Saturday, January 30, 2010
Joshua Bell and "The Girl With the Flaxen Hair"
Government as "Referee"?
In the letter to Sen. Orrin Hatch, obtained by The Associated Press, Assistant Attorney General Ronald Weich wrote that the Justice Department is reviewing Hatch's request and other materials to determine whether to open an investigation into whether the BCS violates antitrust laws.
"Importantly, and in addition, the administration also is exploring other options that might be available to address concerns with the college football postseason," Weich wrote, including asking the Federal Trade Commission to review the legality of the BCS under consumer protection laws.
Several lawmakers and many critics want the BCS to switch to a playoff system, rather than the ratings system it uses to determine the teams that play in the championship game.
"The administration shares your belief that the current lack of a college football national championship playoff with respect to the highest division of college football ... raises important questions affecting millions of fans, colleges and universities, players and other interested parties," Weich wrote.
However, using federal law as a hammer to pound in this nail not only is overkill, but it demonstrates the very arrogance of Washington and the Obama administration, which apparently believes that all of the world is the domain of the president. Now, I am not going to fall into the argument that there are more "pressing matters" for the government to consider, given the state of the economy.
In fact, I might be willing to say that if the president were to "concentrate" on trivial matters like who plays whom for the college football championship, perhaps the economy might recover more quickly. Who knows?
My larger point is that there seems to be nothing that Washington does not claim to own. Yes, economists are fond of saying that government is supposed to be a "referee" in the economy, but this is ridiculous. Enough!
Tuesday, January 26, 2010
The Weekend in Texas
The choral work was quite lovely (and when I can get a recording, I will link it on this blog), as Dan really put together a wonderful piece of music. It was done as a commission by two parents in College Station whose daughter died of cancer just before her 12th birthday a couple of years ago, and we had the pleasure of meeting them at the service.
Jo and I also attended the Mises Circle meeting in Houston, and the different speeches given by Doug French, Tom Woods, Rep. Ron Paul, and Lew Rockwell were superb. Nearly 600 people attended the meeting at the Post Oak Hilton, and there seemed to be a lot of enthusiasm.
So, a great weekend for us in Texas. Thanks to all of you who provided hospitality.
Saturday, January 23, 2010
In Houston for Mises Circle Event
Last night, we had dinner with Tom Kirkendall and his very lovely wife. Tom, a Houston attorney, run the "Houston's Clear Thinkers" blog, which I think is one of the best blogs out there, period. Yes, a great time was had by all.
Afterward, we are on our way to College Station, where the choral piece "Lord of the Small," with lyrics written by Johanna, premiers at A&M Methodist Church Sunday morning (January 24). This is a great event, and Craig Courtney will be conducting the choir with Dan Forrest, Jr., who composed the music for this piece, accompanying on the piano.
Yes, yes, I am utterly proud of my beautiful wife. Glad there is at least one intelligent person in our family!
Thursday, January 21, 2010
Obama to "Focus on the Economy." Please, No!
With the latest economic reports pointing out that unemployment continues to rise, it would seem that perhaps Obama might abandon his unwise "We're going to spend our way out of the recession" stance. The president promises to boost regulation of financial services, impose new environmental restrictions, raise taxes, and make it more difficult for entrepreneurs to operate.
This is not a prescription for a recovery, folks. It is a prescription for a depression.
My wife and I will be traveling to Houston and to College Station, Texas, this weekend. More on this later.
My Regulation Piece is Featured on "Houston's Clear Thinkers"
Kirkendall is a man who really "gets it" when it comes to the expansion of federal power in criminal law. He is an attorney who is not afraid to stand up for the rights of the accused, making him (unfortunately) an unusual character in what passes as the practice of "law" today.
Wednesday, January 20, 2010
Coming Soon: A New Blog on Paul Krugman
Monday, January 18, 2010
What Didn't Happen: Krugman Telling the Truth
In reading Paul Krugman's missive today in the New York Times, "What Didn't Happen," I am reminded of Orwell. According to the Great Nobel Laureate, Krugman insists that we believe the following:
- The "stimulus" was "too small"
- The Obama administration was not "tough enough" with the banks (he should have nationalized them, I suppose -- but, then, they pretty much are nationalized already)
- Obama did not do as did Ronald Reagan and blame the previous administration.
In debunking this latest set of claims, let me begin with the last one first, that Obama refuses to blame Bush for his troubles. Writes Krugman:
Finally, about that narrative: It’s instructive to compare Mr. Obama’s rhetorical stance on the economy with that of Ronald Reagan. It’s often forgotten now, but unemployment actually soared after Reagan’s 1981 tax cut. Reagan, however, had a ready answer for critics: everything going wrong was the result of the failed policies of the past. In effect, Reagan spent his first few years in office continuing to run against Jimmy Carter.
Mr. Obama could have done the same — with, I’d argue, considerably more justice. He could have pointed out, repeatedly, that the continuing troubles of America’s economy are the result of a financial crisis that developed under the Bush administration, and was at least in part the result of the Bush administration’s refusal to regulate the banks.
But he didn’t. Maybe he still dreams of bridging the partisan divide; maybe he fears the ire of pundits who consider blaming your predecessor for current problems uncouth — if you’re a Democrat. (It’s O.K. if you’re a Republican.) Whatever the reason, Mr. Obama has allowed the public to forget, with remarkable speed, that the economy’s troubles didn’t start on his watch.
Yes, Krugman sneaks yet another one of his post hoc ergo propter hoc claims that it was the tax cuts of 1981 that must have created the recession of 1982. Now, remember that in 1981, Congress voted to bring down the top marginal personal income tax rate from 70 percent to 50 percent. Funny about that move. At the Southern Economic Association meetings in New Orleans in 2004, I attended a talk by Krugman, and in the Q & A I asked him if he recommended going back to the 70 percent rates.
"Oh, no!" He replied forcefully. "Those rates were insane!" (Yes, he used the i-word.) Thank goodness, I had a number of economists in the room with me, including Joe Salerno of Pace University and the Mises Institute sitting in the next chair, and I suspect that Prof. Salerno's memory is as sharp as mine.
As an economist, I always like to see the Law of Cause and Effect in action, and I would like to know how those 1981 tax cuts created massive employment. For that matter, Krugman continually claimed throughout the Bush administration that the lowering of the top rate from 39.6 percent to approximately 33 percent played a major role in the recession of 2001, despite the fact that the rates were not even changed until after the recession began.
Has Obama not been blaming the Bush administration, as Krugman claims? Let us look at the recent record. On Saturday, January 9, 2010, the Associated Press had the following piece:
He says "the buck stops with me," but nearly a year into office, President Barack Obama is still blaming a lot of the nation's troubles — the economy, terrorism, health care — on George W. Bush.
Over and over, Obama keeps reminding Americans of the mess he inherited and all he's doing to fix it. A sharper, give-me-some-credit tone has emerged in his language as he bemoans people's fleeting memory about what life was like way back in 2008, particularly on the economy.
(No doubt, the AP must be run by...Republicans! Goldstein himself is president of that faux organization!)
Lest anyone think that just the AP has noticed this from Obama, one of his staunches political allies in the media, Roland Martin of CNN, wrote last month:
...instead of bringing up Bush, maybe they ought to spend more time driving home their message of making the right moves at the right time to get the country moving in the right direction. Bush has gone into retirement, choosing not to speak negatively of President Obama (unfortunately, we still have to hear Cheney and his rants).
If we are to move into a new year and a new way of governing, going back and talking about the past doesn't help. It only gives the impression that you don't have enough good things to say about your own agenda.
We don't have ol' Bush to kick around anymore. Now the heat will be applied fully to Obama, and we'll have to see if Mr. Calm, Cool and Collected can handle the tough moments as easily as he's basked in the praise and adulation.
Now, I find this curious, given that Krugman has had no problem himself blaming Bush's tax cuts for nearly every economic problem, and I doubt seriously that this current White House is so high-minded that it really takes ownership of the rising rates of unemployment and the current economic free fall. Nonetheless, Krugman's column is not about the truth; it is about continuing his partisan narratives couched in the language of The Economist Who Knows Everything.
What about the "stimulus" or alleged lack, thereof? First, Krugman leaves out the role of the Federal Reserve System which has spent trillions of dollars on all sorts of bailout nonsense, and all on the whim of the administration and its own chairman, Ben Bernanke.
Second, there is a more obvious question: How can a government that is flat broke, running more than a trillion dollars in the red, come up with trillions more to spend? Krugman's answer is to print more money (as he points out in his 2008 best-seller The Return of Depression Economics. (I am having my MBA students this spring read that book in order to compare and contrast Krugman's statements to those of the Austrian Economists.)
If printing money works so well, according to Krugman, then why collect taxes at all? In fact, why work at all? Last year, Krugman claimed that the purpose of the "stimulus" was for its spending, not for any real work that might have been done. Well, as I see it, if the work being done is not useful for any purpose other than spending, why use the scarce resources at all and just line up people and hand them their paychecks?
The "stimulus" is a failure not because of any paucity of government spending but because the politically-oriented disbursements don't address the imbalance of the economic fundamentals and the massive malinvestments of the Bush years that still have not been fully liquidated. (That is due in large part because the government continues to try to prop up the owners of the failed assets, with predictable results.)
Last, but not least, there are the banks. Let's face it; if Krugman really believes that the Bush administration "failed to regulate the banks," then I'd like to sell him a few bridges from Brooklyn. While trying to promote his own pathetic narrative of "the bankers serve THEM, but the people in the White House are on OUR SIDE," he forgets that the symbiotic relationship between Wall Street and the banks is not one of reckless free-enterprisers versus wholesome and good Democratic politicians.
There is good reason that the politicians are cozy with Wall Street. Like Willie Sutton, the know "where the money is," and don't mind helping themselves to a few million or more here and there. Economists I respect much more than I do Krugman (like Bruce Yandle of Clemson University, for starters and Jeffrey Miron from Harvard) have noted for years of the real nature of regulation has been for there to be a "revolving door" between the regulators and the industries they supposedly regulate.
Furthermore, as Eugene Fama (perhaps the most distinguished financial economist in the country from the University of Chicago) pointed out in a recent interview with the New Yorker, it was a mistake to bail out the banks in the first place because -- contrary to Krugman and his friends at the NYT -- no institution is "too big to fail." (I love his line that Krugman "wants to be czar of the world." No doubt, the Big K would run everything perfectly.)
Like his rewriting of the history of regulation and deregulation, Paul Krugman begins with the narrative, and then proceeds to pound square pegs into round holes. That hardly is unusual, as most of us perform that exercise from time to time. However, when most of us are caught, we listen to reason.
Krugman, on the other hands, listens only to himself and the daily set of talking points coming from left-wing Democrats. As I have said many times before, the man is not an economist; he is a political operative. Period.
Friday, January 15, 2010
Krugman Without a Clue
Even when Paul Krugman gets it right, he still gets it wrong. Now, I am not someone who is a knee-jerk critic of the guy, although I generally expect Krugman to blame the wrong people and recommend the wrong “solutions.”
Thus, when I saw the title of his most recent column, “Bankers Without a Clue,” I thought that this might be the day that I can read a Krugman column without cringing. Perhaps, I imagined, he might even use the “bankster” term that I have seen from so many libertarians and Austrian economists. Ah, hope!
Unfortunately, Krugman gave us his tired analysis, and in doing so, he also demonstrated that he was clueless himself about the stagflation of the 1970s. (After all, Krugman being a True Believing Keynesian believes that we should not have both rising unemployment and rising unemployment, since he already has written elsewhere that almost any economic problem can be solved by…printing more money.)
Consider what has happened so far: The U.S. economy is still grappling with the consequences of the worst financial crisis since the Great Depression; trillions of dollars of potential income have been lost; the lives of millions have been damaged, in some cases irreparably, by mass unemployment; millions more have seen their savings wiped out; hundreds of thousands, perhaps millions, will lose essential health care because of the combination of job losses and draconian cutbacks by cash-strapped state governments.
And this disaster was entirely self-inflicted. This isn’t like the stagflation of the 1970s, which had a lot to do with soaring oil prices, which were, in turn, the result of political instability in the
The first paragraph is correct, although that is because he is stating the obvious. The second paragraph, however, reveals his ignorance of economic history. However, given that Krugman is ignorant on, well, about everything dealing with a real economy, his “Jake Blues-style” series of excuses for missing his bride at the altar (“There was an earthquake, IT WASN’T MY FAULT!!”) seems about par for the guy.
For the record, the stagflation of the 1970s occurred because of a lot of reasons, none of them rising oil prices, which were largely a result of U.S. inflation that occurred after President Richard Nixon in 1971 ended all ties of the U.S. Dollar to gold and gave us a pure fiat currency. (Keynesians want us to believe that rising oil prices caused inflation, when, in reality, the causality chain ran the other way.) Furthermore, he goes back to his tired and wrongheaded narrative about the
…there was nothing accidental about the crisis. From the late 1970s on, the American financial system, freed by deregulation and a political climate in which greed was presumed to be good, spun ever further out of control. There were ever-greater rewards — bonuses beyond the dreams of avarice — for bankers who could generate big short-term profits. And the way to raise those profits was to pile up ever more debt, both by pushing loans on the public and by taking on ever-higher leverage within the financial industry.
Yes, yes, it was all about the lack of regulation and the greed of those capitalists who were just following the Ideology of Free Markets. (I am sure that each of those bankers had copies of Atlas Shrugged in their back pockets.) Had the system been regulated by those Wise and Generous Regulators That Populated Washington after the New Deal, all of this could have been averted. What Krugman does not say, of course, is that we had both deregulation and the growth of moral hazard. (In fact, I never have seen Krugman refer to moral hazard, even though the perverse incentives that the various government backstops created made for a “heads I win, tails you lose” atmosphere in which the banks could fall into the “we’re too big to fail” nonsense.)
During the 1970s, Congress vastly expanded both the regulatory apparatus and government spending, and for the first half of the decade, the U.S. Armed Forces were bogged down in
Furthermore, as the government taxed and regulated the economy into oblivion, thus destroying economic opportunities, it made up for the lack of economic growth (and the extra tax revenues growth would bring) by turning to the Federal Reserve System, which was all-too-happy to accommodate the growth of government by cranking up the printing presses.
Not surprisingly, the rate of inflation exploded during the 1970s and it was not, as previously noted, due to those greedy Arabs jacking up the price of oil on a whim. No, as the government expanded its jihad against private enterprise, the Fed responded by applying the “Krugman Solution” of printing more money in hopes that the activity generated by the new cash would cover the obvious economic bare spots.
As a result of this government “mismanagement” (to use a nice term), the economy experienced bouts of stagflation throughout the decade. Since Krugman cannot bring himself to believe that government taxation, regulation, and a rapidly-expanding fiat currency could have caused this debacle, it must have been OPEC and those greedy oil executives.
Likewise, he wants us to believe that American bankers in the last decade suddenly were seized by Ayn Rand Fever and decided to be greedy, ideology-directed financiers who recklessly leveraged their institutions and then hypocritically begged for money afterwards. Sorry, but these guys were on the dole all along, and given that Krugman never mentions moral hazard, one can see just how clueless (or maybe dishonest) the guy has been all along.
As I see it, the bankers are not clueless at all. They understand the game, they understand that the government is going to clean up the mess that they and their friends in Congress and the Bush and Obama administrations have created, and they understand that their antics are going to give them what they always have wanted: a nice, cozy, financial cartel which will provide sweet political contributions for the political classes, bonuses and high pay for themselves, and very little for everyone else.
And if Krugman cannot see it, then the guy truly is clueless. However, my take on the matter is much more cynical, and I don’t think I need to go any further on that subject.
Monday, January 11, 2010
Prosperity through Road Construction: Shoveling Something other than Dirt
However, that is not why people like Paul Krugman and other socialists champion tax-funded road building. Instead, they insist that the money spent in itself will revitalize the economy, and that is pure nonsense. Interestingly, this past year has seen a huge amount of government "public works" spending, but the effects have not been what the Krugmanites/Socialists have claimed.
A recent AP article notes that a number of economists have examined the results of this road building, and find them wanting:
Ten months into President Barack Obama's first economic stimulus plan, a surge in spending on roads and bridges has had no effect on local unemployment and only barely helped the beleaguered construction industry, an Associated Press analysis has found.
Spend a lot or spend nothing at all, it didn't matter, the AP analysis showed: Local unemployment rates rose and fell regardless of how much stimulus money Washington poured out for transportation, raising questions about Obama's argument that more road money would address an "urgent need to accelerate job growth."
This is not surprising, but no doubt the Krugmanites/Socialists will have an answer declaring that the real problem was that the government did not spend enough. Spend more, they tell us, and then you will see the positive results.
Why has this spending not had the desired effect? To answer that, one has to understand that an economy is not an amorphous blob into which one pours money in order to make the recipe complete. An economy has a very complex set of relationships in which all factors are valued relative to one another, and in the end the value of those factors of production is determined by the value that consumers place upon the final product that those factors create.
In other words, coal is valuable because it helps to make electricity, which we value. Electricity does not receive its value from coal; coal receives its value from electricity.
Furthermore, an economy that is functioning correctly is one in which the factors either are in balance or are not prevented from finding their proper relationships with one another. By piling on spending and forcing factors to be expended on pet government projects, the Obama administration (like the Bush administration before it) actually is diverting factors from the use that consumers prefer to uses that the political classes and their allies prefer.
This move actually makes economic activity more distorted and prevents the recovery from occurring. In fact, I can say confidently that this forced "massive public works" emphasis is making us poorer because it actually is a massive wealth transfer from the productive to the non-productive economic sectors.
To use a term from Peter Schiff, the government is destroying wealth, and that makes us poorer. Furthermore, as government continues to pound square pegs into round holes, the net effect will be to destroy more wealth and throw many more people into unemployment and poverty.
This is something the Austrian Economists understand instinctively. Keynesians and Krugmanites are clueless, and while they revel in their cluelessness and their ignorance is celebrated in the media as Great Wisdom, nonetheless, they are ignorant people, but (unfortunately) ignorant people who are influencing the government to destroy what is left of our economy.
Indeed, the "shovel-ready" projects are shoveling something, alright, but it is not dirt. I don't think I need to emphasize that the nonsense they are shoveling at us comes from the back end of a bull.
Saturday, January 9, 2010
Once Again, the Law Does Not Apply to the Political Classes
Well, if you are a privileged member of the New York City political class, the answer is...nothing. Former NYC police commissioner Howard Safir did what I described above this past Friday. Reports the New York Times:
Howard Safir, a New York City police commissioner during the Giuliani administration, backed his sport utility vehicle into a pregnant woman on the Upper East Side on Friday afternoon and then drove away, the police said.
The woman, Joanne M. Valarezo, 30, of the Bronx, was not knocked down and was not seriously injured in the accident, which occurred at 2:25 p.m. in front of 1418 Third Avenue, the authorities said. They said she was able to jot down the license plate of Mr. Safir’s black 2009 Cadillac Escalade.
Ms. Valarezo was taken by ambulance to New York-Presbyterian Hospital/Weill Cornell Medical Center, where she was treated for a bruised shoulder and then released, the police said. Ms. Valarezo’s unborn child, nearing its seventh month, was apparently not affected, she later said.
Detectives from the 19th Precinct tracked Mr. Safir down, questioned him and “determined there is no criminality,” said a law enforcement official. The detectives determined that Mr. Safir was unaware that he had struck the woman before driving away, another law enforcement official said.
But the woman’s account raised questions about that.
The account from the victim goes on:
“I was crossing the street in between cars and he hit reverse, and his female passenger screamed, ‘Are you not looking, there’s someone there,’ and as he was reversing, he hit me on my shoulder and my knee and the side of my stomach,” she said.So, we see once again how government agents protect each other. Great work if you can get it.
Then he started to drive away, she said.
“I confronted him and I said, ‘I’m pregnant. Did you not see?’ And he just disregarded that and kept going,” she said. She said if the passenger had not screamed, causing her to turn, she would been hurt more seriously.
Friday, January 8, 2010
Krugman (Of Course) Ignores Moral Hazard
In his latest missive, Krugman claims that financial regulation will be "helped" by the formation of a new government "consumer protection agency." He writes:
A lot of the public debate has been about protecting borrowers. Indeed, a new Consumer Financial Protection Agency to help stop deceptive lending practices is a very good idea. And better consumer protection might have limited the overall size of the housing bubble.
Well, there is a problem here. Why were the subprime loans being made in the first place? It was government policy to "encourage" banks to make these loans. Yes, Krugman might deny that the Community Reinvestment Act of 1977 had anything to do with the subprime disaster, but history tells us something different.
The government was demanding that banks loosen their underwriting standards in order to promote the "Ownership Society" nonsense that came from the Heritage and Cato institutes. While some of the ideas were good, the idea that the government push home ownership no matter what was a disaster.
Furthermore, I never have read anything from Krugman that deals with the institutional moral hazard that has existed with the banks and financial insitutions in general. No Greenspan Put, not bailouts of politically-favored firms, no nothing.
So, Krugman gets it wrong once again. Not that he or anyone else in the economics profession cares. Krugman has spoken and since he is a Voice of a God, that is all that is needed. Standards of truth don't matter.
Today's Links, January 8, 2010
Yep, we have a couple feet of snow in our yard, and I must admit that the X-C skiing today was as good as I ever have experienced. I'll also admit to being absolutely tired at the end of 90 minutes of up and down skiing. Oh, and more snow is on the way. So much for Albore and "global warming" in Finzel and the surrounding area.
On the Freeman Online site, Mike Van Winkle interviews Becky Akers about the TSA and the idiocy of U.S. airport "security."
I have a commentary about the special tax breaks that corporations receive and how some communities are trying to take back those breaks.
Doug Bandow asks an obvious (but often ignored) question: Why is a country that is flat broke spending so much on military adventures overseas?
Wednesday, January 6, 2010
Government in the Bedroom? Let's Try the Bathroom, Kitchen, Living Room ....
Funny, it seems that many of the same people who make that argument also are making the argument that they want government...in the bedroom. Yes, we now read that many on the Left believe that because humanity is the "cause" of "climate change," we need to limit the number of people on the earth, and that means population controls. And, population controls mean, well, government in the bedroom.
However, our masters believe that although they are seeking entrance to our bedrooms, they should not limit their influence to just that place in our homes. Jeff Tucker has a great article on the government's toilet tyranny and the pathetic 1.6 gallon Johns. The article is well-worth the read. Here is an excerpt:
Indoor plumbing since the time of the ancient world has been a sign of prosperity and human well-being. Indoor toilets that flow into a sewer have been around since 1500 B.C., but every new settlement of people in a new area presents the problem anew. In rural America, indoor toilets weren't common until the 1930s. That today everyone assumes them to be part of life is a testament to the creative power of economic progress.Of course, we cannot forget government in our kitchens, living rooms, dens, and the kids' toy boxes. So, the people who claim they don't want government in our bedrooms actually want government not only in our bedrooms, but all over the house, even supervising us when we are going to the bathroom!
What we have in these regulations passed since the 1990s is therefore a step backwards from a central aspiration of mankind to dispose of human waste in the best possible way. We have here an instance of government having forced society into a lower stage of existence.
Sunday, January 3, 2010
Hey, Algore! We're Freezing Up Here!
Now, whenever it is cold outside, Algore pretends that it is not happening (kind of like the late MLB Commissioner Bowie Kuhn not wearing his overcoat after he agreed to have the World Series at night and it was freezing at the first game). However, take a heat wave or a drought and Algore is first to give us the "Aha!" as though there never had been heat waves or droughts before the current decade.
Albore is not a prophet or an intellectual. He is a thug, a fascist who has a wonderful future planned for all of us, a future that he and his friends have no intention at all of being part of. He and his friend James Hansen have called for criminal prosecutions of people who disagree with them, and I have no doubt that if Albore ever obtains the power he wants, the prisons will be full of "deniers."
As for the recent "Climategate" revelations, Albore has declared: Pay no attention to the man behind the curtain!! I have another recommendation for the guy: come up to my place and stand outside in the below zero temperatures and 18 inches of snow and tell me that we are about to be baked off the planet. And, maybe Albore and Mr. "Climate Denial is Treason Against the Planet" Paul Krugman can stand outside together by my house and claim that it isn't cold outside.