Free content added to the Wall Street Journal online site on capital markets, foreign policy-national security, ‘climate change,’ health care, and a variety of other topics.
My commentary ‘calling’ started with enthusiastic and unsolicited posts on the Wall Street Journal (WSJ) online site, in response to articles published on various topics. Starting in May 2008 with capital markets – the role of the Federal Reserve, the impact of government regulation and intervention, the power of special interests, etc. Foreign policy and national security (inextricably linked), and targeted issues in the national debate, such as health care, ‘climate change’ and education, also captured my attention and comment.
I have since given up adding free online content to the WSJ site, and wish to publish this body of commentary somewhere (where better than here?), with the intent for it to provide further usefulness in the public domain. My apologies on the lengthiness – I have since learned that I should have been writing for my own site all along! Cheers to all of you who contribute free online content – it is a risky endeavor in terms of the returns.
Posts on Capital Markets: Capitalism and Free Markets
Let’s Try Market-Oriented Market Reform, 5/31/08:
About the only useful step Congress could/should make from Mr. Ely’s list is to modify corporate tax policy – specifically to bring the level of capital gains taxation for corporations (which include financial institutions) to the same level as individual capital gains tax rates (15%). This disparity alone discourages equity capital investments that companies would have otherwise made, and would likely raise revenue for the Treasury to boot. The market itself, without Congressional meddling, should handle all other reforms. In fact, interest rate policy should also be more market based (independent of the Fed).
A Brave New World for Financial Regulation, 6/19/08:
More regulation by the Fed or the SEC will not solve the problem. Investment banks by their very nature must be allowed to fail, as they will continually look to inventing innovative new products and strategies to take advantage of the efficient (or inefficient) markets. Risk comes with reward and failure. It is part of a free market system. To neuter it with heavy-leaden regulation will render the market anything but free – think socialism. Yes, investment bank fiduciaries should self-police themselves by balancing leverage and reserves to cover losses and margin calls, and investors should actually read prospectuses. What ever happened to accountability? Know your statistics and invest money you can lose. Don’t cast blame for risk taking and loss. Let failure run its course to clean out the system – others will swiftly step in to fill the void.
Information Age: Inherently Risky Business, 6/16/08:
This touches on the features of a market with inefficiencies. Though there are uncertainties we find difficult to quantify, game theory and other strategic approaches (some not so formalistic but intuitive) can help to identify them. Investors and traders should always keep in mind that there are unknowns, and only bet to lose what they can manage.
Toward a Transparent Financial System, 6/27/08:
I would add that price and volume speak for themselves and is information already readily available to everyone. My interpretation of Mr. Pandit’s piece is that the Fed should regulate all dependents equally, commercial or investment bank. But aye, there’s the rub – do we socialize risk and provide safety nets backed up by Uncle Sam for risky investments or do we let the free market work, with the successful investors surviving and unsuccessful investors failing? Commercial banks are heavily regulated because depositors expect that a portion of their money will be available if there is a failure (and there is a premium paid for that – FDIC). If more regulation means socializing risk, then we can do without it.
Paulson’s Fannie Test, 7/15/08:
One wonders whether Mr. Paulson cares more about shoring up the system to protect brokerage houses and hedge funds than he does to maintain a fiduciary role over the U.S. taxpayer balance sheet, and to promote a sound dollar. If Bear had been allowed to fail without backstops to protect bondholders we would have come to this Fannie/Freddie issue sooner. They too should be allowed to fail, and both stockholders and bondholders should take the hit, just like we all do when other investments fail. An RTC-like entity can handle the receivership of F/F’s portfolio from there. Let’s stop this nonsense about “systemic risk” management and let the free markets work as they should. Stop socializing risk Mr. Paulson, there is no blank check from the U.S. taxpayer, and please apologize to Adam Smith and Milton Friedman, who I am sure are both rolling over their graves simultaneously.
This was published as a Letter to the Editor in the Journal on 7/22/08.
What Price Would You Put on a Short Seller’s Head, WSJ Blog, 7/15/08:
The Uptick Rule and stricter enforcement of the borrowing rules were in force during the Tech Bubble – and that didn’t stop the rampant short selling. Sometimes I wonder why people have such short memories of market history…Don’t blame the short sellers. If you want to protect your shares, spend money on stock certs and only invest money long that you can ride out or lose. Short sellers are speculators – they provide liquidity to the market.
Why No Outrage? 7/19/09:
I disagree with James Grant – people are outraged with Fed and Treasury policies and actions – perhaps it is not as noticeable when the mainstream media is so fixated on popular culture, not to mention the high probability that the mainstream probably doesn’t even know anything about how interest rates are set, or about capital markets in general. I’ve gotten so outraged since the Bear bailout I’ve made it a point to start contributing to the WSJ forum pages – and I’m grateful that I have the opportunity to do so. If anything, the WSJ provides the best coverage of the issues surrounding the Fed and Treasury, but I think they could be even tougher in their opinion stances and investigative pieces. Having worked my whole life to become financially independent, fiscally responsible and debt-free, it is rather abhorrent that I must take the hit in not being very well compensated when I lend my money – the Fed and Treasury have seen fit to devalue the dollar with the policies of recent years, and providing bailouts for obscure bondholders I’m sure doesn’t help either. I wish I could have that kind of guarantee, but then again, I’m proud of my accomplishments in managing my money without such socialized backstops from a near oligarchy of a government.
How to Shake Off the Mortgage Mess, 7/30/08:
Asset liquidation is the key strategy here – lower the price enough and buyers will likely show up with cash in hand. The recent CDO sales by Merrill and others at cents on the dollar indicate that this is what is needed, but on a greater scale. There are buyers out there for the foreclosure backlog, but the price on the open market has to be allowed to come down – not subsidized by the U.S. taxpayer.
Hank Paulson’s Fannie Gamble, 8/1/08:
Bush has lost all credibility after he chose to support HR 3221 – Housing Pork and Fannie/Freddie Bailout ExtraOrdinaire. My embarrassment reaches far to Boise – where our own senators voted to support him and that. We really need someone in there soon who vetoes all earmark legislation headed for the WH. Massive budget deficits and a weak currency are not good for a sovereign populace and those supporting such should lose his/her job…our system should be rewarding those showing fiscal responsibility.
We’ll Protect Taxpayers From More Bailouts, 9/9/08:
The authors ought to go further and take a look at steps to “protect” our financial markets from government/special interest manipulation – and move them ever closer to freer markets. Fannie/Freddie should have been put into receivership, and assets sold, with bondholders losing out as much as equity/preferred holders. The U.S. taxpayer should not be on the line for this failure. The current Treasury’s best customers should not have undue influence on the functioning of financial markets in order to tilt the system toward their favor. What we need is a good old-fashioned Boston Tea Party style response to the Fannie/Freddie Bailout. Where and when will that come? The Treasury and Fed have not shown the value of “systemic risk management,” which looks to be a form of nonsense that we will look back on with more critical disdain in years to come. Let the Fed and Treasury get out of the way of the functioning of free markets. Inflated assets should be allowed to deflate, and interest rates should not be kept artificially so low for so long.
Resurrect the Resolution Trust Corp., 9/17/08:
The only viable option is #4. A new RTC can take distressed/illiquid assets into receivership and sell them to interested buyers. The original firms would be disassembled. After the AIG bailout today, the government is that much closer to running out of money to backstop failed/mismanaged institutions. AIG’s insurance customers can find other companies to offer them comparable policies. Retirement annuity customers have some protection of their assets and can move them elsewhere. Why is the government getting involved in backstopping a poorly managed institution? It was known to many of us some 4 months ago that this company had made some bad bets and that management was reluctant to take the necessary steps to forestall the inevitable. Bailing AIG out is not the role of the federal government. Even seasoned investors weren’t willing to touch AIG prior to a formal bankruptcy. So why should the U.S. taxpayer?
Loosen Deposit Insurance Rules to Prevent a Bank Run, 9/17/08:
I disagree with Mr. Lindsey. Why should financial institutions be held to a different accounting standard (not “Mark-to-Market”) than their customers (who are always Marked-to-Market)? Let’s face it. Many financial institutions made some bad bets on structured financial products in an environment of cheap money and lax lending standards. They ignored conservative reserve requirements and capital ratios. Individual investors who have done the same have historically lost out after making such mistakes. Financial institutions should be no different.
Letter to Senator Mike Crapo, 9/17/08:
Dear Senator Crapo,
I urge you not to vote for any legislation that puts taxpayer money on the line for bailing out failing/failed financial institutions that have made bad bets on highly leveraged investments with a high risk of failure. The U.S. taxpayer balance sheet is not infinite, and major bailouts devised in a shortsighted time span would only serve to further dilute and devalue the dollar, increase inflation and ultimately downgrade the debt rating of the U.S itself. The canards by the administration that this is a major crisis are overblown and highly reactionary – and have obviously served to tilt the system in favor of saving institutions of interest to Secy Paulson, as well as others in the Federal Reserve system. This is the kind of manipulation of financial markets that should be investigated. If an RTC-like entity is resurrected, it should follow the original function of the first RTC – to take bad assets into receivership with no monetary outlays to buy them, find a buyer, and ensure that the institution that originally held them is dismantled in an orderly fashion. The $700B+ being discussed is not acceptable to fiscal conservatives like myself. Again, I urge you as a member of the banking committee to consider some of these issues and support fiscally conservative principles that many Idahoans believe in – let’s not bail out failed financial institutions. Let’s support institutions and individuals that make the right financial decisions and follow sound risk management.
Susanne Lomatch, Ph.D
Let’s Get the Bank Rescue Right, 9/24/08:
This shows the problem when there are no fiscal conservatives with high positions and loud enough voices. But many Americans embrace such conservatism, and do not want to support a taxpayer-forced bailout of any kind. They also do not want to see failed institutions survive or yield a windfall of any kind, after showing incredibly poor financial judgment and lack of dexterity in risk management. The left and the administration have agendas, and meanwhile the rest of us see a clear solution. The original RTC concept is appealing, one with the authority to take distressed/illiquid assets into receivership without any monetary outlays to buy bad assets, find buyers (without restriction on a time period), and dismantle the failed financial institutions in an orderly fashion. No fanfare, no parachutes for failed management. I’m convinced the market would embrace such a decisive plan, and we’d preserve American capitalism to boot. What are we waiting for? Anything short of this would not yield satisfactory results long term, as people lose confidence in a system where the game is rigged and losers don’t lose.
How to Restore Trust in Wall Street, 9/25/08:
Mr. Levitt is spot-on here. After hearing so many dissenting voices against FV/M-to-M accounting, we get a staunch supporter with some clout. The dissenters (and I still cannot believe how many there are – and who they are) have a very weak argument for why financial institutions shouldn’t follow these principles. Here’s the doosie I’ve heard recently: “It’s the right set of rules, but not for this market.” True maybe, but not a reason to re-tilt the playing field. When the going gets tough, the tough should get going – if I have to follow these rules, so should financial institutions.
Is Commercial Real Estate Next? 9/27/08:
Mr. DeBoer is like Mr. Bernanke – both have a narrowly trained lens on what they think was the cause of the Great Depression, and it shapes their thinking, or in the case of Mr. DeBoer, their raison d’etre as it applies to an argument for a bailout. There were many factors at play that caused/prolonged the Great Depression, a horribly failed trade policy being primarily among them. Fortunately we don’t currently have such a skewed trade policy, and the commercial real estate market may benefit in getting a cash infusion from foreign investors.
Mark to Mayhem? 10/1/08:
It is correct that “a mere accounting rule can’t alter the underlying economics of a <you fill in the blank> business.” Mark-to-market simply makes a business more transparent, as opposed to having a business hide their poorly performing or essentially worthless assets in off-balance sheet entities. Shifting the rules to mark-to-maturity won’t change reality if some of those assets will be worthless before maturity, no matter what we do. Why don’t we stop talking about accounting rules and start talking about real incentives, such as cutting the capital gains tax for individuals and businesses? This is a no-brainer: when investors and businesses know that they will make more money if they commit capital to new investments in all capital markets (including real estate) they will do so. And thanks to Mr. Laffer we have some evidence that the Treasury will certainly make money on that deal. Businesses pay the same capital gains tax rate as they do corporate tax – many CEOs have commented on how their investment dollars would be unleashed if there were a simple change to lower the capital gains rate from the high corporate rate to the same rate that individuals pay. Stop complaining about how mark-to-market makes no sense and start giving a real incentive to unleash capital.
Volcker: We Have the Tools to Manage the Crisis, 10/10/08
The Great Depression was made worse because of Smoot-Hawley (steep tariffs on foreign traded goods) and price supports on (mainly farm) goods, as well as wages. Mr. Obama has espoused anti-free-trade rhetoric, and he is predisposed to price fixing. Mr. Volcker has been rightly disappointed with Republican leadership. But why he doesn’t even mention the most obvious and easy solution to this mess is beyond me: cut or suspend the capital gains tax on individuals and corporations. This is highly stimulative and will unleash new capital. And it will make money for the Treasury. And it won’t cost the taxpayer a dime.
Washington is Killing Silicon Valley, 12/22/09:
I agree with Mr. Malone, that the options expensing issue is tricky for small start-ups, where their valuation is difficult and where expensing may not make sense. However, if options are not expensed, then they should at least be disclosed in a very transparent way so that the market (including retail investors) can easily factor that in, i.e., that the stock price accurately reflects the density of options grants. Something for FASB to work on, or for SV to lobby for.
The Weekend That Wall Street Died, 12/29/08:
There should have been no gov’t bailout of Bear or AIG or C. If the management of these companies cannot prevent a market meltdown, then the natural course is to declare bankruptcy in one form or another, reorg or liquidation. The U.S. Taxpayer should not “bear” the undue burden of poor risk management or liquidity positions of any public company. There will always be competition to take the place of the loss. Such is the nature of true capital markets. Wall Street is not dead.
Six Lessons for Investors, 1/8/09:
Mr. Bogle has some good advice, but most of it is an advertisement for his Vanguard family of mutual funds. He leaves off some other valuable advice that was largely overlooked by financial experts and the press in recent years: keep a portion of your portfolio in cash and cash equivalents (and no, not those obviously risky auction rate securities!), and pay down your mortgage(s). I cannot believe how many experts told people to get huge mortgages and ignore paying them down because of the missed opportunity costs of the stock market. Luckily, I was not one of those heeding that advice. Keeping cash on the sidelines also works well for those of us who want to buy bargains as the markets continue to vacillate.
Freedom Is Still the Winning Formula, 1/13/09:
It is perplexing why New Zealand is ranked #5 on the ’2009 Index of Freedom’ list.
I just returned from a long stay in New Zealand, and I thought it was one of the more socialist countries I’d been to in recent years. There is wage and price fixing by the (now former Labour) government, which has caused much consternation among all of the small business owners I spoke with. Good service is almost non-existent, partly due to the wage fixing, and also due to a high GST (VAT) with almost no custom for tipping. Therefore there is little incentive for businesses to promote good service, and customers are forced to not expect it. As a visitor, it was very difficult to get over-the-counter drugs or supplies that we take for granted in the U.S. OTC drugs and supplies are regulated and must be sold in designated pharmacies, often at double or triple the cost one would pay for those goods here, and available at every supermarket. New Zealand also has many residual blue laws.
Perhaps the ranking is based on projected results: in November, New Zealanders threw out the multi-decade reign of the Labour Left in favor of a right of center National party, and just three days after our own election. Seems like the populace had had enough of that social experiment and may now indeed choose capitalism as a worthy dance partner.
Geithner Delay Slows Assembly of Crisis Team, 1/24/09:
Geithner’s confirmation should be blocked for as long as possible, long enough for the supposed “crisis” to work itself out on its own, without any government meddling or spending. In the mean time, there are plenty of qualified blue dog dems that could be Treasury secy. Best to pick one that believes in protecting the taxpayer and limited government, and is not a crook. (Wishful thinking but not impossible.)
Geithner’s China Bash, 1/24/09:
China’s just-issued response is perfect: “We thought in the face of the financial crisis, there would be a spirit of self-criticism beneficial to finding ways of resolving the issue and overcoming the crisis,” [Central Bank Deputy Gov. Su Ning] said, adding that it was imperative to avoid any excuses to encourage trade protectionism.
Geithner clearly inserted the wobbly criticism aimed at China to avoid further discretion of his own shortcomings at the NY Fed: $29B to BSC, $125B+ to AIG, and many $B to other associates to protect counterparty trades. Where is the focus on that by the WSJ? There are indeed many more qualified candidates for Treasury Secy – we deserve no less.
AIG in Talks for U.S. to Backstop Assets, 1/31/09:
The basic fact is that AIG made catastrophic bets in the CDO/CDS market and did not have the risk management to cover the losses. Should an entity like that continue to receive taxpayer money to operate? No. If they cannot sell assets to cover their debts or raise capital then their business should go to their competitors.
An AIG Unit’s Quest to Juice Profit, 2/5/09:
“The securities-lending portfolio had shrunk to roughly $70 billion by September 2008, when AIG’s problems reached a critical point. Credit-rating services downgraded AIG’s ratings, allowing trading partners on credit derivatives sold by its financial-products unit to demand billions more in collateral from the firm.”
In effect AIG was a House of Cards with little or no effective risk management. The $B profit target should have been a red flag to scrutinize, along with the possible impact on leveraged CDS trades if there was a liquidity crunch.
There are plenty of insurance companies out there that have managed the financial arms of their businesses without imploding. Instead of continuing to prop up AIG with taxpayer money (in effect rewarding their failure in risk management), the gov’t should get out of the way and let AIG sink or swim so that the marketplace can maintain fair competition.
Let’s Start Brand New Banks, 2/6/09:
“…all of the current proposals for increasing lending require more government involvement…”
Isn’t this the problem? Surely there are plenty of solutions that don’t involve the government. Why are they not being considered? Also, banks should not be expected to lend out of their capital reserve accounts. Banks lend mainly from deposits. Finally, as bad banks fail (if they are allowed to do so), profitable private banks will take their business competitively.
U.S. Weighs Fed Program to Loosen Lending, 2/7/09:
Is this article a sarcastic joke? The Fed should not allow hedge funds to use the U.S. Treasury for its leveraged carry trades. This is a ridiculous and hypocritical after what has already happened in the financial sector. So the next bailout will be to hedge funds who ate up too much cheap money from TALF and made too many bad bets? I can see making it easier for real businesses (particularly small businesses) that actually produce valuable goods and services to get loans if they need them and have sound plans. Where’s the emphasis on that?
Energy Secretary Says Stimulus Money to Be Used Quickly, 2/8/09:
The density and power of lawyers will likely grow during this administration, so Steven Chu should get ready for a fight with the prevailing winds and reconcile the fact that “politics is harder than physics.” A lot of things won’t make sense to him, and he unfortunately might eventually be told to sit down and accept it. I hope he doesn’t.
Greed Is Good, 2/8/09:
Mr. Smith’s piece only provides further motivation for many financial sector companies to revert back to private companies or partnerships. Then they can do anything they want. As public-sector companies, I think many of them have found it has turned out not to be a panacea. They have had to contend with shareholders and Sarbanes-Oxley (whatever good that has ever done, probably none) and more public scrutiny. Shareholder revolt is getting stronger every year, and Carl Icahn has some good arguments for changes in corporate law. So Mr. Smith: quit complaining, and convince your colleagues it’s better to exist as private entities rather than public ones. Capitalism is good. There’s a price (and should be) for access to taxpayer money.
How Government Created the Financial Crisis, 2/9/09:
“What was the rationale for intervening with Bear Stearns, then not with Lehman, and then again with AIG? What would guide the operations of the TARP?”
Very good questions. The answers appear insidious, driven by special interests, but we’d all like to be proven wrong. What is needed is a candid commentary on this very subject from Hank Paulson, preferably on these pages.
This concise analysis is just one of many excellents from John Taylor – one of which was published in 1996 by the Kansas City Fed: “How Should Monetary Policy Respond to Shocks While Maintaining Long-Run Price Stability?” This is available on the web.
It is a shame that Prof. Taylor is not given more consideration by the current monetarists at the Fed. It appears he’s understood the cycles, causes and effects far longer than most and to ignore this knowledge and not put it to work is nonsensical.
Solve the Toxic Asset Problem, 2/9/09:
“…it is of paramount importance that governments inside and outside the EU also show a clear commitment and strategy to reducing budget deficits and rolling back public debts as soon as the recovery is firmly on track. I certainly intend to help them devise an exit strategy…”
Many of us would love for Mr. Almunia to come to the U.S. and fight on our behalf to limit the out of control gov’t spending here. Most of the expenditures in the latest “stimulus” bill are long-term payments, not short-term stimulus. So the fight needs to start now. Maybe he can also help with our gov’t-sponsored Ponzi scheme problem – social security and Medicare.
Railing Against the Rich: A Great American Tradition, 2/9/09:
Prof. Brinkley doesn’t discuss populist anger and resentment toward government. Perhaps that wasn’t a huge factor back in the 30s, but it is now, and in fact, it is under-estimated and growing.
Bank Bailout Plan Revamped, 2/9/09:
“Executives at J.P. Morgan Chase & Co. have been cool to the idea of selling assets into a “bad bank” structure. They believe it may be wiser to hold on to sour assets that have already been written down, in the hope the bank can recoup losses when markets revive.”
Is JPM just coming around to this wisdom now that the Treasury/Fed is considering letting hedge funds bid almost nothing for these assets to make double digit returns? Maybe others will follow suit and we won’t need any further action. There’s lots of money out there already for loans and investments, it appears to be consistently gamed by government involvement.
The Unmentionable Bank Solution, 2/11/09:
Many have now been crying for the end of mark-to-market as a solution but this will make things worse in the medium-long term. The markets may rally on the idea, but it is essentially what Japan chose to do during its long downturn and it did not help. There is no substitute for letting completely insolvent entities fail, and allowing new investment to go elsewhere. The sooner we get to this and move on the better. There’s capital already waiting out there to be put to work.
Obama to Shift Focus to Budget Deficit, 2/14/09:
Deficit control would have been to never pass the ‘stimulus.’ Most of the stimulus is not short-term spending but spread over 5 or more years and a rehashed deal of it is adding more to welfare payments.
This is a political setup to start raising taxes. It has nothing to do with a sincere effort to reduce spending and make government more efficient, and to attack our Ponzi scheme problem (social security and Medicare).
1930s Lessons: Brother, Can You Spare a Stock? 2/15/09:
Personal Credit Institutions (35% gain, ’30-’33)…this will likely also be profitable in the next few years — the assumption is that these are existing institutions without toxic assets biting into their cash flow, or new businesses that will pop up (and they will — look for new private banks and credit unions).
Would have liked to have seen a comparison with 73′-75′ or ’80-’82, which we still have yet to rival. We are still not in a depression, but it looks ever increasingly likely the media wants us to be!
Synchronized Boom, Synchronized Bust, 2/18/09:
Begs the question: is it time to seriously consider removing the power of manipulating interest rates and the money supply from the Federal Reserve and then turning them over to market forces? Radical, heretical, uncivilized…yes, I hear the shouts but the debate should ensue.
Business World: How Democracy Ruined the Bailout, 2/18/09:
Mr. Jenkins makes the mistake of assuming the decisions, if they were left up to the Fed, would not be politicized. He is wrong. Academicians often make decisions that are politically motivated and they crave power just like mere mortals.
There’s Virtue in Geithner’s Vague Bank Plan, 2/18/09:
“Bailout 2.0 lacks details, but it is clear it won’t propose more bank freebies.”
I’d like to know how the authors are convinced of this given Geithner’s track record with AIG and others. I’d like to think receivership and the sale of completely insolvent banks and their assets will happen quickly and smoothly but I’m guessing it will be more complicated than that. I understand the issue people have with selling the impaired CDO/MBS assets on the bank books at fire sale prices. If that is the case, then perhaps a portion (and I mean a portion, not all) of the non-performing/illiquid assets can be held in a trust until those assets recover. In any case, a high-yield market for these assets needs to be developed. In the mean time, while we wait for a resolution the markets continue to reduce the shareholder value of the suspects on their own.
Is the Administration Winging It?, 2/19/09:
I equate Mr. Rove’s pieces with those of Thomas Frank’s. Neither are effective or credible messages from conservatives or liberals. Maybe the Journal should consider new messengers.
U.S. Steelmakers Seek More Tariffs to Fight Imports, 2/20/09:
The other WSJ headline today: “Obama, in Canada, Warns Against Protectionism.” I’m sure the Canadians are rolling their eyes as the top steel exporter to the U.S., now effectively shut out of 25% of the market by stimulus bill fiat. Credibility gap indeed.
‘Nationalize’ the Banks, 2/20/09:
Mr. Roubini gives a bit of revisionist history in this interview. Temporary nationalization of banks and liquidation of the good and bad assets did not start with the Swedes in the early 90s. The Resolution Trust Corporation (RTC) led by Bill Seidman (former FDIC head) in the late 80s employed this strategy to clean up insolvent S&Ls. Bill doesn’t seem to get enough credit these days for his work. The positive of the approach is that the government committed no capital to buy assets – the RTC simply acted as a receiver to facilitate the restructuring and resale of the good and bad assets, including spinning off the banks to new owners and management. The reasons why this approach is unpopular now include: (1) the insolvent banks are larger and the senior management has much more lobbying power to preserve their enclaves; (2) there is a backlash against selling bad assets at fire sale prices. Neither of these reasons should stand in the way of employing this process as a solution, which worked in the past and can be made to work for larger banks. Once again, if fire sale prices for distressed assets is the issue, then put a portion of them in a trust as a partnership with the bad bank bondholders and creditors and let the assets recover. Receivership is the solution over of conservatorship (which is akin to perpetual nationalization and elicits continual cash infusions from the Treasury to keep these poorly run institutions afloat). We don’t need more AIGs, FNMs, or FREs. Insolvent banks and companies need to be allowed to fail so that free market capital can be better spent on stronger and more competitive banks and companies or newly formed ventures.
Inflation Signs Will Likely Be a Mirage, 2/20/09:
I will add that demand does not have to increase to produce inflation – if the offer of goods and services become limited and the gov’t keeps on printing money then prices can rise.
U.S. Eyes Large Stake in Citi, 2/23/09:
Citi deserves receivership and the RTC treatment, not capital injections from the U.S. govt. If you feel the same call your legislator and express your views. We should all have a say in whether the U.S. government takes an investment stake in C.
We don’t need a repeat of the same painful, failed mistakes Japan made for a decade. As I recall the economy rebounded and capitalism thrived after the S&L crisis was resolved with the RTC. To all of you out there holding Citi preferreds: FNM preferreds issued in May ’08 at $25 have paid NO dividends and sold Friday at 95 cents. Know the risks.
Obama Wants to Move the Center Left, 2/24/09:
Mr. Miller’s piece was filled with empty praise for a “visionary centrist.” Can he not read that the majority sentiment and the determination in this country is that that we restore real growth, and the way we do that is not through penalizing producers but by incentivizing them to unlock their capital and spend (invest) it? Promoting an atmosphere where producers and would-be producers (and that can include anyone, from any strata or ethnicity) have the optimal chance at doing what they do best: create, build and grow new ideas, concepts, products, services, etc. To the center-left, government is increasingly seen as the answer to growth and a required involvement in every aspect of life and commerce, when in fact constitutionally government’s primary function is national security and protecting the inalienable rights of its citizens. Man, how the latter has been distorted by the left.
Bernanke Helps Stocks Snap Back, 2/24/09:
Bernanke stated in his testimony that we are not making the same mistakes that Japan did for over a decade, citing that we have more transparency. While he seems to have answers for all the questions thrown at him, this one doesn’t stick. Throwing more government capital at banks with unrealized losses is exactly what Japan did, and he won’t admit we are doing the same. Let’s stop the march to more AIGs, FNMs, and FREs.
TARP Fraud Could Cost Taxpayers Billions, Watchdog Warns, 2/24/09:
The solution to this is to not make the Treasury a piggy bank for the insolvents. Obama et al., wake up. If a guideline is needed for putting the large insolvents (like C) into receivership then get on with it. I’m tired of hearing about how valuable the intangible assets (franchise value, etc.) are when the orgs in question have significantly more downside exposure to their toxic assets. If the intangible assets are so valuable they will do just fine in the hands of new owners.
Obama Seeks to Snap Gloom, 2/25/09:
We are not (yet) in the deepest recession since WWII. Still competing with 73-75 and 80-82. Bad gov’t political propaganda and journalism run amuck. Higher taxes, more welfare programs, bad monetary and fiscal policy, bad bank bailouts and nationalized health care will lead to the worst recession since WWII, however.
Obama Unbridled, 2/25/09:
“This time, CEOs won’t be able to use taxpayer money to pad their paychecks or buy fancy drapes or disappear on a private jet.”
Mr. Obama conveniently forgets that Nancy Pelosi has done all three of these in recent history. If he is so concerned about taxpayer money then he should apply the rule universally, to Congress no less.
Officials Unveil Details of Stress Tests, 2/25/09:
The “stress test” is meaningless because it is de facto designed to pass everyone. The fact that these banks have the open checkbook of the U.S. Treasury and Fed make this whole exercise a sham.
Curse of the Zombie Banks Haunts Fed, 2/26/09:
“Central bank intervention…”
The price fixing by the Fed is bad policy and like loose monetary policy will lead to unintended consequences: increased risk exposure and higher debt. When will we learn?
Stressing Over Bank Tests, 2/26/09:
The stress tests are meaningless if everyone is going to get gov’t $ no matter what, and that no hard decisions are going to be made to clear the system and get our markets functioning again.
Japanese Yen Is Less of a Shelter, 2/26/09:
This is good news. Japan had little room to weaken the Yen with monetary policy without substantial risk. The currency markets are doing it for them.
Support Japan’s Entrepreneurs, 2/26/09:
Japan has one of the lowest foreign direct investment (FDI) ratings of major industrialized nations. Also, Japan has the highest corporate tax rates. Growth will be hampered until these two metrics are changed. They are gov’t policy issues.
Obama Budget Pushes Sweeping Change, 2/26/09:
Consider the classics – they don’t get repeated often enough:
—”The problem with socialism is that you eventually run out of other people’s money.” -M. Thatcher
—”Our whole civilization rests on the fact that men have always succeeded in beating off the attack of the re-distributors. But the idea of re-distribution enjoys great popularity still, even in industrial countries. If we wish to save the world from barbarism we have to conquer Socialism, but we cannot thrust it carelessly aside.” -L. von Mises
—”Man is not free unless government is limited…As government expands, liberty contracts.” -R. Reagan
—”From the saintly and single-minded idealist to the fanatic is often but a step.” -F. Hayek
—”A society that puts equality… ahead of freedom will end up with neither equality nor freedom.” -M. Friedman
How Geithner Can Price Troubled Bank Assets, 2/26/09:
Private investors must step up to the plate to drive a market for the toxic assets and they cannot do this if the government is in the middle with an open checkbook to the banks. That is not a free market. The banking crisis will not subside unless the government gets out of the way of manipulating our capital markets and returns to its more limited role as a regulator.
President Takes Aim at Foreign Profits, 2/26/09:
Multinationals have worked around our high corporate taxes and now they will be chased down even further. Expect multinational stocks to be under pressure, especially those that haven’t already taken a large hit. Corporate taxes ought to be reduced instead, and everyone should consider the impact this tax policy will have on their investments. The administration has no clue how to use tax policy to promote real growth. Everyone pays corporate taxes. This move will only encourage companies to further seek off-shore shelters of some kind, which could be avoided in part by just lowering the corporate tax rates.
Don’t Be Fooled by Faux Bulls, 2/27/09:
It is important for investors to keep cash on the sidelines to put some money to work when good stocks and ETFs hit lows. But in a bear market they have to be disciplined to sell those on rallies and then buy them back if they still remain buys. This is one strategy to replacing lost returns. Simply put: investors need a tinge of a trading mentality.
Rating Agencies Endorse Revised AIG Bailout, 3/1/09:
The credit rating agencies have absolutely no independent credibility after this move, if they ever had any left just before. How far will the government go to meddling in our markets, picking winners and losers by how much lobbying power is involved on both sides, and in fact, increasing tremendously the risk of investing in every asset class for all of us? Everyone should keep in mind that the original bailout of AIG last Sept. by the NY Fed happened because of AIG’s CDS derivative connects to other powerful entities, namely Goldman Sachs. GS stood to lose billions if AIG collapsed and, well, we all know how deep the tentacles of GS reached within the Treasury and Fed, and still do.
This is corruption on a massive scale and it only hurts the healthy companies that played by the rules, had adequate risk management and should be thriving in the absence of AIG and other failures. Finally, as a corporate governance issue the current board should have been replaced months ago, but now they are essentially wards of the government and perhaps consider themselves protected in their role. Every one of them should be ashamed of their performance, or lack of performance, in allowing AIG to incur fatal risks and driving shareholder value to zero.
Japan Mulls Using FX Reserves for Loan, 3/1/09:
A good move for Japan assuming they can control the risks and make smart investments. An alternative to drawing down their reserves too much is for them to make it more attractive for FDI in Japan through incentives and tax policy.
AIG to Receive Additional $30 Billion in Federal Assistance, 3/1/09:
AIG is responsible for poor risk management and financial leverage of their CDS contract issuances and GS and others are responsible for being on the other side of those contracts, regardless of the amount of regulation. If I go to Vegas and bet all my money on black should I get bailed out by the government and taxpayers? Should Vegas be outlawed? No to both. Know the risks and the consequences, accept and learn from them, and move on. We will all come to learn that the government cannot legislate responsibility.
Information Age: Too Risky for Venture Capitalists, 3/2/09:
Tax policy can be used very effectively to change economic behavior and stimulate real growth. The demagoguery by the current administration is quite destructive and without merit. Moving the capital gains rates up will drive VCs to invest in other countries that have eliminated their cap gains rates, simply put. Even Bill Clinton realized this.
U.S. Extends AIG Bailout by up to $30 Billion, 3/2/09:
Correct me if I’m mistaken, GS already received a large CDS payout from the original $85B loan. GS was involved in the discussions leading to the original bailout of AIG by the NY Fed. The WSJ needs to address these rumors, either dispel them or verify them. The market needs transparency.
“Why doesn’t the treasury lay out for us what this “systematic risk” is?”
Because we would find the arguments weak compared to the real reason for the bailouts: to protect special interests. None of us are protected – the markets continue to tank, and will until we get truly credible transparency.
Bush/Paulson are gone, and yes, their management of the situation was tragic; the current Obama/Geithner/Bernanke team is proving no better. All of you who think Bernanke is a brilliant guy should read this:
Koreans Take Pay Cuts to Stop Layoffs, 3/3/09:
Koreans culturally are quite conservative and we could learn a great deal from them. They have always had an export-dominated and have overcome great pressure in the past, like the ’97 Asian currency crisis. They will pull through this better than people give them credit for. Watch and learn.
‘Bad Bank’ Funding Plan Starts to Get Fleshed Out, 3/3/09:
This plan sounds like it will be loaded with contingencies and regulations. Would the savvy managers/investors want to get involved when there are better risk/reward profiles out there and no ominous strings? Face it: banks cannot overcharge for their distressed assets, and a set of essentially leveraged closed-end funds with high risk/measly reward doesn’t sound all that attractive. Why can’t the banks get together without the gov’t and start an auction market for their distressed assets? (Yes, and don’t tell me that this won’t work – I think there are many out there that would bid on the assets if the ask was right and the market liquidity would build over time.)
AIG’s Black Box, 3/3/09:
Rumors abound that $30B was paid out to GS to settle CDS contracts from the original $85B gov’t loan and that GS was involved in the discussions leading to the original bailout of AIG by the NY Fed. Can’t this be dispelled or verified? The next step from there would be to determine if Fed and/or Treasury officials were lobbied by AIG counterparties to produce the bailout loan. I see a great deal of wrong with this picture. The market deserves the transparency, one way or the other. The government should get out of meddling in our markets, picking winners and losers by how much lobbying power is involved on both sides, and in fact, increasing tremendously the risk of investing in every asset class for all of us. It only hurts the healthy companies that played by the rules, had adequate risk management and should be thriving in the absence of AIG and other failures.
Fed Moves to Free Up Credit for Consumers, 3/3/09:
This sounded good when it was targeted to short-term commercial paper, which is needed by most businesses.
Now it (TALF) has evolved into a leveraged lending program targeted to “AAA rated” ABS’s. Most economists I’ve seen comment on this don’t support it, they say it will only perpetuate what hasn’t worked in the past – and doesn’t address the real problem of existing distressed ABSs on bank balance sheets. One even went so far as to say that it is equivalent to “heads speculators win, tails taxpayers lose.” The leverage outlay is 5 cents limit for speculators and 95 cents for the Fed (uh, taxpayer). And we all know how reliable AAA-rated ABS’s are, historically – so extrapolate. The best idea I heard was that said new lending should not be new ABS issues but just plain-old bank lending, just like the old days. Simple is better, and when the gov’t isn’t involved, all the better. And I still think banks should get together and form a JV market to sell all those “bad” ABSs on their balance sheets. And I still don’t want to hear “it won’t work.”
U.S. Pushes for Crackdown on Tax Havens, 3/4/09:
“The proposal also would treat foreign corporations managed and controlled in the U.S. as domestic corporations for income tax purposes.”
This will drive away such foreign corporations – and the jobs and domestic economic growth they create.
Bernanke Expresses Frustration Over AIG Rescue, 3/4/09:
Me thinks he doth protest too much…But seriously – he should continue to get a challenge from Lacker and others. And we’d like to see him replaced by John Taylor.
The Truth About Korea, 3/5/09:
From my research on Korea’s economy over the last 30 years it is very clear that the continued conservative policies from the BoK and the gov’t will contribute to their ability to pull out of this downturn faster than most.
Steve Forbes: Obama Repeats Bush’s Worst Market Mistakes, 3/6/09:
As a set of counterpoints to Mr. Forbes’ comments on short selling:
(1) The average CBOE volatility and its SD were quite high historically from late 1997 to early 2003. Stocks, especially technology stocks, were rampantly shorted after the tech bubble burst in 2000, and the Uptick Rule was in full force during that period. Most of us lost money. Because of the volatility, short sellers also didn’t do so hot. Fundamentals were bad, not just in tech stocks. There were no large gov’t bailouts of failing tech firms – and indeed there should not have been. The markets recovered strongly in 2003.
(2) Volatility did pick up in mid-2007, but it is coincidental with the removal of the Uptick Rule. Fundamentals were getting worse, and in fact turned into a perfect storm from mid-2007 to mid-2008 due to the leverage bubble. The government intervention in early-mid 2008 of backstopping BSC with Fed guarantees and putting FRE and FNM into conservatorship didn’t help.
(3) The SEC orders against short selling (not just naked short selling, but all short selling) on financial institutions in July and again in Sept did not prevent a market meltdown. Indeed, many think the resultant increased volatility and bid-ask spreads impacted liquidity. Repeated Fed/Treasury rescue of AIG and other financial firms has not helped.
When the fundamentals are quite bad it seems convenient to blame short selling. I also think there are similar arguments for mark-to-market. In football when the team is losing the game due to bad strategy and plays the referee doesn’t change the rules to suit the losers. Having the referee pick winners and losers is also a lousy precedent for instilling confidence in the game.
Top U.S., European Banks Got $50 Billion in AIG Aid, 3/6/09:
The issue now is whether counterparties influenced the NY Fed to make the $85B loan so that they could get paid. This has not been reported, one way or the other.
Hank Greenberg noted that $30B was paid to GS in other sources, see http://industry.bnet.com/financial-services/1000250/hank-greenberg-investigate-the-goldman-cabal/ and http://rothkopf.foreignpolicy.com/posts/2009/01/30/a_conversation_with_hank_greenberg_dont_scapegoat_china_he_warns_and_watch_for_gold.
From the WSJ article, not all payments to counterparties have been reported yet. Immediate full disclosure is warranted, as AIG likely remitted the payments after they received the original gov’t bailouts – bailouts that now dwarf anything any other company has ever gotten in history (some $160B+?). Yes, we need to keep the pressure on regardless of which parties were/are involved. This stinks.
How to Twitter, 3/8/09:
I can see the value of Twitter and other social networking platforms for advertising.
But ask yourself – how long is this fad going to last?
Dow 5000? A Bearish Bet That Looks Quite Possible, 3/8/09:
We do need a major capitulation (very high volume to the downside) before a marked rally. Much of the trading lately has been shorting and covering on limited volumes, with net selling on higher volume on some days. I’ve been looking now at the ’96 lows on a technical basis, which are a supported outcome from the fundamentals as well. Keep cash on the side and be ready if we approach those lows. Stock price forecasting may be bogus, but watching how the market is trading and setting your strategies isn’t.
J. Cramer did another bottom-up analysis and he came up with Dow 5350. This is coincidentally the ’96 low. The scenarios he used were worst case in his mind, and I believe he’s not a complete nihilist. GM in bankruptcy, JPM to 5, AA to 2, etc. The other lows from ’96 are not as dire a drop from here, that being the S&P (~8.3%) and the Russell (~11.7%). But the Nasdaq would drop by ~18% like the Dow if we were going back to its ’96 low of 1053. If we do retrace back to 5350, I would think given the S&P weighting of financials and other weak sectors that it would drop by 18% as well. Since tech fundamentals may be perceived as better, an 18% drop on the Nasdaq may be overly pessimistic. Hedge fund redemptions and margin calls continue. Shorting weak names continues. One would think the put buying would accelerate as we go lower, driving up the implied volatilities and making the payouts greater.
Debt to Bank On? Or Is It Time to Think the Unthinkable Again?, 3/8/09:
Changing accounting rules will not change perceptions. Banks and financial institutions have the ability (and have had the ability all along) to do better PR on what is on their balance sheets. The reason they haven’t does not translate fully to the excuse of not being able to value the assets. The assets can be marked to model and reported.
“But 18 months into the crisis, and with little sign that the banking system is stabilizing, investors are again starting to price in radical outcomes.”
Can’t say I blame investors on this one. Gov’t intervention has not made the situation better, it has only increased risk.
O, Canada: Banks Look Healthier, 3/8/09:
Canadian banks could buy up some of our failing banks and take the gov’t risk factor off our hands in the process. Citi is a good candidate right off. But unfortunately the US gov’t might block such actions on a protectionist move. Cut off your nose…
Bearish Big Investors Catch Gold Bug, 3/8/09:
Gold is a short-term investment to be traded and used as a hedge, not to be held for very long periods. Of course this is based on history given inflation-adjusted prices for gold. From the 30s until now gold returned a CAGR of only a few % (or less). Just something to keep in mind. Wouldn’t bet my whole portfolio on it!
Treasury Plans Small-Business Aid, 3/10/09:
More $ to SBA loans for qualified candidates is laudable, but I agree with one of the other comments…just cut corporate and capital gains tax rates and watch growth explode. We all pay corporate taxes and small businesses do indeed incur cap gains taxes.
Dow Surges 5.8%, 3/10/09:
Anyone who lived through the tech bubble and shorted then knows the Uptick Rule is a red herring.
Lawmakers Weigh Need for Second Stimulus to Spur Job Growth, 3/10/09:
Just cut the corporate and capital gains tax rates! Quit the demagoguery over business tax policy. Businesses will start to invest and earn more, and hiring will rise.
SEC May Reconsider ‘Uptick Rule’, 3/10/09:
We had an Uptick Rule during the tech bubble crash, along with significant volatility. Plus years of studies showing it is really irrelevant. Supporters are banking on the fact that this will lead to different market behavior, but if it does, it will be based on perception and short-lived. Short selling enables liquidity in the markets. It is not a safe way to make money, it is risky. Studies show that it can be more profitable to buy short-term put options, depending on whether volatility is in your favor. If we were to really put more disincentive into short selling then the way to do that is by imposing higher borrowing fees. Heck, I’d like to get a cut of those fees! But I don’t want the gov’t legislating that. The brokerages make money off short sellers and set the borrowing terms. I think the liquidity provided by short selling does allow for buying opportunities to everyone.
Fed Considers Its Next Actions, 3/11/09:
“Options Include Purchasing Treasurys, Fannie-Freddie Debt…”
There’s an analogy for this, but I’d rather not go there in words.
Alan Greenspan: The Fed Didn’t Cause the Housing Bubble, 3/11/09:
Mr. Greenspan rests his arguments to be excused from blame for the housing bubble on the decoupling of long-term fixed mortgage rates to the Fed-funds rate. But during the period in question the preferred mortgage products were adjustable rate mortgages (ARMs), which were much more closely correlated with the Fed-funds rate, and were sold in droves by the mortgage industry because of the historically low Fed-funds rate.
So Mr. Greenspan is wrong – monetary policy does have unintended consequences if left too easy for too long, affecting asset price stability. His weak defense of this issue leads all of us to again question the wisdom of the power we have placed in the Federal Reserve system.
Freddie Reports $23.9 Billion Loss, 3/11/09:
The gov’t had its chance in July to break FRE up and sell off the parts, with many at the urging. Instead, we got stuck with poor hedging strategies and more debt. I suggest it’s not too late – no $30B injection, just take any losses and sell off the assets. The gov’t should get out of the mortgage business.
The Next Big Bailout Decision: Insurers, 3/12/09:
No gov’t lifeline please, we all have a vote on that (or should). If all of the insurers capital requirements are being affected by an accounting rule (which I doubt) then give them temporary reprieve, otherwise encourage them to do better PR on what is on their books and to sell more debt (which they will be successful doing if the PR job was believable).
The Obama Rosetta Stone, 3/12/09:
Figure No. 9 is just a graph showing how everyone benefited during economic growth and decline periods since 1980. Art Laffer should get the Nobel Prize for his seminal work, whereas Piketty and Saez should get convicted of a hate crime.
Planning for the Next Blaze Even Before This One Is Put Out, 3/12/09:
“Who shall be saved, and who shall be allowed to die?”
The gov’t should not pick winners and losers in the capital markets. The gov’t should stay out of it. Economic (and social) engineering by our gov’t is most pernicious and insidious.
Cuomo, Frank Seek to Link Executive Pay, Performance, 3/13/09:
This story will put a damper in the recent market performance! Here comes the massive exodus to private hedge funds and a drive back to private partnerships for new and existing firms…
“A person close to Mr. Cuomo said change is needed but the intent isn’t to micromanage or interfere with the private sector.”
Wen Voices Concern Over China’s U.S. Treasuries, 3/13/09:
I’ll provide a few translations:
“We have lent a huge amount of money to the U.S., so of course we are concerned about the safety of our assets. I do in fact have some worries,” Mr. Wen said in response to a question. He called on the U.S. to “maintain its credibility, honor its commitments and guarantee the safety of Chinese assets.”
–Translation: we reserve the right to reduce our exposure; in fact it is likely we will do so.
“He said that while China’s first priority is to protect its own interests, it will “at the same time also take international financial stability into consideration, because the two are inter-related.”
–Translation: There are other opptys out there other than the U.S. and we will start to consider them in a serious way.
“No country can pressure us to appreciate or depreciate” the currency, he said.”
–Translation: Don’t tread on me.
Bottom line: I respect China and they have a great oppty to not make the same horrible mistakes that we have over the last 46 years, but to adopt the policies that have worked (like all the pro-growth policies, such as friendly business tax policies).
Obama Talks With CEOs, 3/13/09:
If Mr. Obama would kindly step aside and yield his job to Mr. Parsons…!
“Mr. Obama made it clear he wants the business community’s cooperation to secure his agenda of expanding the federal role in education, overhauling health care and transforming the energy sector.”
Yeah, and to heck with the business community and its future.
Obama Outlines Plan to Curb Earmarks, 3/13/09:
“We can’t have Congress bogged down at this critical juncture in our economic recovery,” Mr. Obama said. “But I also view this as a departure point for more far-reaching change.”
–Translation: Pelosi runs the country and I can’t stop her. I can only add more of the spending *I* want to do for my *agenda*.
Venture Capitalists Chart a New Course, 3/13/09:
Get rid of Sarbanes-Oxley for start-ups. And yes, Sarbanes-Oxley needs to be rewritten substantially – it did nothing for the latest Enron era in the financials.
This is a great time for bargains, but due diligence is still required!
European Leaders Push Back on Obama’s Calls for Aid, 3/13/09:
France also has lower corporate tax rates than the U.S….just thought I’d point that one out.
Summers: Timing of Turnaround Is Unclear, 3/13/09:
As are any solid pro-growth economic plans coming from the Treasury, White House or Congress.
Is Rand Relevant?, 3/14/09:
To me, Ayn Rand’s work translates to a message of freedom of self-determination without the infringement of egalitarianism. This is quite consistent with our founding fathers’ intents. It is also a principle worth fighting for.
This was published as a Letter to the Editor on 3/17/09.
With Deflation Possibly Near, This Economist Is All Abuzz, 3/15/09:
Deflation is a temporary phenomenon.
Dollar Cost Averaging Through the Downturn, 3/15/09:
The trick is to take profits in your portfolio when there are substantial gains. It always amazes me how many just watch the gains accumulate and don’t at least take half or a portion of the profits off the table, keeping cash for averaging during/after declines. There will always be cycles in the market. Strict buy and hold doesn’t cut it anymore – some active management is prudent. But if you cannot bring yourself to do any management then DCA and diversification are minimal requirements.
AIG Faces Growing Wrath Over Payouts, 3/15/09:
AIG and others will continue to commit the equivalent of economic blackmail against the U.S. gov’t as long as they continue to receive payments and reprieves. So who is worse: AIG or the federal government?
Bernanke Defends Recovery Efforts in Rare TV Interview, 3/16/09:
On AIG: “I understand why the American people are angry. It’s absolutely unfair that taxpayer dollars are going to prop up a company that made these terrible bets.”
Ben: Me thinks thee doth protest too much. You in effect authorized the original NY Fed bailout and subsequent Fed injections. You could have at any time stood up and said “no” but you caved in to special interests, all within the veiled excuse of ‘systemic risks.’ By not allowing for failures (and by indeed continuing to prop up failures) you are imposing price fixing measures.
Bear Stearns: The Fed’s Original ‘Systemic Risk’ Sin, 3/16/09:
Many of us listened to the April 2008 testimony of Bernanke and Geithner, with disbelief of the answers and rationale that were offered in the name of ‘systemic risk’ and the Fed backstop guarantees of Bear assets that to this day are still not transparent to the public. Special interests were involved, and were a motivating factor for the decisions made by the Fed and Treasury. The moves by the Fed to save Bear set a precedent. It sent us on the slippery slope that indeed enabled the bailout of AIG (once again, motivated by counterparty special interests) and the short shrift of Lehman (where the special interest link was weaker). Special interests still reign supreme and until this changes we will suffer the consequences of lack of confidence in our capital markets and a much less efficient system for everyone involved.
Wallison: Congress Is the Real Systemic Risk, 3/16/09:
GSEs and failed GSEs that go into conservatorship in perpetuity should be wiped from the possibility of existence. They crowd out private sector businesses and set a low standard for performance. The government has a responsibility to provide national security to its citizens, not mortgages and insurance products.
The Real AIG Outrage, 3/17/09:
The counterparties are not the problem – they do indeed deserve settlement on the contracts they purchased, under normal circumstances. If I buy a policy or unregulated CDS contract from an outfit that goes bankrupt and can’t pay the settlement, that is a risk I take. The risk failures at AIG should have been passed through to counterparties in a failure settlement (bankruptcy), and not made fully whole via a massive gov’t bailout. All of us want to go back to Sept 17 or thereabouts and shake some sense into Mr. Geithner.
Fed to Buy Treasurys, Expand Balance Sheet, 3/18/09:
The Fed is easing its way into a corner. This move signals that there are not enough buyers of Treasurys to sop up all the stimulus spending and toxic assets. How many more rounds of this? Now we’re in a self-perpetuated Treasury bubble. So much for “free market.” Short the dollar and buy oil.
Fed’s Gamble: Buying Long Bonds, 3/18/09:
The government is paying off one credit card by borrowing from another. They are taxing the savers to bail out the borrowers. Taxation without representation, to be exact.
Short-term: Ride the reflation trade by buying stocks, shorting the dollar and buying oil and other hard assets. Use trailing stops!
Long-term: Fight for a free market. It’s currently held hostage by the Fed. Don’t convince yourself that you can’t fight the Fed.
Secretary of the Fed, 3/20/09:
We put too much power in the hands of the Fed, whether they are independent or not. Interest rates are best set by the markets, not by a committee that is influenced by politics and deluded into thinking that Fed-style economic engineering is in everyone’s ‘best interests.’ It is this kind of market-interventionism that continually creates asset price instabilities.
U.S. Sets Plan for Toxic Assets, 3/20/09:
I agree with the assessment that the private sector has been warded away from anything smacking of a gov’t-private deal, where the ‘private’ will be at risk for being private. As hard as it may be at this time for the markets, the best thing to happen is for the private sector to walk away until the gov’t isn’t involved at all. The implications would be harsh, but they would be temporary as time scales go. It is better we all take the hit now than live under a regime where we all answer to Congress! In the mean time, the toxic assets will recover enough.
Downpayment Insurance Could Stabilize Home Prices, 3/21/09:
The idea of downpayment insurance is appealing, but only if the gov’t isn’t involved. If we’ve learned anything at this point from the abuses of the Community Reinvestment Act and the costly failures of the two major housing GSEs, FRE and FNM, the gov’t should *not* be instrumental in providing mortgage products or insurance. Perhaps former executives of FNM see it differently, since they derived their well being from a GSE, and perhaps look to gov’t to be the solution for everything. But that’s not how the responsible in the private sector see it – we believe that gov’t is here to provide national defense, and that’s about it. Not everyone is entitled to a house – it is a privilege, not a right. Not everyone is entitled to insurance either. All of us must work for these possessions. Allow the markets to self-correct without continual price fixing mechanisms that have little traction and only dig us deeper into a collective debt hole. Buyers will see value when demand starts to outtake supply, and prices will start to recover. If the insurance industry sees value (read: potential profit) in offering downpayment insurance after they’ve run the actuarial numbers, then they will get into the business sans gov’t involvement, as it should be. And remember how we all got here: gov’t-enabled cheap money fueling highly leveraged mortgage products, spurred on by inapt gov’t policy.
Now Is No Time to Give Up on Markets, 3/21/09:
Gary Becker is a voice of reason and a shot of optimism. Business tax policy is an important tool for stimulating growth, yet it is demagogued to death by the sitting Congress and Administration. Cut the corporate and capital gains taxes and we will see private capital unleashed from its coffers, with real growth and jobs to follow. Everyone pays corporate taxes – a fact that eludes most liberal economists when they turn only to the idea of neo-Keynesian spending. Prof. Becker rightly points out that much of the recent ‘stimulus’ spending is not short-term targeted stimulus, it is long-term discretionary or entitlement spending, with a strong political connection. The idea that market forces will prevail in the end is reassuring, and an even better outcome is that they are ‘free,’ i.e., without the constant disruption of countervailing gov’t forces.
Retailers Propose Initiative To Temper Labor Demands, 3/23/09:
Walmart is taking a different tack – they are paying bonuses and profit sharing and fighting this type of legislation as gov’t interventionism, which it is by its very nature. Businesses that do well reward their employees, but the gov’t shouldn’t dictate the terms! Howard Schultz and John Mackey are in over their heads here – legislating their corporate policies to fit everyone will likely come back to haunt them.
Geithner: My Plan for Bad Bank Assets, 3/23/09:
Dear Mr. Geithner: Repeated government intervention caused the problems that we now deal with: government-enabled cheap money fueling highly leveraged mortgage products, spurred on by inapt government policy. Government is not the answer, and to imply that our economy will not recover without yet more government involvement is simply not correct. Banks are already starting to make a profit from the yield curve, and like many of us, they have assets on their books with values that will recover in time, as the economy recovers. Indeed there is no need to rescue banks and financial institutions that will survive this crisis, and those that will not survive even with the current cash flows generated from a munificent yield curve should fail, with their assets sold to settle creditor positions. The taxpayer should not be a put option for financial institutions that under any other circumstances would (and should) fail. Instead of putting up more taxpayer money for a now vague problem where there is an additional punitive risk of association, many of us urge the Treasury to support corporate tax rate cuts, which would unleash capital and spur growth for everyone.
Financial Stocks: Will Good News Follow the Bad?, 3/23/09:
Banks are benefiting big time from the yield curve – this was the bullish news. Banks don’t need more massive bailouts – and we don’t need to prop up the banks that would fail even with the yield curve munificence.
As It Starts Programs, Fed Weighs How to Stop Them, 3/23/09:
Interest rates should be determined by market forces, not the FOMC, a committee that is influenced by politics and deluded into thinking that Fed-style economic engineering is in everyone’s ‘best interests.’ It is this kind of market-interventionism that continually creates asset price instabilities.
China Takes Aim at Dollar, 3/24/09:
There was a WSJ op-ed last week from a conservative economist on gold-backed Treasurys. This may be a concept whose time has come.
While I don’t trust the Fed, I *certainly* don’t trust the IMF – letting them dictate the terms for and control a reserve currency (and its supply) is not the answer. The dollar is slowly losing reserve status just as the pound did early last century – what will replace it? Hopefully not IMF funny money.
Hernando de Soto: Toxic Assets Were Hidden Assets, 3/25/09:
Mr. De Soto wants us all to believe that there is an evil “shadow economy” that should be exorcised from existence, that it is filled with toxic assets and the players who traded them. I reject the view that those “toxic” assets are not governed by property law, and that derivatives – even naked ones – are not recognizable and enforceable contracts.
Instead of his prescription of a government crackdown on the free market and all its principles, why doesn’t he simply state we need more disclosure and transparency? That is what is ostensibly missing here, nothing more.
Volcker: China Chose to Buy Dollars, 3/25/09:
“We’re in a government-dependent financial system; I never thought I would live to see the day… We’ve got to fight to get away from that.”
Does he truly believe this given the fact that he’s strongly supported a liberal socialist government to power?!
On Wall Street, Talk of Trust and Civil War, 3/25/09:
“Mr. Soros sought a thorough overhaul of regulation of the markets. “The idea that the markets are self-correcting has been proven false. … The market, rather than reflecting the underlying reality, is always distorting it.”
This guy is bi-polar. We all know he made his money from bear-raids in multiple markets. I have high respect for capitalism and the money he’s made, but extreme disrespect for his dishonesty. Mr. Soros, perhaps you’d like to take free market opptys away from the rest of us so you can have it all to yourself? Faust indeed.
Geithner’s Gaffe Briefly Hits Dollar, 3/25/09:
Unreported: George Soros made money off the comment, after denouncing that markets are not efficient. Tim got the gaffe from George. (Disclaimer: this is a joke not a rumor.)
Have We Seen the Last of the Bear Raids?, 3/26/09:
Did Mr. Kessler forget that we had a housing bubble and that banks and other financial institutions were highly leveraged, not to mention many homeowners? This was cause for shorting the ABX and then moving on to other inflated indexes, driving the value of CDOs down. The rest is history, namely any exploitation of the CDS market to attain further gain. But I agree with Mr. Kessler’s tone: that traders saw asymmetries in the market and exploited them – in many cases fairly. And this enabled a quicker exposure of market weaknesses than we may otherwise have gotten. In my mind this is an example of how efficient the market is, and we would do well to respect that fact.
Treasury Maps New Era of Regulation, 3/27/09:
PPIP is a scam, a put option provided by the taxpayer. The gov’t should get out of its adopted role as a financial market maker/enabler. That is not the function of gov’t.
The sad thing is that the arb chasers will look for any weakness in this plan and we will find out about it ex post facto – via market reactions. And I would welcome that event, because I think it will prove the gov’t cannot control one of the most important inventions in modern history.
Bankers, Obama in Uneasy Truce, 3/28/09:
I suspect the tone of the meeting was not as cordial as was reported – namely, “cooperative” could be interpreted many ways.
Economy Raises Tentative Hopes a Trough Is Finally in Sight, 3/28/09:
The rate of decline has slowed, but we may move sideways in the trough (compared to levels of late last year) for many months. I don’t see the catalyst that will kickstart the economy out of a sideways trough. This means meager growth if any after the large GDP declines in Q4/Q1. The parallel here is Japan in the 90s. This scenario doesn’t mean that the market can’t trade +/- 20% around a trading range. To get above 1050 on the S&P will require a catalyst, IMHO. And there are many analysts who are bearish long-term (who are otherwise bullish analysts) because of the amount of Fed quantitative easing and the massive gov’t spending. This combination has never worked when coupled with unfocused and irresponsible fiscal policy. So I buy that there will be a retest of the lows sometime this year or next. Best to trade the market, but I realize everyone cannot do this, so DCA plus diversification are fine prescriptions.
GM’s Wagoner Will Step Down, 3/29/09:
GM stakeholders (debt holders and shareholders) should have driven this change, not the White House. This is yet another example of how we’re headed in the wrong direction in the business community. Shareholder/debt holder rights activists like Carl Icahn were on the right track, but haven’t gone far enough on stakeholder reforms, and are standing idly by without saying anything while this mess happens. So now we have the White House and Congress stepping in to make decisions for publicly-traded companies. Gov’t should get out of the picture and let the company stakeholders and management deal with this issue. Several airlines have gone through and emerged from bankruptcy, some more successfully than others. GM should be no exception.
U.S. Bailouts So Far Total $2.98 Trillion, Official Says, 3/31/09:
It’s a sad situation when the voter pool out there is so ignorant of the state of our unfunded liabilities. Explains how we can get a Bernie Madoff, GWB and a BHO. It seems like the best one can do in these times is conduct your life and business so that it minimizes gov’t exposure. Hard to do. As for gov’t bailouts, it is an intrusion on our capital markets and a subversion of the bankruptcy code. It started last year with the BSC bailout, thanks to Paulson-Geithner-Bernanke, and has grown in geometric proportions since.
Credit-Card Bill Narrowly Advances in Senate, 3/31/09:
This bill will motivate credit card companies to eliminate higher risk accounts. It may also motivate those same companies to eliminate rebates and perks for very low risk customers, and perhaps even start charging them fees.
Treasury’s Very Private Asset Fund, 3/31/09:
“The purpose is to create new buyers for these toxic securities, a process that, in Treasury’s own words, will lead to better “price discovery.”"
How can there be efficient price discovery with the gov’t as a market maker for these assets? PPIP is a put option provided by the taxpayer. The gov’t should get out of its adopted role as a financial market maker/enabler, picking dealers and buyers. That is not the function of gov’t.
The sad thing is that the arbitrage chasers will look for any weakness in this plan and we will find out about it ex post facto – via market reactions.
Move to Ease ‘Mark’ Rule May Subvert Treasury Plan, 4/1/09:
Mark-to-market becomes an advantage when the markets improve – so banks are hesitant about adopting changes unless that advantage is preserved. So the changes will likely be surgical on the downside. Remember – rules are meant to be broken.
Lawmakers Have Long Rewarded Their Aides With Bonuses, 4/1/09:
Congress fashions itself these days as a neo-Rome. May it meet the same fate as the old.
Spend It in Vegas or Die Paying Taxes, 4/2/09:
The points made in this article on estate tax could well apply to almost any other area of the tax code. Art notes that “all the costs associated with these tax shelters and tax avoidance schemes are pure wastes for the country as a whole and exist solely to circumvent the estate tax…a number of studies suggest that the costs of sheltering estates from the tax man actually are about as high as the total tax revenues collected from the estate tax.” The former is certainly true for many wealthy taxpayers who do the same to minimize their individual, partnership, or sub-Chapter S income tax paid, while the application of the latter is probably not as dramatic.
Some additional important points to be made:
-As the tax rate is lowered the cost-benefit equation for sheltering vs. paying the tax changes;
-Tax shelters are a heavily advertised and lobbied industry, employing droves of tax attorneys and accountants.
Therefore if we’d really like to make the tax code fair to everyone we’d lower all rates and close all loopholes.
The Socialist Solution to the Crisis, 4/2/09:
Mr. Rasmussen, like many of his ilk, thinks he can subvert American Capitalism and our Constitution with his socialist/Marxist agenda. We will not allow them to succeed. We care too much about individual freedoms and choices, and shun the tyranny of those who wish to control society, by imposing social and economic engineering to limit freedoms and choices.
India’s Faulty Exceptionalism, 4/2/09:
I’ve read in various places that while there are no formal banking relationships with many average and low-income Indians, there are networks of micro-lenders that have had success in supporting small-time entrepreneurs. India is a service-oriented economy and has had the advantage of an influx of service-oriented jobs shifted from other economies that suffer from high corporate taxes and regulations. Our loss is their gain.
Free-Marketeers Should Welcome Some Regulation, 4/3/09:
“But this crisis was primarily caused by managements and individuals throughout the financial system who exercised extremely poor judgment. The private sector, not the public sector, is where the biggest mistakes were made.”
Mr. Singer, I’d wager that the majority of free-market capitalists believe that the government was, and still is, a substantial fraction of the source that has made the outcome of this “crisis” worse than it otherwise would have been had we not been inflicted with gov’t intervention. Artificial interest rates, gov’t price fixing, and subversion of bankruptcy and property rights laws are all examples. In a free market, poorly performing institutions fail (no matter how large), investors and debt holders of those institutions lose their some or all of their investments, assets are sold at market value, and remaining creditors get what’s left. This may seem harsh to you, but it is a self-healing mechanism for the market and an optimum way for participants to learn to set and adjust risks. The fact that you do not support this route means that you do not trust free markets and may even have other motives. We don’t need more regulation that limits free-market functions, we need more disclosure and transparency. If that isn’t available to an ‘optimum’ level, then market participants should factor that into their risk models. If they don’t, then there are consequences that have a learning cycle. Responsibility, like morality, cannot be legislated or regulated. The free-marketers want to preserve freedoms and choices, not severely limit them to suit other special interests. Stick to improving information disclosure and transparency on a voluntary basis and avoid more gov’t imposed rules that have unintended consequences.
Hedge Fund Paid Summers $5.2 Million in Past Year, 4/3/09:
“…the influence of lobbyists is curbed…”
How many people buy this? I don’t believe lobbying power and influence has changed one iota. It existed in the Paulson Treasury and extends to the Geithner/Summers Treasury. It existed in the Bush White House and extends to the Obama/Axelrod White House.
From Bubble to Depression? 4/6/09:
“How can one crash that wipes out $10 trillion in assets cause no damage to the financial system and another that causes $3 trillion in losses devastate the financial system?”
The conclusions on monetary policy, lending standards, real estate market speculation, and the largest growth of Fed liquidity to the market in recent history are spot on. What this analysis does not factor into the outcomes is the role of government intervention and fiscal policy. After the tech bubble burst the government did not extend a hand to failing companies like Enron and Worldcom and a whole host of smaller firms that failed. Investors took their lumps, learned their lesson and moved on. Assets were sold at fire sale prices to investors like Warren Buffet. The economy sprang back in part due to the lack of price fixing (i.e., a floor) on distressed tech bubble assets and the capital gains and income tax rate cuts in 2003. In the housing bubble case, government intervention crossed the line. The Fed extended a significant portion of its balance sheet to guarantee the distressed assets of an investment bank, Bear Stearns, instead of allowing it to fail, and the assets sold off at market prices. Fed backstops were extended to the GSEs, FNM and FRE and then yet again for AIG. Except gov’t cronyism didn’t save Lehman, just the opposite.
Firms Move to Fight Overseas-Profit Tax, 4/6/09:
“They also say it contributes to the inefficiency of the U.S. tax system, making it more difficult to raise the money the government needs.”
Any excuse to feed the monster. Protectionism will not protect the American standard of living, we rely on global trade and the investments by multinationals overseas are not always to seek cheap labor but to improve the goods we do buy from our trading partners. Multinationals also seek to avoid unionized labor, which raises prices for everyone. Keep in mind that Japan and South Korea have major manufacturing facilities here for this purpose. Finally, entropy and the 2nd law do not imply complete disorder – entropy is the amount of order, disorder, and/or chaos in a thermodynamic system and is governed by statistical probability distributions. We would likely not all equilibrate to the standards of living of those residing in present-day Mexico or China. The most likely outcome would be that the average standard of living would rise – how much – TBD.
In Defense of Derivatives and How to Regulate Them, 4/7/09:
The misinformation on derivatives (which extend from ordinary stock options to credit default swaps) is replete in the popular media. Though the author did not mention it, there is also controversy over naked derivatives, namely naked CDSs, where investors or traders have no commensurate insurable interest. Options are traded all the time without having to own the underlying stock, so a regulation requiring an insurable interest on a traded CDS ought to be carefully reconsidered. The author covers well what is really required: improvements in disclosure and a functioning clearinghouse, and that those who voluntarily opt-out are a red flag for risk management models.
Tech Giants Help Clients Tap Stimulus Funds, 4/7/09:
“International Business Machines Corp. developed a software program specifically designed to help companies keep track of how they’re spending stimulus funds. IBM is also positioning its consultants as experts who can help companies measure the results achieved through stimulus funds, which many of the grants require.”
IBM used to be on the leading edge of technology innovation but has shrugged that lately as it repositions itself as a gov’t contractor. I can understand the role of defense contractors, but not IBM’s role.
SEC Floats 5 Potential Short Curbs, 4/8/09:
“One method that would stop this (and the bear runs on stocks that this feeds) is to require that a stock be borrowed and held in the sellers account PRIOR to the short sale.”
I agree with this measure. While the uptick rule will likely make little difference this hassle would. Also: how about giving a fee cut to all stock holders whose shares are lent to short sellers? I’d appreciate that…and even pay it if I want to short a stock.
The NYSE has had program trading curbs (“circuit breakers”) in effect ever since the ’87 crash. For a good long time until Nov. 2, 2007 the curbs went into effect whenever the NYSE Composite Index moved 190 points or more from its previous close, and remained in place for the rest of the trading day or until the gain or loss had decreased to 90 or fewer points. This curb permitted program sales to be executed only on upticks and program buys on downticks. This curb was eliminated Nov 2007 due to “ineffectiveness in curbing market volatility” which I buy. The NYSE still has these curbs, they just kick in at a wider range: At the start of each quarter, the NYSE sets three circuit breaker levels at levels of 10% (1-hr and 1/2-hr halts, depending on trading time), 20%, (2-hr and 1-hr halts) and 30% (market closes) of the average closing price of the DJIA for the month preceding the start of the quarter, rounded to the nearest 50-point interval. As of the first quarter of 2009, these levels are 850 points, 1,700 points, and 2,600 points. OK, now that you know that…to add more rules or breakers — I agree EMPHATICALLY that it would be a detriment. We should be promoting more voluntary disclosure and transparency and focus on that, not more rules that have unintended consequences.
Is Silicon Valley a Systemic Risk?, 4/9/09:
It appears the present government will not stop their mission to control and dominate every aspect of business conducted in this country by private citizens. This has become a matter of a separation of Business and State, much like Church and State, and unless the issue is put forth in those stark terms the headwinds will not mitigate until those who misuse their power and misunderstand Constitutional authority are thrown out of public office. With the exception of Axelrod, none of the characters mentioned has ever started and/or run an entrepreneurial venture or business. As such, their only claim is to control others who do. We live in a dangerous time, with now repeated government threats to American Capitalism, innovation, and our business culture by those who don’t subscribe to or understand their principles. American innovation starts and flourishes under a culture of freedom to privately fund promising ideas that may lead to marketable solutions and a good return on investment. That funding will be in jeopardy if there are government controls and intervention – an menacing thought. We ought to be moving further toward private funding of technological innovation, applied R&D, and even pure R&D. Sincere thanks to James Freeman for a commendable piece on the threats we face from our own government.
Volcker Assumes Smaller-Than-Expected Role With Obama, 4/11/09:
It is probably best that Volcker not be associated that closely with this agenda.
The Path of Kohn: Crisis Changes a Fed Vet, 4/12/09:
“Every talking point of the last 30 years about the dangers of exposing the Federal Reserve to credit risk or lending to nonbanking institutions has [Mr. Kohn's] fingerprints on it….”
And his decision (with others) to deviate from this had led to disastrous consequences. This guy has no conviction. The Fed needs to lose the power it has with politically motivated economic engineering of our economy.
Everyone Should Pay Income Taxes, 4/13/09:
Mr. Fleischer loses me when he spikes “a certain amount of income redistribution in a capitalistic society is healthy, but this goes too far.”
This statement is wholly equivalent to “A certain amount of theft is moral.” Neither justifies a basis for the tax code we currently have or might have in the future. Close all loopholes (from top to bottom) and lower all rates to a flat tax rate. Get the government out of health care and retirement programs that have morphed into Ponzi schemes with unfunded liabilities.
Business World: GM Is Becoming a Royal Debacle, 4/22/09:
I’ll add to this one: “A monarch, when good, is entitled to the consideration which we accord to a pirate who keeps Sunday School between crimes; when bad, he is entitled to none at all.”–Mark Twain
Good Government and the Animal Spirits, 4/23/09:
The government need not be the referee of Capitalist games – as the authors point out, there are well-oiled private sector infrastructures that operate quite well, “such as trade associations and exchanges.” I’d like to hold up the options and futures markets and exchanges as prime examples of complex markets that, as far as I am aware, do not have the gov’t as a referee in the form that I think is being proffered by the authors. I also take strong exception to equating Capitalism with basic animal instincts. Capitalism allows all of us to realize our full potential, should we wish to exercise that right. It demands a critical mind as well as a challenging spirit. As often stated, government intervention and regulation penalize honest, law abiding players, no matter how good and “athletic” they are at their game – which is what I think the authors and their like are concerned about. For the politically appointed referee to handicap the best players to level the game to suit his needs – sounds like an infringement of freedom.
Bank Officials to Hear Results of Stress Tests, 4/24/09:
Analysis based on TCE has just been published at http://seekingalpha.com/article/132969-bank-stress-tests-tangible-common-equity-a-critical-metric. I think the results are not surprising. The question is what the gov’t will ask the 5 “red” banks to do, if anything. The real question is whether there are banks in the 19 that have exceptionally low or negative TCE.
I’ve always thought these tests were meaningless; the FDIC has been doing stringent ratings for years. Waste of taxpayer money and Geithner/Bernanke grandstanding, with a possible gov’t ulterior motive.
World Bank Report Card, 4/25/09:
With the U.S. subjecting viable U.S. commercial banks to stress tests I think it only right that the Treasury review the U.S. funding of the World Bank. The U.S. has the largest voting share (with Britain) on the board, yet how effective has the U.S. gov’t been in dealing with the fraud? Not very effective. Hmmm.
Some Lobbyists Try to Skirt Stimulus Ban, 4/28/09:
This lobby ban is a sham – it reduces transparency. Registered lobbyists just recruit unregistered interested parties to represent them and it goes unrecorded.
Buffett: Simple Answer to Moody’s Question, 5/2/09:
Not everyone made the same mistake on housing — those shorting the ABX in 2006/7 have the profits to show for it, as do those who sold their properties in 2005/6 after seeing a nonlinear run-up in prices. The fact that Buffett’s common sense didn’t kick in on this one sooner is perplexing. His excuse that he didn’t want to “rock the boat” (or a better analogy would be that he didn’t want to shout “Iceburg!”) takes away from his credibility.
Odds-On Imperfection: Monte Carlo Simulation in Finance, 5/3/09:
Invoking some of the techniques of chaos theory might be useful. Some of the instabilities referred to by others (e.g., government intervention) are largely non-random, and could be characterized as chaotic. As is known in chaos theory, random events can be amplified in a nonlinear chaotic system, leading to serious distortions. The problem with using Monte Carlo simulations is that many of them are based on sampling probability distributions that are constructed upon a Markov process or chain – where the desired distribution is the equilibrium distribution.
Declarations: ‘Shrink to Win’ Isn’t Much of a Strategy for the GOP, 5/3/09:
Peggy Noonan ranks right up there with Maureen Dowd – except Maureen is at least honest about which side she’s on and why. Another post a few months back suggested that Peggy consider writing romance novels. It would be refreshing for the WSJ to consider replacing Noonan and Karl Rove as political columnists that pretend to be torch-bearers for conservatives. They have both had their significant hand in giving victory to the liberal left, and in their fabric don’t understand that losing fiscal control was the single largest failure of the GOP, followed closely by Beltway corruption. They also don’t understand the power of what could be – and the WSJ could capitalize on that by recruiting some fresh talent that writes about libertarian issues – “freedom, less government, fiscal control.”
The Next Housing Bust, 5/4/09:
The calamity here is that the voices during the debate to raise the conforming loan limit in late 2007/early 2008 to $700K+ were not loud and influential enough. While we ought not to have the FHA program at all – it is a form of welfare to both buyers who cannot realistically afford a home and to the industry facets that have housing inventory to sell – raising the limit put a gasp in the breath of many onlookers wondering when and how the fairy tale would end. $50-100 Billion seems like a low figure, and I am sure it will be “rationalized” away in view of all the other bailouts that have eclipsed it. The real issue is that the FHA and its conforming limits were promoted and passed by both sides of the aisle – absolving neither side of culpability in the housing mess. And to think – just a mere 9-10 years ago many of us were required to put down 20% and pay relatively high interest rates to buy a home.
New York Fed Chairman’s Ties to Goldman Raise Questions, 5/4/09:
This is a clear conflict of interest, given the current role of the Federal Reserve. It is not really a “private independent bank.” It is a funding arm of the US Treasury, and has regulatory functions. The probability that the NY Fed chairman had access to material inside information on GS is high, and if he traded on this information he should face insider trading charges. There is a bill circulating Congress, HR 1207, Federal Reserve Transparency Act of 2009 (which calls for Fed audits): http://thomas.loc.gov/home/gpoxmlc111/h1207_ih.xml
We Can’t Subsidize the Banks Forever, 5/5/09:
The gov’t can’t subsidize banks forever, but nationalization is not an option either. Receivership and restructuring has worked – the important issue is to uphold property rights and contract laws in the process. As we now know, size of the institution is not the problem – it has become a demagogue.
Capitalism In Crisis, 5/7/09:
Mr. Posner’s piece reminds me of just how far the Chicago school has fallen from the influence of Milton Friedman.
With inane statements like: “a capitalist economy, while immensely dynamic and productive, is not inherently stable,” and
“…businessmen seek to maximize profits within a framework established by government….” and
“…we may need more regulation of banking to reduce its inherent riskiness. But now is not the time for that: There is no danger of a renewed housing or credit bubble in the immediate future. The essential task now is to recover from the depression…”
we get interspersed a tangled mess of commentary that contains no concrete plan for returning to capitalism and free markets; on the contrary, we are left with the impression that the author prescribes more government, more regulation, less freedom.
Mr. Posner: Ye have little faith in capitalism. Allow market forces to function to the fullest extent possible, without the non-random chaotic effects of government intervention and control, and observe what happens.
Stressed for Success? 5/8/09:
…”relax,” said the Geit man,
We are programmed to receive.
You can checkout any time you like,
But you can never leave…
The bad banks have survived because of a steep yield curve, a gift from the Fed. Historically low interest rates will have an inflationary effect, and the Fed refusing to release projections of interest rates that (may or may not) have been factored into the stress models is indeed disquieting. Hedge yourself! This could be heaven or this could be hell.
The Friedman Flap, 5/11/09:
“This structure was designed under the Federal Reserve Act of 1913 to help insulate the Fed from political pressure, and it has worked well.”
Really? I suggest the WSJ editorial board re-read the sordid history of the Fed, particularly the shenanigans of the NY Fed, in the years just prior to the 1929 market crash. Add to that many other Fed histrionics throughout the years, plus this recent incident, coupled with Geithner’s transgressions of the last few years as NY Fed President in favoring special interests. The Fed is not a private independent bank, it is a cartel and a funding arm of the U.S. Treasury. Our markets will not truly be free until the Fed is eliminated. In the mean time, both the House and Senate have called for Fed audits, more transparency and disclosure, which is a step in the right direction until the political will exists to eliminate this institution.
Tax Increases Could Kill the Recovery, 5/13/09:
Not mentioned in this article is the historical fact that no matter what the marginal tax rates have been, government tax revenue has been pegged at around 19.5% of GDP (“Hauser’s Law”). This means that raising marginal tax rates is highly specious and misleading reasoning for increasing tax revenue, and contrary to what Mr. Orszag and others would have us believe. What is needed is an increase in GDP – as total government tax revenues are proportional to the GDP, as data over the last 40 years suggest. Raising marginal rates (corporate, individual) will impede the GDP, as will consumption taxes like cap-and-trade or a VAT.
The New Tudors, 5/13/09:
-King: So what do my court fools have for me today?
-Rahm: Sire, I have visited the Treasury and have made sure that they understand our latest economic insurgency plan.
-Orszag: Yes, Sire, your wealth and prosperity redistribution visions are in play; full equality will be achieved and the proletariat compensated to support your divine destiny.
-Axelrod: I have updated TOTUS with my latest speeches and have reprogrammed your hypnotic marketing chip with enhancements to recruit new followers.
GM to Import China-Built Cars to U.S., 5/13/09:
-Gettelfinger: The King must be arrested for Treason if these imports are approved. He led us to believe he was on our side!
-Faust: He is on the side of everyone and no one, my son. You cannot arrest the one who offers you a bargain.
-Auto Buyer: Wow, great deal on the price, but I hope this Chinese-built car doesn’t have the same problems as that Chinese drywall…
Information Age: Derivatives and the Wisdom of Crowds, 5/18/09:
Some may argue that putting derivative trades through a concentrated set of clearinghouses standardizes trading and streamlines the aggregation of information. So I see an advantage there. Risk pricing has been a real issue, and one can also argue that if trades don’t go through a standard exchange then there may be risk dislocations. In any case, this article raises some very important questions deserving further debate. Should we crowd out the little guys with trading platforms in favor of large trading monoliths? In the equity world we still have OTC and large exchanges, but one disadvantage of the OTC is thin trading and price dislocations.
Why Beijing Wants a Strong Dollar, 5/28/09:
Zach: It is wishful thinking that the U.S. and China will coalesce in economic simpatico – I too subscribe to this wish as a possible outcome. But one is not being truthful to oneself if one does not admit another possibility: that China will divest itself in U.S. debt as it sees practical to do so as other opportunities arise for its reserves. Any seasoned trader would do the same.
VATs Mean Big Government, 6/4/09:
A VAT in addition to income taxes would mean a reduction in GDP, pure and simple. Less discretionary income will be spent and business will be reduced. The electorate must get their act together and vote out all politicians supporting this, if it is instituted in addition to income taxes. The only way a VAT would be acceptable is having it replace the income tax system we have (completely).
SEC Deluged by Support for Uptick Rule’s Return, 6/10/09:
The uptick rule reinstatement will do little to remove volatility during a declining market – in fact, there will be little effect on market dynamics. A study of market data over a 10-year period, during which the uptick rule was mostly in effect, shows that from ’97-’03 market volatility was elevated and, as we all know, there were significant market declines, particularly in the Nasdaq. I personally knew traders who shorted the Nas and tech stocks daily from ’00-’03 and made a great deal of money – legally – during this period. If the uptick goes back into effect, traders will simply modify their methods back to what they were before 2007 and program trading algorithms tweaked back to what they were before 2007. Naked short selling has not been substantiated – but I suspect it is a problem – particularly because the SEC cannot, it seems, accurately account for “fails-to-deliver” rates and how they occur (willfully or system glitch). If the SEC wants to truly make a change with a real effect on short selling it would require that short sellers receive a borrowed security in their account before selling it short (meaning it might take a few days to settle or clear). An additional onerous regulation would be to require that short sellers pay a higher fee for borrowing a security to sell short and having part or all of that fee increase go to those who actually own the security. Both of these remedies are controversial. But not requiring security loan settlements leaves the door open for system manipulation that can affect the market in adverse ways.
Laffer: Get Ready for Inflation and Higher Interest Rates, 6/10/09:
The Fed actions in September 2008 were driven by a panic reaction to the Reserve Primary money market fund breaking the $1 threshold (because of its exposure to Lehman) and a perceived threat of a run on the banks (likely exacerbated by Paulson’s frenzied reactions from the Treasury). As we all now know this action did little to prevent a seizure of the credit markets and a commensurate decline in the broad securities markets from October onward. What might have happened had the Fed done nothing and the markets allowed to correct without this intervention? Bernanke would answer that we would have fallen into a deeper depression and that injecting the system with a massive amount of money was the only solution. This is unsubstantiated. And Art Laffer makes an excellent case that at this point a retraction of that monetary base must occur to avoid the consequence of all that money flooding into the broader system – monetary expansion and inflation. What is Bernanke’s plan? We all ought to be demanding an answer. The rumors are not quieting – that the Fed will be buying more Treasuries. But none of this will be solved until the government develops fiscal control and restraint – a reversal of the trend toward a doubling of the gross gov’t debt as a %GDP.
Volcker: Moral Hazard and the Crisis, 6/16/09:
This effort by Mr. Volcker is laudable but doesn’t go far enough. Hedge funds have not been a threat during this “crisis” and ought not be subjected to increased government regulation. But I would also argue that other financial institutions that are not depository institutions ought not to be constrained further either. If they incur significant risks and fail, let them fail. Depository institutions are different, but only to the extent of their liabilities to insured depositors through FDIC. Beyond that, there is risk. As many of us out here now know, if we’d let some of the financial institutions that were propped up by massive Fed liquidity around September 2008 fail, we’d be much better off. No more price fixing and taxpayer put options please.
Consumer Agency to Seek Wide Reach, 6/16/09:
Several suggestions for names:
“Agency for Consumer Price Controls”
“Wage and Price Control Board”
“Bureau of Redundant Regulation”
“Government Financial Products Division” …
This sounds like massive government intervention into capital markets, under the rubric of “consumer protection” (a.k.a. nanny state). Ben, people learn from failures, but if you don’t let them fail, they won’t learn.
Too Big to Fail, or Succeed, 6/18/09:
Lehman’s losses started accelerating the week that Fannie/Freddie were forced into conservatorship – the data is very clear on this one. That same week, AIG also faltered. After 7 days, Lehman declared bankruptcy and AIG got an $85B NY Fed bailout (special interests duly served). The impact of the Fannie/Freddie forced conservatorship cannot be understated. The correct course would have been to leave them alone, and let them fail if they could not survive as a going concern. The government ought not to be in the business of buying mortgages or setting a market for mortgages. The proof that this GSE system was rotten need not go any further than the clarity of how much money GSE insiders looted from the company (Franklin Raines, Democrat and former CEO, made upwards of $100M+ during his tenure). Systemic risk has been a wedge used against free market capitalism. It is understandable to enable standards and regulations for depositor-based institutions up to the limit of protecting insured FDIC depositors, but beyond that, intervention and regulation starts to hurt those that take risks looking for a reward, and who for the most part do indeed understand the risks. Investors need to read their prospectuses.
How to Get The Fed Out Of Its ‘Box’, 6/22/09:
Addressing the long-term off-balance-sheet debt (from entitlements) is a key issue, but so is a sincere effort to reduce near-term gov’t spending, and to cut corporate and investment tax rates. Eliminating the employer health tax subsidy is great – but why not go all the way: eliminate all govt’t tax subsidies and deductions and simplify the tax code. As for the Fed: The likely course, given Bernanke’s leadership, is more Treasury purchases, quantitative easing, debt monetization…unless we get a radically new plan — which indeed ought to include the Fed not manipulating the market.
A Triple-A Punt, 6/22/09:
Credit rating agencies have the same problem now that tech stock analysts had earlier this decade. The assumption that housing prices would increase indefinitely was fundamentally flawed, as was not seeing the early cracks in the mortgage CDO and credit-CDS markets. The solution for the industry is not giving these firms exclusivity in judging the credit-worthiness of assets and businesses – the due diligence ought to be spread around and verified independently. And information flow is key to managing risk.
Bernanke at the Creation, 6/23/09:
Bernanke overshot the deflation issue with the massive increase in the Fed balance sheet starting in Sept. 2008, and it looks like he has no plan to retreat. Price fixing and artificial price floors don’t work. No more market manipulation by the Fed: Times have changed since the early 30′s and the market ought not to be a depression-era experiment.
The Cap and Tax Fiction, 6/25/09:
“The resource cost does not indicate the potential decrease in gross domestic product (GDP) that could result from the cap.”
And there will be a reduction in GDP – the CBO was/is likely avoiding publishing the results that they already have on this. The solution is to avoid cap and trade and develop a “race to the moon” strategy of nuclear energy technologies. France has a 30-year edge on us here – and we ought to finally recognize that and put a serious effort toward a competitive nuclear energy complex that essentially delivers the same result as a cap and trade, but without a hit to the GDP.
Congress Must Pay for What It Spends, 6/25/09:
The test of Paygo or other Balanced Budget initiatives is sustainability, which neither side of the aisle has been able to accomplish. There must be a sustained reduction of spending and a refrain from raising tax rates. We already have the 2nd highest corporate tax rates – and we are moving toward meeting Japan on gov’t debt as a %GDP.
Wary Banks Hobble Toxic-Asset Plan, 6/29/09:
It’s called a carry trade, courtesy of the Fed/Treasury and the Taxpayer.
This defines why a bank like Citi ought to have failed and been broken up, Sept-Q4 2008.
Too Bernanke To Fail?, 7/1/09:
Bernanke is an avowed believer in price fixing and price floors. He has defined ‘systemic risk’, which is used as a wedge against healthy market cycles. This is the danger that his leadership has presented to us in the last few years. Either eliminate the Fed or put in someone who understands the value of a more benign Fed and price dynamics, such as John Taylor.
Asian Officials Push Back Against Savings Glut Theory, 7/6/09:
“The rise and subsequent collapse of U.S. house prices, he said, “has nothing to do with the difference in savings rates between the U.S. and China.”
And the data supports this conclusion.
The 0% Tax Rate Solution, 7/14/09:
Flat (>0%) income tax on everyone, jettison the tax code and cut corporate and investment tax rates to a flat rate. Trim gov’t spending to balance. The data on tax revenue for the last 50 years tell the story though on direction. Follow the data.
The Bernanke Market, 7/15/09:
Cut corporate and investment tax rates. Cut gov’t spending. Look at the data and what we’ve done after every recession (including the ’73-’75 recession, which has some similar characteristics in terms of the behavior of the real GDP). The O-dogma against business-and-investor tax friendly policies will stifle growth. Mr. Bernanke is a price fixer and has engineered a yield curve to benefit financials (and commodities!). Indeed, what is his plan beyond that? It ought to be warning Congress and Treasury that private investment is key to GDP and job growth (hence business and investor tax rate cuts) and that gov’t must trim spending (and not just spending growth). Get to it, Mr. Bernanke.
A Tale of Two Bailouts, 7/15/09:
Simple solution going forward: firms that cannot survive, fail. All of us independent investors/traders out here know the risks and take the hits. So should we all.
Economists Warn Fed Independence at Risk, 7/15/09:
Fed manipulation of interest rates and the money supply can be replaced with an automatic rule or a programmable calculator. The Fed has been steeped in politics and in reality has never been independent of the Treasury for the duration of its existence, since 1914. Astute students of monetary history will look back at the Treasury from 1900-1914 (including the 1907 bank panic, which will give one a dose of deja vu) and conclude that the Treasury gave birth to the Fed, but that the Fed still has that umbilical cord attached. And as to who rules who – sometimes that baby controls the parent, sometimes the parent controls that baby. Cutting the cord will be symbolic and lead to less of a solution than getting the Fed removed from micromanaging/engineering monetary policy, which has not led to long-term price stability. Let the capital markets decide.
Let Private Equity Help the Banks, 7/16/09:
The question is whether depository institutions ought to be able to take on significant risk – defined as beyond that which might allow them to cover FDIC losses should the risk bets go bad. Some readers have suggested putting these institutions into higher risk pools – i.e., they pay more into the insurance system to take on the higher risks. Makes sense.
Signs of Capitalist Life, 7/17/09:
Much of the market action this week had to do with a weakening dollar (chart DXY).
China’s Bubbling Consensus, 7/18/09:
Any speculation as to when/what levels the bubble will burst? Tied to our own W or WW or WWW or W^n recovery? Going forward it will be a war of currencies and commodities.
Bernanke: The Fed’s Exit Strategy, 7/21/09:
Mr. Bernanke puts forth several variants for reducing the Fed balance sheet and tightening the money supply, all of which will need to happen if the VoM increases and inflation becomes obvious. He has his work cut out for him, and would be prudent to enlist other monetarists, such as John Taylor. The problem: if we do not have an immediate recovery and another large bank fails, i.e., one of the current zombies. This time, let it fail – don’t keep increasing the Fed balance sheet to save it. No more price floors. Let the markets cycle without more artificial injections of money.
Bernanke’s Assurances, 7/22/09:
On Bernanke’s replacement: Larry Summers is not a fait accompli. Summers has tremendous liabilities; it is a matter of informing the voting public, the media and Congressional members of all of those liabilities and what they might portend. Mr. Summers is interested in power and control, not in genuine efforts to promote policies that would mean widespread business and job growth, continued GDP growth. His performance in his present position is evidence of that. Summers has no definable track record on monetary policy – only a desire to hold the title of Fed chairman. Not a strong qualification. Finally—-his resignation from Harvard over accusing women of “the different availability of aptitude at the high end” ought to remove him from consideration of any public policy position, ever.
Treating Financial Consumers as Consenting Adults, 7/23/09:
I’ve been critical of Mr. Posner in the past for not being true to the Friedman school, but he’s hit one out of the park on this piece.
“Behavioral economists are right to point to the limitations of human cognition. But if they have the same cognitive limitations as consumers, should they be designing systems of consumer protection?”
Seems as if Friedman said it himself. All of these so-called designers are interested in one thing: control. We already have credit card agreements and investor prospectuses: the problem is that the consumer does not read them and takes on risks they know are higher than they can afford. There is such a concept as personal responsibility. We need to emphasize that (and basic personal finance) instead of destroying what remains of our markets.
The Fed Can Lead on Financial Supervision, 7/26/09:
The authors have appeared to use their initial voice in this article for relocating ‘systemic risk’ regulation with the Fed as a vehicle to disparage all of the Fed’s critics. To claim that the Fed/FOMC is not, or has never been, influenced by politics in its decision making for engineering the Fed funds interest rate and the money supply is ludicrous. To claim that the Fed is independent of the Treasury is absurd; in fact, the Treasury gave birth to the Fed, and has had a long and intermingled history with the Fed. The Federal Reserve initiates monetary policy, affecting all aspects of business and life in this country. There is no reason why such an institution ought to be exempt from audits. Denying such audits is equivalent to admitting possible wrongdoing and/or perpetuating an unchecked level of power. The real solution is the free market: let the markets dictate interest rates and the money supply and eliminate the FOMC.
U.S. Issues New Rules on Short-Selling, 7/28/09:
The only way to cut down on naked shorting (willful or otherwise) is to require a hard preborrow. Too bad if the settlement takes time before the trade can commence. Fines for “fails-to-deliver” ought to also be considered, but the issue there is reliability of the data. When even the SEC cannot digest industry ‘fails-to-deliver’ data to make sound policy, you know something is wrong. The way I understand it, such data is unreliable, as it is unclear on whether cases are willful or system glitches, and the SEC has yet to publish hard numbers on their analyses of this.
The Politics of ‘Speculation’, 7/29/09
We need more speculators (read: traders and investors), not less.
We also need greater price transparency, which we would obtain by industry improvement of all market systems (trading systems, electronic and otherwise – meaning make them more efficient and reliable). Such improvements might also help curb ‘unintentional’ naked shorting. A few new jobs created there. More participants and market efficiencies are a positive for capital markets. In the unfortunate event that the CFTC further limits and regulates trading on futures contracts, trading ETNs are an alternative for traders, which move on price action. The SPR exists for emergencies, such as a massive supply disruption internationally or domestically – it does not exist as a tool to manipulate oil prices when market prices extend high. Clinton may have used the SPR for such a purpose, but it was wrong. Obviously the SPR ought to stockpile at low prices when possible. The link between oil prices and dollar volatility is a constant debate, with respect to assigning causality…in particular, consistent unidirectional causality.
The Customer Is Right, 7/29/09:
The Chinese and Russians have also been talking for months on a serious push to make IMF special drawing rights (SDRs), which is defined on a basket of currencies, the dominant reserve currency. So while we are warned by our creditors on the issues with the US dollar, there is a distinct possibility that it will be replaced for many international transactions.
Can the Fed Identify Bubbles Before They Happen?, 7/30/09:
Here’s some sample evidence as to how well the Fed has done in preventing bubbles:
“Indeed, recent research within the Federal Reserve suggests that many homeowners might have saved tens of thousands of dollars had they held adjustable-rate mortgages rather than fixed-rate mortgages during the past decade, though this would not have been the case, of course, had interest rates trended sharply upward.” — February 2004, Alan Greenspan
“If I am confirmed to this position, my first priority will be to maintain consistency and continuity with the policies established during the Greenspan years.” 2006, Ben Bernanke
Solution: Eliminate the FOMC and let the market drive interest rates and the money supply.
Poised for a Rebound, 8/1/09:
This piece underestimates the influence of a steep yield curve and artificially low interest rates. I wouldn’t be popping the champagne for real Adam Smith-style growth just yet. I understand the optimism and I am an optimist – but I also believe caution and strategy are essential. We face continued assault from a Congress and White House that threatens shackles and limited options for businesses and individuals. Thriving private investment, a cornerstone for GDP growth and widespread prosperity (jobs), is not going to happen so long as the assault on capital and freedoms from this government continues.
What’s Behind High-Frequency Trading, 8/1/09:
Yeah, but that ‘unsuspecting buyer’ actually fell for it and paid the extra $ by entering a market order. He’s at the mercy of the market, so to speak, whether it’s the case you outlined or any other market dynamic. Market orders are the worst way to trade, and this is pretty old news. No one seems to have a problem with currency exchanges at airports that gouge travelers but they have a problem with HFT and flash. And how about all those banks that are offering us artificially low interest rates for our money? How’s that one? Quite frankly I’m getting tired of the whining over these strategies. These firms pay for special access and tools, and any day trader can pay for special access and tools – the latter are not as sophisticated, but so what – they still allow independent traders to get an edge. I agree front-running ought to be illegal, but it is not clear to me that all flash trading is front-running. The SEC ought to definitively look at the evidence and make a determination with industry on how to remove any elements that smack of front-running, leaving the other advantages for the markets intact. ‘Risk free trading’ is a foreign concept to me. There is always risk in the act of trading, and there always has been, and probably always will be. As a trader, I don’t always get the price I want – but when I don’t, I certainly don’t settle for whatever price is available. Every trader has benefited from arbitrage at some point. And trading thin illiquid markets can be quite irritating, but patience sometimes is warranted there (yeah, funny, esp. when talking about HFT).
Bernanke’s Exit Dilemma, 8/4/09:
The Fed will have to raise target rates at some point, and that will slow the reflation trade we are seeing now. When it chooses to do that and by how much are key. Bernanke ought to enlist the help of other monetarists that have studied this issue well, in terms of how to avoid significant price shocks. To not do so is short-sighted and shows even more of the political bias we simply do not need in the Fed.
People will not get used to sharply higher taxes and inflation – they will vote the bastards out. The problem then is we repeat the cycle without legislators who have read the constitution, know monetary history, have fiscal control, have seen firsthand how businesses function, and so on. We’d better all be preparing to solve the latter.
The problem we have here is our own: Government largesse and a Federal Reserve that conducts monetary policy to support that. The solution is to break this mold: less government, less spending, monetary policy that is market and/or rule-driven, and a Fed that simply is a lender of last resort, without the ability to create money to bail out special interests.
There are many similarities of the past 2 years to the 1907 Panic – a good read of this is Friedman’s passage on it in Monetary History 1867-1960. The Fed has had immutable power since its birth, which by the way was made possible as a result of the Treasury – the parent. The Treasury held many a Fed role before 1913, with the same cast of characters. Secy Shaw smacks of Paulson and Bernanke all rolled into one. History repeated itself in 1929 – with a powerful NY Fed and all of the classic mistakes we have seen repeated yet again. There is just simply too much power and politics in the Fed – this must change.
Teeing Up the Middle Class, 8/4/09:
And to hear these words again:
“Government’s view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.” Ronald Reagan
“When the people find they can vote themselves money, that will herald the end of the republic.” Benjamin Franklin
We all know what we need to do. Vote for less government and keep more of our money.
Goldman Had 46 $100 Million Days in Second Quarter, 8/5/09:
GS is benefiting from a steep yield curve and artificially low interest rates. And yes, they benefited from that $20B from Geithner last year, not to mention other counterparty bailouts (BSC, et al.) that indirectly helped them. I applaud their trading prowess – the issue is any illegitimate influence they exert to be in favored positions. The Fed needs to be neutered.
In China, Land Prices Fan Bubble Fears, 8/5/09:
One wonders if China will succumb to the same fate as Japan in the late 80s. There have been many articles on this lately:
Shanghai has overtaken Japan as the world’s second largest stock market, and China’s GDP is set to eclipse Japan’s very shortly. One can argue that this inflation in land and stock market prices can go on for awhile given China’s vastly larger population, but not all of that population participates in this growth yet.
It’s Time to Legislate a Spending Cap, 8/7/09:
Spending caps are sensible, but every time Congress has agreed to one it has either been repealed or violated. Mr. Moore does not offer any real solution to this dilemma.
What does one do when dealing with incorrigible, irresponsible parties? Vote them all out.
And an absolute yes to removing the Federal Reserve from the very monetary policy control that keeps the spending party going.
Posts on National Security and Foreign Policy
Russia Can Be Part of the Answer on Iran [in which Senator Schumer urges the U.S. to give up missile defense in Eastern Europe (and most probably Japan) to quell the Russians and Chinese…], 6/1/08:
Mr. Schumer has forgotten (or never understood) how Reagan won the Cold War.
Bush Owes His Successor a Tough Finish on Foreign Policy, 9/6/08:
John Bolton rightly keeps the pressure on the Bush administration to finish with a strong strategic position, particularly w.r.t. North Korea, where mistakes have been made. But he neglects to mention enough the strategic value of the NATO missile defense system in Poland, an accomplishment that will protect our allies. Ms. Rice deserves credit for the latter.
Bill Targets How U.S. Buys Weapons, 2/25/09:
Fixed price contracts will mean more no-bids from the industry. Cost-overruns are not always the fault of the defense contractor – the gov’t many times has unreasonable demands that lead to cost creep. Changes to only fixed price bids will mean more due diligence and less competitive bids. I’m not saying the system shouldn’t change, but the gov’t buyer side needs reform too.
Obama Aims to Reduce Reliance on Defense Contractors, 2/28/09:
When I was a program manager for a major defense contractor I hired many subcontractors, some of which were sole-source. This was unavoidable, as the subcontractors were experts in their field and there were no other sources to provide the studies/products my team needed. To have those studies/products replicated in house would have either not been possible or would have cost 10x+. For the govt to apply a blanket rule against contractors when federal $ are involved is asinine. Yes, there should always be due diligence on the program manager’s part to ensure fair bids and get the best value. Many of us did just that. The new “rules” had better not be as Orwellian as they sound – standardize some guidelines if needed, but if they already exist and it is a matter of more wasteful oversight then it has other motives. We all agree no-competitive-bid contracts for cronies is wrong but don’t hamper the system so much so that money is wasted even when people are following guidelines.
Iran Has Fissile Material To Make Nuclear Bomb, 3/1/09:
“The Obama administration has signaled it might slow down the U.S.’s development of a missile shield in Europe if Moscow were to provide greater assistance in international efforts to curb Tehran’s nuclear ambitions.”
There were never any good reasons for Russia to be against the missile shield or for Tehran’s ambitions, indeed they should stand with us no matter what. Call them on their bluff and concentrate on the real threats.
U.S. Willing to Roll Back Missile-Defense Plans in Europe, 3/3/09:
This is bad strategy. Once again, the U.S. should focus on the real threat (Iran) and stop trying to get an official quid pro quo from Russia (which won’t work). Even if we bluff each other into it, it would be a waste of time. The missile defense system is an asset for the free world.
Obama Orders Overhaul of Government Contracts, 3/4/09:
“We will stop outsourcing services that should be performed by the government and open up the contracting process to small businesses,”
The increase in small business participation sounds good but I am highly skeptical. There are already incentives in place for hiring small businesses as contractors. Need more quantitative details here!
“We will end unnecessary no-bid and cost-plus contracts that run up a bill…”
The majority of the time the party who is responsible for running up the bill is the gov’t! In my years as a program manager on the contractor side, I’ve seen the gov’t continually move the specs around and impose change orders. This drives costs up, period. So contractors are not the singular pariahs here. They have so many restrictions on them that to mandate fixed price on all contracts going forward will only ensure a reduction in those bidding or high bids to cover the higher risks. The gov’t procurement side needs overhaul itself, but not just a new set of cronies and poor performers to replace the old.
Beware of Doing Deals With Putin, 3/4/09:
This is bad strategy. The U.S. should focus on the real threat (Iran) and stop trying to get an official quid pro quo from Russia (which won’t work). Even if we bluff each other into it, it would be a waste of time. The missile defense system is an asset for the free world.
Cheney Says Obama Moves Raise Terrorism Risks, 3/15/09:
The fact that we did not have a bombing after 911 in this country is due in no small part to Cheney. You may (like me) be quite disgusted with the Bush/Cheney economic failures, of which there are many. Both of them (admittedly) ignored sound economic policy and management, allowing Hank Paulson to run the show in 2008 when he needed to be replaced in Fall 2007 for doing nothing. So while they had the country’s best interests in mind by fighting foreign terrorist threats, they lost sight of another piece of the national security puzzle: economic terrorism.
Obama Video Message Reaches Out to Iranians, 3/19/09:
Carter-esque indeed. Except now there are nuclear weapons involved. And trust but verify has no meaning. Peace, love and joy from…the 70s. Will it work this time?
Pain Iran Can Believe In, 3/25/09:
I would add that the current administration must continue to “follow the money trail” as suggested by John Bolton, in trying to map out how Iran is financing both an internal and external weapons race in the Middle East, and to methodically close down all illicit financial and related trading links. This is a necessary ongoing process for the U.S. and allies to effectively contain Iran.
Iran, Syria Got Indirect U.S. Nuclear Aid, 3/31/09:
More solid evidence for the elimination of the UN and the IAEA, or at the very least the elimination of U.S. involvement in or funding to these agencies.
Oil-Rich Arab State Pushes Nuclear Bid With U.S. Help, 4/2/09:
We’ve continually given the UAE all kinds of military and civilian technology, and perhaps incredulously, military technology that was even ahead of our own in some niche areas. This relationship extends back to the Clinton admin, and perhaps even farther back than that. Good policy? UAE has been very pro-American, so there’s something to be said for that given their surrounding neighborhood. Risky? You bet.
Pentagon Pushes Weapon Cuts, 4/6/09:
The WSJ really needs to edit their pieces (or maybe they are truly misinformed):
“…new funding for low-tech weapons such as the unmanned drones being used to hunt insurgents…”
These are anything but low-tech weapons. UAVs, their sensor, weapons and guidance systems are among the high-techest of any of our military systems.
“Mr. Gates’s proposed 2010 Defense Department budget signals a major departure from business as usual at the Pentagon, with a heavy emphasis on overhauling a procurement process that he and congressional leaders have decried as being too heavily influenced by powerful contractors.”
This I simply don’t buy. Not much will change. Gov’t contractors are already highly regulated. It’s the gov’t side that has to change to make any difference. The F22 cuts are a mistake. All this investment only to then cut a program. We must support the concept of air dominance if we are to protect the U.S. We don’t make the F15 anymore so what will replace it in the future…? Micromanagement. And finally the biggest mistake – massive (20%) cuts to missile defense *because* liberals just don’t like the concept. No real reason, other than it’s taboo because Reagan promoted it. Just like corporate tax rate cuts. Can never have those either. Despite the fact everyone pays them. And everyone would be protected with a functional missile defense system. But can’t have either, period. Regardless of the waste of the years of investments and a faltering business economy to boot. Must shift all focus onto socialist cronyism. And, well heck, Obama has his own fortified bomb shelter, so what does he care?
“The Pentagon chief said his plan represents “one of those rare chances to match virtue to necessity; to critically and ruthlessly separate appetites from real requirements,” and that politics played no role in his analysis.”
Yeah, right. Which would you rather have, a gun or a helmet? Which would you rather supply your troops with, food or ammunition? You’d supply both. You’d have a military well equipped and not second-guess what you need for a conflict. True, programs need review for performance and focus, but they are all designed to keep our military modern and ready for unfortunate events. I’m willing to pay for that protection given the real threats we face. Moral high ground must be backed up with a willingness to defend your moral position, otherwise your morality will have an expiration date. (The term ‘Dead Right’ comes to mind.) Missile defense and a nuclear arsenal are prudent measures in the world we live in, period.
Henninger: Obama Among the Dictators, 4/23/09:
Some sobering words to add to this Op-Ed:
“The pacifist is as surely a traitor to his country and to humanity as is the most brutal wrongdoer” – Theodore Roosevelt
“Every dictator is an enemy of freedom, an opponent of law” – Demosthenes
“Between capitalist and communist society there lies the period of the revolutionary transformation of the one into the other. Corresponding to this is also a political transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat.” – Karl Marx
Obama will be judged on the decisions he makes going forward – appearing as a sympathizer of ideological views completely counter to our Constitutional character and spirit, parroting other angry heads of state and targeting that anger toward his own country will earn him a swift trip out of office.
Torture and the ‘Truth Commission’, 4/28/09:
There is little doubt that the Obama Administration will use ‘techniques’ in their intelligence gathering; they just won’t document it, and the measures may be more severe than those used previously. The fact is that the Bush Administration did document their actions and sought legal counsel, in the honesty of following Constitutional precedents in other wars, and with the intent to not exceed constitutional bounds.
Don’t Forget About Foreign Aid, 5/5/09:
There was a reference that appeared in the Journal some months back: “Why Foreign Aid is Hurting Africa” – link: http://online.wsj.com/article/SB123758895999200083.html. This piece offered the alternative view, which is from an economist and aid worker. As the author states, “the strategy of development finance emphasizes the important role of entrepreneurship and markets over a staid aid-system of development that preaches hand-outs.” South Africa and Botswana have developed their economies – it’s only a matter of time for many others.
The Nuclear Realists, 5/13/09:
A modern nuclear arsenal and a strong missile defense system are indispensable investments toward ensuring we maintain peace and freedom. There are obvious dangers in allowing our nuclear capabilities to deteriorate, such as from weapons safety perspective. Proliferation will happen no matter what, so yes, reality dictates that we prepare for all of the possible scenarios.
Putin’s Ninth Year in Power, 5/15/09:
Not to get on Mr. Kasparov’s case too much, but after a string of articles with the same theme (Putin as the “arch-enemy”) one wonders what a nation under Mr. Kasparov’s leadership might look like. Perhaps he could enlighten us in future articles? I think that might be more productive. What I do know is that within the first month of the Obama administration, Mr. Putin warned the U.S. to eschew socialism, as he learned that “excessive intervention in economic activity and blind faith in the state’s omnipotence” and that “Nor should we turn a blind eye to the fact that the spirit of free enterprise, including the principle of personal responsibility of businesspeople, investors, and shareholders for their decisions, is being eroded in the last few months. There is no reason to believe that we can achieve better results by shifting responsibility onto the state.” Mr. Putin is spot-on with his words and timing here, even if it is rhetoric.
North Korea Advertises Its Nukes, 5/26/09:
One has to ask the question: How does North Korea manage to evolve its nuclear program in view of all the sanctions and outside monitoring of its transactions? Possible answer: China. Instability in the region surrounding Japan and South Korea is a strategy that China might advance. A bonus is observing how the U.S. reacts to such instability. As a pro-China advocate, I’d like to think otherwise, but the reality of possibilities dictates.
How to Reduce Nuclear Threat, 5/27/09:
The authors appear to avoid any significant discussion on missile defense – which is an effective, practical deterrent. It is unrealistic to assume that world states will eliminate their stockpiles, no matter what Obama’s position on the matter might be. Vulnerable nuclear materials have already fallen into the wrong hands – and action has been selectively taken. Intelligence and tracking of inventory ought to continue to be at the forefront, along with a strategically distributed missile defense network and the continued modernization our own stockpile (for safety and security). Reducing or eliminating our stockpile as an “example” will only be viewed as a weakness, whereas a strong missile defense will be viewed as a strength and a deterrent.
The Test Ban Treaty Would Help North Korea, 5/29/09:
The U.S. ought never to sign a CTB treaty concerning North Korea or any other nation, for that matter. North Korea proved yet again yesterday that it would not observe any agreement it has made with anyone – the latest case being the 1953 armistice agreement ending the Korean War. The U.S. and its allies need to remain committed to the development and deployment of an effective missile defense network. This remains the key deterrent to problematic rogue states (aside from strategic military strikes).
The Axis of Evil, Again, 6/2/09:
Japan will develop nuclear warheads, and within a short period of time. The only alternative for them is the deployment of a missile defense shield.
U.S. and Russia Push Arms-Control Talks Forward, 6/2/09:
And look how effective concessions by the Clinton admin with NK worked out on nuclear disarmament…Abandoning defensive counter-measures (e.g. missile defense, etc.) is insanity.
Putinism’s Piranha Stage, 6/9/09:
Putin is surely not dumb enough to kill what gave him enormous poll ratings – the illusion of cleaning up a corrupt Russia from the brink of mafia control. So portraying Deripaska as party to that threat is in his favor. Putin has played his cards well outside of Russia – for example, by giving a speech at Davos in January that more or less accuses the U.S. of falling into a socialist trap and over-printing its supply of money to cover. So while he may indeed be a piranha, and one of the last left, he might have enough food to get him through a few more stages. And it’s not clear yet to some of us that he is completely evil.
Obama, the Neocons and Iran, 6/26/09:
In one of his recent speeches on Iran, Obama invoked the word “justice,” a term administration officials said would have more resonance in the Muslim world than “freedom.” It is this type of thinking that will work against us. A consistent message of what the U.S. is all about – individual freedom, religious freedom, a right to self-determination – is a speech that few Americans would disagree with.
Our Decaying Nuclear Deterrent, 6/29/09:
The missile defense system in Eastern Europe ought to be off the table in any negotiation discussion. It is such a network that is needed as a deterrent and to protect allies. In reality, it protects Russia as well. Obama et al. would do best to consider a thrust of missile defense into negotiations as an attempt to use it as a political football and resist – focus on eliminating the old nuclear arsenal for a modernized one and avoid signing/ratifying a “nonproliferation treaty” with anyone, as it will not work in practice. A missile defense network ought to be a high priority given the threats we face.
Wasteful Defense Spending Is a Clear and Present Danger, 7/18/09:
The author has some well-reasoned and sensible solutions to containing wasteful spending in the defense arena, especially the first two points listed: (1) Procurement management side reform – esp. accountability; (2) Limiting change/engineering orders. Having worked in the defense sector, I can say (2) is a big deal to cost creep. I would also add that in some circumstances I’ve seen a better outcome when the military (in the case I’m thinking the AF) runs a program from cradle-to-grave with only a few subcontracts, with better outcomes in terms of delivering an innovative and deployable product – but these were smaller programs – so in limited cases point (3) is apropos. I do know there are clear exceptions to what the author stated: (a) It is career suicide to admit your program is failing/has failed – somehow this has to be addressed with incentives to pick the best capability/value rather than sticking with the initial decision; (b) defense companies often spend their own money developing prototypes in the process of bidding for government contracts. The current administration apparently wants to cut defense spending, jettisoning valuable programs (missile defense, F22 air superiority/dominance) that would ensure the continued freedoms enjoyed by us and our allies, while apportioning little cost control to entitlement programs and other discretionary spending (Congress). The Constitution is clear about providing for national security.
The Right and Wrong Stuff, 7/21/09:
Buzz Aldrin is pushing for a manned mission to Mars, as well as a base on Phobos. Good goal. Funding several parallel efforts of new propulsion systems, co-operative with private investment, is a good goal. Treaties on colonizing space and working out mining rights need to be addressed. Some of us out here are optimists, by the way.
Grounding the F-22, 7/22/09:
Big mistake. We need the air superiority the F-22s provide to keep up with adversaries. Same goes for missile defense. Dead right is not a defendable position.
There Is a Military Option on Iran, 8/7/09:
With all due respect to the General, there is a reason why “there has been a lack of serious public discussion of the military tools available to us.”
We simply don’t discuss what is possible and not possible in too distinct a term. To do so would allow for the development of countermeasures.
Posts on Health Care, Education, ‘Climate Change’ and Other Assorted Issues
What’s at Stake in the Medicare Showdown, 6/24/08:
Defined contribution must be a serious consideration for not only Medicare, but also employer-paid insurance. The fact that most people don’t pay for their own health insurance masks the hyperbolic medical costs that make our food and fuel inflation today look paltry. If people are directly involved in paying for insurance they would scrutinize the costs and there would actually be a free market and more liquidity.
Google, IBM Promote Online Health Records, 2/5/09:
Electronic health records are somewhat of a farce in the health care debate. Security and privacy issues are severely under-rated. Health cost savings is severely over-rated. Who wins and who loses? The pharmaceutical and biomedical companies win if they can buy the data. The patient loses if their data is sold to the highest bidder without their consent or profit, or if security breaches occur and privacy is compromised. HIPAA privacy rules do not cover the government or other specified parties. Technological and medical innovation is important, but the patient needs to be in the game and profiting too.
We Cannot Delay Health-Care Reform, 2/26/09:
National health care will be yet another entitlement program with an unfunded liability weighing on our sovereign debt rating and burdening future generations. National health care will also limit personal freedom. Everyone agrees that costs are out of control and that the system needs to change, but national health care is not the way to fix the problem; it will only cost more and limit people’s choices.
The alternative should be explored as part of a national debate: (1) employ a methodical process of recognizing and fixing the systemic issues that contribute to the high costs and lack of health insurance availability, reversing those trends; (2) ensure a free market model for health care and insurance to allow for more efficient price discovery within the given universe of supply and demand.
If the viable alternatives are not explored as part of a debate then we know that the motives of this administration and its Congressional supporters are suspect. We deserve a fair debate.
In Science and Technology, Efforts to Lure Women Back, 2/25/09:
Businesses might consider offering more contract jobs, and not just for women technologists who exit the workplace. Many highly skilled and productive independent contractors do not want to work full year or even full time in a regular employee capacity, and will accept the more limited pay and benefits for independence and flexibility. Contract work is one way to fulfill labor needs as opposed to hiring a regular employee, which is often very expensive. There are workarounds to such issues as preserving proprietary firewalls, etc., such as asking contractors to sign NDAs.
Regulators See Big Funding Boost in Plan, 3/1/09:
“In a move that promises a major fight with drug makers, the plan backs development of an FDA plan enabling Americans to buy less expensive medicines abroad, an effort drug makers have protested for years.”
Wait…this is deregulation! And a positive development. Let’s hope it’s not a mirage. Many of us buy drugs from Canada and have been threatened in the last year or more with red FDA stickers saying our drugs could be confiscated next time…recently I’ve seen those disappear.
High Court Eases Way to Liability Lawsuits, 3/4/09:
Which makes me wonder why the drug company appealed to the high court knowing it might lose, and in the end making it much worse for everyone. Their appeal had weaknesses, as does Alito’s dissent (” being covered by federal regulation gave Wyeth immunity from state law”). This ruling will of course drive up those costs even more. Why didn’t Wyeth just appeal the state court ruling asking for it to be dismissed, knowing the patient already settled with the clinic (if indeed that is true)?
As an aside, FDA regs didn’t prevent the problem from occurring, and they add to the significant cost of a drug. So the value of the FDA needs review!
Steele: Why the GOP Can’t Win With Minorities, 3/16/09:
“It [conservatism] seeks the discipline of ordinary people rather than the virtuousness of extraordinary people.”
Conservatism demands rigor, critical thinking, and a tinge of the scientific method, all of which know no race or color or class status. But Dr. Steele should not confuse the GOP with true conservatism – those who follow its principles have been marginalized over the last 8 years and are now disenfranchised, with only a soapbox and a voice – and a smile when just about anyone from any background or ethnicity speaks up and echoes the same principles, as they choose to see the value in them.
The Fine Art of Copyright, 3/16/09:
I strongly side with Mr. Garcia on this one. His photo was published and therefore is protected by copyright laws, although publication is not necessary for copyright law protection. Those laws should apply to derivative work based on the original work. It is clear from the poster rendition that the infringement involved no more than about 15 minutes of digital algorithm application to the original photo in Photoshop or an equivalent program, using posterization, which is a common technique that does contour rendering using color schemes. As a photographer-artist I publish my work on the web with the good faith that others will give me credit if the work is used elsewhere. One way to ensure that is with the use of digital stamps or watermarks, but those can be removed easily. In the end the goal is to get your work out there and seen so the risk of infringement is outweighed by the benefits of distribution. Prosecuting and proving infringement can be expensive and difficult, even though the infringement is blatant, as it is in this case.
U.S. Is Open to Carbon Tariff, 3/18/09:
Energy Secy Chu is an ivory-tower academic who finally got a chance to funnel money to causes he and others have wanted for years. Having a Ph.D in Physics doesn’t make you brilliant. A month ago he said in a press conference that he didn’t know the administration’s position on foreign oil, but that he’d find out. All he was interested in at the time was getting stimulus cash out to pet projects. With this reckless policy, if enacted, we’ll start a trade war with China. Worked real well with Mexico – they were right, Congress doesn’t respect NAFTA. And they don’t respect any other nation and free trade. These tariffs will double the impact of cap/trade.
Democrats Angle for Health-Care Edge, 3/19/09:
Nationalized health care will be another major entitlement we cannot afford, take away individual choice, and ruin our highly innovative medical fields. Medicare is being touted as the model yet…Medicare costs are already growing faster than any other health care expenditures and show no sign of slowing. We need to get the gov’t out of providing for health care.
Stimulus Funds for E-Records Augur Big Windfall for Small Health Firms, 3/24/09:
I have seen no studies suggesting digital medical records (DMR) will lower health care costs, indeed the studies I’ve seen show the DMR costs will increase overall health care costs. This is all a ploy to get everyone into a system to pave way for the nationalized health care entitlement program; just as assigning everyone an SSN got him or her into the social security system. Both are Ponzi schemes. The DMR issue has a long way to go to win people over – the privacy and property rights issues (“who owns my data – can it be sold to the highest bidder”) have not been addressed and absolutely need to be. These issues should be on the forefront of every patient-consumer’s mind. Gov’t expenditures of this kind without a public policy debate are a crime – or should be.
National Health Preview, 3/27/09:
The outcome will be worse than this Op-Ed predicts. The model in the sights is not RomneyCare, it is Medicare, as Barney Frank made clear on Fox News Sunday a few weeks back. Medicare has by far the worst metrics for cost containment – it has the highest growth rates across almost all spending categories, over a 9% CAGR in the aggregate and over 50% CAGR for prescription drug spending. The right move would be in the opposite direction: toward a free market where the consumer buys private insurance that is on the basis catastrophic insurance, and then pays all maintenance costs out-of pocket. The consumer is the best arbiter and scrutinizer of cost control (home economies), what their precise individual/family needs are, and in effect should be the direct payer for most health care costs. The middlemen are an extra cost layer in the data. In 1970 consumers paid 33%+ out-of-pocket costs, now they pay 12%. This needs to be reversed. Finally, tort reform must be addressed – while the direct malpractice insurance costs are one factor, the indirect “defensive medicine” practices to avoid lawsuits are at least an order of magnitude higher.
J. Wayne Leonard: Carbon Cap Dilemma, 3/28/09:
Businessmen like Mr. Leonard are dangerous, for their propensity to stand on either side of an issue and appear weak in their convictions and arguments. Auctions of carbon allowances by the government constitute a market-based approach? Gov’t revenues will be returned to the market? Ideally indeed! One would think his fiduciary duty is to his customers and shareholders, but how does a gov’t sanctioned cap and trade or a straight carbon tax square with that? Utility rates will go up for everyone, blind to what the energy source is. Margins will take a hit.
“Mr. Leonard argues that the best way to square these circles is to channel research dollars into the technology that can retrofit existing coal plants with carbon capture technology.”
Completely agreed. But why not have conviction for this approach over tax and gov’t spend cap-and-trade?
“While Mr. Leonard says — repeatedly — that Entergy has nothing against solar or wind, “Our view is that government shouldn’t be in the business of picking technologies. . . . And we’re moving down a path where we’re mandating renewables instead of a price signal to do it. We’re . . . moving toward a planned economy by mandating a technology.”
Completely agreed. Yet Mr. Leonard still supports cap and trade, and even more directly, a carbon tax. This is not market based; it is gov’t picking technologies…so where does he really stand on the issue? His customers and shareholders deserve an answer.
“The focus,” Mr. Leonard reiterates, “should be on developing the cap-and-trade program: Setting the amount of reductions, where we want to be, setting the price signal that works so that it’s not so high that it shuts down coal plants prematurely, and that’s not so low that it becomes a loophole and people don’t end up doing anything — and all we end up doing is taxing people, and God knows what the government will do with that money.”
Aaahh…I see…so price fixing is still ok, but now Mr. Leonard admits that he’s concerned about what gov’t will do with all that money. Please take a side.
“That is really the tough part,” Mr. Leonard says. “The trade-offs are not simple. . . . With a well-crafted bill, the market will make those choices. Or you can do it with a planned economy, and hope you get it right.”"
Again, Mr. Leonard, please take a side. You either have a centralized planned economy or a market-based economy, and better that the latter is free. “Hoping” to get something right is not a sound way to conduct any business, period.
The GOP’s Alternative Budget and Health Care, 3/31/09:
“The budget moves toward making quality health care affordable and accessible to all Americans … We preserve the existing Medicare program for all those 55 or older; and then, to make the program sustainable and dependable, those 54 and younger will enter a Medicare program reformed to work like the health plan members of Congress and federal employees now enjoy.”
This unfortunately proves that the GOP does not understand the extent of the cost containment issues with Medicare, nor the unfunded liabilities that this program has. The liability for current generation is an estimated $30T alone. We need a reduction of entitlement programs, not “reform” solutions that look oddly similar to those proposed by tax and spend liberals.
Sebelius Backs Public Health-Insurance Option, 4/2/09:
“Ms. Sebelius told the panel that public-insurance plans in states across the country didn’t create the havoc upon insurance markets”
Misinformation. Gov’t insurance plans and mandates on public and private insurance plans raise costs, period. We need a free market for health insurance and the gov’t to get out of the health care industry.
The End of Private Health Insurance, 4/13/09:
The electorate needs to get the government out of health care and throw its support to a completely free market, where buying power is placed back into the hands of the patient-consumer. State/Federal mandates increase insurance costs for patient-consumers, and everyone should question their value. Tort reform must also be part of the solution to bring down the substantial costs due to defensive medicine.
Campus Leftists Don’t Believe in Free Speech, 4/17/09:
Mr. Horowitz concentrates his attention toward college campuses with regard to the problem of one-sided ideological indoctrination of students by academics. The larger problem is that such actions happen in public K-12 schools where students usually are not exposed to a market of outside speakers – only parents are aware of what their children are being taught, if they are even in tune with their child’s curricula.
The problem with academia from top to bottom is that we do not have a free market – teachers and professors get lifetime appointments without continued checks and balances of how well they are performing at their job.
Duncan: School Reform Means Doing What’s Best for Kids, 4/22/09:
“We need solid, unimpeachable information that identifies what’s working and what’s not working in our schools.”
But what exactly will Mr. Duncan do with this information? Centrally planned education won’t work for a country our size – the federal gov’t is too inefficient and ought to get out of education. Throwing more federal money at the education system has shown time and again not to improve education quality. $100s of billions of dollars for data is not a carrot – it is a bloated banquet. I don’t see our education system changing with these incentives, I see it preserved in more money. The Dept. of Education ought to be on the list of gov’t departments to eliminate. What needs to change? The stranglehold that the NEA has over our education system, with underperforming teachers asked to leave the system unless they improve, and the market opened up to gifted, dedicated teachers eagerly waiting to teach children. Parents have become more activist in demanding a better educational environment for their children: the rise of charter schools and home schooling is strong evidence of that. But what Mr. Duncan threatens with his piece (if I read between the lines) is more regulation against freedom of choice in education and a preservation of union control. Scary indeed.
Does Avoiding a 9-to-5 Grind Make You a Target for Layoffs? 4/22/09:
“In tough times, many employers revert to thinking critical jobs can only be done full-time, flat-out and under the boss’s nose…At other companies, however, oddball work setups are considered an advantage in the drive for efficiency…”
Companies need to change their attitude toward where work is done and by what type of employee. Full-time on-site employees are the most expensive, and not always the most efficient. I’d like to see companies consider independent contractors for their hiring needs. Contractors are focused and portable, and cost much less to hire.
Teach for (Some of) America, 4/25/09:
Teach for America is but one example of an initiative that has had clashes with union control of our education system.
Another program that I am familiar with, “Physics First,” now sponsored by Project ARISE (American Renaissance in Science Education) and started in the 90s by Nobel Laureate Leon Lederman, has had continual problems with adaptation by 9-12 public school system. Dr. Lederman put it best recently in an interview (http://www.ait.net/technos/e-zine/interviews/leon_lederman.php):
“I’d like to see more businessmen become active in the management of schools. Look at what we have: We have a school, so you have teachers, and then you have a teachers union; then there’s the principal, and they have their own union. Then you have the teacher training institutions, who determine who gets into their course of study; but not too many kids want to be teachers these days (it doesn’t pay too well), so the teacher training institution lowers its standards to attract customers—and that’s the kind of teachers you have in your schools. Primary teachers get maybe one semester of science or math in college, and all of a sudden they have to teach it, so they approach it with total insecurity, fear, and loathing, and of course, the kids pick up on that. It’s a disaster.”
I cannot find the quote, but I recall Dr. Lederman also talking several years ago about how dismal the outlook was for highly trained physicists and engineers who wanted to become public school science/math teachers – the uphill battle against the union enclave. This needs to change. Gifted/highly trained science and math teachers are sorely needed in our public school system to meet the technological challenges that we face this century.
Drugs: To Legalize or Not, 4/25/09:
Drug legalization is a Libertarian issue, and as such does not fit within either of the two national party platforms. Obama voters thinking they will get reform on drug prohibition had better think again.
National Health Care With 51 Votes, 4/27/09:
A grass roots movement against government-run health care is a solution to actions such as this. In 1993-4, constituents called their Congressmen en masse against “Hillary-Care.” George Mitchell could not then summon the votes necessary to pass any legislation. With Presidential talk of pay-to-play, that alone ought to kill any legislative initiative, if the President were indeed serious. Gov’t-run health care is an unfunded liability, with the gov’t unlikely to achieve efficiencies and the innovation of the private sector.
Obama Urges Major Investment in Scientific Research, 4/27/09:
Gov’t R&D expenditure increases sound great – but most of the money spent is politically motivated, not based on merit.
How to Wake Up Slumbering Minds, 4/28/09:
Teaching young and seemingly unmotivated students to “learn how to learn” is a valuable approach. Many of us endure years of mediocre teaching before we command that skill, so to impart it early in an effective way is an exciting prospect for both young students and the teachers that become effective in doing so. A pedagogical revolution would include this to enable students to more easily embrace abstract thinking and concepts.
The Science and Psychology Behind Overeating, 4/28/09:
While reading I was skeptical of Kessler’s motives until I read the last paragraph, where I think he hit one out of the park:
“In the end it’s not about regulation. Government can play a role. It’s about how we as a country view the product. What was the real success of tobacco? We changed how we viewed the product. It was a critical perceptual shift. That’s the key.”
This is how cultural shifts happen (perception changes from a grass roots growth) and I really respect Kessler for admitting that gov’t over-regulation and intervention aren’t nearly as effective: they have the added detriment of reducing personal freedoms and choices. Public perception of healthy behavior vs. addiction is the real issue.
David Wessel: A Determined President Sees Chance to Fix Health Care, 4/30/09:
“He [Obama] is drawn to what Jews call “tikkun olam” or “perfecting the world.”"
David, do you really believe this? Utopias sound good until you realize that in attaining a utopian scenario someone has to lose their freedom to provide for another. Perfect to one is not perfect to another. Think about the implications of what you are saying here. As a person with some Jewish heritage I take issue with your statement. Capitalism and free markets must prevail: we cannot allow gov’t run health care that dictates what kind of care people can have access to, enables price controls (which never work) and squelches innovation. Cost issues can best be contained by reverting to a free market.
An Affordable Fix for Modernizing Medical Records, 4/30/09:
Make no mistake: The $20 Billion gov’t bribe program for “adoption” of medical records is to pave the first step toward nationalized health care. Think of it as no different from being assigned a social security number. This was but one example of many disingenuous outlays in the “stimulus” that underwent no Congressional debate – and indeed it should have been debated – the cost-benefit is far from obvious. There are many issues with electronic medical records that need to be addressed and haven’t – security and property rights issues among the forefront. I would not want my data sold to the highest bidder without my knowledge, consent, benefit, etc. If these issues are not addressed via public debate then down the line we will see many cases before the high court.
Cancer Patients Deserve Faster Access to Life-Saving Drugs, 5/3/09:
We are left to wonder where Mr. Epstein stands on solutions to the legal implications here, given the track record of unbridled litigation. Even if cancer patients sign a waiver in good faith to risk taking a potentially life-saving drug via off-label use, the threat of litigation may further penalize doctors and drug companies and further depress innovation and access. Our hyperactive and emotional tort system must address reforms before “drastic measures” such as Mr. Epstein’s worthy prescription are adopted “when lives are at stake.”
Potomac Watch: Republicans and ObamaCare, 5/8/09:
Take a look at the Medicare spending data over the last 42 years and decide whether Medicare has “held down costs.” Barney Frank and others have made it clear that the model for nationalized health care will be Medicare. The majority of Republicans gave us Medicare Part D, so where’s their conviction to change? Mr. Coburn ought to start looking seriously at a grass roots approach here. There are many of us who want to see a more competitive free market for health insurance, not the system we have, which is wrought with mandates, price fixing, and unfair subsides. We also want to see the innovations that we have in medicine not get squashed by government control and rationing.
The Science Prize: Innovation or Stealth Advertising? 5/10/09:
This is (or should be) the future of funding for many areas of science, astronomy and technology. Government cannot and should not be the answer. There are many people out there (myself included) that look forward to the oppty to donate their estate or money to solve important problems.
Signing On to an Obama ‘Dream’, 5/12/09:
It appears that Faust is doing a brisk business this year. Having Mr. Orszag decide who gets care and who doesn’t, what the right incentives are and what aren’t – social engineering is fun when you (think) you have the power and control, eh? Government involvement in health care means the following: price fixing, subsides, and mandates, which drive up costs or drive away supply, such as in doctor or procedure supply. Rationing of care is common in other countries with nationalized health care.
EPA Chief Says CO2 Finding May Not ‘Mean Regulation’, 5/13/09:
I encourage a read of “State of Fear” by Michael Crichton (GRHS). Global warming propagandists control many ‘educational’ websites, including Wikipedia and various purportedly neutral and balanced science news sites. On Wikipedia, every time a post is made citing scientific studies or evidence that do not support global warming, biased editors delete the posts and bar further posts. So much for academic freedom and an honest forum for looking at all of the available information. Mr. Crichton, along with those of us who have training in the scientific method and in statistics, understood/understand that this debate is replete with misinformation and scare tactics, and without a sound basis.
Social Security, Medicare Face Insolvency Sooner, 5/13/09:
The Madoff detractors were vocal for years before all the money was gone in that scheme. Let’s not wait that long for Social Security and Medicare folks.
Orszag: Health Costs Are the Real Deficit Threat, 5/15/09:
Mr. Orszag seems to miss some key insights in his piece:
(1) The patient-consumer has little control over costs they don’t see. The trend since 1970 is a 60-70% decrease in the amount of out-of-pocket payments for health care services and supplies. This trend is very obvious in the National Health Expenditure Data (NHED), which I am sure the OMB also uses for their studies and projections;
(2) Medicare has the worst cost control record (vs. Private Health Insurance, Medicaid, DoD/VA coverages) – again, evident from the NHED data;
(3) Defensive medicine practiced by doctors and clinicians in order to avoid tort judgments is estimated to be at least 30% of the costs charged to patients. This is over and above the direct costs resulting from tort judgments, such as from medical malpractice insurance. Unless tort reform is addressed, which IS A MAJOR contributor to costs, we will not see cost control. As the American Assoc. of Trial Lawyers (ATLA) was/is a major contributor to Obama and the Democrats, this may not ever change under a Democrat supermajority;
(4) We spend more per GDP in this country for health care partly because patients are denied certain procedures, medicines and services in other countries. Canada is a prime example: since national health care and its rationing and price fixing is mandated in many provinces, Canadians who are forced to get the procedures and attention they need elsewhere end up unreported in the Canadian health care %GDP expenditure data. Thus the argument that we spend more for the same procedures is a red herring;
(5) The cost benefit of electronic medical records has not been justified and the MAJOR issues of data security and property rights have NOT been addressed. (Would you want your data used without your permission or sold to the highest bidder?) Without such important public debates, medical e-records are simply a way for the Obama admin to force people into a national health care system – just as they were forced into Social Security and Medicare entitlement systems many years ago;
(6) Federal and state mandates on health insurance drive up the costs of insurance, penalizing consumers.
Mr. Orszag, we need to move in the opposite direction: toward a free market where a multitude of options are available to the patient-consumer, where there is price discovery and not price fixing (the patient-consumer decides from the many available options what is the best value vs. price, in the given supply/demand – and not mandated/limited by a central government command/control machine), and a health care environment less fettered by the threats from a hyperactive and emotional tort system.
Laffer and Moore: Soak the Rich, Lose the Rich, 5/18/09:
Throwing more money to schools and public services won’t improve the quality of education and life – these are truly improved through a more cognizant citizenry that puts more effort into realizing quality through keeping and maintaining values and standards that don’t equate to more money. Why not let successful citizens donate or contribute their knowledge and skills to public education and services if it means keeping taxes low or even reducing taxes? Ah, but this is where we get into trouble – many of these institutions are protected from unions, and the last thing those unions want is an upset from successful citizens that may eclipse their performance or deliver needed value.
Canada’s ObamaCare Precedent, 6/9/09:
Rationing – the inevitable dividend of nationalized health care. What the author does not emphasize enough is that the Canadian expenditures for health care (the purported and often quoted 10-11% C-GDP) under-report the level of care eventually paid and delivered to Canadian citizens as a result of rationed health care, and a system where advanced procedures and treatments are simply not available.
Conservatism and the University Curriculum, 6/12/09:
In the U.S., Conservatism is Classic Liberalism. The problem is that we’ve gotten completely turned around. Neo-Liberalism has become a socialist movement, defined by the concepts of egalitarianism, wealth redistribution, social justice and central government planning and control, and seeks to employ social and economic engineering to achieve those ends. Didactically, Neo-Liberals have no problem with the retraction of individual freedoms, as they interfere with socialist goals. It is indeed a travesty that our great educational institutions have wandered toward this Neo-Liberalism, and away from Classic Liberalism, or Conservatism. The individual and preserving individual rights define Classic Liberalism. Truly free market principles and a limited government are concepts that belong to Classic Liberalism. The thought of our nation turning into a socialist country and shunning the very document (the Constitution) that binds us from the Founders is a horrible thought. I have faith that there are many people in this country, even young people, who maintain Classic Liberal/Conservative values, and will pass them on to their children. But I wholeheartedly agree with the author that our educational institutions ought to include the true American history and values in modern curricula and not deprive students of a comprehensive education at the expense of social engineering aims. Thomas Paine in Age of Reason argued reason in the place of revelation. The Age of Reason is not atheistic, but deistic: it promotes natural religion and argues for a creator-God. Conservatives (Classic Liberals) believe in freedom of religion and that forms a significant basis for our nation.
Naturalism Has Been Hijacked, 6/13/09:
First: Mr. Kurzweil might want to have a debate with Roger Penrose, who it appears believes that human sentience cannot be replicated by machine. I’d like to witness that debate. I take neither side at the moment.
Second: Yes, don’t kid yourself. Environmentalists are driven by power and greed. They could indeed be Neo-Luddites.
Third: The word Conservation has gotten co-opted as much as the word Conservative. May we all be Liberated.
Health Reform and Competitiveness, 6/17/09:
Competitiveness means not only cutting corporate and investment tax rates, it means eliminating *all* federal and state mandates on health care, including favored tax subsidies. Many small businesses and partnerships are excluded from those tax subsides, unless they organize under Subchapter S.
Dissecting the Kennedy Health Bill, 6/19/09:
Agreed on most points, but take strong exception to the last: we cannot afford what is “good enough for Congress.” (Translation: we cannot afford Congress.) That has been a major problem all along.
Yes, We Can Expand Access to Higher Ed, 6/21/09:
The authors ought to turn their attention toward primary and secondary education, where indeed the failures are occurring, primarily due to the dominance of the NEA, a very political union whose goals are job security and ever increasing funding over teacher performance. In doing so, perhaps the authors can address the problem of qualified science and math teachers and a more positive unbiased emphasis on science, math and technology disciplines in general.
Is Government Health Care Constitutional?, 6/21/09:
The Constitution does not speak clearly on the right to privacy; in fact, such a right is not succinctly defined therein. Privacy is a societal norm that we’ve come to respect and promote. Electronic medical records have a danger of breaking privacy rules (as well as property rights!). The cost-benefit of such records are currently being debated, but the privacy and property rights issues have not been addressed, nor has the issue that such records are actually a front for a new entitlement system (think social security and the social security number).
Government Health Care and Voters, 6/23/09:
Americans do not want universal coverage. Most of the polls show that. Universal coverage = a new Ponzi scheme, and Americans have caught on to that game. As a small business owner, I am most concerned of all of the state and federal mandates that have increased my costs for the health insurance I pay for, and if you look at the data there is a clear correlation with the increase in those mandates and costs. Universal coverage will increase my costs (as it has done in all other countries that have universal coverage) and limit quality care – I have no illusions otherwise. The answer to this whole mess is to return to a free market, where the consumer sees something closer to the real prices and supply/demand, and pays most of the costs out of pocket.
What would happen if the government ran all the supermarkets and produced all the food goods in it? Let’s get the government out of health care.
A Doctor’s Reflections on Health-Care Reform, 6/23/09:
“I feel strongly that if doctors are reimbursed more for office visits, they will spend more time with patients.”
This is a doctor-dependent choice. Personally, I would drop a doctor with this attitude. And no, I do not advocate that doctors get paid less than a market-going rate.
“This will lead to fewer referrals by primary-care physicians and result in lower health-care expenditures. Currently, harried primary-care physicians don’t have the time to delve into medical problems with a hint of complexity. So patients who could be dealt with if more time was available are referred to specialists or expensive radiology studies.”
This simply speaks to the fact that there is considerable defensive medicine practiced by the establishment. Defensive medicine is a major problem and must be addressed through tort reform, which will reduce unnecessary tests. Finally, the problem is with “reimbursements.” Very few other professions and trades depend on a system of reimbursements for their services – they work on a fee-based system, directly with the client/consumer.
Robert Reich: Why We Need a Public Health-Care Plan, 6/24:
“But such [non-profit] cooperatives would lack the scale and authority to negotiate lower rates with drug companies and other providers, collect wide data on outcomes, or effect major change in the system.”
In effect, the over-arching ability of the gov’t to set prices and control the market. Mr. Reich is unconvincing.
Big Health Firms Underpay Claims, 6/25/09:
“He hopes to insert into the health-care bill language creating some type of independent evaluator that can certify that health claims are evaluated properly.”
There’s a true waste of taxpayer money and a pile onto more gov’t bureaucracy (and higher costs for everyone!).
“Health insurers need to publish their allowable charges for all to see.”
The issue is with transparency and flow of information, as in a functioning market, where prices are known to the consumer. This system of reimbursements through third parties where the consumer is often times not involved needs to be thrown overboard.
The Climate Change Climate Change, 6/26/09:
Re-engaging on the science and attendant statistics has led many to the conclusion that global warming is unsettled, and in fact suspect.
“A group of 54 noted physicists, led by Princeton’s Will Happer, is demanding the American Physical Society revise its position that the science is settled.”
The APS has been considerably political on this issue – very troubling, considering it is a professional society. The mean global temperature now is close to that for 1878; human emission of CO2 to the atmosphere for more than a century had no effect on the mean global temperature. As a result, the theory that human emission of CO2 causes global warming has not been substantiated. The CO2 proportion in the atmosphere is ~ 0.038%. Why do you think the politicos changed their moniker from “global warming” to “climate change?” It’s because the data does not support the movement. To avoid a hit to the GDP, any nation ought to reconsider their position on “climate change.” It already sounds like several have. The U.S. is next.
The Dangers of Fannie Mae Health Care, 6/26/09:
Yes, we’ve already seen the effect of government sponsored entities (GSEs). They are corrupt, wrought with fraud, and end in a government nationalization (‘conservatorship’), requiring massive capital infusions. Let’s please not go down that road. The government ought to be out of the mortgage and the health care markets.
God and Science Don’t Mix, 6/26/09:
Richard Feynman sums it up for me:
“God was invented to explain mystery. God is always invented to explain those things that you do not understand. Now, when you finally discover how something works, you get some laws which you’re taking away from God; you don’t need him anymore. But you need him for the other mysteries. So therefore you leave him to create the universe because we haven’t figured that out yet; you need him for understanding those things which you don’t believe the laws will explain, such as consciousness, or why you only live to a certain length of time—life and death—stuff like that. God is always associated with those things that you do not understand. Therefore I don’t think that the laws can be considered to be like God because they have been figured out.”
Feynman’s work that led to calculations of the anomalous magnetic moment of the electron is a marvel of work in theoretical physics, in it’s agreement with experimental data – but as he surely knew, there remain many mysteries that defy such concertos. The search continues.
Hello to Carbon Trading (but With Smog?), 6/26/09:
Carbon trading is a likely fraudulent exercise. If traders want to trade around such entities put it on Intrade and call it a bet on whether CO2 actually affects the mean global temp. That trade can run for years, be between trading parties and won’t adversely affect consumers and businesses – basically the economy as a whole – the GDP.
The EPA Silences a Climate Skeptic, 7/3/09:
This type of political blacklisting (of Mr. Carlin) and deliberate disregard for a balanced debate of all the available information (academic freedom – sound familiar?) is insidious. The citation of events surrounding Copernican theory (I will add the censorship and dismissal of Galileo) is apropos. Wikipedia and other “fair and balanced” (not) science fact outlets ought be chided.
Given all this, I leave readers with the following links – the first contains reasoned arguments based on peer-reviewed information (you might want to ignore APS’s gratuitous political statement at the beginning of the technical letter):
“AGW,” “global warming” and “climate change” have become a political movement, pure and simple, and many who stand to benefit are those who have invested – follow the money trail.
China Ministry Opposes Carbon-Tariff Policies, 7/5/09:
“This violates basic WTO rules. It only pretends to protect the environment, but really it protects trade.”
China has more common sense than most on this one.
House Health Bill Released, 7/14/09:
“The new public plan would see $2 billion in start-up funding from the federal government and would pay doctors and hospitals rates based on Medicare payment rates for its first three years.”
**Look for health insurance and care costs to rise even further. Cause and effect.
“The surtax and other tax changes would help pay for expanding health-insurance coverage for millions of uninsured Americans. It would do so by providing subsidies and setting up an “exchange” where consumers can shop for private health insurance. The bill would also create a new government-run plan that would compete with private plans.”
**Translation: Nationalized Health Care.
“The Blue Dogs are committed to passing health-care reform,” said Rep. Mike Ross (D., Ark.) “However, reform that does not meet the president’s goal of substantially bringing down costs is not an option.”
**The Blue Dogs can kill this beast if they stick by their guns.
“The bill would require individuals to purchase health insurance and includes penalties for employers who don’t offer affordable health insurance to their workers. Large firms that don’t comply would face a fine equivalent to 8% of payroll.”
**Translation: Nationalized Health Care.
“Besides the surtax on high incomes, the bill includes three tax changes that would affect corporations.”
**Disaster in the making. Tax producers and job growers to fund a massive new entitlement program.
Weighing Price and Value When Picking a College, 7/14/09:
The growth (many times the growth of the CPI) of college costs vs. returns is indeed an issue. Some of us were lucky enough to move out of the house at 17, self-afford college and grad school costs and get a spectacular return on that investment, and we’re talking early GenX, not BB. Clearly it would be great for today’s generation to benefit likewise.
Why are costs so high? Here’s my take: today’s universities find no resistance to containing costs. They spend spend spend, much like the gov’t – and the top reason: a matter of ‘prestige.’ Until parents and society push back against the growth of the costs of higher education, we won’t see a change – but of course, the economics may take care of the problem by then – a decline of enrollments, etc.
Blame the Employers on Illegal Immigration, 7/16/09:
Decrease illegal immigration by enforcing the law. Increase legal immigration by increasing skilled workers or wealthy immigrants who can afford to buy distressed assets (come with money). Also the gov’t selling Visas and Green Cards at a decent profit is a good idea.
Senate Leaders Clash With CBO Head on Health-Care Overhaul, 7/17/09:
A public option that underpays reimbursements (as is now done with Medicare/Medicaid) will shift costs to all other consumers. A federal mandate on employer-based insurance will also raise costs, as has every mandate. Let’s move to a free market folks. The CBO director apparently hasn’t been bought off yet (thank goodness) — he’s right on and even he underestimates the cost increases. Producers and businesses that are taxed to pay for a new health care entitlement (public option) will surely pass on costs to consumers.
Call or write your legislators before these ridiculous bills get passed under the dark of night, and not even read by legislators.
India and Climate Change, 7/18/09:
Mr. Antholis is so pickled in the “climate change” religion, that it is difficult to get any critically reasoned argument from his piece. Attacking population growth in India: the Malthusian crutch.
Second City Ruse – Charter Schools and Public Education, 7/18/09:
The cost of public K-12 education is anything but free. It is based on local, state and federal taxes, with a majority from property taxes. The fact that people might perceive it as “free” is a major problem. Lower taxes, repeal legislative attendance mandates and let parents decide how/where to educate their kids or spend their money.
Celebrity Culture vs. The Right Stuff, 7/21/09:
There are always celebrities and they are most always transient. Those that have value (yes, the Right Stuff) will survive the test of time.
Repealing ERISA, 7/21/09:
The self-insured under ERISA could avoid state mandates and courts but not federal mandates and courts – so there is a downside anyway in terms of being at the whims of Congress and the White House. The fact that Congress would go after every advantage the self-insured might have is not surprising at all. The solution: (1) Fire (vote out) all incumbents in 2010 that support this nonsense and (2) Support the move to a free market in health care.
Sick and Getting Sicker: Small Business Health Insurance, 7/22/09:
Intelligent reform means addressing the cost issues without instituting yet more mandates. What is killing the market for small business owners is the rapid rise in state (and federal) insurance mandates. When a small business buys a policy for its employees, most often that policy includes coverages that not all consumers need but that states mandate on insurance policies. The solution is for small business owners to identify legislators that are passing insurance mandates and re-educate them or vote them out. These mandates can also be repealed. Medicare (and any new public option) will surely continue to shift costs to consumers. The cost shift from Medicare has been estimated to be around $1800/year for the average family. The solution is to avoid any new public option and address the below-market reimbursement system from Medicare. I am a small business owner whose insurance premiums have doubled in the last 3 years. Let’s get the government out of health care and move to a free market!
Obama Needs a Move to the Middle, 7/23/09:
Mr. Boskin is naive, but is genuine in his suggestions. Barack Obama is not Bill Clinton: when Clinton realized that HillaryCare was not popular he moved on – and he showed many more tendencies toward capitalism and free markets, not to mention the merit in reducing the capital gains tax rate. He was also a staunch free trade advocate in comparison. Obama on the other hand has dogmatic and demagogic viewpoints that put him at odds with free capital market principles and tax/regulatory policies that would truly unleash growth in this economy: promoting private investment, which will spur job and GDP growth. He clings to pushing for ObamaCare despite its unpopularity and evident cost impact, instead of advocating a bullet approach of removing the cost drivers without destroying completely a market. To Obama, government is the end all, be all, the answer and the raison d’etre.
Intimidator in Chief: Throttling the CBO, 7/23/09:
Nixon’s tactics against the media and his adversaries also comes to mind.
Obama/Reid/Pelosi do a disservice by chiding the results when they don’t flow their way. If the CBO is a casualty in the near term from all this, then all of the watchdogs outside of Congress need to step up their roles even further. The critical analyses must continue.
GovernmentCare’s Assault on Seniors, 7/23/09:
“Less money and more patients will necessitate rationing.”
It will also increase the cost shifting to all other health consumers. Doctors, hospitals, providers and drug companies will need to pass costs on somehow. If they are not allowed – then we truly have hit nationalized health care and most/all health-sector companies will be told by the government what level of profit they can make (if any).
ObamaCare in Trouble, 7/23/09:
The point of ObamaCare is more government, not cost control. Medicare Part D was a huge GOP mistake and showed that big government ends can also motivate the GOP. Those in Congress with fiscal discipline need to take back control – or those of us out here will do it for them.
Detroit’s Schools Are Going Bankrupt, Too, 7/26/09:
We all pay for public education through local, state and federal taxes, and property taxes primarily, so we all ought to have a vested interest to voice concern about how that money is spent. The solution I’d prefer is to see taxes that go to schools lowered, and let parents decide where/how to educate their children. Eliminate legislative mandates that give precedence to public schools that are fraught with union-controlled malaise, as is evident from this excellent article. Many children get pulled from public schools due to poorly performing teachers, and the tax money collected still goes toward poorly performing public schools and teachers. Let’s change the system.
“Collective bargaining for government employees is not a constitutional right; it is a special privilege, and one that has been abused.” Sums it up.
Blue Dogs: All Bark, No Bite, 7/28:
“There are many men of principle in both parties in America, but there is no party of principle.” -Alexis de Tocqueville
This article strikes home quite closely. My Congressman is a freshman Blue Dog, and voted against both the stimulus and Cap and Tax. But on both it was evident that he waited until he took a definitive reading from the political winds before registering his vote; in particular, on the Cap & Tax bill he waited until the results of the ‘test vote’ were completed the day of the vote, and when it was obvious that 8 Republicans were switching sides to vote he suddenly decided to vote ‘no,’ knowing his vote would not be on the line. He knows quite well the wishes of his constituency, mind you, but if his vote is ever on the line, indeed I have no doubt he will vote the party line. I did not vote for him, but the Republican he replaced evidently miffed off enough voters to swing the election. If he jumps the fence toward Pelosi on a key vote, he will lose in 2010. His constituents are overwhelmingly for fiscal discipline in government.
Name: Walt Minnick, District 1, Idaho. Fair warning, Mr. Minnick.
Fannie Med, 7/30/09:
Yep, this is all we need: another GSE pushing subprime products (in this case, health care products). Get the government out of health care and the mortgage market — forever eliminate all GSEs.
(P.S.–I invite all of you readers out there to read again what happened to Fannie/Freddie, which may be considered causal in the decline last Fall…..http://online.wsj.com/article/SB122079276849707821.html)
Farmers Can Feed the World, 7/31/09:
Dr. Borlaug’s article is inspiring:
“Even here at home, some elements of popular culture romanticize older, inefficient production methods and shun fertilizers and pesticides, arguing that the U.S. should revert to producing only local organic food. People should be able to purchase organic food if they have the will and financial means to do so, but not at the expense of……”
Some recent studies on organic food point to a questionable increase in health benefit: http://www.reuters.com/article/scienceNews/idUSTRE56S3ZJ20090730
Studies ought to continue on the differences; advanced technologies in seed and fertilizer development are key, as is crop management.
From what I’ve read of Dr. Borlaug’s comments on AGW/climate change, he is a skeptic:
“I do believe we are in a period where, no question, the temperatures are going up,” [Borlaug] said. “But is this a part of another one of those (natural) cycles that have brought on glaciers and caused melting of glaciers?”
“How much would we have to cut back to take the increasing carbon dioxide and methane production to a level so that it’s not a driving force?” he asked. “We don’t even know how much.”
And I took his comments on climate change in this current article as somewhat innocuous. Supporting AGW/climate change measures that the neo-Luddites advocate does not appear to be his character, and his statements support that.
I respect Dr. Borlaug for the following statement on environmental lobbyists: “some of the environmental lobbyists of the Western nations are the salt of the earth, but many of them are elitists. They’ve never experienced the physical sensation of hunger. They do their lobbying from comfortable office suites in Washington or Brussels. If they lived just one month amid the misery of the developing world, as I have for fifty years, they’d be crying out for tractors and fertilizer and irrigation canals and be outraged that fashionable elitists back home were trying to deny them these things.”
The Fat of the Land: Taxing the Obese, 8/1/09:
That’s the point of getting government out of people’s lives. Government provides the conduit (‘public trough’) for people to seek distribution from others (taken by government, usually). Cut that conduit, and have the government revert to what its Constitutional mandate is. Using tax policy or other government economic engineering to inhibit behavior is wrong-headed and leads to less freedom, not to mention stunted economic growth. Let personal responsibility and the consequences of excess take their natural toll without government intervention. And as for forced ‘equality’ – I certainly don’t want to live under someone else’s definition of how I ought to live my life. Sounds repressive.
Global Warming and the Poor, 8/4/09:
“First-World environmentalists” are primarily elitists whose real interests involve a payoff in their investments in the AGW/climate change movement.
Laffer: How to Fix the Health-Care ‘Wedge’, 8/5/09:
Laffer is right: The alternative is to promote the consumer-as-direct-payer model, with catastrophic insurance payouts above a certain level. Consumer exposure to direct costs and price transparency will happen with a direct, out-of-pocket payer model. The problem is that we’ve moved away from this model since 1965, with out-of-pocket payments decreasing by over 50%. A market-based model would have us move back in that direction. Tort reform and a repeal of state/federal insurance mandates are key to reducing costs as well.
Blue Dog Blues, 8/7/09:
Folks: Here is the letter I wrote Mr. Minnick (my Congressman) on July 16, 2009:
“Dear Mr. Minnick,
I urge you to vote ‘NO’ on any health bill proposed that includes a public option and/or federally mandated health insurance coverage by employers or individuals.
We need to reduce health care and insurance premium costs, and the way to do that is to address the following points:
(1) Rapidly rising state and federal mandates on health insurance and health practitioners – such mandates raise costs for everyone;
(2) Medicare/Medicaid cost shifting from ‘below-market’ reimbursements;
(3) Tort reform, such as pushing for ‘loser pays,’ limiting damage awards, and waiver of jury trials, all of which will help reduce the causal effects of defensive medicine;
(4) Moving toward a free market for health care, where the patient-consumer pays most costs directly, out-of-pocket, except for catastrophic payouts. Price transparency and customer service are key, as they are in other markets, such as the retail and service sectors.
For more suggestions and analyses, please see http://www.eidolonspeak.com/?p=159.
Susanne Lomatch, Ph.D.
Populist anger ought to be refocused on a bloated, irresponsible government. Voters ought to take charge and ownership and vote out legislators who are driving away business and jobs, squelching widespread prosperity, and siphoning away individual freedoms. And partisan politics ought not matter anymore. For example: Mr. Minnick (the subject of this article) ought to vote consistently in support of the wishes of his district constituents, and not jump the fence to save face with the DNC or Pelosi.