He was curious about something, though, because in our last discussion I stated that of all the Republicans in the field***, John McCain was the one I was least likely to vote for. I think my words, at least partially stolen from Weird Al, were something like, "I'd rather clean all the bathrooms in Grand Central Station with my tongue than vote for McCain," which might be why he remembered it. So, if I didn't mind answering, he'd like to know who I voted for.

When I told him I voted for Bob Barr, he kind of shook his head. "What a wasted vote," he said, displaying that fleeting expression of haughty contempt that only a halfway college-educated Obama supporter can pull off perfectly. "Au contraire," I said. "The only truly worthless vote in Kansas is one cast for Obama." How did I figure that, the wannabe lawyer wished earnestly to know.

It's actually very simple. Bob Barr will not win Kansas. That's a given. However, a vote for the Libertarian has several slightly less than meaningless effects, not limited to future ballot access issues and avian hand gestures directed at the major parties. Yes, they are of minimal utility, but they are not completely worthless. "Follow?" He did.

On the other hand, did he think Obama was going to win Kansas? "Probably not," he admitted. About 90% probably. "So," I noted, "there is about a 90% chance that a vote cast for Obama will have absolutely no effect." If the nationwide popular vote does not count, and if the loser of a state gets nothing in the electoral college, then a vote for the loser is nothing. "Follow?" He did, but.

But there's still a 10% chance that Obama might win Kansas. Yet Kansas is the reddest of the red states, right? Right. And if Obama should win Kansas, it is highly likely that he will win other red states, right? Right. And so even if your own vote should turn out to be the single vote that puts Kansas in the Obama column, the very fact that Obama is carrying Kansas makes it highly unlikely that he will need Kansas. In short, if Obama loses Kansas, your vote doesn't count and is wasted, but if he wins Kansas, your vote is unnecessary and is therefore wasted. "Follow?" He did, but he didn't seem happy.

Labels: Obamarama

Bob Saget should not be on the Periodic Table of Awesoments

Labels: science, Things you have to click to read

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A better kind of regulation

I thought about commenting on this article, in which the former CEO of Fannie naively wishes he has made the government decide which of its mutually-contradictory goals they prioritized higher*, as if anyone in Congress would have accepted the idea that you can't have everything. But then I found a much more interesting article talking about a different kind of regulation:

A smelly rotten-egg gas in farts controls blood pressure in mice, a new study finds.

The unpleasant aroma of the gas, called hydrogen sulfide (H2S), can be a little too familiar, as it is expelled by bacteria living in the human colon and eventually makes its way, well, out...

“Now that we know hydrogen sulfide’s role in regulating blood pressure, it may be possible to design drug therapies that enhance its formation as an alternative to the current methods of treatment for hypertension,” said Johns Hopkins neuroscientist Solomon H. Snyder, M.D., a co-author of the study detailed in the Oct. 24th issue of the journal Science.

The thing that caught my attention, though did not surprise me, was the scientists' attention to method - creating a drug - rather than goal. If the goal is to relieve hypertension by "enhancing" the formation of H2S in the colon, there are plenty of dietary alternatives that are actually a lot more fun to eat than pills.

While science can tell us all the benefits of barking spiders**, it seems to me that if one wants to make egg farts, it's best just to eat eggs.

* which is, at its heart, the main reason regulation fails and will always fail: its goals and mandates are always anti-reality or mutually contradictory.

** Not that we really didn't know already. Surely everyone has experienced the reduction in stress that accrues immediately following a particularly successful H2S release - one whose pitch, volume, length, and aroma are in such perfect balance that they send Leonardo DaVinci himself in search of some Lipton onion soup. Unfortunately, that reduction often only lasts until I am sent to sleep on the couch.

Labels: science, Things that go bark in the night

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The goblins are upon us

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All about the timing

Jack Frost has a sense of humor:

Snow fell as the House of Commons debated Global Warming yesterday - the first October fall in the metropolis since 1922.

This is actually becoming something of a tradition. I guess there's a reason they changed the name to climate change.

But here's the funny part:

In order to combat a projected two degree centigrade rise in global temperature, the Climate Change Bill pledges the UK to reduce its carbon dioxide emissions by 80 per cent by 2050.

I'm curious and don't know the answer to this, but has there been a single country that has reduced its emissions by even 30%? It's so easy for politicians to promise that the next generation will carry some burden that the current one is unwilling to bear, but as we've seen with the current financial issues, as soon as people start to get scared for their jobs, all politicial rules go out the window.

Any politician who believes that future government is going to purposely put its population through a depression for the sake of global warming is a fool.

And here's the unsurprising part:

The bill creates an enormous bureaucratic apparatus for monitoring and reporting, which was expanded at the last minute.

It's actually a double-irony effective solution. Carbon emissions come from people working and producing things. If we instead hire them to work for the government, problem solved.

Labels: Global Climate Progress

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I'm gonna miss this guy...

You know the worst part, I never even made up a cool label for his posts. Just "McCain."

How sad is that?

Labels: McCain

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I am completely boggled

Mogambo quoted John Embry this week to the effect that, "The recent events that have occurred on the U.S. financial scene can only be described as mind-boggling." And I had been looking for a word to adequately describe my mood concerning recent financial events, and it's not "scared" and it's not "mad." I'm not particularly angry or disappointed, I am a little frustrated, but mostly I'm just boggled by stuff like this:

The still-tight credit markets are anticipating a half-point interest rate cut from the Federal Reserve this week, but investors are worried it won't be enough to quickly revive the economy...

Christopher S. Rupkey, chief financial economist in Bank of Tokyo-Mitsubishi UFJ's economic research group in New York, said he hopes Wednesday's anticipated rate cut by the Fed will be "the final blow that brings Libor down here. They're running out of ammunition."

Of course it won't quickly revive the economy. With the Fed Funds rate at 1.5%, our problem is not that interest rates are too high. Nor will it bring the London Interbank Offered Rate (LIBOR) down, because the problem with LIBOR is not that the Fed Funds rate is too high, it's that banks will not lend to each other at such low rates. With the 1-month LIBOR rate at 3.2%*, the closest thing there is to a market interest rate is telling us that Fed rates are too low. And yet the Fed is preparing to lower them more.

In tangentially related news, we attacked Syria yesterday, apparently in hopes of sparking a Jihad that will stretch from the Mediterranean to China. And speaking of China, our ally Pakistan is apparently turning to them "to safeguard the country’s sovereignty and territorial integrity." Think those words through, considering that it is the US who is currently raiding and bombing them in search of terrorists.

Is it just me, or has this administration gone completely batshit crazy in the last 6 months?

* If that rate itself is not a lie, as some have alleged.

Labels: Financial Death Spiral

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Congratulations Bethie and John

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More than they bargained for

It turns out that Sarah Palin really is a maverick:

ALBUQUERQUE, New Mexico (CNN) -- With 10 days until Election Day, long-brewing tensions between GOP vice presidential candidate Gov. Sarah Palin and key aides to Sen. John McCain have become so intense, they are spilling out in public, sources say.

Several McCain advisers have suggested to CNN that they have become increasingly frustrated with what one aide described as Palin "going rogue." ...

A second McCain source says she appears to be looking out for herself more than the McCain campaign.

"She is a diva. She takes no advice from anyone," said this McCain adviser. "She does not have any relationships of trust with any of us, her family or anyone else.

John McCain is not a maverick, he's a liberal. He's a progressive and a press whore who has spent the majority of his career cultivating, with a willing press, a reputation for independence, which in his case means a willingness to vote with the Democrats when it is politically popular to do so. Then he went out and got another Republican with a reputation as a maverick and expected her to fall in line behind his advisors and his themes. And it didn't work out that way.

So now she's a diva. She's "going rogue." Last time I checked*, the definition of maverick was, "a lone dissenter, as an intellectual, an artist, or a politician, who takes an independent stand apart from his or her associates." They call her a maverick in public and then privately** complain that she really is one. Maybe she's just a smart enough rat to get off the sinking ship first. Or maybe she really is a maverick who understands now what I wrote a week after she was nominated:

Palin doesn't need McCain anymore. She's a hero. She's a star. She's every bit the celebrity Obama is, and she is on top of the world. Right now, barring a President McCain running for re-election, the 2012 GOP nod is hers... [and she'll be] stronger for not having been besmirched by the residue of McCain.

In dubbing Palin a maverick, the McCain campaign turns out to have accidentally told the truth about something. But they sure don't seem very happy about it.

* 5 seconds ago.

** by which I mean, "anonymously and to the press"

Labels: Great Expectorations, McCain, Palindrones

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Joey the Plumber

(Hat Tip: Huck)

Labels: Obamarama, press

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Baby Seal Hunt redux redux

John McCain foresees the bad end of the club:

ALBUQUERQUE (Reuters) - Republican presidential nominee John McCain, trailing in the polls, raised the prospect on Saturday of a complete Democratic takeover of Washington as a reason to elect him over Democrat Barack Obama in 10 days.

McCain, struggling to defend New Mexico and other Western states that typically vote Republican from going to Obama on November 4, used the argument to try to change a gloomy election picture.

A funny thing happened on the way to the permanent Republican majority.

In the late 90s, I used to sit around a lunch table with an eclectic group of computer programmers, a virtual Island of Misfit Toys whose philosophies ranged from libertarians to conservative pro-life Republicans to atheist, socialist Democrats, the latter of whom who worried what a GOP congress and president would mean for the house that FDR and Johnson built. When their worst fears were realized in 2001, it turns out they needn't have worried a bit: they were just as surprised as I to discover that the GOP had no intention of being different; they only had intentions of taking the Dems' places as the effective looters of our nation's vast wealth.

Instead of following the Contract with America that allegedly put the speaker's gavel in the hands of America's adult population for the first time in a half-century, the GOP chose Karl Rove's* admonition to permanently disinherit the Democrats by taking over their popular positions - a vastly-expanded education bureaucracy, increased government benefits, an ever-growing, intrusive government as the solution to every societal ill - while maintaining the pro-life and pro-family rhetoric that resonated so well with the GOP faithful. They tried to out-Democrat the Democrats while holding over the heads of their faithful the idea that just one dead Supreme Court justice could fulfill their long-pursued ambitions.

There was only one problem they failed to consider: half-assed socialism works even worse than the real thing. Government actions have consequences, usually unforeseen and unhoped for, which demand other actions so the cycle can begin anew. As the government now forces banks to sell them preferred stock and bails out favored industries with borrowed dollars, as they run a trillion dollar deficit on a three trillion dollar budget, as they implement trading rules meant to keep the stock market afloat, it falls daily further and further**, symbolic of the complete implosion of our debt-saturated consumer culture, a culture underwritten with artificially low interest rates, continuous inflation, and perverse financial incentives. They should be thankful the election falls before the middle class receives their 4th quarter 401(k) statements or there might not be a Republican elected anywhere.

If ever there was a party that deserved almost complete destruction at the hands of the electorate, it is the national GOP. They wasted a balanced budget, they wasted momentum, they wasted the nation's one-time desire to move from the creeping socialism of the 60s and 70s toward federalism and freedom, instead cloaking their own meddling and centralization in words designed to maintain a fearful population in cowed subservience. If we do not spend $750 billion to buy crappy burritos, the market will crash. If we do not bail out AIG and Chrysler, the economy will fail. If we don't print money to buy commercial paper and bad mortgages and bank stock, if we don't guarantee the bad bets of our foolish mortgage lenders, we shall all drown in lakes of blood. They did those things, and yet the horrors they promised to avoid are coming to pass anyway, armed with a tax bill our grandchildren will labor to pay off. It was immoral and in many cases illegal to bind the unborn with such a burden. And it didn't work and could never work. You simply cannot build a castle in a swamp and expect it to stay up, no matter how many senate hearings you hold or bridges to nowhere you build.

It's a wonder that the GOP has picked for their baby seal a politician who has spent the last 20 years running against them from the left. It is not a wonder that such a stragedy will not work. McCain is not Bush, at least not the Bush that the United States elected the first time, when the GOP ran both houses of Congress. But he has been for 20 years the Bush that we ultimately got. Though he now parrots the words that got Republicans elected to run every branch of government a decade ago, the voters seem in the mood to elect an empty suit Democrat to take the reins, and that by a wide margin. And I fully expect that beating will carry down the ballot to the point that Republican dog catchers may be declared an endangered species, assuming the Democrats want to save a few for posterity's sake. If the people are going to get socialism, it appears that they prefer it straight.

And it's going to be horrible, as it always is. But at least those who support freedom, free markets, limited government, and federalism will no longer have to listen to Republicans who claim they are giving it to them while nationalizing banks and insurers and the housing market and schools and prescription drugs and marriages. When the government owns all of our homes and businesses, at least we will have an honest socialism.

I don't fear what Obama will do, assuming he can keep his promises***, because when he is rejected, his statist philosophy will be rejected with him. It's going to be a nasty 4 or 8 years; I am prepared to live with that. It's still not as bad as getting epic socialist failure and having the politicians call it a free market.

When the Republicans fail to offer an adult alternative to the infantile Democrats, the best thing the voters can do is send them back to school in hopes that they will grow up. Or, as they are about to do, they can make a fur coat of them and leave only bloodstained snow behind.

* The second time he got Bush elected was truly a political miracle, as by then it was obvious to everyone but conservative columnists that Bush was no conservative - hell, he was barely recognizable as a Republican. But his expertise never transferred well from elections to governance.

** Almost to the point where I would consider buying index funds with one of my still all-cash retirement accounts. That day seems about 6 months off, maybe a bit more.

*** which I don't.

Labels: democrats, republicans

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A suggestion for Plan 14

You're gonna need a bigger boat.

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Jozum asked if I needed a shower

He wasn't going Barney on me, I had just confessed that for the first time in my adult life, I voted for more Democrats than Republicans. I mean, sure, the score was 1-0, but still.

The ironic thing was that that particular race was pretty hard for me to decide. On the GOP side was Russ Connor. Nice kid with a nice family. I know him from church and my wife works with his wife. I'm sure he'd do a fine job managing the $15 a year I pay in property taxes to the township so they can keep our graveyards mowed. On the Dem side was Don Delaney. I also know him from church and from the volunteer fire department - he's the guy who certified my CPR last time around. Also a good guy. Smart guy. Which is why I'm not sure why he's a Democrat.

His wife and my wife had the "What do you mean you're not a Democrat?" discussion a few years ago, and I think Faye had no idea what a Libertarian was*. The feeling I got is that like a lot of folks here, they're Democrats like they're Irish. It's just what they are and have always been, and no reason need apply. I voted for Don because he's the sort of chap that you vote for, even with his affiliation handicap.

The rest of the ballot was easy: for the Libertarians and against the judges**, and if someone was running unopposed they didn't get my vote.

So I've done my civic duty. Whatever happens from here on out, it's all y'all's fault, not mine.

* Technically, while I'm a Libertarian, Rogue is a Republican. But you'll have a hard time getting her to admit it.

** There were no taxes, bond issues, or constitutional amendments to vote against, leaving me feeling strangely incomplete. But I shall endeavor to persevere nonetheless.

Labels: politics

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Dump the old guys and just dance

(hat tip: Rogue)

Labels: Obamarama, Palindrones

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God Bless America

Seriously, what other nation could ever come up with this:

Expect to see Palin look-alikes galore this Halloween. Wiggles Dog Wigs earlier this month started selling Palin-style wigs for canines after a customer request. So far owner Ruth Regina says she's sold about 150 of the wigs, which start at $39 - making it a top seller. Meanwhile, owner of Miami Beach-based WigSalon.com, Joseph Aronesty, said strong sales of $25 "Sarah Palin style wigs" indicate she'll be the hit character of the season. Four wigs that Aronesty re-branded after the Alaskan governor now make up about 25% of his weekly sales, and customers are buying approximately 10 times as many of those pieces as they did before Palin hit the national scene.

Whatever happens over the next few years, however bad the economy gets, whatever blood runs in the streets, if there's one people who can dig their way out of it, it's us.

Don't get me wrong: Americans are pussies. There has never been a nation that spent more money on woody pills and aspirin, on salve for restless leg syndrome or on therapy sessions to banish bad memories than us. There has never been a nation as medicated, as distracted, as pampered as us. There was also never a nation that could successfully and profitably sell dog wigs during a recession.

As pussified as we've become, as whiny as we've become, as drug-addled and dependent and disgustingly obese as we are as a nation, there remains something in the American character that can take any challenge and turn it into an opportunity for improvement and profit. What we have lacked since WWII*, to be blunt, is a challenge.

The sooner government efforts to keep us pacified and pussified and spending money we don't have fail, the sooner we can get back to doing what we do best. Americans are whizzes at solving problems, and boy howdy do we have problems. I sleep well at night knowing that I'm surrounded by Americans, a people seemingly genetically predisposed to turn even the most preposterous misfortune into an opportunity for profit.

* Maybe since 1865 or even 1812. Seriously, it's been 195 years since a foreign army has marched on our soil. Sometimes I think we just create problems because we have nothing better to do.

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A big fat dose of Keynesianism

And lots of rich people we can tax

Labels: democrats

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Another bucket for monsieur

And finally, monsieur, a series of wafer-thin mints:

Plan 12 (CNBC): A second economic stimulus package gained sudden momentum after Federal Reserve Chairman Ben Bernanke urged Congress to consider a new plan and the White House said President Bush was "open" to the idea.

Plan 13 (WSJ): The Federal Reserve has created a new facility to ease the stress in the short-term debt market. ...[T]he Fed will provide funds to a private-sector controlled effort to purchase assets from U.S. money market mutual funds.

Plan 14 (CNBC): Having already passed one piece of legislation to rescue the housing sector, the government appears ready to embrace a bigger and more costly plan, hot on the heels of its historic efforts to bail out financial firms.

Since the government is fully determined to eat its way out of the present obesity crisis, there seems to be nothing left to do but dive behind a chair. Bon appetit.

Labels: Financial Death Spiral

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I have a few more pictures to burn up before this guy goes away. Which will be nice.

Labels: McCain

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Republicans and free markets

The former do more harm than good to the latter:

TOPEKA - The campaigns of Democratic Rep. Nancy Boyda and Republican challenger Lynn Jenkins continued Thursday to spar over Jenkins' stance on the federal minimum wage...

Jenkins said during the debate, "On the minimum wage, I don't think that we need to mandate that. I'm a free-market girl. Let the free market decide.''

Questioned after the debate, Jenkins said she had been talking only about an increase, not the minimum wage law itself.

A free-market Republican, then, is one who does not support a change in a current governmental price control, but does support the existing price control, which she opposed when it was proposed as a change to the former price control, which she supported when it was the existing price control but opposed when it was a proposed change to the price control before that, which she supported. This you call "letting the free market decide," unless you are asked about it, at which time you simply claim to have been misunderstood.

This is fabulous for the free market because once all the Republican* mucking around in the markets manage to screw them up to the point that governments all over the world feel the need to step in and save thousands of incumbents' jobs with trillions of taxpayer dollars, non-existent free markets** will be in a perfect position to take the blame.

* Mucking is not limited to Republicans of course, but the Democrats don't do it while pretending they are not doing it. They fully expect to be noticed doing it. In fact, they claim to be doing it even when not doing it.

** Well there actually are free markets - used books, ebay, farmers selling tomatoes at the car wash, kids selling joints at the school lunch table - but none of those are getting blamed. This blame belongs to the free market of heavily-regulated and quasi-governmental financial institutions acting under the auspices of Congress and a federally-chartered banking cartel that sets interest rates at a secret bi-monthly meeting and creates legal tender paper money out of thin air.

Labels: republicans

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Government suppressed the embarassing truth

And all I got was this crappy recycled diaper t-shirt:

A government report that found old-fashioned reusable nappies damage the environment more than disposables has been hushed up because ministers are embarrassed by its findings.

The Department for Environment, Food and Rural Affairs (Defra) has instructed civil servants not to publicise the conclusions of the £50,000 nappy research project and to adopt a “defensive” stance towards its conclusions...

A Defra spokesman said the government was shelving plans for future research on nappies.

It's easy being green when your therapy consists of purely symbolic actions that give you a feeling of smarmy insufferableness moral superiority and intellectual enlightenment far beyond that of the benighted masses. So long as one has a government that will fund that therapy and, what's more important, conveniently suppress any findings that might surprise or upset you, there is no cost or obligation.

But when word does leak out that scientists sent to find justification for more spending guest starred on Mythbusters instead, it is a ton of fun to watch the green commenters, based on the facts in a 7-paragraph newspaper story, explain precisely how those who actually did the study got the science all wrong.

Stories like this make being an environmental skeptic worthwhile.

Labels: environmentalism

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A nightmare for Huck

Labels: democrats, demotivators

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Fairness

Charles Krauthammer notes Obama's definition of fairness:

Gibson then responds, but historically when you cut the rates, it increases the government revenue. So if you increase the rates, you may actually hurt the government and decrease its revenues. And Obama persisted in saying he would still do it on the grounds of fairness.

So spread the wealth. You raise the capital gains rates even if it hurts the government, and add Biden's statement that paying taxes is patriotic.

Charles Gibson is incorrect on two points. The first is that when you cut rates, it does not result in more revenue, or cutting rates to zero would result in the most revenue of all. Cutting rates up to a certain point merely results in less than the less you might expect due to resultant economic growth. The second is the assumption that maximizing government revenues is good. But be those as they may, it seems to be beyond the reach of the press to even examine the type of "fairness" that Obama seems to have in mind here.

Fairness is usually assumed to be:

• Giving everyone what they deserve,
• Giving everyone the same, or
  
• Making people pay in proportion to what they can afford.
  

It is usually the first two that are at issue, and they are not always so easy to unwind, since giving everyone the same sounds great, unless they have not done the same to deserve it, and then who is to judge?

Jesus told an interesting parable in Matthew 20 that might lead us to an answer. "The kingdom of Heaven," he said, "is like a certain landowner who went out one morning to hire laborers to work his vineyard." He hired a bunch of guys in the morning, agreeing on a wage, and they worked all day. About noon he went out and hired some more, and they worked all day. Twice more in the afternoon he went out and hired more and they worked the part of the day that was left. When the day was over he called them in reverse order and paid the guys who worked only a few hours the whole day's wage.

Rather than being immediately jealous, the guys who worked all day were pretty pumped. "Obviously," they thought, "we deserve more money, having worked more." They didn't get it. When they got paid, it was exactly the same as everyone else, but it was also what they had agreed on when the day started.

When they got their pay, then they were pissed and murmured against their employer, who rightly said they had no grounds for complaint; they had agreed to work for that amount. His conclusion was that it was perfectly within his rights to do what he wanted with his own money, and if wished to pay others more, what concern was that of theirs?

And while I suppose there are a few lessons that can be drawn*, I think the most important one is that what a person agrees to work for is by definition a fair wage. It is what he deserves. He has no right to complain about anyone else, how much they work, or how much they make. And if that's the case, then there is simply no grounds in fairness for taking from those who have more simply because they have more and giving to those who have less simply because they have less**.

And while the owner ultimately gave everyone the same, there is no argument for fairness based on that fact. He did so simply because he wanted to and it was his money to do with as he wished. It was an exercise in freedom, not in fairness. He would have been within his rights to pay the last workers half as much or even twice as much so long as they agreed to it beforehand.

The third, the Democrat position, is ludicrous. Imagine the fairness in charging for goods like food or gas based on the ability to pay. You make $40k and the grocer charges you $2 for a loaf of bread. Should he charge your neighbor $4 for that same loaf just because he makes more or because his wife works? If not, then there is no argument for "fairness" in making someone pay more for the same governmental protections of life, liberty, and property***. In fact, one could argue that since the rich actually get less government benefit (they do not use public schools or public transportation, do not collect unemployment, etc.) they should actually pay less in taxes than the poor, just like those who use less electricity will have a lower bill at the end of the month than those who use more.

Mike T makes a good point about Democratic fairness, being based as it is on constantly comparing what you make and what others make and attempting to gain from their labor:

At the end of the day, it's the sin of envy and covetousness. People who think like Biden covet their neighbor's property. They begrudge them the fact that we're not all the same.

They, like the whiners in Jesus' parable, begrudge the fact that others seem to be getting a better deal through no effort of their own. What that results in, even while we believe that what we make is ours, is an attitude that what others make is also ours. We may wrap our covetous motives in the high language of fairness, we may idolize Robin Hood because he cares about us enough to steal for us, the less fortunate, but it in the end merely justifies our innate desire to plunder the property of others.

Luckily for us, we will always find plenty of politicians who will do that for us in exchange for power over us.

* The most obvious being, start your job search late in the day.

** Which is why giving to the poor is an act of mercy, not fairness.

** Well, I suppose that someone could make the argument that a person with more property to protect should pay more for that protection, like he does for insurance. It might even be a decent argument. I have just never heard it made.

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A larger than expected drop

There's been a strange theme appearing in the press lately:

(CNNFN) - Government data show construction of new homes plunged by a bigger-than-expected amount in September as builders slashed production to the slowest place since early 1991...

(USA Today) - A larger-than-expected drop in U.S. retail sales yesterday triggered another rout in [Latin America's] stock, bond and currency markets as investors began betting on a prolonged slump.

(RTTNews) - Industrial production fell by much more than expected in the month of September, according to a report released by the Federal Reserve on Thursday, with the report also showing a bigger than expected drop in capacity utilization.

The thing I find funny about the above is not that everything's going to pot* but that even a year and a half into the inevitable but expertly-unexpected credit bubble bust, everything that happens is still unexpected.

Oil prices** are a great example. CNBC's Peter McGuire was saying a mere 3 weeks ago that oil was going straight back up from $110, but now that oil has dropped to $70, he has revised his near-term target to $60, a significant change from the near term target of $200 he pronounced last May. I guess it's considered expertise to be able to state confidently that whatever trend is in effect will continue to the next really round number, but that just makes experts look like fools when the sand in the gears starts making the whole machine sputter and pop and grind in seemingly random fashion. It's not just that one guy on TV is a fool or an ignoramus, it's that all of them are the latter***; no one can tell what is going to happen next because we are in the midst of a crisis where many things could happen.

The way such published "expectations" come about in the first place is less useful than asking one person who doesn't know anything for his opinion. Press agencies collect a lot of opinions about numbers from a lot of people like Peter who don't know anything, average them out, and that becomes the "expectation" against which reality is measured****.

Of course, asking a bunch of people who don't know anything for their opinions and then treating them as if they are meaningful has a long tradition in America. We call them elections. And the results are generally just as useful.

* It's not really funny in a laughing out loud sense, but there are some pretty funny side effects.

** I have no idea where they are going in the near term. I hope they go lower before they go higher. I expect they will go much higher in the long term. But I don't know anything. Neither do the experts.

*** you just know what this footnote is supposed to say, don't you?

**** Thus it's not even necessary that anyone actually expect that. Averaging in such a way is like saying that if half the fans expect the Vikings to win this weekend and half the Bears, then the consensus expectation is that they will tie.

Labels: Expertise and Other Myths

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Labels: demotivators

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No comment is sufficient

CARACAS (Reuters) - Socialist Venezuelan President Hugo Chavez mocked George W. Bush as a "comrade" on Wednesday, saying the U.S. president was a hard-line leftist for his government's intervention of major private banks in the U.S. financial crisis.

Chavez, who calls capitalism an evil and ex-Cuban leader Fidel Castro his mentor, ridiculed Bush for his plan for the federal government to take equity in American banks despite the U.S. right-wing's criticism of Venezuelan nationalizations.

"Bush is to the left of me now," Chavez told an audience of international intellectuals debating the benefits of socialism. "Comrade Bush announced he will buy shares in private banks."

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Chaotic Neutral is unpatriotic

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When your only tool is a hammer

Every problem looks like a nail:

Now that the US consumer has finally hit the wall, there’s growing speculation the Federal Reserve will push its interest rate pedal to the floor.

So if I understand it correctly, the solution for economic slowdown is a rate cut. For deflation, it's a rate cut. Banks not lending? Rate cut. Now apparently consumers can't afford to spend any more money. Solution? Exactly.

But given that following the last emergency* rate cut, the Fed Funds rate is a whopping 1.5%, it seems that comrade chairman is growing dangerously close to running out of hammer.

Then all we'll have left is sickle.

* emergency being a euphemism for "timed to make stocks go back up."

Labels: Interest Rate Follies

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Something wrong with this picture

Gold prices from our good friends at ajpm.com

Labels: Pretty soon you're talking real money

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Plan 11a

By now even el Presidente understands that Plan 9 was really, really stupid*. That makes it time to do something else with all that money:

The US government Tuesday outlined three new initiatives to aid financial institutions amid a historic credit crunch that has frozen lending around the world...

Bush said the funding will come from the $700 billion set aside for an auction plan under the emergency legislation of two weeks ago.

The initiatives include a combination of questionable** economic ideas from the British, Germans, Irish, and maybe even the hungry Icelanders. These ideas are then rolled into a plan, rated investor-quality by captive, friendly talking heads, and then sold retail to an unsuspecting public.

[Treasury Secretary] Paulson called the recap/equity idea "objectionable" but necessary, acknowledging that it was not his first choice in attacking the credit problem.

Objectionable, to be sure. And the sad part is that the only worse choice was his own Plan 9.

But here's the funny part:

The Treasury Secretary emphasized that the measures aimed to restart bank lending would also stem the tide of home foreclosures.

The government is going to spend hundreds of billions of borrowed and newly-created dollars buying bank stock and extending FDIC insurance to checking accounts, and this is going to ensure that people can make mortgage payments on houses they can't afford and that are worth less than the balance on the mortgage. Seriously, he said that.

Surely he knows what he's talking about, right?

* Not to mention dishonest. I mean, wasn't it sold as, "You've gotta do this TODAY or the world will end"? It's almost 3 weeks later and not a single crappy burrito was ever purchased. I guess it couldn't have been that critical, huh?

** One might call them "subprime."

Labels: Plan 9

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And too late to plant

Iceland illustrates what eventually happens when you try to run an economy via imports paid for by financial speculation:

Oct. 13 (Bloomberg) -- ...Icelanders are flooding the supermarkets one last time, stocking up on food as the collapse of the banking system threatens to cut the island off from imports...

Iceland's foreign currency market has seized up after the three largest banks collapsed and the government abandoned an attempt to peg the exchange rate. Many banks won't trade the krona and suppliers from abroad are demanding payment in advance. The government has asked banks to prioritize foreign currency transactions for essentials such as food, drugs and oil.

Iceland is not some dinky little third-world country*. With per-capita GDP among the five highest in the world, a 99% literacy rate, a life expectancy among the world's best, and an advanced banking system that lent billions all over Europe, it is considered a "modern" economy if not a particularly diverse one. They have a huge welfare system, low unemployment, housing subsidies, and a relatively even distribution of income. It's basically a social democrats' paradise.

And in the past few years Iceland has enjoyed the rewards that accrue from "hot" dollars - currency speculation, carry trades, and all manner of financial shenanigans - as opposed to production. Because Iceland's interest rates were higher than the artificially-low US ones, currency traders have gone short the dollar and long the Krona. Not only does this give a better return because of interest, but because the Krona is so small, it has the effect of artificially raising its value**, making imports into Iceland cheaper. Everybody has a really great ride until the tide goes back out. The tide has gone back out.

Now with their currency destroyed, they can't import all those necessities that everyone couldn't wait to sell them just a few months ago. That's a manageable problem in some places. But when you live on an island where everyone relies on the government and where all your necessities come from others, it takes a little more serious turn.

The population is about the size of that of Pittsburgh, Pa. Which makes me wonder: how will Pittsburgh react when our currency, which is also runs an economy based on imports and financial shenanigans, goes the way of the Krona?

* Well, it is today. It was not considered such 2-3 weeks ago.

** Promising a return of 22%.

Labels: Financial Death Spiral

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Don't teabag me, bro

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Prelude to an ugly Christmas

So anyway, I abandoned Rogue and the kids this morning to head in to Wally World to get my oil changed, pick up some WD-40 and maybe some potting soil; you know, your basic man-shopping marathon.

And when I got down to lawn and garden, I noticed that the selection and floorspace dedicated thereto had been greatly reduced in size. That's understandable, I guess, because thanks to global warming, autumn got here plenty early* this year. But I was not prepared for what had replaced it: Christmas.

Christmas everywhere. Bells are ringing, Children singing, and we're not even half way through October yet. By my calendar, Christmas is still 10 weeks away. Aren't we missing some pumpkins and pilgrims before we jump right into Rudolph?

So either somebody moved Christmas and didn't tell me, or the folks who supply Americans' seemingly** insatiable appetite for plastic baubles are planning a very unusual Christmas shopping season this year.

* With winter looking like it's not too far behind.

** By which I mean, "formerly."

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Wife of Iron

So anyway, it's been a little hectic around here because we got three new foster kids* straight from PPC yesterday. The lovely and gracious Rogue picked them up rather than having them dropped off here, which resulted in her having to meet a very hysterical gaggle of aunts who informed her that these kids would cry the whole time they were with us, which time will likely be counted in months, not days.

Unfortunately for me, Rogue still had to leave at 5 this morning for an all-day Students in Free Enterprise conference in Arkansas, which meant that yours truly was left with five kids under the age of three, three of whom were as scared and confused by this strange turn of events as you might expect. I had planned about 6 hours' worth of yard/garden work, to which I now got to add meals, naps, diapers, and feeding an underweight infant who barfs more than any baby I've ever seen. Thanks to a ton of help from son T-Lu***, I got everything done, and crying was not really a problem except at naptime.

Unlike other kids we've had, this wasn't "I'm scared of bed because bad things happened there" crying, but rather "I don't feel like a nap so I'm going to break you" crying. Four took naps anyway, the other spent his entire hour and a half very loudly not napping****. Sister had one crying fit after dinner, about a half hour before Rogue rolled in, but because they had been outside all day I think she was just tired. So was Rogue who, having spent 14 hours driving to Arkansas and back with an SUV full of college kids, arrived home just as tired as I and for pretty much the same reason.

Well, apparently the kids are used to getting their way with women by crying, because as soon as Rogue rolled up, on came the waterworks. Don't want a bath, don't want pajamas, don't want to go to bed, and to top it off, I'm going to refuse to look at you. In short, typical power trip games from 2-year-olds who are used to running a household.

As Rogue put the first cryer firmly in bed, I heard her say, "I know what you're doing, and I just want you to know that I am immune to your tears." Then she left the girl crying in her bed. By the time she put the next one down 5 minutes later, the first one was sound asleep.

Good woman, that one.

* two girls and a boy, which (for those of you keeping track at home) makes the score 4 girls and 1 boy here presently, but about 10 girls to 3 boys over the past couple years. Though Rogue and I asked God for boys**, we have resigned ourselves to the idea that our calling in life presently is to put little girls back together.

** for no other reason than that they are simpler. Not easier, just simpler.

*** Who is going to be a heck of a dad someday.

**** That's fine by me, because having been a dad for almost 10 times as long as he's been a kid, I realize that he's not going to break*****; all that crying is just going to tire him out.

***** he will be molded, however.

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We gone to Peru BRB

Labels: Save the Wails

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Gotta do something with them

My commie Spanish professor had never even heard of this. I'm so disappointed. But I did share it with the class.

Labels: Save the Wails, Stuff Jaley Can't Watch

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Place your bets

Now that Plan 11 has failed to instill confidence*, it is obvious that we need a Plan 12. Bets are currently open, so pick a number and a color and guess what the Fed will lend, the Treasury will buy, or the SEC will ban next.

Possible examples:

• The SEC will draw up a list of 799 stocks and their "target prices." Sales of such stocks below the target price are prohibited.
• In order to discourage closing out of losing positions, the IRS will institute a tax on Capital Losses.
• A pizza party for you and 10 of your closest vice presidents at Bernanke's house for every interbank loan opened.
  

One bet per person, void in New York state and anywhere else I despise.

* by which is meant, "make the stock market go up."

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Labels: Plan 9

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Plan 11

Coming to a bank near you:

Having tried without success to unlock frozen credit markets, the Treasury Department is considering taking ownership stakes in many United States banks to try to restore confidence in the financial system, according to government officials.

Treasury officials say the just-passed $700 billion bailout bill gives them the authority to inject cash directly into banks that request it.

In the news today, Britain nationalized a number of its biggest banks, Iceland managed to borrow enough from Scandinavian countries to stave off national bankruptcy, Germany nationalized its second-biggest real estate company, the ECB promised to provide unlimited amounts of money to whoever needed it, and for the first time ever, the Fed lowered rates in conjunction with five central banks on four continents. The LIBOR overnight rate, which measures banks' propensity to lend to one another, is up another 1.5% to 5.4%.

So I ask each traveler five questions three questions, and I hope the world's financial systems are not thrown into the Gorge of Eternal Peril until after you've all had time to answer the five questions three questions.

The first is, if Treasury officials have this magical power, why is it that no one heard of it until the day after Britain did the same thing?

The second is this: following Plan 9 last week and Plan 10* last night, will Plan 11, the outright nationalization of even healthy banks**, restore confidence in the banking system?***

The third is perhaps most important: is it a good idea to mail order some heirloom vegetable seeds tomorrow before Plan 12 comes out?

* The direct purchase of hundreds of billions in commercial paper. In case no one noticed the progression, let me spell it out: last year the Fed began lending larger amounts of money to big banks using Treasurys as collateral. Then they started accepting asset-backed crap burritos for collateral. Then they started lending to companies, like AIG - which is now getting another $40b on top of the $85b they got last week - accepting business assets as cvollateral. Now they are lending directly to companies and asking for no collateral whatsoever. All of these "facilities" were designed to restore confidence; not one of them has done so.

** Sure there's such a thing. Just ask the FDIC.

*** Because time is running so short, I'm going to give you the answer to this one: It's no. If I had any remaining respect for the intelligence, wisdom, or foresight of Bush, Bernanke, or Paulson I would honestly believe they were purposely trying to destroy confidence. There is no better way to destroy someone's confidence in your abilities than to say, "Well, let's try this" and then immediately say, "Hey, let's try this other thing." There is probably no better way to get people to sell bank stocks than for the government to take a bunch of preferred stock. I mean, why own a bank except for the dividends? And the government will be taking the dividends, assuming banks still earn any money. There is no better way to increase volatility than to chase people out of the market through constant interventions and random rules changes - seriously, has there ever been a regulation more stupid than that list of 799 specific stocks that no one can short between two arbitrary dates? A couple of the companies on the list even petitioned the SEC to take them off of it. It's obvious to everyone that our dear leaders are just thrashing about with no idea what they're doing. What only they fail to grasp is that at this point it does not matter what they do - they are themselves the destroyers of confidence.

UPDATE: There's now a name for that: The Paulson Effect. That's got to be the funniest thing I've seen all day.

Labels: Financial Death Spiral, Plan 9

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Party like it's 1873

Those looking to 1929 for a parallel to today's economy need to look a bit further back.

Labels: history

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I knew it was over when JD gave up

The London Times notes that human evolution is toast:

Human evolution is grinding to a halt because of a shortage of older fathers in the West, according to a leading genetics expert. ..

“Quite unexpectedly, we have dropped the human mutation rate because of a change in reproductive patterns,” Professor Jones told The Times.

“Human social change often changes our genetic future,” he said, citing marriage patterns and contraception as examples. Although chemicals and radioactive pollution could alter genetics, one of the most important mutation triggers is advanced age in men.

And thus is illustrated the rather silly mistake of assuming that the future is just like today, only forever*. Whether one believes that random genetic mutations are responsible for the fact that we create asset-backed securities instead of dams of mud and sticks or not, it's pretty silly to assume that - given the vast amounts of time both claimed and required for evolution - the existence of a 40-year period in which older men don't father a lot of kids** in one part of the world is likely to make much of a difference in a cosmic sense. It is just as foolish to project today - our present populations, procreation patterns, migrations - into the indefinite future as it would have been to project any random generation from the past into today. There is very little guarantee that "today" will last even a century and a lot of history that argues that it will not.

Rather we should assume that evolution is just taking a little break. Hey, after 4.5 billion years hard work culminating in the creation of Obama, I think evolution deserves a couple of centuries off anyway.

* just with better game graphics.

** Itself a misleading comparative. A lower percentage of a much higher population still means more kids are being born today to older fathers than at any previous time in history.

Labels: evolution

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Wait, wasn't this problem solved last week?

USA Today reports that Plan 9 was not enough:

WASHINGTON — The Federal Reserve has announced a radical plan to buy massive amounts of short-term debts in a dramatic effort to break through a credit clog that is imperiling the economy.

No comment seems sufficient, does it?

Labels: Financial Death Spiral

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And failing, I might add

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The blackshirts are back

Because of Obama, I'm the next John Galt:

They're not old enough to vote, but a group of Kansas City middle school students pledging their political support is raising eyebrows.

A choreographed chant by a group of students at the Kansas City charter school Urban Community Leadership Academy has people talking ever since it showed up on the internet...

The Youtube video features the next generation of camo-sporting community organizers stepping out of line to chant slogans like, "Because of Obama, I'm the next architect" and "Because of Obama, I'm the next brain surgeon." While as false is it is ridiculous, one can understand the desire of the Urban Community Leadership Academy to use the most successful black politician of our day* as a role model for youth who might otherwise be planning their careers as the next absent father. On the other hand, the fact that they are creating what looks like a paramilitary Hitler Youth brigade, complete with black shirts and paramilitary discipline, will also rightly raise a few eyebrows**.

One interesting observation is the seeming inability of the press to understand that two seemingly-opposite positions - "Some call it indoctrination and others say it encourages political involvement" - can be true simultaneously***.

But the most telling fact is that the teacher involved was not suspended for creating the Obama Youth brigade in the first place, but rather:

...the school suspended the teacher in charge of the after school activity for insubordination after he posted the video online.

After all, we sure don't want the public to know what's going on in their public schools.

* Nelson Mandela and Robert Mugabe excepted.

** after all, this is not the first time youth have been militarized on behalf of a charismatic politician and trained in publicly-funded academies.

*** What's the purpose of indoctrination if it's not political involvement?

(hat tip: Huck)

Labels: Obamarama, Public Maleducation

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Today is the day

... that the First Bank of Porkins has to settle $500 billion in Freddie and Fannie derivatives. I wonder if they can hold it?

(hat tip: JN)

Labels: Financial Death Spiral

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Running against the black guy is racist

AP reporter Douglass K. Daniel tries to prove that Sarah Palin's words carry a racial tinge:

Palin's words avoid repulsing voters with overt racism. But is there another subtext for creating the false image of a black presidential nominee "palling around" with terrorists while assuring a predominantly white audience that he doesn't see their America?

In a post-Sept. 11 America, terrorists are envisioned as dark-skinned radical Muslims, not the homegrown anarchists of Ayers'* day 40 years ago. With Obama a relative unknown when he began his campaign, the Internet hummed with false e-mails about ties to radical Islam of a foreign-born candidate.

Whether intended or not by the McCain campaign, portraying Obama as "not like us" is another potential appeal to racism**. It suggests that the Hawaiian-born Christian is, at heart, un-American.

It's gotta be tough being a liberal these days, especially one trying to find a racist under every sheet bed. First you have to claim that your would-be racist opponent "avoids repulsing voters with overt racism," which in itself presumes that voters are repulsed by racism***. On the other hand, you have to simultaneously claim that voters are susceptible to subliminal suggestion via some strange and undefined "racial tinge" which disappears into a puff of nothingness as soon as you look at the actual words. What makes it even tougher is that to find anything that can be twisted into racism you have to hearken back to the days when Obama was "a relative unknown" rather than the Democratic nominee and you have to rely on ephemeral emails rather than the actual words of the candidate you are accusing of racism. You have to find code words and suggestions and "potential appeals to racism," because those opponents for some reason just refuse to make an issue of the issue that is most important to you, race.

But that makes me wonder: if liberals are really of the opinion that voters are so stupid that they can be easily tricked into voting against someone by statements they would find repulsive if they were intelligent enough to understand them, why do they try so hard to ensure that even the most benighted can vote?

* Doubtless the charge that Obama pals around with terrorists is a bit much. While Ayers is the kind of unrepentant, self-righteous, disappointment-to-his-parents middle class punk who has always infested progressive and anarchist causes, the undecided voter will likely conclude, as I do, that Obama used whomever he could - whether William Ayers or Jeremiah Wright - in pursuit of his own ambitions, didn't ask too many questions, and stood ready to throw them under the bus when they became too embarrassing. That's the very stuff successful politicians are made of.

** The same racism that "repulsed' voters 2 paragraphs ago.

*** Even writing silly articles that try to paint your opponents as racists is a tacit admission that most voters find racism repulsive, at least in those they would elect to high office.

Labels: Palindrones, racism

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How to recognize the bottom

There's a strange gold rush going on:

London's two leading bullion dealers, ATS Bullion and Baird & Co, have reported a rush of interest from savers, many of whom have hundreds of thousands of pounds worth of savings they want to convert into the precious metal.

At least two customers have invested the entire proceeds from selling their houses into gold, each buying up more than £500,000-worth of gold bars, according to one dealer.

Of course, it's not just across the pond. Our own government has run out of 1-oz coins and is rationing sales to their favored dealers, as well. AJPM.com will currently give you spot + $40 for your gold eagle and sell it back to you for spot + $70, when that spread had been $10 on either side of spot for years. That little necklace with the 10-franc gold coin I bought my wife for $70 a month ago now goes for $90-$100, even though the spot price of gold is a bit lower.

That the spot price of gold is so much lower than the physical price is indicative of two things.

The first is fear. Enough said.

But the second is most interesting because it's the least visible: the two gold markets have finally separated and may be on their way to divorce. You see, the spot price of gold is a paper price, the price for a contract to buy or sell gold; it's not the actual price for gold. Sure, one could demand delivery, but no one really ever does*, they just roll the contracts over until next month and book their gain or loss. But gold futures are not even a bet on the future price of gold, just a bet on the future price of the gold contract. They are manipulable and a rather poor substitute for real gold in hand**. What happens when the brokerage that holds your futures contract goes bust? I don't know, but a couple of hedge funds have discovered that having your assets held by a bankrupt entity is bad news. That the difference between the price of actual gold and promises of actual gold is increasing marks a significant change, one not recognized yet by the financial press.

But be that as it may, there is one way to discover when we are at "the bottom," or when it is time to move from real assets back into paper ones. It's when this doesn't happen anymore:

Some analysts say that while it may be romantic to buy bars of gold, there is a far more practical way to investing in gold. Investors can buy Exchange Traded Funds, which are like shares – they trade on the stock market – and they are directly linked to the price*** of gold.

When "some analysts" start saying that while it may be romantic to own parts of companies, gold is much safer, more convenient, and holds its value over the long run, it will be close to time to sell some gold and buy stocks again.

* I suspect if enough people tried, the SEC would come up with some new rules to restore their confidence in contracts, by force majeur if necessary.

** For example, you could always offer a gold coin to your grocer for a cart full of food and I doubt he'll turn you down. Just try that with a futures contract.

*** the paper price, that is.

Labels: investing, money

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Feel free to play along at home

Labels: Plan 9

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Of wisdom and folly and innocence

Newsbusters neglects to ask who's supposed to bail out the bailers:

...is the bailout a bandaid on a severed artery, and things are going to get much worse before they get better? Is this all spiraling into a total, global financial meltdown leading to a massive depression? Is there anything that can be done? And, for the libertarians that have been saying that government should do nothing to assist these financial institutions, should all states, cities, towns, municipalities, and companies that rely on short-term financing to manage their accounts payable be also allowed to go bankrupt due to the malfeasance and stupidity of those responsible for this financial meltdown? If inaction is desirable to teach Wall Street a lesson, what is being taught to all the entities and individuals that have played by the rules and done absolutely nothing wrong but are going to suffer as a result of the actions of a few?

I've never been terribly impressed with NewsBusters, whose approach to problems never seeks the decisions or assumptions that caused them, but rather tries to show that the Democrats are responsible for late frosts and the Republicans for sunshine. But they do ask questions a lot of people are asking*, so it's only fair that someone step up and answer them. The answers are "Yes," "Yes," "No," "Yes," and "The value of wisdom and the cost of folly." But the last 2 answers will take a little more explaining, if only because these questions - addressed to libertarians - are built on faulty premises.

If one cannot pay for all the fun he desires through his income, then he needs to pare back his ambitions or get more income. That is a simple truth, one upon which all prudent finance is based. It is as true for the individual as it is for the company, as true for a city as it is for a state. For debt-ridden governments, playing by Wall Street's "rules" - issuing bonds to cover current expenses and buying interest-rate swaps or derivatives - is evidence of naivete, not of innocence, because those rules were designed to enrich Wall Street, not to protect the taxpayers whose taxes were entrusted to those governments**. Many governments ignored the simple truth in favor of rules that allowed for more fun in the short run. It was a very foolish decision.

If an organization cannot balance its books voluntarily, then reality will step in and force that sooner or later. If cities and states who have spent like California*** find that it's politically impossible to reduce spending or raise taxes, then they must to go bankrupt, which act of reality will force the choice that politics forbids them from making. It is not the end of the world****, only of some very bad decisions and a lot of pretending.

Those who ignored "the rules," relying instead on prudence and wisdom to forego derivatives and bond issues and to spend only current revenues, are the only companies and governments "who have done absolutely nothing wrong." Not coincidentally they are in very little danger of imminent bankruptcy from the inability to float more debt.

Those in danger should all learn a lesson from those entities that are not endangered, and they will - unless the lesson we consciously decide to teach them instead is that prudence must be punished so Bernanke and Paulson can try to bail out all of the world's financial fools. That would be foolish of all of us, for not only can they not do it, rewarding such foolishness is one of those things that got us into this trouble in the first place.

* Mostly, like Newsbusters, to find witches to burn.

** In that case, the state is not going bankrupt because of the "malfeasance and stupidity" of others but because of its own. They caused the problem just as much as Lehman Brothers did. And Lehman is bankrupt.

*** California's general fund spending (.PDF) has more than doubled from $58b to $112b over the last 10 years. Its population has grown about 10% in that period. As they admit, their current budget problem "was created when the state added new, permanent spending increases that relied on ... one-time revenue gains." Why should anyone but California voters bail them out for that foolishness?

**** and it has happened before: Orange County went bankrupt in 1994 because of derivatives. But Orange County is still there and I'll bet they have a little better oversight of their citizens' money as a result.

Labels: Financial Death Spiral

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Economists Warn Anti-Bush Merchandise Market Close To Collapse

(hat tip: JD*)

* who is shutting down his evolution**. If you read and enjoyed his stuff, stop by and say thanks.

** If you shut down your evolution, the creationalists win.

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Hi, is Henry there, please?

Calls on line 5, 6, and 8 for you, sir:

California is fast running out of cash and may need as much as $7 billion in aid from the Treasury Department within weeks, the Los Angeles Time reported, quoting a letter from California governor Arnold Schwarzenegger to Treasury Secretary Henry Paulson...

"Absent a clear resolution to this financial crisis," Schwarzenegger wrote in his letter, e-mailed to Paulson, "California and other states may be unable to obtain the necessary level of financing to maintain government operations and may be forced to turn to the federal treasury for short-term financing," according to the paper.

So Aaahnold didn't actually call, but emailed his request for seven thousand million dollars over to treasury. But what gives California the audacity to even imagine that state government can "turn to the federal treasury" to finance their very non-federal operations?

Perhaps it was the treasury itself. It seems pretty obvious that with public companies like Ford and GM and even private companies like Chrysler lining up at the trough for guaranteed, subsidized loans from Uncle Sam, the least he can do is open his wallet for his own profligate children.

Because if the Federal Government doesn't borrow or print a bunch of money in order to re-lend it to other governments, those governments might have to raise taxes or cut spending. That is simply not an option because it would be bad for the economy, or what's worse, for incumbent politicians.

UPDATE: Plan 9 is a now Law 9. Whatever happens from here on out, it's not the government's fault. They've fixed that old problem that we used to have.

Labels: Financial Death Spiral

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Labels: Obamarama

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Some identification is completely unnecessary

Like this one:

BOULDER, Colo. — Molly Winter, a longtime supporter of Mark Udall, the Democratic congressman for this liberal-leaning city nestled up against the Rocky Mountains, got up Tuesday, looked at the shambles of her 401(k) retirement plan, and dashed off an e-mail message to Mr. Udall. It was laced, she said, with some very pointed questions.

“I asked him what his plan is now to reinstate the value in my 401(k),” said Ms. Winter, 58, who works for the city and identified herself as a Democrat.

I mean, come on, it's pretty obvious that a bureaucrat who writes her congressman because her own investment decisions are not panning out is probably a Democrat.

Labels: democrats

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Primal Hippies

(hat tip: kawaika)

Labels: environmentalism, moonbats

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False Advertising

I think I just figured it out. The Republicans are not the party of smaller government, they are the party of smaller bigger government, as opposed to the Democrats, who are the party of bigger bigger government.

The difference is subtle but perhaps important. The party of smaller bigger government is interested in bigger government, but only when they get to run it. The party of bigger bigger government is interested in bigger government, knowing that they will eventually get to run it.

That means that the Republicans will oppose only Democrats efforts to build bigger government, not those of Republicans, while Democrats realize they will eventually get elected to run the show, so they are quite happy to carry water for big-spending Republicans and big-spending Democrats alike.

When Bill Clinton said the era of big government was over, what he meant was that as a Democrat, the ascendant Republicans would oppose his efforts to build a bigger government and that building a bigger government would have to wait for either a) a Republican president, B) a Democrat congress, or c) both, as we have today.

What he didn't mean when he said the era of big government was over was that the era of big government was, you know, over. The party of smaller bigger government would never go for that.

Labels: republicans

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Huck lives in a Red State

For those who don't know, "payment option" ARMs allow people to choose each month whether they will make a regular payment, an interest-only payment, or "make only a specified minimum payment that could be less than the monthly interest on the loan."

That's a pretty good deal, huh?

Labels: Housing and Other Disasters

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Plan 9 and crappy burritos

Even if Henry Paulson's Plan 9 passes the Senate tonight as I fully expect it will*, it is already guaranteed that while it still may end up costing more than promised, it will absolutely not do as planned. Those saying we have to implement Plan 9 or face credit market collapse have it wrong: we can either face that collapse with Plan 9 or without it.

As I 'splained over in the Fire Swamp, the underlying problem is not confidence; that is merely an effect of the actual problem, overindebtedness in an economy that cannot produce enough goods to service it.

But even assuming that the entire problem is one of confidence as Bernanke and Paulson have been portraying it, Plan 9 will still not work as advertised; it has already been sabotaged by something in it - something that was implemented today even without it.

The problem, as Paulson explained it, is a lack of confidence owing to the fact that banks have all these crappy mortgages, rolled into bonds, and since no one trusts other banks to tell the truth about what they have for collateral, therefore banks will not lend to one another. This "not willing to lend" is represented by the record-high LIBOR (London Inter-Bank Offered Rate), which at more than 5%, represents a significant danger premium.

First off, I don't think that's a problem. Banks ARE willing to lend to each other, just not at the bargain basement Fed rate. It serves as but one more proof that Fed rates are too low in light of economic reality. But be that as it may, the argument is that because banks have all these bad loans they want to use as collateral, and no one knows what's in them, therefore the Treasury needs to buy up the bad loans - at above market rates - that are "clogging" the system, and thereby get banks lending to one another again. Over in the Fire Swamp I compared the bad loans to crap cooked into a tray of burritos. No one knows how much crap there is or where it is, therefore they sure don't want to eat those burritos. The Paulson plan is to buy the crappy burritos so banks can go back to making burritos that other banks are willing to eat.

But here is what dooms his plan to failure:

WASHINGTON (Reuters) - U.S. securities regulators on Tuesday gave the financial industry a reprieve from marking hard-to-value assets down to fire sale prices, throwing a lifeline to an industry beset by strained credit markets and the latest round of bank failures.

The U.S. stock market added to gains on the news, in hopes that regulators' new interpretation of fair value, or mark-to-market, accounting rules, will slow or reverse the heavy flow of mortgage-related losses on banks' balance sheets.

In short, the SEC allows banks to price crappy burritos not as current accounting regulations require (mark-to-market, or the actual price at which the burrito could be sold on the market**), but at a different rate, a mark-to-model rate, at which the bond is priced by comparing it to a mathematical model that tells what it *would* be worth if pigs could fly.

As the SEC expects, that will have a positive effect on banks' balance sheets, because if you are allowed to tell the world your crappy burritos are valuable, you can make your balance sheet look pretty good. In this way, they hope to restore confidence between banks.

Banks are foolish and shortsighted, or we would not be in this mess. But they are not so stupid as to not realize that if they are overvaluing their own crappy burritos, then so is everyone else. Which means, since they know that other banks have crappy burritos to use as collateral, even though those banks are saying the burritos are now made of gold, they are going to have no more confidence in the collateral of other banks than they do now. The problem is not solved in the least.

In fact, it is exacerbated, because let's assume that El Borak's Bank of the Prudent does not have a bunch of crappy burritos to use as collateral. His balance sheet is pristine, full of actual golden burritos that can cure both cancer and male pattern baldness. Other banks will still assume that El Borak is a lying scoundrel like them, with a balance sheet full of crappy burritos, and they will not lend him money any more easily than they will a bank they know is lying. When you encourage banks to legally hide their lies, they have no alternative but to assume that everyone is likewise lying. The problem is not solved by a long shot: it is written into law.

The Treasury is saying that in order to restore confidence, they need to start a $750 billion burrito collection. Martin Weiss predicted as much in his 1989 book, How to Survive the Great Money Panic:

Nevertheless, one group of die-hard administration optimists clung to the hope that the debt could naturally paid down over time. Their theory was that, if only confidence could be restored, if only some symbolic action could be taken in the right direction, that would be enough to get back on the right track.

It did not work in Weiss' fictional Money Panic, and it will not work in our real one.

Plan 9 is a symbolic action. Everyone knows that $750 billion, while a ton of money to slobs like us, will not remove enough crappy burritos to remove the actual danger banks face in lending to one another, especially if Paulson pays above-market rates and therefore removes fewer burritos than he otherwise might. The administration's hope is to fool the market into thinking both that the burrito problem is solved and the banks who want to borrow are stronger than they are.

But regulation that assures that everyone knows the banks are lying about the value of their assets will never restore confidence, it will destroy even the little confidence that there is today. Let the bill pass and - as resulted from every prior symbolic action Paulson has taken - in a few months we'll be right back where we are today: with a tray full of crappy burritos that no one wants to eat.

Then what are we supposed to serve for dessert?

UPDATE: CNBC headlines, "Senate Passes Sweetened $700 Billion Bailout"

Pass the sugar, please.

* Of course, I expected it to pass the House as well, but I do not believe that, given its earlier failure, Nerdy Harry and his gang would bring it to a vote unless a) they had the votes securely in hand, or B) this is a double-clever plan to frustrate the president. Since no one has ever accused Harry of being clever, much less double-clever, I'm sticking with "A" until events, once again, prove what a poor prophet I am.

** Which, not coincidentally, is the ONLY value it has as collateral. If you don't believe me, just try to convince someone to accept your car as collateral based on the value it will have someday when it becomes a classic.

Labels: Plan 9

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