So what?

Brother Gregory notes something missing from President Obama's second* taking of the Presidential oath:

For the first time in history the presidential oath to uphold and defend the Constitution of United States was not taken on the the Bible.

Was this just an oversight or was it the plan all along? It is unlikely that the ceremony will be repeated for those who have concerns about this breach of presidential protocol. I have no doubt Washington and Lincoln would have found a Bible...

While some will cry conspiracy, it is certainly an omen of things to come.

Or not. Or rather, some will have to cry "poor historical research," for not only is Obama not the first President to be sworn in in both public and private ceremonies with-and-without a bible, he could not even have been the first to be sworn in without a bible at all, had he so chosen.

According to the Library of Congress, Rutherford B. Hayes was the first president to be sworn in privately without a bible and publicly with, followed four years later by Chester A. Arthur. Lyndon Baines Johnson was sworn in with his hand on a Catholic Missal, which while it contains bible readings is not a bible any more than is that Four Spiritual Laws tract Christians leave instead of a tip**.

But at least LBJ tried. Teddy Roosevelt, on the other hand, was sworn in without a bible, and no one cared. In fact, for most of America's history no one has cared so much that we simply don't know how or if 12 of the first 14 presidents used bibles at their inaugurations.

What does it add up to? Not much.

* And I presume less entertaining.

** Don't get me started.

Something might not be George Bush's fault

But whose it is, CNN fails to note:

(CNN) -- Amber Easton has gone from $80,000 a year in salary to scrambling for work. At a time in her life when she should be scaling the corporate ladder, she has instead spiraled into a deep depression. She recently lost her car and now faces eviction from her apartment...

It's a sad story being played out all over America, formerly wheeling, dealing, kiss-stealing (Whooooo!) professionals are losing their jobs. Sometimes, however, I think the reporters ought to work a little harder to find sympathetic victims:

Easton's saga began in July 2007 when she traded in her job as a corporate compliance officer to attend law school, what she thought would help advance her career. But after a year of law school, she decided it wasn't for her. By then, her old job was gone and the job market had shrunk.

So she had a job*, and a good one, making almost twice what the average American makes. But she quit it. Then she went to law school** which all things considered is probably a pretty good place to ride out the next few years, one reason I am encouraging my college-attending boys to be thinking about their masters. But after a year, she quit that, too.

Now the world has changed. Or has it? Walter Williams a few years ago explained the secret to not being poor in a couple easy rules. Finish high school. Stay married. Keep your nose clean. But the last turns out to be important, too: don't quit your job except to take a better one.

If you voluntarily stop working, it's hardly a worthy sob story that you're not working anymore.

* Hey, "compliance officer" is a job, though what work the title is a euphemism for I have no idea.

* And she certainly had the money saved up for that, right? I mean, no one would try to pay for law school by relying solely on the largess of the taxpayers.

I'm rich, biotch!

Obrigado, America!

When you pull your tax forms out of your mailbox, don't forget to check for that thank you card from Brazil:

SAN PAULO -- General Motors plans to invest $1 billion in Brazil to avoid the kind of problems the U.S. automaker is facing in its home market, said the beleaguered car maker.

According to the president of GM Brazil-Mercosur, Jaime Ardila, the funding will come from the package of financial aid that the manufacturer will receive from the U.S. government and will be used to "complete the renovation of the line of products up to 2012."

"It wouldn't be logical to withdraw the investment from where we're growing, and our goal is to protect investments in emerging markets," he said in a statement published by the business daily Gazeta Mercantil.

While one can hardly blame GM for investing that government bounty in a place where it can do the most good, the fact that that place is not here ought to make it quite clear to Americans that the problem their money is going to solve is not necessarily the one they signed up to pay for.

(hat tip: Mish)

Famous last words

You've gotta love the confidence displayed in the last sentence...

BTW, that modem at :37 is exactly like the one we used in my first computer class, when we were severely busted for accessing a computer in Minneapolis for a few* hours. Hey, man, how was I supposed to know they could track long-distance calls?

* by "a few" I mean "I really thought that huge purple vein on my teacher's forehead was going to explode," of course.

(hat tip: JD)

Adventure in headlines

There's a theme here:

Economic data released before the bell were predictably* grim: Initial jobless claims rose by 3,000 last week to 588,000, more than expected. Durable-goods orders skidded 2.6 percent last month, also more than expected. Excluding transportation, orders tumbled by 3.6 percent, which was far worse than the 2.8-percent slide expected. And new-home sales tumbled 14.7 percent to a 331,000 annual rate, the slowest pace on record and a far cry from the 400,000 rate expected...

Yes, clever little monkeys that you are, you immediately realized that we need experts who can provide us with more accurate expectations. After all, we are told that surprises in the markets are what cause fear and panic. These experts will be the death of us all. Luckily for us, financial press headline writers are able and willing to restore calm where their prognosticatory cohorts fall so short.

Just witness the headline on the above story:

"Stocks Tumble as Profit Taking Kicks In"

Now that is a thing of beauty.

* doesn't the rest of the paragraph lead one to believe that the data were UNpredictably grim?

A different skill set

When JD made an admirably-footnoted reference to "El Borak's Pirates" tonight, I realized I have never really explained what I meant by that.

Despite what I said below, empire-builders constitute a unique skill set, and perhaps a necessary skill set, in capitalism. These are the guys who build companies, starting with an idea for whatever product, and bring it to the public, being rewarded by that same public with profits from the voluntary purchases of those who find the idea worth paying for.

As an example, I once worked for a now-bankrupt company called House of Lloyd. Headquartered in Grandview, Missouri, it was the personal empire of a man named Harry Lloyd who began in the 1950s with a fireworks stand and eventually built it into one of the 3 or 4 largest home-party companies in the world. Harry sold imported Chinese trinkets via a network of hardworking housewives, making millions. He died in the mid '90s, just a handful of years before I came on to fix their Y2K code.

So long as Harry ran the show, HoL's profits accrued to the owners - it was capitalism at its Darwinian best. But as soon as he died, its profits began to accrue into the hands of those who were not owners, but employee managers. They were not capitalists - they did not own the company - but pirates, people who benefited from the company paying wages and providing benefits they themselves set by virtue of their power in the organization. Primarily because they had a different skill set from Harry*, HoL went bankrupt in 2001, leaving nothing behind but an empty warehouse. All its assets had been looted by pirates.

One can see this same dynamic - though perhaps not so quickly tragically - in other companies that survive their founders. Ford and General Motors might be good examples, but just about any "old" company will suffice. When the original founder dies, the company is taken over not by people who own the company but by managers who run the company on behalf of the new legal owners, but in their own interest.

It is doubtless difficult to run a company on behalf of anonymous** owners, especially when the owners are "represented" by a board whose members are themselves selected by the same management they oversee. This incestuous relationship rewards a different skill set and one shared with politicians: the ability to manage the politics of the business rather than the business itself, to move up the organization rather than to direct it. Because the managers no longer answer to the owners, politics and then piracy - the wholesale looting of the company's accrued value - quickly becomes the norm.

One probably needs no better example than John Thain's $1.2 million office redecoration when he headed Merrill Lynch. It is hard to believe that he would have spent $4000 of his own money on a trash bin, but because it was not his money but represented his power in an organization, he had no problem looting the shareholders without regard to company performance. And the true owners had no way of knowing the day-to-day operations of the business, being separated from the working of their company by mutual fund managers and a board, and each shareholder owned only a tiny percentage of the company anyway.

While I would be the last person to call for legal limits on such piracy - it is a shareholder problem, not a government one - there can be no doubt that late-stage capitalism, managed as it is by pirates, their captive boards, and their golf buddies who vote the shares through the mutual funds they manage, represent perhaps the final, senile stage of capitalism***. I have very little confidence they can fix what is wrong with Wall Street, because they are in many cases themselves what is most wrong with it.

Their skill set, like that of most politicians, is geared towards enjoying wealth created by the empire-builders, the capitalists, whom they had the good fortune to be born after.

* Make no mistake, it was Harry's fault. He liked to make decisions and was good at it, so he surrounded himself with people who were good at implementing decisions. when he died, there was no one left who could make a decision. It was not simple incompetence that doomed HoL, it just made that doom nearly immediate.

** Not in the sense that they are not legally known, but in the sense that they are simply a list of names on a ledger held somewhere on "the Street."

*** this is not to say that there are not still capitalists. Say what you like about Bill Gates or Meg Whitman or even Vince Offer at Shamwow, they represent the ability to create value rather than to consume it.

I'm sorry

But I simply could not pass up this banner:

Speaking of Pakistan:

ISLAMABAD, Jan 24: Pakistan on Saturday lodged a strong protest with the new US administration over continuing drone attacks, terming them an infringement of the country’s sovereignty and calling for a review of the policy....

The two missile strikes, coming three days after the new administration assumed office, are being taken as an indication that President Obama has endorsed drone attacks on Pakistan.

I can't think of a better way to end up with a nuclear-armed Taliban than to consistently undermine the legitimacy of the current government of Pakistan in the eyes of its rather, um, unhappy populace. Can anyone else? Anyone?

Beuller?

Can you hear it calling?

MikeT notes a timely truth:

"the ruthless drive for profit is the fatal flaw of modern banking system..."

I would agree, and especially with his notation that the bank's business model is different from the shipping company's.

But I do wonder if there is not something more at play than simply profit, because a number of companies never seem to make a profit, or if they do, they never seem to enjoy it*. Rather they exhibit what was opined by a very smart (reformed) lawyer with whom I was talking on the way back from the conference today: he said that in a market system, a company must grow or die, and therefore capitalism will grow until it implodes**.

Of course, my immediate thought was to question why this must be, or at least why it seems that it is. There is no reason why a manufacturing company cannot be happy selling a million dollars' worth of ink a year, pocketing a few percent as profit - mom and pop shops all over the nation do it, sometimes for generations. But some companies seem obsessed with growth just as some churches do. It seems in many cases growth for the sake of growth, with all other considerations secondary.

And then I thought - but did not get a chance to throw out to him, as we arrived at my house just then*** - that the real problem is that fatal human tendency to wish, as the Book of Genesis says, to make a name for ourselves, to grow and conquer and control more and more, and to be seen doing it. Why did Alexander conquer? He was already a king. What will Warren Buffett do with his 41st billion? Certainly it's not about the money - from all accounts the man lives modestly. Perhaps it is the temptation of 'great' men towards empire, to build big for the sake of big, not for money, but to stand on top of it.

But even if that is the truth, and even if there is nothing we can (or even should) do to make men not wish to build Babels, when it comes to banking, it is not simply a flaw, but a fatal one, and not simply for the bank, but for nations and societies.

Why only in banking? Because the fraud of modern banking gives banks an unlimited ability to lend. Because the demand for money is endless, there could theoretically never be an Alexander weeping because there are no more worlds to conquer, no more people who want loans. When the demand of money is endless and the supply of money is endless, there is no limit on the empire that can be built by men tempted by empire. Right?

Wrong. There is a limit, and that limit is the amount of money everyone can earn to pay back the interest on the unlimited debt. In allowing a costless supply of debt, we have guaranteed that we would be driven to its limits by men who wish to build empires. In doing so, we have consigned all of our empires to death by debt, sooner or later.

* By which I mean allow the owners to enjoy it by giving the profit to them.

** I think Marx may have said something similar. But Shawn's no Marxist, he's a guy who loves ideas and takes them from wherever he can get them, chews them over, and gladly spits them in the trash when they turn out to be bitter.

*** and I'm kind of afraid to take it back to him, not because I think it will turn out weak, but because we'll spend 3 hours talking about it, and I've got work to do.

I sure miss that guy

Ignorance is strength

At least when it comes to banking:

Britain was just three hours away from going bust last year after a secret run on the banks, one of Gordon Brown's Ministers has revealed.

City Minister Paul Myners disclosed that on Friday, October 10, the country was 'very close' to a complete banking collapse after 'major depositors' attempted to withdraw their money en masse...

But 60-year-old Lord Myners was accused last night of being 'completely irresponsible' for admitting the scale of the crisis while the recession was still deepening and major institutions such as Barclays remain under intense pressure...

Ruth Lea, economic adviser to the Arbuthnot Banking Group, said last night that it was 'highly irresponsible' for Lord Myners to reveal the scale of the problems because it could serve to further wreck already fragile levels of confidence.

There is something almost ghoulish about being constantly reminded that one should not tell the truth, because if people knew the truth, the entire economic world would collapse around them.

That might seem a little hyperbolic, but I assure you it's not, because Ms. Lea doubtless speaks for many in positions of authority who would criticize telling the truth about our modern banking system, if their doing so would not simply draw more attention to the problem. But even then, they see the wrong problem: they see confidence as a cause, rather than an effect, of a functioning banking system.

The cause-effect difference is obvious if one puts it in a little different perspective. Let's say that you discover that your friend's husband is cheating on her with his secretary. Because she is ignorant, your friend has complete confidence in her marriage. Telling your friend the truth will likely wreck her marriage - her confidence in it will be destroyed. To not tell your friend the truth means that she will be deceived and betrayed, not only by her husband but her friend, until that day that she pays him a surprise visit at the office and learns the truth for herself. You will not have saved your friend's marriage by withholding the truth from her, nor will you likely be able to save your friendship if she discovers your duplicity*. While in ignorance, your friend may have confidence in her marriage, and it may even have the appearance of being functional (this is the government's attitude: it is better for you to live happily in ignorance) but it is a sham that will - must - someday fail.

The major result of the government valuing this ignorance/confidence as a cause of sound banking rather than the experience of dealing with sound banking, is that it must generate that confidence through all manner of symbolic measures - interest rate adjustments, guarantees, even show trials - designed to 'save' the marriage by keeping the betrayed partner ignorant of the truth. To stand Churchill on his head, in banking, falsehood is so precious that should always be attended by a bodyguard of lies.

The weakness of the comparison is obvious in the actual solution - that the husband should be faithful to his wife: you obviously cannot control his actions, you can only choose from bad alternatives. But there is no such excuse in the case of government, for banks have not the husband's free will: as creatures of government they do what they do at the behest of government and under the auspices of government. They only exist because banking laws create them.

The real solution to the problem of confidence in the banking system is to create a banking system that doesn't need it in order to function**. Such a system naturally creates confidence, not by ignorance and propaganda, but by experience. Any other solution is an ignorant and betrayed wife: at some point her misplaced confidence will give way to the painful truth.

Britain was three hours from discovering that truth, and the U.S. maybe six. But the truth will come, eventually, with all the screaming and thrown lamps it deserves.

* especially if you are the secretary.

** To do so is simple. Not easy, but simple. The Fed and fractional reserve banking should be eliminated and all deposits lent out should be time deposits, meaning that you lend the bank x dollars for x years at x rate with no expectation of early withdrawal. "Your" money is not in the bank, so don't show up asking for it. If you want the bank solely to hold and protect your money - i.e. if you want it on demand - then you pay the bank for that privilege, just like you pay the storage facility to hold all those old clothes you might fit into again someday.

Let 'em starve

California smokes its own seed corn:

WASHINGTON (CNN) -- President Obama signed a memorandum Monday requiring the Environmental Protection Agency to reconsider an application by California to set more stringent auto emissions and fuel efficiency standards than required by federal law.

If the EPA grants a waiver allowing California to set its own emissions standards, the nation's largest state will be allowed to require automakers to produce trucks and cars that get better mileage than what is required under the current national standard.

With California and any number of its counties and municipalities facing economic doom, it is somehow heartening to see that they are still attempting to make it harder for companies* to do business there. Obama is making half the right decision in letting states set their own standards**; that California will use that freedom to inconvenience and disemploy even more of its citizens shows that they know how to make decisions as well, the consequences of which they ought to be left to deal with on their own.

Of course, they'll surely receive a bailout*** like everyone else. But the obstinacy with which they cling to poor decisions means that if anyone has a chance to outstupid even the current spending spree and really, really suffer, it just might be California.

* And car manufacturers, no less.

** The other and more important half would be to let states lower - or completely opt out of - such regulations.

*** It's not their fault that they are bankrupt. I mean, who could have known what would happen if they spent so much more than they took in?

Oh the weather outside is frightful

Help (un)Wanted

The Democrats are going to need a new whipping boy:

...oil’s swift fall in late 2008 paints a starkly different picture for those last three months and possibly well into 2010, depending on when economic recovery begins eclipsing the worst recession in decades...

ConocoPhillips already alerted investors to its plan to slim down in response to lower oil and natural gas prices, including impending layoffs, asset value write-downs, shrunken capital spending and a significant hit on reserves.

It was only a few short months ago that big oil executives were put on show trial for the sin of making money. Now it appears that all those people they hired with all that money are going to be sucking up their fair share of the generous unemployment compensation passed by the same Democrats who clucked and strutted for the cameras. "I want to take those profits...," said the new SecState. As they might ask on Inside the NFL, where are they now?

Google provides the ability to quickly discover how in 2001, 2005, and 2008, the same Democrats made the same arguments about 'obscene' oil company profits. Yet in between those years, our watchdogs are conspicuous in their silence. It seems to me a strange 'monopoly' that can only monopoly price 3 years or so of every 10.

Over the next few days, I shall be conspicuous in my silence as well, being in a place where you have to pay for internet by the day. It's not all bad, as the first session is called 'Wine Tasting*,' and since in between sessions I've got a couple of papers to write and a book to read, I might not have time to charge the good taxpayers of this state for internet. So enjoy the break**, and let the world take care of itself for a bit.

* Yes, Rogue is mad at me

** I will, I promise.

Thank you, St. Louis

Vikings fans owe you a huge one:

Paul Ferraro, who served as the Vikings special teams coordinator* since Brad Childress took over as head coach in 2006, has resigned to become the St. Louis Rams linebackers coach, according to people with knowledge of the situation...

Childress may not be the best, brightest, flashiest, most debonair, or best-smelling coach in the NFL, but he's got to be one of the luckiest. How else do you explain the fact that someone else wants the coach that led the Vikings to a league-record seven special teams touchdowns, including a permanent NFL-record 109-yard field goal return and back-to-back Reggie Bush punt return TDs?

I suppose there is the thing about him being friends with the new Rams coach, and I note he is not going to be a special teams coach anymore. But still, I think I'll go buy a lottery ticket today.

* i.e. he drives the short yellow team bus.

The arrogance of liberalism, distilled

Working on a college campus, I thought I had seen every liberal slogan imaginable. But on the way home tonight, I saw one that, if I had seen if before, had never really registered* with me; it said, "Comfort the Afflicted / Afflict the Comfortable." I doubt modern liberalism has ever been distilled into such a tiny, bitter draught.

It immediately stuck me that there are (at least) three ways in which modern liberalism, summarized by this pithy, self-righteous slogan, is shown to be arrogant, futile, and evil:

1. First, it is arrogant to take upon oneself the responsibility to judge and impose the rightful place of others. "Comfort the afflicted" is fine, of course, so long as the afflicted wish to be comforted: you are simply helping those who need help. However, I doubt the comfortable desire to be afflicted, especially by self-righteous, know-it-all liberals.
2. Second, it is futile to comfort the afflicted if that puts them in a place where they will need to be afflicted again, or to afflict others who will then need the comfort they formerly possessed. Such "change" makes no progress toward resolution of problems, it simply perpetuates misery.
   
3. Third, if a state of affliction presumes an evil act of affliction**, then modern liberalism promotes doing evil, afflicting others, that some later good might come of it. It is no more than the end justifying the means, wherein the liberal is justified in doing evil to others for his own*** moral edification.
   

What I think it boils down to is that the liberal justifies himself in harassing and annoying others by concluding that his victim deserves whatever the liberal wishes to inflict upon him.

* There's something about waiting on a train behind an oil-burning Subaru covered with "Visualize World Peace" and "Change" bumper stickers and driven by a short-haired woman in a flannel shirt that lends itself to reading and reflection.

** If affliction is not evil, why the moral outrage? One might as well get outraged at the fact that if you feed a man he will be hungry again in three hours.

*** Though I suppose that we must assume the recipient of such treatment is helped in some way, at least in the opinion of his afflictor.

Whom to believe?

Pirate CEOs or lying government officials:

LONDON (AFP) — The chief executive of US bank JPMorgan Chase, Jamie Dimon, told the Financial Times on Thursday that the worst of the economic crisis still lay ahead as hard-hit consumers default on their loans.

"The worst of the economic situation is not yet behind us. It looks as if it will continue to deteriorate for most of 2009," he told the business daily.

One could have done pretty well gauging this crisis so far by a) completely ignoring anything anyone drawing a government paycheck says, and b) taking the outlook of the most pessimistic CEO available and at least doubling it*. Thus far none of the people designing solutions have any idea what the problem is. The likelihood that they will solve the problem before it simply burns itself out** is slim, to put it mildly.

UPDATE: Here's what I mean: In a CNBC article today titled "'Bad Bank' regains favor as a solution for Toxic Debt," there are any number of the usual suspects, including Sheila Bair, saying that the government buying up all these crappy burritos might just be the solution. The article even goes so far as to note that this was the original Plan 9 that Paulson and Bernanke rammed through Congress like chocolate through a hamster*** last fall and then abandoned, while keeping the money.

What it fails to note is this:

Nov 25. (CNBC) - The U.S. Federal Reserve, in another massive life-support intervention for the U.S. financial system, Tuesday announced a $600 billion program to buy mortgage-related debt and securities and a $200 billion facility to buy consumer debt securities.

Late last November, not only did the Fed announce that they were doing this very thing, they did it with even a larger amount of money than the original Plan 9 imagined.

Now either they never really did it, or they really did it and it didn't work. But the fact that the bad bank idea is being bandied about, passed, abandoned, promised, expanded, maybe implemented or not, then proposed for a third time in four months is proof that the people stealing your money simply have no idea what to do about this crisis.

* So I suspect the situation will, as Dimon says, deteriorate for most of 2009, if by that we mean "through 2010 or longer."

** and they take credit for the solution in Columbus-like fashion.

*** remind me to tell that story some time.

Quick, everyone act surprised

And pretend it will all be different now.

UPDATE: Meet the new boss, same as the old boss:

The nation's banking system remains generally sound despite the doom and gloom that has dominated some of its biggest names, FDIC Chairman Sheila Bair said Wednesday.

"It was a tough quarter. We knew it was going to be a tough quarter. Banks have some real challenges," Bair said during a CNBC interview. "But I think it needs to be emphasized and re-emphasized these banks are solvent, they're well-capitalized overwhelmingly, and that really is what creditors and depositors seem to be focusing on right now." ...

She said 98 percent of all banks are well-capitalized, representing 99 percent of all assets.

Sheila Bair is one holdover from the Bush administration* who ought to demonstrate to anyone with a room temperature IQ** that government regulators are little more than industry cheerleaders: it is their government-funded job to acknowledge hangnails while denying the cancer that is causing the economy to vomit blood all over the floor.

In light of the continuing panic moves by the Treasury and the Fed, the forced mergers, the calls for a "bad bank," and the pressure by the government on the FASB to implement fantasy accounting rules that would hide the truth about banks' capitalization, there can be no doubt that banks are, in fact, generally insolvent***, that they are being propped up and protected, that Sheila Bair is flat-out lying, everyone knows she's lying, and everyone goes along with the lie because there is simply no way the FDIC has the resources to deal with the truth.

* i.e. one of those people who did such a fine job that Obama is keeping her. For change's sake, you know.

** People who do not qualify under those guidelines are constantly a) surprised when "regulation" fails to avoid problems, and b) calling for more regulation

*** Just like the British banks after which they were designed.

Declaration of victory

Mr. President declares Mission Accomplished:

“What the cynics fail to understand is that the ground has shifted beneath them — that the stale political arguments that have consumed us for so long no longer apply,” said Mr. Obama, who in his campaign emphasized a commitment to reduce partisanship. “The question we ask today is not whether our government is too big or too small, but whether it works — whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.”

It is not surprising that in class today we watched the inauguration. It was a history class after all, and this is history. One interesting note was that no one in class raised their hand when the professor asked if anyone thought this was a bad day for America. Not even me, as I don't find it any worse than yesterday or tomorrow, and see no difference whether the man with his hand on the Bible is named Obama or McCain. I certainly hope Obama turns out to be the best President we have ever had, wish him the best of luck, and pray* that he will make all his decisions - decisions that I would never wish to face - with God-given wisdom. While perhaps it is faithless of me to expect that prayer to go mostly unanswered, I cannot fail in my duty to ask. I will also rejoice in those small times when it is answered.

But Obama's inauguration is in some sense, "Mission Accomplished," as one will note that nothing in Obama's laundry list of what separates him from "the cynics" - those who still care whether government is too big or too small - is found in the Constitution. It is no longer at issue whether - as arises from my cynical reading of history or the document - it is the primary responsibility of government to manage employment or retirement or health care for individual Americans. Smooth words about an Era of Responsibility aside, it will not be Americans who are responsible for America, but America which is responsible for them. This is what we asked for. This is what we shall pay for.

For one brief, shining moment, the Congress stood against a $700 billion, budget-busting, blatant looting of the public treasury. 4 Months later, it accepts with precious little dissent trillion dollar deficits as far as the eye can see***, with the Democrats lining up shovel-ready Mob museums and Republicans begging for table scraps. Our government now looks foursquare upon Change, the institutionalization of that day when, as Tocqueville warned, it might spare us all the care of thinking and all the trouble of living.

God bless America.

* The day Clinton was inaugurated, or actually that night, I was at a Bible study and was asked to lead the (somewhat dejected) group in prayer. I prayed pretty much the same prayer that I pray for Obama, that God would give Bill Clinton wisdom, in accordance with 1Tim 2:1-2**. You could have heard a pin drop. It was apparently outside the conception of Republicans that a Democrat president might be used by God for our good. I'm afraid that most Christians' God is too small.

** "My desire is foremost that you will you will make requests and prayers and give praise to God for all men, and especially for kings and all those in authority, that we may lead a quiet and peaceable life in all godliness and honesty."

*** Or as far as the dollar can stretch, which I suspect is significantly shorter.

Jumping Joe was right

Obama may face a crisis early, this one arising from his own promises:

...the situation in Afghanistan has been complicated by the situation in Pakistan. Roughly three-quarters of U.S. and NATO supplies bound for Afghanistan are delivered to the Pakistani port of Karachi and trucked over the border to Afghanistan. Most fuel used by Western forces in Afghanistan is refined in Pakistan and delivered via the same route. There are two crossing points, one near Afghanistan’s Kandahar province at Chaman, Pakistan, and the other through the Khyber Pass. The Taliban have attacked Western supply depots and convoys, and Pakistan itself closed the routes for several days, citing government operations against radical Islamist forces...

In their excellent and inimitable style, Stratfor lays out the immediate foreign-policy problem Obama faces as he tries to maintain and expand military operations in Afghanistan. Afghanistan is not Iraq, where the massive supplies demanded by a modern, mobile army can be simply offloaded from boats in friendly ports. Afghanistan is landlocked, and it is landlocked by nations that are either falling apart (Pakistan), hostile (Iran), or who are themselves locked in by Russia (e.g. Turkmenistan). The Russian national gas crisis ensures that we will get little European help*, the Mumbai one continually reduces the support we can expect from Pakistan.

But I would go further than Stratfor here, and look not at how to get supplies in, but what happens if we have to get our troops out. If for whatever reason the two main supply routes through Pakistan fail, that will pose a far larger problem than a temporary strategic setback in American operations there - the American army will either starve in place or have to fight its way through Khyber pass and the same Pakistani tribal areas it is currently bombing. Don't think the Iranians - and maybe the Russians - won't do what they can to make that flight as costly as possible. It is conceivable that, should Pakistan suffer the kind of rapid collapse that the aforelinked Joint Forces Command report warns of, the US could lose an entire army. It's not a pleasant thought, it's the kind of thing that happens when an Empire sticks its finger out too far.

What makes it interesting from a political perspective is that Afghanistan is all Obama's. The Democrats have consistently said that's the place the war on terror should be fought, quite possibly because they could shed a dovish image by re-prioritizing what has been considered an easier and cheaper conflict. Should Afghanistan go bad**, the Democrats are not going to have old George Bush to blame for this one.

* They're all in the process of leaving anyway.

** and I fully expect that it will, because I fully expect Pakistan to implode. Maybe this year.

Hahahaha

Hahahaha haha ha ha:

We Republicans believe we can help mitigate [wasteful spending] if we are given a meaningful place at the table...

We trust the Democrats' assurances that the economic stimulus will not be turned into a grab bag for favored interests. Serving as the honest and fair check on majority power, we will work to ensure they keep their word.

Haha ha hahaha haha haha hahaha ha hahahaha haha hahaha ha haha hahaha haha ha hahaha hahaha hahaha hahaha hahahahahaha hahahahahahahahaha.

Oh, stop, it hurts.

Hat in hand

Well, that didn't take long:

CARACAS: President Hugo Chávez, buffeted by falling oil prices that threaten to damage his efforts to establish a Socialist-inspired state, is quietly courting Western oil companies once again...

With oil prices so low, the longstanding problems plaguing Petróleos de Venezuela, the national oil company that helps keep the country afloat, have become much harder to ignore...

Chávez's olive branch to Western oil companies comes after he nationalized their oil fields in 2007...

But Venezuela may have little choice but to form new ventures with foreign oil companies. Nationalizations in other sectors, like agriculture and steel manufacturing, are fueling capital flight, leaving Venezuela reliant on oil for about 93 percent of its export revenue in 2008, up from 69 percent in 1998 when Chávez was first elected.

So I guess it only takes about 18 months from nationalization* to the realization that nationalization always results in losses, capital flight, and production collapse. Of course, it won't stop the socialists from re-nationalizing as soon as the high price of oil makes the rebuilt property worth stealing again. The oil companies and miners would be idiots to even answer Chávez's phone calls. But they will.

UPDATE: it is not only despotic South American governments that refuse to learn anything from history. I mentioned before how FDR's Agriculture Adjustment Administration, in an attempt to keep farm prices from falling during the last Depression, slaughtered about 6 million piglets and dumped tons of milk down drains. In other words, their solution to widespread poverty was to purposely destroy wealth**.

It seems that bad ideas never die, they just demand a new administration:

Lawmakers are looking for ways to use the forthcoming stimulus bill to help dairy farmers, and the number one priority is to dampen milk supplies and prop up prices. Translation: reduce the nation's dairy herd.

Exactly how Congress will accomplish that remains uncertain...

Variations on the theme have been tried several times, with - as the article notes - perfectly predictable yet unforeseen side effects, like crashing the price of beef and thereby creating a whole new class of farmers in need of a bailout.

Not surprisingly, even if they managed to enrich the dairy farmers without bankrupting the beef farmers or young families who buy a lot of milk, the solution won't last. Too much production means low prices, and low prices mean that

farmers have a harder time finding credit to buy equipment, expand their farms or otherwise improve their businesses***...

Therefore government will reduce milk supplies so dairy farmers can expand their operations.

It's genius, I tell you.

(Hat tip: Vox)

* read: wholesale theft of property by government.

** further evidence that Keynesians don't just do the wrong thing in any given situation, they do exactly the wrong thing.

*** which is the perfect market solution to too much milk on the market, lacrimations of farmers and their captive politicians aside.

That's why we elect them

I read the news today, Oh boy

Let's see if we can guess today's theme:

Nortel Networks Corp, North America's biggest maker of telephone equipment, filed for bankruptcy protection Wednesday, as the global economic downturn further erodes its once high-flying business.

Retailer Gottschalks Inc. says it put itself up for sale and has filed to reorganize in a Chapter 11 bankruptcy.

Tarragon Corp. ... and 19 of its subsidiaries filed for Chapter 11 bankruptcy reorganization in New Jersey federal court on Monday.

The Shane Co., a jewelry chain... filed for Chapter 11 bankruptcy protection Monday.

Oklahoma-based Tronox said Monday it filed for Chapter 11 protection as it looks to reorganize its operations and alleviate legacy liabilities...

Apex Silver Mines Ltd. and its subsidiary, Apex Silver Mines Corp. filed voluntary petitions for reorganization under Chapter 11 of the United States Bankruptcy Code...

Goody's LLC, a privately held family apparel retailer that emerged from bankruptcy in October, has filed for Chapter 11 protection again, and said it plans to liquidate its remaining 282 stores.

A couple items of note:

It was less than 10 years ago that Nortel's price was a split-adjusted $800 a share. At the current CNBC-quoted price of .07, that's a loss of better than 99.99%. As Darth Vader would say, "Impressive."

If memory serves correctly*, Apex Silver is or was at one time controlled by George Soros - famous sufferer of Bush Derangement Syndrome - and for that reason had a market cap that was always way out of line with its peers. Being able to raise money more easily than their peers didn't help them mine silver any better, I guess. That lesson might come in handy to the distributors of TARP bounty.

There is a hidden phrase in one of the above: "alleviate legacy liabilities." Prepare to see that many, many more times in the next few years.

* which is shorthand for, "I don't really care enough to look it up." I never owned Apex anyway.

Escape from New York

Wall Street does some contingency planning:

“The system really was about six hours from failing,” says Gene Lange, a manager at a midtown hedge fund, referring to the week in September when Lehman went bust and AIG had to be bailed out. “When you think about how close we were to the precipice, I don’t think it necessarily makes a guy crazy to prepare for the potential worst-case scenario.”

Preparations, in Lange’s case, include a storeroom in his basement in New Jersey stacked high with enough food, water, diapers, and other necessities to last his family six months; a biometric safe to hold his guns; and a 1985 ex-military Chevy K5 Blazer that runs on diesel and is currently being retrofitted for off-road travel. He has also entertained the idea of putting an inflatable speedboat in a storage unit on the West Side, so he could get off the island quickly, and is currently considering purchasing a remote farm where he could hunker down. “If there’s a financial-system breakdown, it could take a year to reset the system, and in that time, what’s going to happen?” asks Lange. If New York turns into a scene out of I Am Legend, he wants to be ready.

I'm sure everyone mentioned by name in this short article will receive more than a little ribbing from the half-dozen people still working in their office for being one of "those people" who actually believe that such a thing could happen* - even as their relatives make a mental note of whose doorstep to show up on, sharply-dressed poodles in tow.

Though it does make me wonder: if "the system" went to hell so fast as to demand such a timely escape, would it necessarily be "reset" even in a year? Just look at New Orleans, with squillions and squillions provided by a nation that was otherwise unaffected by Katrina: it's now the murder capital of the nation. I suspect that if you turned the lights off in New York for 2 weeks, such a situation would quickly become more or less permanent. A significant percentage of the population would be hard-pressed to go two days without truckloads of refrigerated foods***. A month without infrastructure and you might as well blow the bridges, mine the harbors, and set Snake Plissken's cell number on speed dial.

Even though I don't think a financial crisis such as we face would immediately devolve NYC into a John Carpenter movie, I certainly can't criticize someone for being prepared. Contingency planning requires first that one emotionally accept the possibility that the worst-case may come to pass****. If someone can successfully prepare for that, they just might find that anything less is disappointingly easy to deal with. Besides, it will turn out much better at the soup kitchen if someone actually knows how to cook dried beans.

* though perhaps our hero is a bit naive to believe that if he needed to escape the island via high-powered inflatable speedboat, his fellow** inmates would just give give him a friendly wave goodbye.

** By which I mean "more numerous, more desperate, and better armed."

*** even odds says they would still steal plasma TVs first, however. Priorities, you know.

**** And while our friends the Keynesians might worry that such thoughts are bad for consumer confidence, if that particular ball gets rolling, the freeze-dried food industry might be able to lend the government all that money they will be so desperately seeking over the next year or more.

* Side effects may include: abdominal pain, agitation, anxiety, constipation, decreased sex drive, diarrhea or loose stools, difficulty with ejaculation, dizziness, dry mouth, fatigue, gas, headache, and decreased appetite. They also may include increased sweating, indigestion, insomnia, nausea, nervousness, rash, pain, sleepiness, sore throat, tingling or pins and needles, tremor, vision problems, acne, allergic reaction, altered taste, back pain, blindness, breast development in males, breast pain or enlargement, breathing difficulties, bruise-like marks on the skin, cataracts, changeable emotions, chest pain, cold, clammy skin, conjunctivitis (pinkeye), coughing, difficulty breathing, difficulty swallowing, double vision, dry eyes, eye pain, fainting, feeling faint upon arising from a sitting or lying position, feeling of illness, female and male sexual problems, fluid retention, blushing, frequent urination, hair loss, heart attack, hemorrhoids, hiccups, high blood pressure, high pressure within the eye (glaucoma), hearing problems, hot flushes, impotence, inability to stay seated, increased appetite, increased salivation, increased sex drive, inflamed nasal passages, inflammation of the penis, intolerance to light, irregular heartbeat, itching, joint pains, kidney failure, lack of coordination, lack of sensation, leg cramps, menstrual problems, low blood pressure, migraine, movement problems, muscle cramps or weakness, need to urinate during the night, nosebleed, pain upon urination, prolonged erection, purplish spots on the skin, racing heartbeat, rectal hemorrhage, respiratory infection/lung problems, ringing in the ears, rolling eyes, sensitivity to light, sinus inflammation, skin eruptions or inflammation, sleepwalking, sore on tongue, speech problems, stomach and intestinal inflammation, swelling of the face and throat, swollen wrist and ankles, thirst, throbbing heartbeat, twitching, vaginal inflammation, hemorrhage or discharge, and yawning.

Don't plan to retire

There are more government promises that can't be kept:

Jan. 13 (Bloomberg) -- State governments from Rhode Island to California have run up estimated pension-fund losses of $865.1 billion, forcing some to cut benefits for new hires.

Assets for 109 state funds declined 37 percent to $1.46 trillion over the 14 months ended Dec. 16

Changing the rules for the new hires who would not retire for three decades does nothing to deal with the real problem that state governments lost 40% of the money they had saved to pay their current employees for not working*. Other superficial changes include raising the minimum retirement age (all the way to 57 in Kentucky) or the number of years one has to work in order to retire, often raising that number to 30.

So the revised promise is that if you come work for the government for 30 years (say age 27 to 57), taxpayers will continue to pay you until your natural death (age 57 to 87). 60 years of pay for 30 years of work. Does anyone really expect that to be kept, given that they lost 40% of the money to do that in the last 9 months?

It's not going to work any better than it works at GM. And the worst part is, it was never going to work. Anyone - in government or private industry - planning to retire at some arbitrary age significantly less than the age at which they expect to die had better make sure they are independently wealthy** before they walk away. Because the more years it takes for the market to recover, the more currently-retiring boomers will suck the capital out of all these newly-depleted accounts. It will not be long before governments will have to make real changes as opposed to the merely superficial.

And those changes are going to surprise a lot of gullible hard-working, 57-year-old boomer retirees who are expecting to travel the world on the taxpayers' dollar.

* Well, for not coming to office when they are old, to be more specific.

** This does not mean a million in the bank, it simply means possessing income streams that will cover regular expenses with a cushion to cover the extraordinary.

Let us punish the innocent

Can your heart stand the shocking facts about Keynesians from the outer space?

The next logical step [would be that] the Government could tax all bank deposits and other risk-free savings. This would create a negative risk-free interest rate, encouraging savers either to invest in property, shares and other productive assets - or simply to save less and consume more. In either case, the result would be more consumption and physical investment, less unemployment and faster recovery from the slump.

The next logical step after the collapse of a pyramid based on bad debt is apparently to punish those who did not take part by charging them de facto interest for the privilege of sitting the insanity out. Once you have driven interest rates to zero, I suppose there there is simply nowhere else to go.

The problem is not that Keynesian economists are wrong, it's that they are EXACTLY wrong: they zig when they should zag, they lower when they should raise, and they punish just about the only people who were not causers of the current financial crisis. Even worse, that they consistently find themselves wrong about the present* never keeps them from confidently promoting ideas for molding the future so counterintuitive** that only a PhD could believe they might possibly end in other than disaster and poverty. We will spend ourselves rich. We will borrow our way out of debt. These are the people who advised Bush, and they advise Obama as well. It's like reading a history book in real-time. A pop-up one with lots of clown cars in it.

But a funny thing happened on the way to Keynesian fantasy land: they forgot that people generally act in their own interest - if they cannot put their money in the banks, it does not mean they will buy stocks or government bonds or plastic Pokemon toys or all the things that Keynesians think are better for them than money to the bank.

I don't know what people will do - they might buy gold or bury coffee cans full of currency in the yard or shove it under mattresses. But I do know that a) what the Keynesians expect to happen will not happen, b) what the Keynesians do not expect to happen will happen, and c) they will quickly develop a completely new set of ideas that are absolutely certain to work.

Just as well as the last set.

* "I have been wrong about so many aspects of this crisis - as have most conventional economists and policymakers, whose views I broadly share." Seriously, it doesn't get more obvious than that.

** read: mind-boggling stupid.

The question not asked

means the wrong answer will be assumed:

HONG KONG — China has bought more than $1 trillion of American debt, but as the global downturn has intensified, Beijing is starting to keep more of its money at home, a move that could have painful effects for American borrowers.

The declining Chinese appetite for United States debt, apparent in a series of hints from Chinese policy makers over the last two weeks, with official statistics due for release in the next few days, comes at an inconvenient time.

The financial press is filled with the story of Chinese accumulation of our government debt and what it means: with a trillion dollars in agency debt and treasuries across the spectrum, they have been instrumental in keeping interest rates artificially low, credit artificially loose, and, not coincidentally, enabling Americans to buy more imported Chinese goods*. It often ends with what will happen on that sad day many years in the future when the Chinese decide that they have enough of our paper.

It's not the whole story, because the Chinese can only sate their "appetite for US debt" in proportion to how much we buy from them. The Japanese are in the same boat, along with Korea and the rest of the Asian Tigers - they accumulated a ton of US debt because they had huge trade deficits with the US. But as the US consumer pulls in his horns and decides that maybe 3 cars are enough, 4 TVs are enough, 1250 assorted plastic toys littering the basement, garage, and yard are enough, there will be less money going to China for them to recycle into US debt of all stripes.

Sound like a good thing? In many ways it is. In one very important way that Obama is counting on, it's not**. The question not asked is, "what if the Chinese cannot lend us a trillion dollars to pay for Obama's stimulus?" Not, "what do they want to make the deal happen?****" But what if they simply don't have the money to lend us and there is simply no way the administration can cajole them or any other foreign government to pay for it or the trillion dollar deficits Obama has promised as far as the eye can see?

Before Congress decides to spend a trillion dollars this month to follow the trillion dollars they spent 3 months ago and the trillion dollars they will have to borrow over the next year, they would be wise to ask where the money is going to come from.

Which is why that question will not be asked, either.

* Up close, it looks more like a company store arrangement, occasionally necessitating that our Secretary of the Treasury head to China to assure our bosses that we're good for it. And if the Chinese are in a good mood, they will choose to continue the game a bit longer.

** Just like while it's a good thing for you to pay less in rent, that doesn't mean your landlord will be happy about it. Things are seldom all good or all bad in economics***.

*** Except for John McCain. All bad.

**** This is the question asked by those who see the future just like today except with smaller cell phones. When they ask it on TV, everyone ooohs and aaahs to be in the presence of such brainpower. That there simply might not be a political deal possible does not occur to them.

Uncle Jay explains 2008

Uncle 'Bam wants you

to die of irony poisoning:

(CNN) -- President-elect Barack Obama on Wednesday will announce his pick for "chief performance officer," a newly created position that will work on the federal budget and to reform government, a Democratic official told CNN...

The CPO will "help put us on a path to fiscal discipline," a Democratic official said.

The announcement comes a day after Obama told reporters that the deficit will probably hit $1 trillion this year and that "potentially we've got trillion-dollar deficits for years to come."

A Chief Performance Officer that will work on the federal budget? My goodness, what is the First Assistant Undersecretary to the Deputy Manager of the Office of Management and Budget going to do with all his new-found free time*? The only thing Obama needs now is an Economic Recovery Accountability and Transparency Board to make the process really, really efficient. Oh, wait, he's on it.

So to go along with our continuing trillion dollar deficits, we now have a multitude of new offices** to make sure "fiscal discipline" is implemented in an orderly and efficient manner.

This administration is not even officially started and it's already enough to make a thinking person go mad.

* my guess is that he'll be reassigned to shutting down thrift stores to help the economy.

** filled with "swarms of Officers to harass our people and eat out their substance."

Nerdy Harry sends his regards

To those who thought he was serious about ethics:

WASHINGTON (CBS) ― Senate Democrats plan to accept Roland Burris for President-elect Barack Obama's vacant seat.

Burris was scheduled to meet Wednesday with the Senate's top two Democrats ... a day after his paperwork was rejected at the opening of the 111th Congress.

That was fast*. Seriously, it has only been 2 weeks since Reid declared, in a fit of new-found ethical harrumph, that "anyone appointed by Gov. Blagojevich cannot be an effective representative of the people of Illinois and, as we have said, will not be seated by the Democratic Caucus."

So either Burris is not an "anyone" or ethical harrumph just ain't what it used to be.

* Maybe there is something to this new-fangled government efficiency after all.

The pitchforks and torches come out

Everything starts in Britain:

Two-thirds of Britons want the rich to face punitive tax rates not seen since the 1980s, according to a new poll which suggests that the recession has hardened attitudes towards the wealthy.

Bankers are now seen second only to footballers as being overpaid, while seven in 10 think that ordinary workers should sit on remuneration committees setting executives' pay to ensure that high salaries are deserved.

While any study published by an organization with "Fabian*" in its name ought to be taken with a litre of salt, there can be no doubt that there will be a backlash - especially against obscene Wall Street bonuses but eventually against much of the piratical management class - once the current financial debacle reaches a certain critical mass. And there can be no doubt that much of the castle-swarming will be well-deserved.

It is unfortunate, however, that - according to the Fabian Society's numbers - barely a quarter of those surveyed place the primary blame in the correct place. In their ignorance of the nature of money, they will call upon the greater monster to help them slay every lesser one they find.

* "Fabian" comes from the Roman general of the Second Punic War, Fabius Cuncator (Quintus Fabius Maximus Verrucosus), famous for his delaying tactics which were designed to slow but never directly engage Hannibal. Fabian Socialism is then the idea that socialism ought to be implemented slowly, through a sort of economic attrition, rather than by direct confrontation with capitalism.

Eagles > Vikings

Am I the only one who thinks Coach Reid looks like that doctor in Office Space who drops over dead?

UPDATE: And no, I'm not calling for Childress' head. A new special teams coach and a real quarterback, sure. But you have two choices when you hire a new coach in the NFL: a) someone who has never done the job before, or b) someone who has already failed somewhere else. Might as well stick with boring old Chilly and hope to God the Vikings can accidentally learn how to cover a punt or throw a screen pass.

The walk of shame

(might be NSFW depending on where you W)

It's amazing to me

that some people still think I'm too cynical:

MINNEAPOLIS (AP) — The state Canvassing Board was posed to certify the results of the recount in Minnesota's grueling Senate election in Al Franken's favor...

It took them two months, but the voters of Minnesota finally gave their election officials the correct answer.

First Favre goes to the Jets, then Al Franken goes to the Senate. Gotta be tough to be PiffordT these days...

Because state taxpayers can't afford it

Federal taxpayers will have to chip in:

PHILADELPHIA (Reuters) - Governors of five U.S. states urged the federal government to provide $1 trillion in aid to the country's 50 states to help pay for education, welfare and infrastructure as states struggle with steep budget deficits amid a deepening recession.

It may be meaningful that all five governors are Democrats, or it may just be one of those weird coincidences that turn up now and then*. Either way, it seems likely that unless Helicopter Ben can add a few more zeroes to the printing presses** we are going to have significantly less state government over the next 5 or so years than politicians believe. Not that I'm complaining, you understand.

But there was one rather interesting item buried in the week-late Santa list, right after squillions for new roads and paying people not to work:

The remainder would be used to fund middle-class tax cuts...

If it seems a little odd that the Federal government is being asked to cough up money so state taxpayers can pay even less for all the government they are apparently demanding, well then I guess you just don't understand the stresses to the middle-class family budget that state taxes represent.

Federal taxpayers, on the other hand, are on their own.

* like the fact that, thanks to Karl Rove's "permanent majority" stragedy, GOP governors are becoming an endangered species.

** Certainly you don't think there's another trillion out there just waiting to be borrowed at zero percent interest rates?