Tuesday, December 30, 2008
Retail gasoline prices tumbled Friday to the lowest level in nearly five years. And while crude futures rose, analysts believed it was a temporary pause in an extended, downward arc as the recession spreads.
"We're paying about a billion dollars per day less than we were in July" for gasoline, said Tom Kloza, publisher and chief oil analyst at Oil Price Information Service. "We could probably bail out some banks and maybe even some of the auto companies with the savings."
But cheap gas is bittersweet news for an economy that shed millions of jobs this year. Pump prices were driven down mostly because Americans are staying home more. Transportation Secretary Mary Peters said the travel habits of Americans are "fundamentally changing" as drivers clocked 9 billion fewer miles in October, even as gas prices plunged.
Awful holiday retail sales, job uncertainty and shrinking global trade all suggest that demand for energy from both businesses and consumers will continue to fall into next year.
"By Tuesday or Wednesday, we could easily see crude oil roughly $3 below what it is right now," said Jim Ritterbusch, president of energy consultancy Ritterbusch and Associates.
New evidence that OPEC members had cut production and a weaker dollar boosted crude prices Friday in light trading.
Light, sweet crude for February delivery rose $2.36, more than 6 percent, to close at $37.71 a barrel on the New York Mercantile Exchange. Trading was closed Thursday for Christmas.
In London, February Brent crude rose $1.76 to settle at $38.45 a barrel on the ICE Futures exchange.
Tumbling crude prices have led to enormous declines in the price of retail gasoline.
At the pump, retail gas prices fell six-tenths of a penny overnight to a new national average of $1.642 a gallon Friday, well below the year-ago average of $2.981 a gallon, according to AAA and the Oil Price Information Service. The last time retail prices dipped this low was in February 2004, Kloza said.
The Organization of Petroleum Exporting Countries, which accounts for about 40 percent of global supply, has announced crude production cuts totaling more than 4 million barrels per day as it tries to stop the decline in prices. OPEC members, however, have a history of ignoring announced quotas and crude traders waited for concrete evidence that the 13-nation group was tightening the spigot.
Analysts pointed to a release from the United Arab Emirates advising clients that it would reduce supply almost immediately. The state-owned Abu Dhabi National Oil Company said it would cut production of some grades of crude by as much as 15 percent next month.
"For now, at least Saudi Arabia and the United Arab Emirates seem to be fully complying with the cuts," said analyst Olivier Jakob of Petromatrix in Switzerland.
OPEC may meet again in Kuwait City on Jan. 19 to discuss further production cuts. The group's next official meeting is March 15 in Vienna.
Investors in recent months have ignored supply cuts from OPEC, with demand issues clearly driving the market. What's kept crude prices at four-year lows is the steady drumbeat of gloomy economic news that shows consumers aren't spending like they used to.
The latest comes from a preliminary report by MasterCard SpendingPulse, which said retail sales fell between 5.5 percent and 8 percent during the holiday season, compared with last year. Excluding auto and gas sales, they fell 2 percent to 4 percent, according to SpendingPulse.
SpendingPulse is a division of MasterCard Advisors that tracks total sales paid for by credit card, checks and cash.
Crude has given up 70 percent of its value since July, and this month alone it has fallen by more than $17 per barrel, a 30 percent decline.
Tom Kloza said he'll know that crude prices are poised for a sustained rebound when global demand matches last year's levels for several weeks in a row.
"Before you turn the corner, you need to get to the corner," Kloza said. "And right now we're seeing gasoline demand running about 3 to 5 percent behind year-ago levels.
Investors eyed more evidence that plummeting consumer demand from the U.S. and Europe is undermining growth in export-dependent Asia, as production at major Japanese manufacturers fell by its largest margin ever in November.
Japanese industrial production fell 8.1 percent in November from a month earlier, the largest drop since the government began measuring such data in 1953, the Ministry of Economy, Trade and Industry said Friday.
The decline followed a 3.1 percent drop in October, and the government expects another 8 percent plunge in December.
"These are pretty ugly figures that show the recession deepened in Japan," said Christoffer Moltke-Leth, head of sales trading for Saxo Capital Markets in Singapore. "I don't see any catalyst to bring crude higher. We'll likely test $30."
Many companies will likely report dismal earnings for the fourth quarter and may use the lowered expectations to include massive writedowns or one-time charges, Moltke-Leth said.
"I think a lot of CEOs want to put everything bad into the fourth quarter because the market expects it to be bad so why not put everything you can in there," he said. "There's going to be a lot of bad corporate news during the next few weeks, and that's going to reinforce the demand destruction theme for crude."
In other Nymex trading, gasoline futures rose 5.17 cents to settle at 88.4 cents a gallon. Heating oil gained 4.67 cents to settle at $1.245 a gallon while natural gas for January delivery fell 8.4 cents to settle at $5.826 per 1,000 cubic feet.
Monday, December 29, 2008
2. Quality, high-powered scope........................$ 550.00
3. Bore sighting device.....................................$ 140.00
4. Hospital Visit......................$ 4,893.00
5. Forgetting to remove the bore sighting device prior to actually shooting the damned thing? . . . . . . Priceless
Sunday, December 28, 2008
First, all over the world, temperatures have been dropping in a way wholly unpredicted by all those computer models which have been used as the main drivers of the scare. Last winter, as temperatures plummeted, many parts of the world had snowfalls on a scale not seen for decades. This winter, with the whole of Canada and half the US under snow, looks likely to be even worse. After several years flatlining, global temperatures have dropped sharply enough to cancel out much of their net rise in the 20th century.
Ever shriller and more frantic has become the insistence of the warmists, cheered on by their army of media groupies such as the BBC, that the last 10 years have been the "hottest in history" and that the North Pole would soon be ice-free – as the poles remain defiantly icebound and those polar bears fail to drown. All those hysterical predictions that we are seeing more droughts and hurricanes than ever before have infuriatingly failed to materialise.
Even the more cautious scientific acolytes of the official orthodoxy now admit that, thanks to "natural factors" such as ocean currents, temperatures have failed to rise as predicted (although they plaintively assure us that this cooling effect is merely "masking the underlying warming trend", and that the temperature rise will resume worse than ever by the middle of the next decade).
Secondly, 2008 was the year when any pretence that there was a "scientific consensus" in favour of man-made global warming collapsed. At long last, as in the Manhattan Declaration last March, hundreds of proper scientists, including many of the world's most eminent climate experts, have been rallying to pour scorn on that "consensus" which was only a politically engineered artefact, based on ever more blatantly manipulated data and computer models programmed to produce no more than convenient fictions.
Thirdly, as banks collapsed and the global economy plunged into its worst recession for decades, harsh reality at last began to break in on those self-deluding dreams which have for so long possessed almost every politician in the western world. As we saw in this month's Poznan conference, when 10,000 politicians, officials and "environmentalists" gathered to plan next year's "son of Kyoto" treaty in Copenhagen, panicking politicians are waking up to the fact that the world can no longer afford all those quixotic schemes for "combating climate change" with which they were so happy to indulge themselves in more comfortable times.
Suddenly it has become rather less appealing that we should divert trillions of dollars, pounds and euros into the fantasy that we could reduce emissions of carbon dioxide by 80 per cent. All those grandiose projects for "emissions trading", "carbon capture", building tens of thousands more useless wind turbines, switching vast areas of farmland from producing food to "biofuels", are being exposed as no more than enormously damaging and futile gestures, costing astronomic sums we no longer possess.
As 2009 dawns, it is time we in Britain faced up to the genuine crisis now fast approaching from the fact that – unless we get on very soon with building enough proper power stations to fill our looming "energy gap" - within a few years our lights will go out and what remains of our economy will judder to a halt. After years of infantile displacement activity, it is high time our politicians – along with those of the EU and President Obama's US – were brought back with a mighty jolt into contact with the real world.
I must end this year by again paying tribute to my readers for the wonderful generosity with which they came to the aid of two causes. First their donations made it possible for the latest "metric martyr", the east London market trader Janet Devers, to fight Hackney council's vindictive decision to prosecute her on 13 criminal charges, ranging from selling in pounds and ounces to selling produce "by the bowl" (to avoid using weights her customers dislike and don't understand). The embarrassment caused by this historic battle has thrown the forced metrication policy of both our governments, in London and Brussels, into total disarray.
Since Hackney backed out of allowing four criminal charges against Janet to go before a jury next month, all that remains is for her to win her appeal in February against eight convictions which now look quite absurd (including those for selling veg by the bowl, as thousands of other London market traders do every day). The final goal, as Neil Herron of the Metric Martyrs Defence Fund insists, must then be a pardon for the late Steve Thoburn and the four other original "martyrs" who were found guilty in 2002 – after a legal battle also made possible by this column's readers – of breaking laws so ridiculous that the EU Commission has even denied they existed (but which are still on the statute book).
Readers were equally generous this year in rushing to the aid of Sue Smith, whose son was killed in a Snatch Land Rover in Iraq in 2005. Their contributions made it possible for her to carry on with the High Court action she has brought against the Ministry of Defence, with the sole aim of calling it to account for needlessly risking soldiers' lives by sending them into battle in hopelessly inappropriate vehicles. Thanks not least to Mrs Smith's determined fight, the Snatch Land Rover scandal, first reported here in 2006, has at last become a national cause celebre.
May I finally thank all those readers who have written to me in 2008 – so many that, as usual, it has not been possible to answer all their messages. But their support and information has been hugely appreciated. May I wish them and all of you a happy (if globally not too warm) New Year.
Saturday, December 27, 2008
Friday, December 26, 2008
Waking from Lever-Lever Land The financial crisis has been a wake-up moment for America's Peter Pan generation as baby-boomers discover that fairy dust no longer entitles them to fly. Now they are struggling to put something aside for a retirement that they never may be able to afford. Harnessing the productivity of the world's young people is the challenge for next year and the next decade. (Dec 24,'08)
*Oswald Arnold Gottfried Spengler (29 May, 1880 Blankenburg am Harz – 8 May, 1936, Munich) was a German historian and philosopher whose interests also included mathematics, science, and art. He is best known for his book The Decline of the West (Der Untergang des Abendlandes) in which he puts forth a cyclical theory of the rise and decline of civilizations. After Decline was published in 1918, Spengler produced his Prussianism and Socialism in 1920, in which he argued for an organic version of socialism and authoritarianism. He wrote extensively throughout World War I and the interwar period, and supported German hegemony in Europe. The National Socialists held Spengler as an intellectual precursor but he was ostracised after 1933 for his pessimism about Germany and Europe's future, his refusal to support Nazi ideas of racial superiority, and his critical work the Hour of Decision.
Thursday, December 25, 2008
On this day of cheer, let us not forget where it all started. The birth of Jesus of Nazareth, the Son of God.
Now it does not matter whether you have "faith" in God or not. The Christian values taken from the Bible are something we can and should all live by, atheists, agnostics and believers.
Now personally I believe there is a God and I know there was a Jesus but at times, like many others I have doubted.
Who would not with all the horror in the World? I have raised my fist to the sky and cursed Our Creator in rage and grief but always (usually when needing my hand held) I always return to Him. He understands. He is that type of guy.
God created us but he is not responsible for Our Actions. We were given free will to choose if you like, the paths of either righteousness or wrong and he has left signs for us to follow. But we alone must make the decision on what path to take.
A new days sunrise and the birth of a child are both in a way, to me at least, reminders of the Resurrection.
So whilst all you parents are picking up the wrapping paper spare just a moment to think about the real meaning of Christmas. Here endeth the lesson with a poem...
One night I dreamed I was walking along the beach with the Lord. Many scenes from my life flashed across the sky.
In each scene I noticed footprints in the sand. Sometimes there were two sets of footprints, other times there was one only.
This bothered me because I noticed that during the low periods of my life, when I was suffering from anguish, sorrow or defeat, I could see only one set of footprints, so I said to the Lord,
“You promised me Lord, that if I followed you, you would walk with me always. But I have noticed that during the most trying periods of my life there has only been one set of footprints in the sand. Why, when I needed you most, have you not been there for me?”
The Lord replied, “The years when you have seen only one set of footprints, my child, is when I carried you.”
Like I said. What a guy.
Reprinted from "The Green Arrow"
Wednesday, December 24, 2008
I occasionally poke around the Internet to see the response to my articles, and I just came across a reply to my December 11 RealClearPolitics article warning about the return of the Old Left, complete with central planning for the financial and auto industries. Over at MyDD, a prominent clearing house for "netroots" Democratic Party activists, Charles Lemos responded by complaining that "Central planning is the latest conservative epithet in the wake of president-elect Obama's bold and sweeping proposals for revitalizing the increasingly moribund American economy." He then goes on to declare that, "As liberals, as progressives it is imperative that we fight for planning. It's time we rehabilitate the concept of long-term planning."
Can anyone really be saying this in the 21st century? If so, it is because they have failed 20th-Century History 101. For those in need of a quick refresher, the satirical website The People's Cube has posted a helpful overview of the product line once offered by the East Bloc's centrally planned auto industry. My favorite line is an old joke about the Yugo: "Every car came with a rear defroster to keep your hands warm as you pushed it."
But central planning has not just been discredited by a mass of empirical evidence. It has been thoroughly refuted in theory, too. Legions of pro-free-market economists, particularly the Austrian school's Ludwig von Mises, have thoroughly demonstrated that the government's so-called planning is actually an attack on planning.
Planning is what is already done in a free economy by millions of private individuals. Every economic decision they make is a plan about how to allocate the only money and effort they have a right to dispose of: their own. And these plans are made with full access to the only kind of information that is really relevant: the context of their own lives and values.
Government planning, by contrast, consists of smashing all of these private plans and replacing them with inferior plans made by inferior men.
Planning for its future solvency, for example, Bank of America decided not to lend money to a defunct window and door manufacturer—but then along comes Illinois Governor Rod Blagojevich, right before his arrest, to demand that the bank extend such a loan anyway. Other banks decided, reasonably enough, that the best way to survive an economic downturn is to make only conservative investments—but along comes their new, uninvited business partner Hank Paulson, who declares that he expects them to open a floodgate of new lending.
And how about you? You may have decided, for example, that you will get better value for your money by spending it on a Toyota rather than a Plymouth—but then along come George Bush and Barack Obama to decree that your money really ought to go to General Motors after all.
This is the world of central planning, which consists of forcibly substituting the plans of government officials for the far more sensible plans that private individuals make about their own lives and money.
And we haven't seen the worst of it, at least not yet. Much bigger and deadlier lessons will spring to mind for those who were paying attention in 20th-Century History 101. Remember Trofim Lysenko? He's the crackpot scientist who got Stalin's ear and set himself up as the central planner of Soviet agriculture, single-handedly wiping out Soviet wheat production. Or what about the hucksters who convinced Mao that it was possible for peasants to manufacturer steel in small backyard furnaces, helping to turn the Great Leap Forward into a great leap backward?
If you think that these central planning catastrophes are limited to the most doctrinaire Marxist dictatorships, consider that Bernie Madoff's $50 billion Ponzi scheme is minuscule compared to the multi-trillion-dollar Ponzi scheme that is Social Security. And if the economic downturn exposed the fact that Madoff's scheme wasn't backed by any real assets—what do you think a sudden decrease in payroll tax revenues is going to do to Social Security?
Certainly the plans of private individuals can go awry. Just ask the former homeowners who over-extended themselves by taking out adjustable rate mortgages, or the investment banks who over-extended themselves by financing those mortgages. But private mistakes are corrected by the workings of the market. People who can't afford their houses will have to sell them to those who can; failing banks get bought out by healthy banks; unprofitable automakers go bankrupt and their brands are bought out by manufacturers who can make a profit.
But notice that the whole point of the government's planning in the current crisis is to prevent all of these corrective mechanisms. The government is intervening, not to make the economy healthier and more efficient, but to keep the overextended borrowers in their homes, to keep insolvent banks afloat, and to pump money into failing automakers so that they can keep losing money for another year or two.
And that leads us to the deeper reason for the comprehensive failure of government planning. By its very nature, government planning always sacrifices economic calculations to political calculations.
The purpose of government planning is not to maximize the creation of wealth, but rather to maximize the satisfaction of political pressure groups. Hence the auto bailout, the purpose of which is not to make GM profitable but rather to prop up the UAW—the only organization whose destruction is guaranteed if the Detroit automakers file for bankruptcy.
The clearest example of this principle is the attempt to use the auto bailout to force Detroit to stop fighting global warming restriction and to manufacture underpowered "green" cars. In another interesting response to my RealClearPolitics article, Todd Myers of the Washington Policy Center—a state-level pro-free-market think tank—observes the irony of Washington, DC, spending billions to save the automakers just as the state of Washington plans to spend billions on a public-transit scheme designed to discourage people from driving cars. "The logic of these activities," Myers concludes, "is that we need to spend $25 billion to save an industry that we are spending $22 billion locally to kill."
The absurdity of George Bush's public proclamations about the financial crisis is that he still considers himself a "free-market guy" who is destroying capitalism in order to save it. But the reasoning behind the auto bailout is even more perverse. Washington wants to save the auto industry so that the global warming lobby can conspire to destroy it.
Given a century of factual and theoretical refutation, continued advocacy of government planning is a transparent fraud. It is an attempt to cover up the fact that what the planners really have to offer us is not planning but chaos—an economy held hostage to the contradictory, ever-shifting whims of government officials and political pressure groups. Isn't that the predominant character of the current bailout frenzy, as the Treasury, the Fed, the president, Congress, and the president-elect careen from one stimulus plan to another? Haven't the past three months given the impression, not of planning, but of spur-of-the-moment improvisation?
The modern left is already based on two big frauds. They call themselves "liberals," even as they oppose liberty—in the economic realm and, increasingly, in the intellectual realm. And they describe themselves as "progressives," even as they seek to reverse two centuries of progress made by capitalism. So it should be no surprise to find advocates of "long-range planning" who systematically oppose the genuine economic plans made by private individuals.
Tuesday, December 23, 2008
As George Will points out in the column below, that is the pattern of the auto industry bailout, which was voted down by Congress—only to be resurrected unilaterally by the Treasury Department, using the blank check signed over to it by Congress when it passed the financial bailout. That is the inevitable pattern when government attempts to overstep its legitimate powers and manage the entire economy. That is too complex a process to be spelled out in detail in legislation, so Congress "delegates" its authority to the executive branch—and in doing so, Congress renders itself irrelevant.
Unfortunately, Will puts this point in language that is a bit too precious and effete. So Doug Bandow deserves credit for expressing this point a little more sharply in an editorial reprinted in Investor's Business Daily. This is a follow-up on the story of the sit-in strike at the defunct window factory in Illinois where Governor Rod Blogojevich—the day before his arrest—hatched a plan to shake down the Bank of America for a "loan" to a bankrupt company. Blago's plan worked, and the Bank of America caved in. Here is Bandow's comment.
Many good economic arguments existed against turning the Treasury and Federal Reserve into one vast corporate soup kitchen. The Republic case demonstrates yet another danger: inviting the government to direct where banks should lend.
If the federal bailout required Bank of America to "lend" money to an insolvent company ready to close its doors, we are descending to banana republic status.
That is where we are headed: a bailout banana republic, with a federal loan "czar" deciding which firms have the political pull to demand loans that they don't have to pay back.
"Making Congress Moot," George Will, Washington Post, December 21 A new Capitol Visitor Center recently opened, just in time for the transformation of the Capitol building into a tomb for the antiquated idea that the legislative branch matters….
Congress's marginalization was brutally underscored when, after lawmakers did not authorize $14 billion for General Motors and Chrysler, the executive branch said, in effect: Congress's opinions are mildly interesting, so we will listen very nicely—then go out and do precisely what we want.
On Friday the president gave the two automakers access to money Congress explicitly did not authorize. More money—up to $17.4 billion—than had been debated….
The president is dispensing money from the $700 billion Congress provided for the Troubled Asset Relief Program…. If TARP funds can be put to any use the executive branch fancies because TARP actually is a blank check for that branch, then the only reason no rules are being broken is that there are no rules….
The expansion of government entails an increasingly swollen executive branch and the steady enlargement of executive discretion. This inevitably means the eclipse of Congress and attenuation of the rule of law….
Still, most of the administration's executive truculence has pertained to national security, where the case for broad prerogatives, although not as powerful as the administration supposes, is at least arguable. With the automakers, however, executive branch overreaching now extends to the essence of domestic policy—spending—and traduces a core constitutional principle, the separation of powers.
Most members of the House and Senate want the automakers to get the money, so they probably are pleased that the administration has disregarded Congress's institutional dignity. History, however, teaches that it is difficult for Congress to be only intermittently invertebrate.
2. The Fed's Infinite Balance Sheet I am still not a pessimist about America's long-term future. It's just the short term—by which I mean the next five years or so—that terrifies me. And the main reason for terror, in my view, is that the Federal Reserve has once again unleashed the specter of runaway inflation, taking on trillions of dollars in new liabilities paid for by an "infinite balance sheet" of newly printed paper money.
The bureaucratic euphemism for this new policy of flooding the market with dollars created out of thin air is "quantitative easing," and the article below is correct in describing this as very big news that is not being reported with the importance it deserves.
"It's Dramatic! It's Sensational! It's the Fed Rescue," Gerard Baker, London Times, December 19 Central bankers are those rare human beings who actually go out of their way to make their jobs sound boring. Where the rest of us like to thrill our interlocutors with exaggerated tales of courage in the face of unimaginable challenges in the accounts receivable department, they understate for a living, professionally….
Yet such is their job, of course, that often they do things that are truly historic, momentous, as consequential in their way as a great political initiative, a soaring piece of oratory or an invasion.
But when they do, they are careful not to trumpet it. They shrug it off, downplay it all, wrap it in some impenetrable language, hoping to God that no one will notice it.
And they call it something like quantitative easing…. It is in fact a sensational financial departure, a revolutionary bit of economic policy. It is the monetary policy equivalent of Martin Luther's Ninety-Five Theses, the Gettysburg Address or the D-Day landings. And this week, the Federal Reserve, the US central bank, the most powerful financial institution on the face of the planet, in characteristically understated fashion, decided to do it….
The central bank essentially prints money, unrelated to the level of interest in the economy. Specifically, what the Fed is proposing to do is to use the printed cash to buy up all sorts of long-term debt—mortgage securities and government bonds…. So mortgages and other loans will become cheaper, and money will slosh around the economy.
At the same time the new administration of Barack Obama is going to spend a fortune on everything from roads to railways to computers and solar panels. This will not be paid for by taxes but by the same printed money pouring out of the Fed….
Japan is the only other leading country that has tried quantitative easing in the past 50 years. It's been at it for seven years and is still in a slump (though it has at least stopped deflation)
3. The Frauds at the SEC Every time there is an economic downturn, one of the inevitable consequences is a string of business scandals as large-scale frauds are uncovered. Think of Enron in 2002—and now Bernard Madoff's $50 billion Ponzi scheme, which fell apart last week, bankrupting several large Jewish charities. (Madoff swindled his marks by gaining their trust as fellow Jews, an MO that the cops call an "affinity scam.")
In low-brow populist newspapers like the New York Times, it is often implied that these scandals are the cause of the economic downturn. In fact, they are consequences of the downturn. Financial frauds are always being attempted, and they are easier to maintain in a booming economy—but when the markets go down, the frauds come crashing down at a faster than usual rate.
The populist rags will also claim, at this point, that the problem was too little regulation and that we need another set of restrictions on financial institutions in order to prevent anything like this from happening ever again. The new restrictions will be passed, which will of course succeed only in suppressing the economic activity of the law-abiding.
But the real story of the Madoff scandal is in fact the failure of regulation, which functions only to obstruct legitimate economic activity while doing nothing to prevent frauds.
After all, if someone like Madoff is willing to break the laws against fraud, why wouldn't he be willing to evade a whole new set of regulations imposed on top of those laws? And if he can swindle private investors, why can't he hoodwink SEC bureaucrats, too? So it should be no surprise to discover that the SEC was repeatedly warned about Madoff and repeatedly failed to do anything about him.
So it turns out that it is the SEC that is the real fraud, convincing its marks—the American people—of its nonexistent power of omniscience in detecting and preventing private frauds.
"Madoff Warnings 'Ignored for 10 Years'," Suzy Jagger, London Times, December 17 The world's biggest fraud could have been averted if the Securities and Exchange Commission (SEC) had acted on numerous warnings about Bernard Madoff's financial impropriety years ago, the regulator's chairman admitted last night….
Mr. Cox said that in less than a week of checks made into the regulator's oversight of investment businesses run by Bernard Madoff, he had found that "credible and specific allegations" had been "repeatedly" brought to the attention of the SEC but that no recommendations had ever been made to investigate the accusations.
The admission comes a week after Bernard Madoff, a 70 year old financier, admitted to his two sons that he was "finished" and that his investment firm was nothing more than a giant Ponzi scheme.
He also admitted to his sons, who worked for him, that he believed that losses arising from his financial wrong-doing amounted to around $50 billion, representing the biggest fraud in history….
[T]he scandal remains painfully embarassing to the SEC because Mr Madoff once served on one of their advisory committees.
4. The Rise of the Religious Left It should be clear by now that the influence of the religious right—which had its last hurrah with the Terri Schiavo case—is waning. But it is being replaced by the religious left, as the Democrats decide to find God as a replacement for secular Marxism.
Hence Barack Obama's selection of Rick Warren—a religious book huckster and politically connected mega-church preacher—to deliver the invocation at next month's presidential inauguration. Warren offers the worst of both worlds: the cultural right's crusades against abortion and homosexuality, combined with the political left's support for environmentalism and the welfare state.
Warren's selection has upset some on the secular left, but as we know by now, Obama likes to be all things to all people. So the culturally conservative Warren will be counterbalanced at the inauguration by an awful modern "poet" who apparently specializes in semi-obscene subject matter.
"Obama Selects Saddleback Founder for Invocation," Katherine Q. Seelye, New York Times, December 17 Barack Obama has selected the Rev. Rick Warren, the evangelical pastor and author of The Purpose Driven Life, to deliver the invocation at his inauguration, a role that positions Mr. Warren to succeed Billy Graham as the nation's pre-eminent minister and reflects the generational changes in the evangelical Christian movement….
The choice of Mr. Warren, pastor of a megachurch in Orange County, Calif., is an olive branch to conservative Christian evangelicals. Mr. Warren is an outspoken opponent of abortion and same-sex marriage—litmus-test issues for Christian conservatives. In fact, his selection set off a round of criticism by gay rights groups angered by his support for California's ban on same-sex marriages.
But Mr. Warren has also been one of the most prominent evangelical leaders calling for Christians to expand their agenda and confront global problems like poverty, AIDS, climate change, and genocide in Darfur.
Mr. Warren flaunted his clout this year when he managed to draw both John McCain and Barack Obama to his Saddleback Church for a forum in which he interviewed them on stage about faith issues.
5. What They're Doing About Pakistan Part of the goal of today is to catch up on the most important news that happened during last week's countdown of the top stories of the year. One of the most interesting things that happened last week was a stand-off between India and Pakistan over Pakistan's toleration of the planners of the Bombay attacks.
Note that we are already seeing the operation of a new US-India alliance, with an Indian threat of air strikes against terrorists in Pakistan being matched, at least according to some reports, by a US threat against Pakistan.
Pakistan has blinked, launching a crackdown on the Kashmiri Islamist group behind the Bombay attacks. We'll see how far this goes and how long it lasts. But do notice Pakistan's weakness and the raw fear in Islamabad that comes from knowing that a conflict with India, Britain, and the US is a conflict they cannot win. This is the long-term key to controlling Pakistan: maintaining and increasing that fear.
Meanwhile, it was nice to see the Tata family show its defiance of the Islamists by officially reopening the Taj Mahal hotel with the eminently civilized custom of high tea.
"Pakistan Blinks in India Standoff," Dean Nelson, London Times, December 14 Gordon Brown arrived in Delhi last night to try to calm Indian anger at Pakistan's role as the launchpad for the attack. He will promise continuing support for an Indian campaign to bring the Pakistani masterminds of the raid to justice.
His visit comes after Pakistan finally gave in to intense Anglo-American pressure to arrest the leaders of the Al-Qaeda-linked terrorist group Lashkar-e-Taiba (LeT).
Islamabad also agreed to shut the popular religious charity Jamaat ud Dawa, which runs hundreds of schools and many hospitals throughout the country and has close links to the banned LeT….
Last week Britain and the US were engaged in a two-pronged attempt to persuade Pakistan to close its "terrorist infrastructure"—the training camps and religious schools of militant groups….
A western diplomat in Islamabad told The Sunday Times last week that Pakistan had finally capitulated in the face of international pressure and in fear of an Indian military strike.
"Pakistan has backed down. They are shutting down Jamaat ud Dawa, offices have been locked and schools are being shut down. Fear has brought them to this point. They understand how angry India is and that they can't afford a confrontation. They already have a war in the tribal areas, they have no resources for another challenge and no stomach for it," he said….
India and Pakistan have clashed over Delhi's demand for 42 terror suspects, including Hafiz Saeed, the LeT founder arrested last week, and LeT's operations chief, Zaki-ur-Rahman Lakhvi, to be handed over.
Pakistan insisted the men will not be extradited to India and that any criminal charges will be brought in its own courts.
6. China's Reckoning For a long time, I've been arguing that China manages to maintain its dictatorial system, despite its abandonment of that system's Marxist ideological base, simply by promising its subjects ever-increasing wealth from the semi-liberalization of trade. China's leaders keep the population in line by warning the new middle class not to rock the boat for fear of endangering their very recent and hard-won prosperity.
But what happens if the leaders can no longer deliver prosperity? What happens if China enters a sharp and prolonged economic downturn? It looks like we're about to find out.
I mentioned, in item #3 above, that every economic downturn exposes a few business frauds. But in a society without the rule of law, a society in which business is hopelessly intertwined with a network of corrupt officials, this will happen on a vast scale. And without the rule of law, China lacks a system that allows for the orderly liquidation or reorganization of failing firms. This will all get very ugly, very fast.
(Note, incidentally, the immediate cost of the lack of the rule of law. The first wave of business failures is among toy manufacturers. Thanks to a series of scandals involving lead paint and various other toxins, the label "made in China" has become a deadly stigma for toy retailers.)
More important is the absence of representative government. Free nations are far better able to deal with crises because if one set of leaders has failed, the people are able to kick them out and choose different ones, as we have just seen. And if those leaders fail, as Obama and the Democrats are likely to do, the American people can do it all over again, which I hope they will do in 2010 or 2012.
But in a country like China, there is no outlet for anger at the government except riots, demonstrations, and ultimately, revolution.
See the article below for an analysis that largely agrees with mine.
For us, the next few years will be a crisis. For China, it is more likely to be a catastrophic upheaval. Stay tuned.
"Thirty Years of Reform in China," Gordon G. Chang, Weekly Standard, December 22 As Beijing celebrates the 30th anniversary of its reform era this month—generally considered to have begun with the accession of Deng Xiaoping—the dominant narrative in the world is that this is China's century. This perception is almost entirely based on the country's roaring economy, which has, according to official statistics, averaged 9.8 percent annual growth during the period.
Yet at this very moment the Chinese economy is moving from expansion to contraction and decelerating rapidly. In 2007, China's gross domestic product grew by an astounding 11.9 percent. In the first quarter of this year, growth was 10.6 percent. Second quarter: 10.1 percent. Third quarter: 9.0. This quarter, analysts expect 5.8 percent growth. If the trend continues—and there is every reason to believe it will—next year the Chinese economy will expand by one or two percent—or maybe not at all. China is experiencing a greater and faster economic slide than almost any other country this year….
Despite the seriousness of the situation they face, China's leaders seem unable to break from their old way of doing things. China's economy has progressed about as far as it can within its existing political framework. Further reform would threaten the power of the Communist party.
At this moment, one of the country's most popular heroes—executed at the end of last month—is a man who entered a police compound in Shanghai and killed six officers while wounding four others on July 1, the anniversary of the founding of the party. Outside his trial, middle-class Chinese chanted "down with the Communist party" and carried banners emblazoned with "Long Live the Killer." Even among the relatively well-to-do in the important coastal cities, the country's ruling organization is losing legitimacy.
After abandoning ideology, the party's primary source of legitimacy became the delivery of never-ending prosperity. It should therefore come as no surprise that recent economic troubles have coincided with an extraordinary wave of protests….
Protests are bound to become larger, more frequent, and more violent as the economy continues to weaken and as workers begin to feel safety in numbers. Chinese workers—even poor migrants—are starting to think they can get what they want by defying the authorities, because governments have tried to buy off protesters with small payments. Yet with the accelerating failure of industry—more than half of China's toy factories went out of business in the first seven months of this year, for instance—local officials have fewer resources to fund benefits to those who have suddenly lost their livelihoods.
Monday, December 22, 2008
Sunday, December 21, 2008
Saturday, December 20, 2008
But this story isn't just about business, economics, and finance. It is not the mere fact of an economic downturn (and a mild one so far) that is the big news. The big news is the use that is being made of the financial crisis. The left is trying to put over the myth that this crisis—a product of government intervention that is being made worse by government intervention—is a failure of the free market.
The "Reagan Revolution" and the swing to the right in the 1980s had a lot of flaws. But they did create a kind of general presumption in favor of the free market, and this has served, if not to reverse the growth of government, at least to hinder it. So the left is now trying to stage a counter-revolution aimed at lifting this inhibition and eliminating all checks on the expansion of government power.
(Incidentally, this crisis is a clear refutation of the claim, made in some Objectivist circles, that the intrusion of religion into government is the central political issue of our time. If religion were really the central issue, politically or culturally, we would expect large numbers of people to turn to God—and to religious politics—in a crisis. Instead, when the crisis came, people turned to the state.)
When this financial-political crisis exploded in September, it was bigger and moved faster than I had expected. Yet when I went back to look the coverage, I was pleasantly surprised to discover that I had not been caught as flat-footed as I feared. I give a few samples of my pre-bailout coverage in the first two links below.
I am not an economist, and I did not get all of the economic predictions right, partly because I tried to avoid making any such predictions. But at least I got the basic story right: that the real crisis would come, not from an economic slowdown, but from government interventions launched in a panicked attempt to prevent the slowdown.
And that is what we have seen, though on a scale much bigger than anyone expected. Many people, myself included, had assumed that the socialist Old Left was dead. It turns out it isn't—or at least it hasn't stopped moving yet.
If the attempted revival of the Old Left is the biggest story of 2008, then we know our top priority for 2009: making sure that we kill it again, and kill it for good this time.
The last three items below indicate the way to do this. Note particularly the final item, about the one piece of really good news this year: the legal revival of the long-undefended individual right to keep and bear arms. Now if only we can do the same thing for the right to property.—RWT
Commentary by Robert Tracinski
1. The Return of "Stagflation"? February 28 I have been keeping track of predictions of higher inflation and of an economic downturn for some time, but I haven't posted many links on this story because they were just predictions—and economic predictions are almost as unreliable as political predictions. But now higher inflation is a definite fact, and just to cheer you up, the Wall Street Journal says that inflation could be closer to 6%, which is higher than the official measurement. And while we may not be in much of a downturn yet, there is plenty of evidence to show that we are in danger of one.
But these facts alone do not constitute the real danger that we could be facing a replay of 1970s-style "stagflation"—the uniquely misery-inducing combination of inflation and economic stagnation. The real danger of stagflation is the fact that both the Federal Reserve and the administration seem to regard fighting a recession as a higher priority than fighting inflation. Historically, that's the surest indication that we will get both.
The Democratic Congress is doing its part as well, reacting to rising oil prices by trying to raise taxes on oil.
Robert Samuelson's comments below are worthwhile mainly for his recognition that inflation is a government-created phenomenon, that "The Fed creates inflation and can control it." For 25 years, the Fed has chosen not to inflate, or at least to inflate at a [relatively] benign rate. But the danger is that the new Federal Reserve chief either doesn't want to curb inflation or does not know how.
"The Specter of Stagflation," Robert Samuelson, Washington Post via RealClearPolitics, February 27 What's renewed interest in stagflation is the latest consumer price index (CPI), the government's main inflation indicator. For the year ending in January, all prices were up 4.3 percent. Excluding the temporary surges after Katrina, inflation hasn't been higher since July 1991. Even eliminating food and energy prices (about a quarter of the index), January's year-to-year increase was 2.5 percent.
All these figures exceed the Federal Reserve's informal inflation target of 1 percent to 2 percent a year: a range deemed so low that it constitutes effective price stability. And these aren't the truly disturbing numbers. The more upsetting figures are those for the last three months. In this period, the full CPI rose at a 6.8 percent annual rate….
Price increases of individual items can have many immediate causes: poor harvests for food; OPEC for energy; uncompetitive markets for health care; corporate market power for drugs. But persistent inflation—the general rise of most prices—has only one cause: too much money chasing too few goods. It's not a random accident. The Federal Reserve regulates the nation's supply of money and credit.
Since August, the Fed has been under enormous pressure to ease money and credit. It has. The overnight Fed funds rate has fallen from 5.25 percent in early September to 3 percent now. Politicians are clamoring for the Fed to prevent a recession. Banks and other financial institutions want cheaper credit to enable them to offset losses on subprime mortgages. There is fear of a wider economic crisis if large losses erode confidence and, by depleting the capital of banks and other financial institutions, undermine their ability and willingness to lend and invest….
No one wants a financial crisis; but no one should want the return of stagflation either…. Trying to prevent a recession at all costs is a fool's errand that could ultimately backfire on us all.
2. The Statism Bubble, March 26 I have been arguing recently that the threat to the economy we really need to worry about is not mortgage defaults, but rather the panicked actions the government is likely to take in response to those defaults. One such risk is described below: the Fed's adoption of an entirely new role as the negotiator and guarantor of mergers and bailouts among large financial institutions.
As the author below points out, the Fed's promotion and bankrolling of a buyout of Bear Stearns sets a precedent that could break the Fed if it is implemented consistently: a promise to use Fed assets to bail out any large financial institution that gets into trouble by purchasing bad debts.
"Our Overextended Fed," Vincent Reinhart, Wall Street Journal, March 26 In the past few weeks, the Federal Reserve has fundamentally redefined the role of a central bank in a market economy.
Almost one-half of our nation's central bank balance sheet—more than $400 billion—is exposed to credit risk through new lending facilities. It has also entered an open-ended commitment to use its discount window to back stop major securities firms….
[T]he implicit declaration that a midsize investment bank was systematically important puts any firm at least as big as Bear in the cross-hairs of speculators. In coming days, how can the Federal Reserve turn away another like-sized entity, whether primary dealer or not, that is suddenly in the marketplace's disfavor for having used leverage to borrow at short-term maturities to fund longer-term obligations?
In such circumstances, the Federal Reserve's $900 billion balance sheet will not look that big.
3. The Anti-Reagan Counter-Revolution, September 23 If the American economy is going to be wrecked, it will not be wrecked by a mere spike in mortgage default rates. I will be wrecked by the massive government intervention in the economy that is justified as a response to the mortgage defaults. And that is precisely the direction we are currently headed.
The left has used the financial crisis to argue that free markets have been discredited, reversing the rightward drift of American politics that began in 1980. The "Reagan Revolution" is a somewhat inadequate term for the ascendancy of pro-free-market ideas in the past quarter century—Reagan himself was not a very consistent free-marketer—but the left takes this as their target and are now staging an anti-Reagan counter-revolution.
I observed this a few weeks ago in my analysis of Barack Obama's convention acceptance speech, in which I pointed out this line: "For over two decades, he's subscribed to that old, discredited Republican philosophy—give more and more to those with the most and hope that prosperity trickles down to everyone else." As I wrote, "The references to 'two decades' and to 'trickle-down economics'—a derogatory term for Ronald Reagan's pro-free-market policies—make his meaning clear. It is the free market that he wants us to regard as 'discredited.'"
Obama is now repeating this line of attack, responding to John McCain's ridiculous vow to fire SEC Commissioner Christopher Cox by declaring:
I think that's all fine and good but here's what I think. In the next 47 days you can fire the whole trickle-down, on-your-own, look-the-other way crowd in Washington who has led us down this disastrous path. Don't just get rid of one guy. Get rid of this administration. Get rid of this philosophy. Get rid of the do-nothing approach to our economic problem and put somebody in there who's going to fight for you. [Emphasis added.]
And it is not just the far left. The article below indicates how the current bailout is being engineered by two centrist pragmatists, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, who believe that there is no room for ideas and principles in the middle of a crisis—which is, in reality, precisely when one needs them most.
The article below also highlights the way in which Paulson and Bernanke are making trillion-dollar decisions on their own initiative, leaving actual elected officials guessing what they will do next with the taxpayers' money.
George Will has an outstanding column describing Paulson as the "fourth branch of government" and making a point I have argued for years but have never seen made clearly in the mainstream media, until now.
[S]ince the federal government was transformed into a regulatory state in the 20th century, Congress has routinely delegated essentially legislative powers to the executive branch and independent agencies. This is one reason conservatives regret the growth of government: it entails supplanting the rule of law—laws written by elected representatives—by the rule of rules written in the executive branch.
So this bailout plan is not just an attack on economic freedom. It is also, by necessity, an attack on our political freedom.
"A Professor and a Banker Bury Old Dogma on Markets," Peter Baker, New York Times, September 20 "It just happened dramatically," Mr. Paulson said in an interview on Friday. "There was only one way that we could reassure the markets and deal with a very significant and broad-based freezing of the credit market. There was no political calculus. It was overwhelmingly obvious."
Just like that, Mr. Bernanke, the reserved former Ivy League professor, and Mr. Paulson, the hard-charging former Wall Street deal maker, launched what would be the government's largest economic rescue operation in modern times, one that rivals the Iraq war in cost and at the same time may redefine Washington's role in the marketplace for years….
Along the way, they have cast aside the administration's long-held views about regulation and government involvement in private business, even reversing decisions over the space of 24 hours and justifying them as practical solutions to dire threats.
"There are no atheists in foxholes and no ideologues in financial crises," Mr. Bernanke told colleagues last week, according to one meeting participant.
The improvisational nature of their effort has turned President Bush and Congressional Democrats into virtual bystanders, sometimes uncertain about what comes next and left to wonder about the new power dynamics in the capital. Seemingly every time lawmakers tried to get a handle on what was happening and what role they might play with elections around the corner, Mr. Paulson and Mr. Bernanke would show up again on Capitol Hill for another evening meeting with another surprise development.
4. The Fed's "Infinite Balance Sheet," September 23 Here's the one line from the whole mortgage bailout story that really ought to make your blood run cold: a former Federal Reserve governor's assurance that it is no problem for the Fed to organize a trillion-dollar financial bailout because its balance sheet—referring to the assets it has to draw on—is "infinite."
What he means is that the Federal Reserve has an unlimited ability to create money to pay off its debts—or in this case the debts of the companies being bailed out. See a catalog of all the programs the Federal Reserve is currently using to flood the financial markets with cash.
But creating an unlimited amount of new money means inflation. So the Fed's "infinite balance sheet" really means that the Fed has an unlimited ability to siphon off all of our assets by debasing the value of our money.
Actually, though, even on those terms it is not infinite. Zimbabwe's central bank tried to take its balance sheet to infinity and beyond, only to find that it ran out of the paper and printing presses necessary to keep printing money. No central bank's balance sheet is really infinite; it is limited to merely taking everything we've got.
"Is Fed's Balance Sheet in Trouble?" Lee Brodie, CNBC, September 17 Where does Uncle Sam come up with huge sums of money during a financial emergency? Like the rest of us, the government taps available reserves and, if needed, it borrows some more.
Well, guess what? After the recent buying spree (also known as bailouts) the Fed needs some dough. As a result, the Treasury Department has begun to sell bonds specifically to fund the Fed's coffers.
Just minutes after unveiling the financing program, the Treasury said it would sell $40 billion of cash management bills—essentially a fresh batch of debt—on Wednesday at the US central bank's request as part of an attempt to "help them better manage their balance sheet."
In other words, the nation is taking on more debt to prevent AIG, as well as Freddie and Fannie from collapsing.
That sounds like a bit of a problem, but former Federal Reserve governor Wayne Angell says that's not the case.
"I am very comfortable with the Feds actions," he says on "Fast Money." "The most important thing to remember is the Fed's balance sheet is not finite. It's infinite. It can expand."
5. Our New Economic Dictator, October 3 In a dereliction of legislative responsibility that will live in infamy, the House voted today to pass the trillion-dollar bailout. The official figure is $700 billion, but that does not include the roughly $300 billion already pledged to bail out Fannie Mae, Freddie Mac, and AIG. Nor does it include the potential future costs of the bailout if, as is quite likely, it only makes the financial crisis worse.
The most important feature of this bailout is that it is featureless. Following the historical process by which Congress has slowly ceded its authority to the executive-branch agencies, the bill authorizes the Secretary of the Treasury to achieve a whole set of very broadly stated goals—and leaves the actual implementation of these goals at his almost completely arbitrary discretion.
That is the upshot of the article below in Slate, which observes that no one really knows yet exactly what Congress has just approved—not the markets, not the congressmen who voted for it, not even the Treasury Secretary himself. In effect, Hank Paulson is now America's economic dictator, empowered to reshape the financial markets as he sees fit and armed with a trillion dollars of our money to do so.
Oh, but Congress didn't leave the contents of the bill entirely vague. It took the time to include billions of dollars in pork-barrel subsidies for the "alternative energy" scam.
"Channeling Paulson," Chadwick Matlin, Slate, October 3 It's been 14 days since Henry Paulson injected the mega-bailout into all of our lives…. And yet, 14 days later, we still don't know much about how the bailout is actually going to work….
The bill itself  doesn't provide any help. It demands Paulson explain how this whole thing is going to work two days after the first troubled assets are purchased….
When is all of this going to happen?
Nobody knows for sure. The bill does not impose a timeline on Paulson, but he's been very adamant about the fierce urgency of now. Still, it will probably be at least a few weeks, based on a call between the Treasury Department and bankers last Sunday (before the first bill failed)…. Without fully forged tools, the Treasury Department will be handcuffed and unable to save failing banks. Reminder: According to Paulson, the bailout is necessary because without it, banks will fail.
Who is going to run this thing?
Nobody knows for sure…. Whoever comes in will still report to Paulson but will presumably operate the superfund day to day in something called the "Office of Financial Stability." Anti-anxiety medication will be handed out at the door.
What kind of assets are we going to buy?
Nobody knows for sure. The bill mandates a purchase of "troubled assets from any financial institution."… The opportunities are endless!
How much are we going to pay for these assets?
Nobody knows for sure. The bill gives Paulson total control in the matter as long as he writes a memo or two on the subject. Two main options: The government pays market value (not very much) or original value (way too much). If we go with the first avenue, we'll probably use a reverse auction, which would allow the government to buy toxic assets at the lowest price and establish a price floor for the assets in the broader marketplace….
That route, though, may not inject enough capital—read: new cash—into the financial sector….
[W]e do know one thing for sure. There will be a bailout. Fourteen days from now, maybe we'll find out what that means.
6. The Ayn Rand Factor, October 3 It looks as if we are about to live through a weird re-enactment of the 20th century, as the old enemies of freedom that we fought during the Cold War struggle to reconstitute themselves. So just as we face a new Cold War Lite against Putin's Stalin Lite regime in Russia, we are facing a mini-revival of the 20th century's domestic contest between free markets and advocates of big-government socialism.
But the revival of the left is only half of that story. The other half—which we are slowly beginning to see, but which I think will grow in strength—is a reconstitution of the pro-free-market side of the debate, which has atrophied for a variety of reasons over the past few decades, but which is slowly rallying in an attempt to repel its old adversaries.
Thus, the past few weeks have seen some very good op-eds on the financial crisis and bailout. Joseph Calhoun clearly explains that capitalism still works even in a crisis—I would add, especially in a crisis—and he argues that it is the Treasury and the Fed, not the markets, that are not working. At CNN, of all places, Jeffrey Miron presents a case for bankruptcy of failing firms, rather than a bailout, as the fastest and least costly route out of the crisis.
On a more humorous note, Investor's Business Daily's Michael Ramirez has a great cartoon portraying Fannie and Freddie as Bonnie and Clyde.
But what I have found most interesting is a string of good articles recently by authors who I know have been influenced by Ayn Rand.
Jeff Jacoby—a Jewish religious conservative who is nevertheless influenced by Ayn Rand—has a very effective column pinning some of the causes of the mortgage crisis directly on Barney Frank, the chief legislative sponsor of the bailout.
Jonathan Hoenig has some excellent observations on government as the cause of financial instability:
[M]arkets are now being dictated by political rather than economic factors. Leading politicians, from Treasury Secretary Hank Paulson to Rep. Barney Frank (D., Mass.), are literally winging it on an ad-hoc basis, making up rules as they go along. It’s not confidence they are instilling, but chaos.
I’m a trader, not a political pundit. To that end, I’d love nothing more than to get back to talking about earnings, trends, new products, and corporate management. Unfortunately, right now none of those matter. Big Brother is jerking the strings of the financial markets on a daily basis, making normal methods of analysis all but impotent.
But I've saved the main link for the article below, which makes two references to Ayn Rand in presenting—very convincingly—the most radical answer to this crisis that I've seen anyone promote in a large newspaper: a return to the gold standard.
"Loose Money and the Roots of the Crisis," Judy Shelton, Wall Street Journal, September 30 In the aftermath of this financial catastrophe, as we sort out causes and assign blame, with experts offering various solutions—More regulation! Less complex financial instruments!—let's not lose sight of the most fundamental component of finance….
It is the money that is broken….
When credit markets seize up, when financial instruments disintegrate, when the dollar fails—it's not because Alan Greenspan was not sufficiently omniscient. He wasn't, true. But no one ever was. No one ever could be.
If capitalism depends on designating a person of godlike abilities to manage demand and supply for all forms of money and credit—currency, demand deposits, money-market funds, repurchase agreements, equities, mortgages, corporate debt—we are as doomed as those wretched citizens who relied on central planning for their economic salvation.
Think of it: Nothing is more vital to capitalism than capital, the financial seed corn dedicated to next year's crop. Yet we, believers in free markets, allow the price of capital, i.e., the interest rate on loanable funds, to be fixed by a central committee in accordance with government objectives. We might as well resurrect Gosplan, the old Soviet State Planning Committee, and ask them to draw up the next five-year plan.
"There are numbers of us, myself included, who strongly believe that we did very well in the 1870 to 1914 period with an international gold standard." It would be easy to dismiss this statement as a quaint relic from Mr. Greenspan's earlier days as an Ayn Rand acolyte; his article on "Gold and Economic Freedom" appears in her 1966 compendium "Capitalism: The Unknown Ideal." But Mr. Greenspan said it, rather emphatically, last October on the Fox Business Network. He was responding to the interviewer's question: "Why do we need a central bank?"
Whatever well-intentioned reasons existed in 1913 for creating the Federal Reserve—to provide an elastic currency to soften the blow of economic contractions caused by "irrational exuberance" (and that will never be conquered, so long as humans have aspirations)—one would be hard-pressed to say that the financial fallout from this latest money meltdown will have less damaging consequences for the average person than would have been incurred under a gold standard….
[T]he goal [should be] to hammer out a new financial order where the validity of the monetary unit of account is not determined by hollow men roaming the marble halls of government central banks.
This is where the new world of sound money begins. This is where the unknown ideal of capitalism takes form.
7. The Battle Is Just Beginning, November 12 Has America undergone a long-term swing to the left, giving Barack Obama a mandate to dismantle the free market?
Dick Morris provides some good election statistics which refute a few myths (the youth vote, for example, did not surge in this election). The overall picture is that Obama won because Democrats in general and black voters in particular were extremely motivated and engaged—while Republicans and conservatives were demoralized. Given the Republican candidate, this is no mystery.
But the most interesting comment on the issue of a "swing to the left" is the one below from Tony Blankley. He argues that the real "swing to the right" didn't happen in 1980. It happened in 1984, when millions who had chosen Reagan as a protest vote against Carter decided to stick with him because he had proven he was right. It was "morning again in America," and they gave the credit to Reagan's ideas.
Thus, Blankley argues that it is Obama's first term that will determine whether there is a long-term "swing to the left." If Obama imposes a radical far-left agenda, as his supporters are urging him to do…, and if the right is unable to expose this agenda as a disaster, then there will be an enduring swing to the left. If the right can make its case, then there will be a swing back to the right.
But this will require some reform and refocusing on the right. Some pretty good guidance is offered by two representatives of a previous generation, conservatives whose heyday was in the 1980s and 1990s. P.J. O'Roarke argues that the right's mistake was that it failed to kill the collectivist beast when it had the chance.
Liberalism had been running wild in the nation since the Great Depression. At the end of the Carter administration we had it cornered in one of its dreadful low-income housing projects or smelly public parks or some such place, and we held the Taser gun in our hand, pointed it at the beast's swollen gut, and didn't pull the trigger. Liberalism wasn't zapped and rolled away on a gurney and confined somewhere until it expired from natural causes such as natural law or natural rights.
Meanwhile, former House Republican leader Dick Armey offers a broadside against "compassionate conservatism."
[T]oday there is a categorical difference between what Republicans stand for and the principles of individual freedom…. Too often the policy agenda was determined by short-sighted political considerations and an abiding fear that the public simply would not understand limited government and expanded individual freedoms. How else do we explain "compassionate conservatism," No Child Left Behind, the Medicare drug benefit and the most dramatic growth in federal spending since LBJ's Great Society?
If Blankley is correct—and I think he is—then the battle didn't end with the election. It is just beginning.
"To Battle Stations," Tony Blankley, Washington Times, November 12 Consider that in 1980, when Ronald Reagan won his first presidential election, the public was self-identified as 46 percent moderate, 28 percent conservative and 17 percent liberal. But by the 1984 Reagan re-election the public had shifted to 42 percent moderate, 33 percent conservative and 16 percent liberal—a statistically significant shift to the right. In those four years Mr. Reagan had convinced 5 percent of the electorate to move largely from moderate to conservative. And that 5 percent have stayed conservative for 24 years, right through the 2008 election. It is that 5 percent that has made America a center-right country, rather than a centrist country—allowing a fairly conservative Republican Party to win both congressional and presidential elections most of the time.
That is why it is so vital for both the Republican Party and a newly aroused conservative movement to work feverishly to make the case to the broadest possible public for our right-of-center views over the next four years. Mr. Obama has not made his case yet. Just as Mr. Reagan won in 1980 in part because a lot of moderates were tired of Jimmy Carter—double digit interest rates, stagflation, Soviets in Afghanistan, Iranian hostage crisis—so a lot of moderates voted for Mr. Obama because of housing market crash, financial crisis, drop in 401(k) account values, and two wars.
Mr. Obama will try to convert those temporary moderate and conservative votes of his into permanent liberal and moderate voters, just as Mr. Reagan did in reverse between 1981-1984. If we conservatives can make our case, the election of 2008 will be a blip, just a kick-the-bums-out election. If Mr. Obama makes his case, he may have moved the center of political gravity to the left for a generation. Every conservative man and woman to battle stations.
8. Individual Rights and Constitutionalism, June 30 The importance of last week's ruling in Heller v. DC, recognizing the Second Amendment as guaranteeing an individual right to own guns, goes beyond its probable effect in rolling back gun control regulations in America's big cities. This is the first ruling in many years to assert individual rights as the grounds for a significant limitation on the power of government.
Advocates of liberty should be thinking about how we can achieve this same result for other individual rights—particularly another right that was universally recognized by the Founding Fathers but has been widely ignored in the past century: the right to property.
Below, the Chicago Tribune's Steve Chapman gives a brief overview of how the victory for gun rights was won, including a too-brief description of the most important factor: a decades-long campaign by legal scholars to restore an understanding of the real history and original meaning of the Second Amendment.
It is a model to follow for other rights as well—and for the concept of individual rights as a guiding principle in interpreting the Constitution as a whole.
"How Gun Control Lost," Steve Chapman, Chicago Tribune, June 29 Thursday's Supreme Court decision affirming that the 2nd Amendment recognizes an individual right to own firearms for self-defense was a vindication of those who have long argued that position. But it was an even more stunning defeat for advocates of gun control, who not so long ago seemed to have history, law, and public sympathy on their side. Back then, they couldn't have dreamed that the Supreme Court would say, "You know what? The National Rifle Association is right."…
What happened? Three main things:
Gun control didn't work. In the 1990s, despite its draconian ban, Washington became the murder capital of the United States. Chicago's homicide rate, which had been declining in the years before it banned handguns, climbed over the following decade….
Laws allowing concealed weapons proliferated—with no ill effects. In 1987, Florida gained national attention—and notoriety—by passing a law allowing citizens to get permits to carry concealed handguns. Opponents predicted a wave of carnage by pistol-packing hotheads, but it didn't happen. In fact, murders and other violent crimes subsided…. [T]oday, according to the NRA, 40 states have "right-to-carry" laws….
The 2nd Amendment got a second look. In 1983, a San Francisco lawyer named Don Kates published an article in the University of Michigan Law Review arguing that, contrary to prevailing wisdom in the judiciary and law schools, the Constitution upholds an individual right to keep and bear arms.
Numerous legal scholars, spurred to examine the record, reached the same surprising conclusion….
The majority opinion last week, written by Justice Antonin Scalia, drew heavily on this stack of scholarship.