealth for their societies.

They taught that running a company could be mastered by anyone through a set series of formulas from a textbook. The entire private-equity industry, mergers, and acquisitions are founded on that principle.

Academia largely invented the intellectual tools that led us into the financial meltdown. Complex models for pricing risk created the market for the options and derivatives contracts that have caused so much trouble in the past year.

The business schools took mysterious and unknowable "risk" and tried to make it as easy to count as peas in a pod. They encouraged a generation to go into investment banking armed with the belief that they had mastered risk.

In reality, management is a skill that is acquired through experience, judgment, and flair. Billions are about to be wasted relearning a simple fact that should never have been forgotten.

- - - -

Did Joseph Wharton Cause The US Financial Meltdown?
10/21/08 - Mises.org by Tim Hartnett

A disapproving review of what Americans will support, as long as an MBA in finance is proposing it. If you can't understand what they are saying, they must be smarter than you.

[edited] Americans are raised to believe there can be no such thing as a glut in graduate degrees. We don't think that any form of schooling can do harm.

What are the talents of the guys who rise to the top of established business empires? A good lot of them seem to specialize in finding ways to produce revenue, but not much of anything else.

Well into the 20th century, journeymanship in a business was a natural route to an executive position in big-time corporate America. People with the hands-on experience in mechanics, sales, manufacturing, and agriculture were residing at the top of many fields of trade. As late as the 1950s, entrepreneurs with widely divergent perspectives arising from a vast array of influences and experiences held sway in American industry. Today, those back roads are almost unknown.

The latest line is that government bailouts are good investments. This comes from politicians, ex-politicians, TV personalities, and people who run the cocktail circuit from the west side of the District to the east side of Manhattan.

"Remember Chrysler, we all made out big on that one." is the common refrain. Skeptics might have difficulty recalling it as quite so clear cut. Sure, number three of the one-time "Big Three" is still with us, but who-got-what out of that sweetheart deal remains hazy.

Money passing back and forth between the amorphous blob in DC and listed corporations is as difficult to follow as a shell game. Finding our end of the "profits" is like trying to unravel derivatives. So we take their word that all is soundly managed. Between cigar puffs, the MBAs reassure us that "in five or ten years everyone will be sitting pretty." The public is expected to sit blinking like a corporate mistress in a James Thurber cartoon.

Tuesday, March 24, 2009

The Revolutionaries Ayers, Dohrn, and Rudd

Underground: My Life With SDS and the Weathermen
03/22/09 - NewYorkPost by Ronald Radosh

Mark Rudd worked with Bill Ayers and Bernardine Dohrn to change the world through terrorist violence.

[edited] In 1969, Rudd, Ayers, Ayers' wife Bernardine Dohrn favored "the necessity for violence in order to end the war and also to make revolution." They were fighting "a revolutionary war from within the United States," Rudd explains. When successful, the Weathermen would then build a new revolutionary army staffed by young defectors from the US armed forces.

At some level, Rudd knew that all he was doing was a terrible mistake, but, he writes, "I felt like a member of the crew on a speeding train, dimly aware of disaster ahead but unable to put on the bakes." Rudd acknowledges he was part of a "classic cult, true believers surrounded by a hostile world that we rejected. We had a holy faith, revolution, which could not be shaken."

Their attempts at guerrilla warfare ended with the 1970 New York City town house bombing, which Rudd, Ayers, and Dohrn approved. Rudd is honest about its intent, emphasizing how the bomb they built was meant to kill hundreds of GIs and their dates at a Fort Dix dance. It was, he now knows, a "fantasy of revolutionary urban-guerrilla warfare," done on their own, without police agents provoking them. He and his associates, he ruefully reflects, killed a broad and powerful movement opposed to the Vietnam War, all in the name of a fanciful goal.

Sunday, March 22, 2009

Energy Can't Get Here From There

Energy “Plan” - No New Transmission
03/22/09 - ChicagoBoyz by Carl from Chicago

Deception and Policy

[edited] We are allowing our energy infrastructure to deteriorate. The Greens and the Left are disingenuous when they propose their “solutions”, because they don’t want to do anything constructive. They decry “old school” solutions like building new coal plants, which are known, sensible and cost-effective. They promote complicated and unproven alternatives.

This New York Times opinion article shows their duplicity by clearly stating that they don’t WANT to solve the transmission problem, even if someone could wind their way through the rat's nest of financing, legal issues, and permit requirements. The article is a “confession” of their duplicity.

The US has failed to invest much in generation and transmission assets over the last 25 years. “Base load” generation consists of

  • Coal plants -- no one is building new ones because of environmental legislation.
  • Hydroelectric plants -- no one is damming rivers due to the Sierra Club.
  • Nuclear plants -- far too expensive, regulation is uncertain, and Three Mile Island hasn’t gone away.

Even if all the forces were lined up for building generation and transmission, financing is very difficult right now, and the utilities have little incentive to stretch and fund something that the states could invalidate even after giving all the permits to go forward.

The greens and the Left will sabotage any constructive solution. Remember, they dismantled the completely constructed Shoreham nuclear plant on Long Island, pretty much bankrupting the Long Island utility company in the process. Needless to say, the utility had the permits to build it, but the Left played dirty with politics and lawyers and had it disassembled.

The actual platform of the Left is:

  • Do nothing about generation.
  • Do nothing about transmission.
  • Invest a little bit in distribution.
  • Talk a lot about conservation.
  • Dance for a few years, let the problem get much worse, and hand it to the next administration. Really, it will go to the states, since the Federal government can’t fix the problems, but can make them worse thru legislation.

----
Magic Power
Could they do the magic if they wanted to?

Posts about energy.

Saturday, March 21, 2009

Begging for Medical Care

Natasha Richardson and "Medical Capital"
03/21/09 - Blog.Mises.Org by William Anderson

The famous actress Natasha Richardson hit her head in a minor fall while skiing. She developed an increasing headache and serious symptoms that required emergency treatment.

She died from an epidural hematoma, bleeding between the skull and the tough membrane (dura) surrounding the brain. The blood pools, clots, and puts pressure on the brain, contained by the rigid skull. Pressure eventually pushes down on the brain stem enough to shut down neurological functions controlling heartbeat and breathing.

Montreal does not have fast transportation to a primary hospital, even near a ski area. Why not? Patients are a cost to the system.

[edited] Canada has socialist medical care. Socialist systems tend to be undercapitalized, because equipment costs money, but doesn't increase reimbursements from the state. For example, the county where I work in the U.S. has 80,000 residents and has as many MRI machines (internal imaging) as does Montreal with millions of residents.

It took three hours to drive Natasha Richardson from the Mount Tremblant ski area to the trauma center in Montreal, because Quebec has no medical helicopter system. Helicopters are common in the USA.

In Canada, no medical device or advanced service produces income for the hospital, because no one can charge medical consumers for anything. An MRI machine or helicopter is purely a cost in a budget. Medical facilities have only so much money, and the purchase of costly machines removes funds from paying medical workers.

When a hospital in the USA (for now) purchases an MRI, that machine provides an income to the provider as patients use it. It pays for itself by delivering superior care.


Lack of medical helicopter cost actress
03/21/09 - News.Yahoo by Mesfin Fekadu (via Econlog.Econlib) by David Henderson.

[edited] Tarek Razek is Director of Trauma Services for the McGill University Health Centre, representing six of Montreal's hospitals.
Driving to Mont Tremblant from Montreal is a 2 1/2 hour trip. That is the closest trauma center. Our medical system isn't set up for traumas and doesn't match what's available in other Canadian cities, let alone in the States. Not being airlifted directly to a trauma center could have cost Richardson crucial moments. [This is what is available near a busy ski area -amg]
Richardson's initial refusal of medical treatment cost her two hours. Someone called 911 twice from her hotel room at the Mont Tremblant ski resort. She was driven to a local hospital that could not handle head trauma, then to a specialized hospital in Montreal, arriving about four hours after the second 911 call.

David Henderson:

[edited] The essence of "single payer" medicine in Canada is that only the government is allowed to pay for medical care. Thus the term "single payer."

The more serious the ailment, the more stringent the ban, with a few exceptions. So, if you want special treatment for cancer, you can't get it legally, and any doctor or hospital that tries to charge you faces serious penalties, up to and including a prison sentence. In that sense, Canadian health care is one of the most totalitarian systems in the industrialized world. It is far more extreme than the National Health Service of Britain.

That is what the world is like when you are a cost rather than a customer. When you go to an emergency room under socialized medicine, you are a pure cost. Your treatment may be directed by caring people of good will, but the institution is treating you only to raise its statistics, within the budget set at the annual (say) Medical Cost Process Review.

Another thought. What would the food be like at a socialized "free" gourmet restaurant run by the government? Would they even wipe the tables? Of course, tipping is forbidden, and please eat everything on your plate.


Did the Canadian health system fail Natasha Richardson?
03/20/09 - KevinMD

[edited] Would Natasha Richardson be alive today if she had gone skiing in the United States instead? I don't think it would have made a difference.

Epidural bleeds are treated by drilling a hole in the skull to relieve the pressure. This often results in complete recovery. However, time is of the essence, and some are wondering if Ms. Richardson would have fared better Stateside.

Community hospitals would likely lack neurosurgical coverage in remote resort areas in the United States. In fact, because of the huge malpractice risk associated with the field, a neurosurgeon might not respond to an emergency call at a community hospital.

It is very likely that Ms. Richardson would have been transported to a tertiary care center if her accident happened here. The difference is that she would have been flown by helicopter, rather than taking hour-long drives by ambulance.

Dr. Crippen in the UK blames the American wussification of today's doctor. A brave physician would have drilled the burr holes without the benefit of a CT scan (explanation and typical x-rays at the link):

It would be a career making or breaking decision. Few American doctors are brave. Defensive medicine is the order of the day. You cannot have a migraine in the USA without someone ordering an MRI scan.

Had this accident happened at base camp on Mt. Everest in a helicopter-blocking snowstorm, a doctor would likely have drilled. Had this accident happened in a ski resort forty years ago, before CT Scanners had been invented, a doctor would likely have drilled.

Then, a subdural/epidural haemorrhage was a clinical diagnosis. Apparently minor head injury, lucid interval, headache, sudden deterioration in consciousness, a dilated pupil, all adds up to an obvious diagnosis.

Medical technology has deskilled doctors.

Friday, March 20, 2009

The Policies of Bush -- I mean Obama

Bush Did It
03/20/09 - NationalReview by Victor Davis Hanson

What a difference an election makes. (sarcasm)

Obama's policy choices were so much better than the current policies of the hated President Bush  Obama  Bush. Hold on here. Just exactly who is in office? ?

[edited] President Bush was ridiculed today by critics of the Guantanamo Bay detention facility when he suggested that his administration no longer was incarcerating “unlawful combatants,” but was instead in the process of renaming them as mere “detainees.” The President also promised to close Guantanamo “within the year,” and added that he had assigned a “special task force” to look into the matter.

“Orwellian,” the New York Times fumed in an editorial entitled “Just Close It!”: “If the President’s Ministry of Truth thinks that his metamorphosing words change reality, then it is going to be a long four years.

This latest Doublespeak comes on top of the President’s ignoring his past assertions that ‘signing statements are unacceptable’ and continuing the policy unchanged from the Clinton administration.”

The Los Angeles Times joined in, adding, “Remember that Bush promise about posting pending legislation on his administration’s website before signing it into law? Well, somehow several days’ notice has evaporated into 24 hours, and now zilch.”

Much more at the link.

Wednesday, March 18, 2009

Obama Thanks Himself Reading Teleprompter

The truth about Barack Obama's Irish teleprompter "gaffe"
03/24/09 - Telegraph.co.UK by Toby Harnden

Well, it seemed a bit fishy to me and there was no video. And upon further investigation - Obamaphobes and dittoheads brace yourselves for a big disappointment - I can confirm that there was no gaffe by the president.

Harnden reports that Obama's remarks were a joke, following up on Brian Cowen's minor mistake in reading a few words of Obama's speech from the teleprompter. There is really nothing here but a simple mistake and good humor all around.

-----------
The following was my take on what was reported.

Obama Reads Teleprompter and Thanks Himself
03/18/09 - Fox News via AP

There is now strong evidence that some politicians are "replacements". They have been kidnapped by aliens and replaced with lifelike but imperfect substitutes. (smile)

[edited] Irish Prime Minister Brian Cowen gave a speech at a St. Patrick's Day celebration at the White House. It was the second time that evening he would give the same speech to two different groups.

Cowen was 20 seconds into his second presentation when it dawned on him that he was reading word for word the speech that Obama had just read from the same teleprompter.

Cowen stopped and looked back at the president to say "That's your speech."

Obama laughed and returned to the podium to offer some remarks. It seems that he then read some of Cowen's remarks from the Teleprompter. In doing so, President Obama thanked President Obama for inviting everyone over.

So, politics isn't so hard. Just read from the little screen. Probably this is why politicians have been chosen as the first to be replaced. Few of the public will notice.

Thankfully, the replacements do not think ahead. "Obama" knew that the Teleprompter had just shown the wrong speech. You would think that he would be wary of what was displayed. But, he automatically read what was there.

Fellow humans, the replacements have weaknesses, and we have some hope in our fight to regain the world.

Tuesday, March 17, 2009

The Godfather's White House

Welcome to Franicis Ford Coppola's White House
03/17/09 - PajamasMedia by Nicholas Guariglia

Thin-skinned President Corleone and his crew go after their enemies.

The Godfather, part IV
03//09 - PowerLineBlog by Scott Johnson

About the above article.

[edited] The Obama administration has taken on a thuggish mien from Obama's first days in the White House. Nicholas Guariglia captures the essence of what is transpiring by comparing Obama's White House to "The Godfather".

About the press:

The Obama-journalist relationship has been a one-sided love affair: the more they appease him, the more he disdains them. And yet, still, many journalists are all too willing to bow their heads, kiss the don's ring, and play the role of hit man, stuttering and stammering in the presence of their boss like an overly eager Luca Brasi rehearsing what he's going to say.

Monday, March 16, 2009

Regulatory Costs

Take the pressure off
03/16/09 - WashingtonTimes by Wayne Crews

Lifting heavy regulation by government would be a big stimulus.

[edited] America now has the biggest government in world history. It will spend $3.55 trillion ($3,550 thousand million), before counting President Obama's ambitious "stimulus" agenda.

Renewable energy, carbon caps, internet neutrality, and universal health care will cost trillions more. There are also hidden regulatory costs these and other proposals will impose on American business and the people.

The Federal Office of Management and Budget seeks public comment on how “to improve the process and principles governing regulation.” We're glad they asked!

Nearly 70 agencies created 4,004 rules in 2008, and the Federal Register of regulations adds almost 80,000 pages annually. These regulations on business, health, safety, and environment cost an additional $1.2 trillion annually.

Deregulation would stimulate the economy. But, federal agencies rarely admit that rules are poorly targeted or too costly. For example, a 15 MPH speed limit would save lives. A benefit could be claimed, if you ignore the costs hidden in delays. Costly agency regulation isn't affordable anymore.

The recent Consumer Product Safety Improvement Act (CPSIA) regulates testing of items intended for use by children. This "zero tolerance" regulation is threatening to close 10,000+ small businesses that make children's goods such as quilts, toy blocks, and books.

Saturday, March 14, 2009

Bailouts by John Stossel

20/20 and Reason: “Bailouts & Bull”
03/14/09 - QAndO.net by Jason Pye

John Stossel of ABC's "20/20" program asks questions about the bailouts. At the end, he asks Democratic House Majority Leader Steny Hoyer if the stimulus will work. "I hope so" replies Hoyer. Video 1:00 to 7:46.

[edited] There are six videos. In the first one, Stossel talks to 18 economists about why the “stimulus” was a bad idea. He asks House Majority Leader Steny Hoyer if debt got us into this recession, then why is creating more debt going to get us out? One economist says that one dollar taken out of the economy is one less dollar to be spent in the private sector.

-------------
Why Spending Stimulus Plans Fail
They take a dollar to give a dollar.

A Short Argument Against Stimulus
Economist Henry Hazlitt reminds us that you can't help an economy by spending when you have to hurt the economy with taxes or inflation.

Let's Counterfeit Our Way to Wealth
If the Obama team is right about economics, then counterfeiting should be a way for us all to become rich.

A Tested Stimulus Plan
The housing bubble was a giant stimulus. We are now living in the post-stimulus economy. How do we like it?

The Bank's Mistake was Trusting the Government

Their Mistake Was Trusting the Government
03/13/09 - ChicagoBoyz by Shannon Love

Rep. Maxine Waters was a major investor in OneUnited Bank, which lost heavily on its investment in Fannie Mae and Freddie Mac shares when they were taken over by the Treasury.

Ironically, she fully supported Fannie and Freddie in her congressional role on the House Financial Services Committee. That committee had oversight and detailed knowledge of what Fannie and Freddie were doing. They were lending to risky borrowers without verifying their loan applications.

Her experience is an example of what happened to banks worldwide because of Fannie and Freddie and their government supported actions in the housing market.

[edited] For leftists, OneUnited should represent the perfect small, minority owned bank. The “socially responsible” Maxine Water’s invested in the bank and sat on its board. There’s no evidence it made predatory loans. Yet, it failed.

It failed not due to any short-sighted greedy decisions of the bank’s management, but because the bank’s management and board members, like Waters, trusted that the mortgage-backed securities issued by the government sponsored enterprises (GSEs) Fanny Mae and Freddie Mac were worth the paper they were written on.

OneUnited is a microcosm of the entire financial collapse. Over the past 40 years the GSEs have piled up a vast store of toxic assets created by the attempt to get something for nothing by fooling the market about the risk of residential mortgages. Ratings firms gave the GSEs top ratings because of their implied government guarantee and oversight. Banks like OneUnited bought into the political myth and now they and everyone else are paying for it.

A comment posed that the housing crisis is a failure of the free market under lax regulation. Shannon Love replied:

[edited] The commercial real estate market has no government intervention at all, it has some securitization, and it was fine until the entire financial system tanked. You argued that private individuals cannot price risk without the guiding hand of the State. If so, then why didn’t the commercial real estate market bubble and burst before the heavily regulated residential market?

The residential market couldn’t price risk properly because the government set out specifically to blind the market to the risk of residential mortgages. The entire point of the creation of Freddie Mac and other GSEs was to hide the risk of residential mortgage lending!

Tuesday, March 10, 2009

Use Inflation to Fool People

We Were All Keynesians Then
01/09/06 - Cato.org by economist Ike Brannon
(via The Angry Economist)

Keynesian economists expect most people to be slow-witted and unable to make rational economic decisions. The government tries to fool people into working harder by inflating the currency to just the right amount. But, it doesn't work for long.

[edited] In 1961, John Muth published in the journal Econometrica, demonstrating that people thoughtfully use available information to predict future prices, and then make economic decisions based on "rational expectations".

Muth's insight was radical during that heyday of Keynesian economics. Today, it is an accepted part of the canon of economics.

"Rational expectations" says that entrepreneurs and workers do not assume that prices will be constant when they need to forecast future prices. They use all available information to estimate what prices will be, and their estimate is correct on average. They will make mistakes, but they will not be consistently wrong.

Muth demonstrated that rational expectations explained prices quite well for a market in hogs, thought to exhibit wide, predictable price swings.

Muth's paper was published at the time that Keynesian economics had become ascendant in the political world. Policymakers thought they could permanently increase employment by increasing inflation. Supposedly, higher inflation fools workers, who mistake a rising dollar wage for a real increase in their buying power. As a result, people would take jobs they would not otherwise take, and work more hours than they would otherwise work, increasing employment and output.

Muth's work explains why the 1970's economy experienced "stagflation", slow economic growth and inflation at the same time. Rational expectations predicted that people may not always make economically optimal decisions, but they can't be consistently fooled by government policies.

Monday, March 9, 2009

Publicly Challenge Politicians

Congressman McClintock Urges Opposition to Climate Change Legislation
03/09/09 - Business & Media Institute by Jeff Poor

[edited] Rep. Tom McClintock (R-CA) advised how to fight the good fight against Draconian climate change legislation.
Don’t write officials a letter. Write that same letter to the local newspaper, or put it on a blog. Mention them by name and ask how they’re voting, and other inconvenient questions.

Don’t visit them in their office. Visit them at a public meeting where you can hold them accountable in front of their constituents. Call them on a local talk show, not at their office.

Friday, March 6, 2009

Obama Team: No Nuclear Energy

Obama Administration: No on Nuclear Energy
03/06/09 - RedState by Francis Cianfrocca

Modern nuclear power can be stopped in many ways.

[edited] Energy Secretary Steven Chu told the Senate Energy and Natural Resources Committee that using the Yucca Mountain underground repository for storing nuclear waste is no longer an option. The proposed budget provides only token funding for the site.

Chu: We have better options than Yucca Moutain for storing commercial nuclear waste.

Providing nuclear waste storage has been a key barrier to expanding nuclear power in America. There are no clear alternatives to the Yucca site. America’s nuclear plants now store their waste on-site, above ground.

Chu and President Obama are saying in veiled language that they will not allow nuclear power to stage a comeback. If these guys get everything they want, America faces a future of much higher energy costs.

Thursday, March 5, 2009

The Government Bailout IS the Problem

The Failout and Krugman
02/29/09 - Angry-Economist by Russ Nelson

The economy is bad because no one can predict the future with a big government elephant stomping around. The elephant can't solve the problem, and it scares away the elves who can solve the problem. The elves are small, but they are smart and there are a lot of them. The economist Paul Krugman has spun a theory for recovery. Will he bet on its success?

[edited] The problem here is simple: credit is scarce because nobody wants to lend and nobody wants to buy. The Federal Government is threatening to borrow and spend a TRILLION dollars.

If you are bank, would you loan money if you knew that an A-grade customer was going to be spending a TRILLION dollars soon? Of course not. Even if they choose not to get their loan from you, the price of lending is going to go up. It must go up when a TRILLION dollar buyer is showing up. So nobody is lending now.

And why would anyone buy anything now. You want to be positioned correctly for the TRILLION dollars which is going to enter the market soon. You don't want to invest your money in something, only to find that the market has shifted and your investment is toast.

The failout is not the solution to our problems. It is the CAUSE of our problems, merely by being threatened as a government action.

Why is this not obvious to everyone? I blame Krugman.

I wonder if Paul Krugman has borrowed huge amounts of money and spent it already? If he hasn't done it, then why should we do it? If he doesn't trust his own theory for his own household, then why should we trust his theory for our country?

Of course he hasn't done it, because his theory requires that many people behave differently together than each person would for himself. The group is made up of individuals, so how can that be?

Krugman's theory has no legs. That dog don't hunt.

The Housing Crisis in a Nutshell

The Housing Crisis, in a nutshell
02/24/09 - Angry-Economist by Russ Nelson

[edited] Pretend that you are a bank.
  • You make a loan to somebody, say with no down payment at all.
  • Because you're loaning money to everyone that doesn't run away fast enough, everyone thinks they can own a house.
  • The price of houses rises 20%. The loan you originated is now only a loan for 80% of the value of the house, so your risk has gone down.
  • In fact, your risk has gone up; way up.
  • But because there's a school of thought that says that your risk has gone down, people are willing to buy your risk and turn it into a stock.
  • All sorts of people bought "80%" risk mortgage stocks that were really 100% risk mortgage stocks; people who shouldn't have been investing in anything that risky.
  • And because these mortgages were intermingled with real 80% risk mortgages, nobody knows which of these stocks is worthless, so nobody realy knows how much money they have.
  • Time is the only cure for this, but during that time nobody really knows how much money they have, so nobody will want to spend anything.
  • What will the stimulus do to change this? Nothing. In fact, it will make the problem worse because if the feds are borrowing that much money, nobody has any incentive to loan to more risky folks (which is everyone).

Wednesday, March 4, 2009

Obama is a Gifted Talker

The sobering voice of Mr. Market
03/04/09 - PowerLineBlog by Scott Johnson

[edited] Obama's self-awareness has been a source of his strength. Has he been misled by it?

Fred Barnes quotes Obama letting his hair down with a group of television anchors at a White House lunch. Obama assured them he likes being president. "And it turns out I'm very good at it."

What could he mean? Paul Mirengoff has rightly identified Obama's "faith in words" as his leading characteristic:

"Obama's faith in words is a function of his life experiences. His faciility with words is extraordinary, and it accounts almost entirely for his astonishing success in life. Obama has never run anything substantial other than a political campaign, so he has not yet confronted the limits of his words. He has dabbled in lawyering, where words can take on a disproportionate significance, and in teaching law, where words are the be-all and end-all."

Don't Worry, Be Happy
Obama gives the markets the back of his hand.
03/03/09 - WeeklyStandard by William Kristol

[edited] Now, Obama wants to focus on "long term" issues like health care, energy, and education -- while not showing any urgency about the banking crisis.

Instead, the Obama administration throws more money at Citi and AIG. This at best simply puts off the day of reckoning (but at some considerable cost); at worst, Obama's Treasury is fiddling while Rome burns.

Everyone agrees the toxic assets have to be separated from the rest. The Obama administration has shied away from embracing any solution. Has a single toxic asset actually been seized, separated, sold, or de-toxified? I don't think so.

The stock market isn't like a tracking poll. Polls were about the electoral prospects of Barack Obama. The stock market is about real money, about the livelihoods of real Americans.

Obama's political advisors may have told him that dealing with the banking system will be politically difficult. Treasury Secretary Tim Geithner may want to build up his political capital after a rough confirmation before he steps up to the plate. Larry Summers may not want to endanger his chance to be Fed chairman by being identified with an unpopular bank "bailout".

I'm told almost every theme in Obama's speech last Tuesday night was focus-group tested, and the speech played pretty well politically. But the markets weren't impressed. Isn't it time for Obama and his team to get up the nerve to stop playing politics and to govern?

Sunday, March 1, 2009

Government vs The Market

Government, the Downturn, and Responsibility
03/01/09 - CafeHayek by Don Boudreaux

Mr. Nouriel Roubini is an economist, interviewed by the Wall Street Journal on Februry 21. He recommended nationlizing the banks because markets have failed to price and trade assets, due to excesses, greed, and irrational exuberance. Some readers responded in letters to the editor.

[edited] Mr. Roubini makes no mention whatsoever of the government interventionism that is largely the cause of our current crisis.
  • Was the Federal Reserve's policy of holding interest rates below the real rate of interest and thereby causing a credit bubble and debt-fueled consumption a market failure?
  • Or was the market failure that market participants did not read F.A. Hayek's "Monetary Theory and the Trade Cycle" and divine the peril that was not being signaled through the price mechanism?
  • Or does Mr. Roubini consider it a market failure that lenders were coerced by the government to make mortgage loans that never would have been made based on market-driven underwriting standards?
  • Is the failure of unqualified homebuyers to decline the cheap, no-down-payment loans that lenders were coerced to offer them another market failure?
  • Was it market failure that lenders knew they would never have to suffer the consequences of reckless underwriting when they could dump their rotten portfolio on the taxpayers via the government-backed Fannie Mae and Freddie Mac?
The word "market" does not mean an old man in a turban who rubs his chin and suggests a price. It means all of the people with an interest in the problem, with intelligence and experience bought with thousands of hours of study and action.

These people are wiser and better than an academic economist who has spun theories and equations, claiming to understand what government-forced result is good for us all. But, the government pushes the self-interest of its politicians and favored interests, claiming that it knows best.

Tolerance, Muslim-Style

Tolerance, Muslim-Style
03/01/09 - AdviceGoddess by Amy Alkon

[edited] Ramzan Kadyrov is age 32, a former militia leader, and president of the Russian state of Chechnya. He finished afternoon prayers and explained "with chilling composure" why seven young women were shot in the head and deserved to die.

He said the women had loose morals and were rightfully shot by male relatives in honor killings. "If a woman runs around and if a man runs around with her, both of them are killed." Kadyrov is imposing Islamic values to strengthen the traditional customs of predominantly Muslim Chechnya.