This is a wonderful clip passed along by Robert K. I saw Louis CK live and he was really good. As the clip below demonstrates, he has a pretty cool moral code as far as comics go. (Notice how Conan can't even proceed because he realizes Louis CK is on a roll and that his prepared remarks are much better than whatever "spontaneous" joke would come up from following the notes.)



Robert K also passes along this from Louis CK's bio:

"Louis Szekely was born in Washington, D.C.[3] to an economist father of Mexican Catholic and Hungarian-Jewish descent." Wiki

"His father did not find a great deal of work in the United States as a Mexican economist."

Folks, I see tons of these videos; I only pass along the most outrageous. And let's get something straight: The point isn't so much, "Whoa, there are some bad apples in the police industry!" because yeah, there are violent thugs in most lines of work. Out of a million cops, surely some will occasionally be caught on tape doing horrible things.

But that's not the point; the point is the typical police department response to these "bad apples." Whether it's a cop drawing his gun and blowing away an incapacitated guy in front of a hundred witnesses, or a cop punching a guy handcuffed to a wheelchair, invariably the other officers either ignore it or help, and then their superiors completely minimize what happened when reporters ask them about it.

In contrast, imagine if, say, a road construction worker suddenly grabbed a pedestrian and started jackhammering the guy's foot. Do you think (a) the other workers would rush to stop him and (b) his boss would fire him immediately and apologize profusely to the public? It's even more obvious that those things would happen if it were a non-union crew working on a privately owned parking lot.

Anyway, here's the rather depressing video, followed by commentary from William Grigg to give more of the story. (But watch the video first.)



William Grigg:

In his official report, Schene did what police almost always do in such circumstances: He lied, in the serene (albeit misplaced) confidence that nobody would review the video from the holding cell, or at least take it seriously.

Schene claimed that the girl "provided resistance and failure to comply with instructions"; in fact, it was her compliance with instructions that precipitated the beating. The deputy wrote that his response was merely to "place" her in handcuffs, while omitting mention of kicking her in the stomach, beating her head against the wall, hitting her twice while she was prone and pinned down by two men twice her size, and then dragging her out by her hair.

He also reported that the shoe hurled by the detainee injured him so severely that he -- fragile, delicate creature that he is -- had to be treated at a nearby hospital. If that injury occurred, it was entirely self-inflicted: The video shows him banging his shin against the toilet as he attacked the terrified girl.

The video record documents that after the assault the girl, who understandably had difficulty breathing, required medical treatment. Schene described the treatment as necessary to deal with a "panic attack," a dishonest way of describing the reaction of a traumatized teenage girl to being gang-beaten by two adult males.

The video was discovered weeks later by a detective assigned to investigate the auto theft. Schene has been charged with fourth-degree assault, a gross misdemeanor with a maximum penalty of one year in jail.

Several years ago, Schene shot and killed an unarmed, mentally disturbed man following a traffic stop that degenerated into a "knock-down, drag-out" fight. The shooting was ruled "justifiable." Shortly after that incident, he was stopped for driving under the influence (apparently of prescription medication). He was given a deferred sentence and placed on probation, so that he could continue to bless the people of King County with his singular professionalism.

* Here's a great Wenzel analysis of censorship (perhaps self-imposed) in financial reporting. At a New York conference recently Luo Ping, a director-general at the China Banking Regulatory Commission, said, "We hate you guys. Once you start issuing $1 trillion-$2 trillion [$1,000bn-$2,000bn] . . .we know the dollar is going to depreciate, so we hate you guys but there is nothing much we can do.” It's amazing to see what the major US media did with the original story.

* Another great post by Mario Rizzo, further proving that Keynes would not have been a (modern) Keynesian. By the 1940s, Keynes realized that massive bursts of government deficit spending wouldn't fix the problem if the economy were still plagued by massive uncertainty about the future.

* Here Brad DeLong lends his support to the "Employee Free Choice Act." Now far be it from me to oppose employees' freedom--I guess the Republicans should introduce a "Was Slavery Really So Bad?" act--but if we're trying to fight unemployment, I don't see how, say, tripling the fines on employers (for infractions of labor laws regarding voting for unionization) is a move in the right direction. Incidentally, I speak from some (limited) experience: I was a member of the United Auto Workers for a few years. "What?!?!" you ask. You see, the UAW came in and unionized the graduate students at NYU, who were close to death from their onerous tasks of grading exams and such, while being paid to get PhDs. I'll explain the hijinx that ensued during the UAW campaign in a future post.

I noted two weeks ago that the monetary base had dropped significantly in the new year, and wondered whether Bernanke had come to his senses. Looks like that's a big fat negatory:

Wow, I can't believe Ron Paul wrung it out of him. But at around 4:45, Bernanke says that if price inflation really heats up, he will concede that his approach to the financial crisis was wrong. I suggest watching the whole video to see the exact context of his daring statement. (HT2LRC)

I really like the podcast interface. (If that's not the word I want, let me know. I am not totally familiar with the Intertubes just yet.) The Ron Paul vanguard talks with me about some basic economics from the PIG to Capitalism as well as the forthcoming PIG to the Great Depression and the New Deal.

Sure, I could justify my recommendation to buy physical gold with all kinds of jargon and thought experiments. But I will spare you. The real reason I think everyone should get his or her little pot of gold (just in time for St. Patty's Day) is this:



You have to ask yourself, "Does Ben Bernanke really have a good plan for dealing with that?"

Then, even if you think so, you have to ask yourself, "Does The Man really let a Princeton economics professor who doesn't know kung fu have control over the world currency?"

This ABC News story (HT2EPJ) gives the breakdown of the $989 billion in new taxes under Obama's budget forecast for 2010-2019. (Keep in mind folks that the federal government's fiscal year starts on October 1. So that's why the upcoming ten-year forecast starts in "2010." Right now we are in the middle of Fiscal Year 2009 as far as the federal budget goes.)

However, I am almost positive that this astounding $989 billion figure does not include one dime of the additional $645 billion in new revenues from cap and trade auctions. Check out the bottom row of page 123 in the actual budget (pdf).

Props to Dan Simmons for bringing this to my attention, and also for finding this cool analysis (pdf) of the Greatest Hits in tax hikes and cuts. The previous one-year record was a little over $100 billion (in 2007 dollars) from the enormous tax hike in 1942. Obama's new proposal blows that out of the water.

Mitche Hunt emailed me a description of the bailout mascot, and Google pulled up this page at the top. I think that's the original source but not sure... Anyway:

The United States government today announced that it is changing its national symbol to a CONDOM because it more accurately reflects the governments political stance.

A condom allows for inflation, halts production, destroys the next generation, protects a bunch of pricks, and gives you a sense of security while you're actually being screwed.

To my fellow Americans, it really doesn't get much more accurate than this.

This guy really cracks me up. If you watch it, then come back and watch it again in a day, he is even funnier. Do you think that is really his accent, or is it an American doing a Borat/Siskel/Saget merge? What's great is now that people have seen how easily you can bring traffic to your website by putting out a very entertaining video clip, the stuff on YouTube is going to get awesome.



Another thing: I don't get what the guy on the ground with a bullet in his forehead is doing right then, but it's clearly not the agent that Trinity shoots at point blank range (in the side of the head). So the "blooper" documented at around 2:55 is an open one in my book until I see more evidence. (I don't work for Scotland Yard or anything.)

Back when Treasury Secretary Geithner was telling China to stop "manipulating" its currency, I was puzzled: Didn't that mean he wanted them to stop buying US Treasurys, and hence push up US interest rates and consumer prices? (Robert Wenzel over at EPJ was saying this too, I believe, but I don't have the link handy.)

Well Greg Mankiw (HT2MR) nails it by quoting Geithner on "manipulation," and then now Hillary Clinton on China's duty to finance Obama's spending spree. Mankiw comments:

The inconsistency in the policy here becomes fully apparent only when one understands how China "manipulates" its currency: It keeps the value of the yuan lower than it otherwise might be by supplying yuan and demanding dollars in foreign-exchange markets. Those dollars are then invested in U.S. Treasuries.

In other words, Secretary Clinton is now asking the Chinese to do precisely what Secretary Geithner asked them not to do.

Now this is just the kind of thing I meant in my earlier post about Obama's possible sincerity. Some right-wingers will say, "Ha! What a moron! Clinton/Geithner doesn't understand currency markets."

But no, that's not it at all. Each of them understands full well that if China stops buying Treasurys, that will make the dollar fall. We have to always remind ourselves that politicians say things for political effect, not in order to communicate their actual view of the world.

To those readers who want to nurse their hatred of politicians, I want to raise the possibility that Barack Obama actually believes his stimulus plan is a good idea. Don't get me wrong, he knows full well all the political back deals and payoffs it contains. But I am entertaining the possibility that he actually thinks on net, it is better than doing nothing, or doing what Sean Hannity would recommend.

We have all heard the "Well whaddya think a stimulus is?" line, but the fuller context shows Obama's charm. And when he says, "That's not me talking, that's the economists talking..." well darnit, he's right!

If someone gets a PhD in economics and manages to write this, or wins the (pseudo) Nobel Prize and writes this, how can you fault Obama for believing his plan will work?



Does anybody know if Obama is right about the Republicans initially saying the mix of tax cuts and spending was a pleasant surprise, and then a week later going nuts about the ratio? I think he is right, but is that a fair charge on his part? Because the package went through an evolution. Did the original version have more tax cuts or less?

Another thing: My theory is that Obama tries to minimize his actual lying. So during the campaign, he would answer tough questions by saying, "I have always said..." so that he can RIGHT THERE be uttering a true statement, referring to the lie of his earlier self.

In the clip above, when he's discussing earmarks, listen carefully to what he says:

"Then there's the argument, 'Well this is full of pet projects!' When was the last time that we saw a bill of this magnitude move out with no earmarks in it? Not one."

Then people start clapping, because of course Obama has led them to believe that this ~$800 billion monstrosity is earmark-free. But notice that he doesn't actually say that.

Straight-shootin Bob Higgs learns us all a lesson about fiscal responsibility at LRC today. But before I give you Higgs' funny conclusion, you need to know what he is responding to. At first I was going to just paraphrase, but folks, you really have to read this New York Times article describing the government's latest plan:

The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans.

The Fed is expected to start the first phase of the program, which will provide $200 billion in loans to investors, in early March.

The program . . . does not try to change securitization practices that, many investors say, spread risks throughout the world and destroyed financial institutions. Policy makers acknowledge that for now, fixing credit ratings, reducing conflicts of interest and improving disclosure can wait.

Under the program, the Fed will lend to investors who acquire new securities backed by auto loans, credit card balances, student loans and small-business loans at rates ranging from roughly 1.5 percent to 3 percent.

Depending on the type of security they are borrowing against, investors will be able to borrow 84 percent to 95 percent of the face value of the bonds. Investors would not be liable for any losses beyond the 5 percent to 16 percent equity that they retain in the investment.

In the initial phase, the Treasury will provide $20 billion and the Fed will provide $180 billion. Treasury Secretary Timothy F. Geithner said last week that the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion.

So in response to that, Higgs declares:

Well, there you have it. If you can imagine anything more idiotic in the present circumstances, your imagination is more powerful than mine.

I have this recurring nightmare in which Tim Geithner is lying in a dark corner of a saloon. His bosom buddy Ben Bernanke comes in, sees him lying there in a heap and rushes to his side. He finds his comrade breathing heavily and reeking of a warehouse worth of booze. He shouts for help: "Bartender, get over here quick. Bring this man a whiskey. And make it a double!"

Into such hands has fate delivered us. May God have mercy on our souls.

Go get em, Bob!

I try to make a religiously themed post every Sunday, but my other work took over my weekend. (I shudder to think what that says about my priorities, I know.)

For today's post I want to move toward an understanding--i.e., I am not claiming I actually have it yet--of how the God of the Old Testament could issue commands like these (Lv 20):

1 Then the LORD spoke to Moses, saying, 2 “Again, you shall say to the children of Israel: ‘Whoever of the children of Israel, or of the strangers who dwell in Israel, who gives any of his descendants to Molech, he shall surely be put to death. The people of the land shall stone him with stones. 3 I will set My face against that man, and will cut him off from his people, because he has given some of his descendants to Molech, to defile My sanctuary and profane My holy name. 4 And if the people of the land should in any way hide their eyes from the man, when he gives some of his descendants to Molech, and they do not kill him, 5 then I will set My face against that man and against his family; and I will cut him off from his people, and all who prostitute themselves with him to commit harlotry with Molech.
6 ‘And the person who turns to mediums and familiar spirits, to prostitute himself with them, I will set My face against that person and cut him off from his people. 7 Consecrate yourselves therefore, and be holy, for I am the LORD your God. 8 And you shall keep My statutes, and perform them: I am the LORD who sanctifies you.
9 ‘For everyone who curses his father or his mother shall surely be put to death. He has cursed his father or his mother. His blood shall be upon him.
10 ‘The man who commits adultery with another man’s wife, he who commits adultery with his neighbor’s wife, the adulterer and the adulteress, shall surely be put to death. 11 The man who lies with his father’s wife has uncovered his father’s nakedness; both of them shall surely be put to death. Their blood shall be upon them. 12 If a man lies with his daughter-in-law, both of them shall surely be put to death. They have committed perversion. Their blood shall be upon them. 13 If a man lies with a male as he lies with a woman, both of them have committed an abomination. They shall surely be put to death. Their blood shall be upon them. 14 If a man marries a woman and her mother, it is wickedness. They shall be burned with fire, both he and they, that there may be no wickedness among you. 15 If a man mates with an animal, he shall surely be put to death, and you shall kill the animal. 16 If a woman approaches any animal and mates with it, you shall kill the woman and the animal. They shall surely be put to death. Their blood is upon them.
17 ‘If a man takes his sister, his father’s daughter or his mother’s daughter, and sees her nakedness and she sees his nakedness, it is a wicked thing. And they shall be cut off in the sight of their people. He has uncovered his sister’s nakedness. He shall bear his guilt. 18 If a man lies with a woman during her sickness and uncovers her nakedness, he has exposed her flow, and she has uncovered the flow of her blood. Both of them shall be cut off from their people.
19 ‘You shall not uncover the nakedness of your mother’s sister nor of your father’s sister, for that would uncover his near of kin. They shall bear their guilt. 20 If a man lies with his uncle’s wife, he has uncovered his uncle’s nakedness. They shall bear their sin; they shall die childless. 21 If a man takes his brother’s wife, it is an unclean thing. He has uncovered his brother’s nakedness. They shall be childless.
22 ‘You shall therefore keep all My statutes and all My judgments, and perform them, that the land where I am bringing you to dwell may not vomit you out. 23 And you shall not walk in the statutes of the nation which I am casting out before you; for they commit all these things, and therefore I abhor them. 24 But I have said to you, “You shall inherit their land, and I will give it to you to possess, a land flowing with milk and honey.” I am the LORD your God, who has separated you from the peoples. 25 You shall therefore distinguish between clean animals and unclean, between unclean birds and clean, and you shall not make yourselves abominable by beast or by bird, or by any kind of living thing that creeps on the ground, which I have separated from you as unclean. 26 And you shall be holy to Me, for I the LORD am holy, and have separated you from the peoples, that you should be Mine.
27 ‘A man or a woman who is a medium, or who has familiar spirits, shall surely be put to death; they shall stone them with stones. Their blood shall be upon them.’”

Whatever else you want to say about the LORD, it's clear that He means business.

No, seriously. I really think that's part of what is going on in the above.

If you don't have kids, you may not agree with or understand what I'm about to say. But the one person on Earth on whom I am the hardest, the person that I am the "meanest" to, is my 4-year-old son. Now some of it is due to my mistakes (in losing my temper or being impatient), but a lot of it is intentional. In other words, heck yes I want my son growing up being a least a little bit afraid of me. I was afraid of my parents, and it was a good thing.

Why? Because even though they overreacted at times to what were really minor trangressions (compared to all the crazy stuff my friends did), they were fair about it and their rules really were for my own good. So when I say I was afraid of my parents, I don't mean because my dad might come home drunk and take out his belt. No, I mean if I did a halfhearted science project in 5th grade I would get yelled at. NOT because "you're stupid," mind you, but because, "Why didn't you put in any effort into this? Did you see how much work the other kids did?"

So the same with my son, if he talks back to my mom (i.e. his grandma) and she thinks it's hilarious, I am still going to (verbally, not literally) slap the back of his head and say, "Whatsa matta wich you?"

I think that is the way we need to understand the God of the Old Testament. The children of Israel behaved like children when it came to their relationship with their Father.

Now I know, some of you are going to say, "So why don't you stone your 4-year-old when he talks back?" I am admitting that the intensity of the above passages surprises me. But I must reiterate that the one person I really let "have it" when he has screwed up is my son. He's a little guy, so don't misunderstand: I don't mean I do anything that would concern Social Services. But that's my point; I actually spend a lot of my day criticizing / correcting what this little 4-year-old does. In contrast, if somebody else's 4-year-old came up and literally stabbed me, I truly don't think my reaction would be to scold the kid. (I'm thinking the kid would have to be about 6 or 7 before I would really be insulted.)

So, when he has really screwed up--like if he asks me for apple juice and I say, "OK one minute" and then he doesn't wait but instead tries to fill up his own sippy cup and drops the ENTIRE bottle of apple juice on the kitchen floor so the sticky liquid flows under the stove and refrigerator--he is not happy with my performance for the next 10 seconds. He knows I am seriously mad.

OK now back to the children of Israel: They grew up in a sick, twisted world. There was lots of crazy stuff going on back then. Picture it this way: Sure you can be cynical about things, but generally speaking society gets more civilized over time. E.g. it would be inconceivable for police departments to spray down unpopular minorities nowadays, thought it happened in the '60s. (Of course, it is still acceptable for the BATF to burn unpopular minorities, but that's another matter.)

Now, work your way backwards. Every generation, humans just keep getting more bigoted and vicious and...well, they are a bunch of animals by the time you go back thousands of years.

Now in that context, the LORD decides He is going to personally deal with this situation. The human race, without His direct intervention, was going to hell. Now when the children of Israel were very immature in their relationship with Him, He had to--you saw this coming, right?--put the fear of God into them. That was the first order of business.

Last point: Some people understandably ask, "How could God possibly order the Israelites to kill pagan babies?" Well, He is the author of the universe, truth, beauty, love, mathematics, nature, and limericks. You don't think He is "allowed" to setup the universe in such a way that people get killed?

Suppose your wife says, "Guess what honey, John Grisham is coming to dinner next week. Jill knows him and he's in town." Would you say, "Are you nuts? Do you know he makes his characters murder other characters in his novels? You think I'm allowing that fiend into our house?"

Have you heard the new term for bank nationalization? All the cool kids are calling it "pre-privatization." Oooh, you're so scared of bank nationalization, what a chicken. Is it because your mommy and daddy warned you about it? I bet they told you to stay away from dope and rock 'n roll, too.

This is a really neat idea by the New York Times. They got a few big guns to discuss the government's moves during previous recessions. Unfortunately, the three economists all cling to the Keynesian/monetarist view that government spending and money printing boost the economy, with the only downside being rising prices. (Somebody else, who claims to be an Austrian business cycle theorist, holds the exact same view apparently without realizing that his analysis is identical to that of mainstream, NYT-approved gurus.)

A colleague recently forwarded me an email he had received asking about the broken window fallacy. (If you have never heard this spelled out before, you absolutely must read Hazlitt's discussion--it's very short.)

Anyway, the correspondent was puzzled, because if the "flaw" in the broken window fallacy is that the baker would have spent money on, say, a suit, then isn't that compensated when the glazier goes and buys something? In other words, isn't Hazlitt just narrowly focusing on the loss in employment and income to the tailor (who would've sold a suit to the baker had the hooligan not broken the baker's window)? Here is my answer:

The issue isn't one of income or job creation. [Your correspondent] is right; there will be just as much employment and the level of sales will be the same in the aggregate.

The difference is that the community will be one item poorer. So yes, the window glazier can go buy a suit that the baker would originally have purchased, but by the same token the tailor would have bought something with the $$ that the baker would have spent on his suit, if the window had never been broken.

If you picture the two timelines diverging once the hooligan breaks the window, the point is that no matter how much production the spending stream entails, the community will always be materially poorer in the timeline that starts off with one fewer window. Only by assuming that people produce *more* after the kid breaks the window, can the community close the gap in wealth at the starting point.

And Bastiat/Hazlitt's point is that there's no reason to assume people would produce more after the window is broken. The baker's spending doesn't do it, because he would have spent that $$ on somebody else, and the glazier's spending doesn't do it, because the tailor's spending would have done the same in the original timeline, etc.

Ah, poor Brad DeLong. In a post entitled, "Against Stupidity the Gods Themselves Contend in Vain," he echoes Paul Krugman's exasperation with moronic Republicans. Here's Krugman full post:

The most valuable lesson I learned from the year I spent in Washington (1982-1983, on the staff of the Council of Economic advisers — I was the senior intl economist, the senior domestic economist was a guy named Larry Summers. What ever happened to him?) was the extent to which senior government figures have absolutely no idea what they’re talking about.

So when I read something like this:

“Why should we reward Fannie Mae and Freddie Mac with $200 billion in taxpayer dollars without first reforming these housing entities that were at the heart of the economic meltdown?” House Minority Leader John A. Boehner (R-Ohio) said in a statement.

and people ask what on earth Boehner might mean when he talks about taxpayers “rewarding” institutions that are owned by taxpayers, I go for Occam’s Razor: Boehner doesn’t have some complicated notion in mind, he either doesn’t know that the government took over F&F months ago, or he just doesn’t get this “government-owned” concept. [Emphasis in original]

Huh, that is surprising. But of course, what's even more surprising is that we taxpayers would shift our funds around in such a pointless fashion. I mean, I didn't transfer $200 billion from my checking account to my wallet yesterday, so why would I do the same with my Fannie Mae property?

Oh, it's because F&F are going to buy stuff with our money, or they're going to guarantee the value of certain assets, using our money as the backstop. That's why the government is authorizing money in the first place; that's why they are picking $200 billion and not, say, $200 trillion--even though according to Krugman, the latter number would just be a meaningless accounting trick.

Note that I am not necessarily defending the wisdom and intelligence of John Boehner; his statements are no doubt calculated for political effect.

But what I am saying is that Boehner's statement is perfectly sensible. It is Krugman (and DeLong) who are falling for the crudest of fallacies when they think the taxpayers can't possibly lose on agencies that they "own."

Anyway, I'm a little bearish right now. I want to sell my shares of Fannie and Freddie. Does anyone have the correct broker contact info? I seem to have misplaced the laminated card that Henry Paulson mailed me back in September.

So argue McGrattan and Prescott in this 2003 Fed paper (pdf). Here's the abstract:

Many stock market analysts think that in 1929, at the time of the crash, stocks were overvalued. Irving Fisher argued just before the crash that fundamentals were strong and the stock market was undervalued. In this paper, we use growth theory to estimate the fundamental value of corporate equity and compare it to actual stock valuations. Our estimate is based on values of productive corporate capital, both tangible and intangible, and tax rates on corporate income and distributions. The evidence strongly suggests that Fisher was right. Even at the 1929 peak, stocks were undervalued relative to the prediction of theory.

Hmm. I think if your model predicts that stocks were undervalued in 1929, then your model is wrong. Forget the fact that the Dow didn't surpass its 1929 peak until the 1950s (according to Amity Schlaes)--after all, one could plausibly argue that the New Deal and World War II totally changed the underlying fundamentals that prevailed in 1929. Fine.

But still, how do our authors explain the huge rise in the stock market during the late 1920s? In other words, if stocks were undervalued at the 1929 peak, then they must have been ludicrously undervalued in 1927, since I don't think there were any major changes in the "fundamentals" during the two years.

I haven't read the paper so maybe they give an answer. They do address the issue of the crash itself--they follow Friedman and blame it on the Fed tightening. I think this theory that the tightwad Fed caused the crash may be Friedman's worst contribution, surpassing his role in creating tax withholding.

* Here is Nouriel Roubini explaining that laissez-faire capitalism has failed. I'm not sure how the Federal Reserve (which caused the boom) or the trillions in bailouts and other rescue moves (which caused/exacerbated the financial panic) qualifies as laissez-faire. But beyond that quibble, I love how Roubini lists all of the things that can go wrong with more regulation (such as regulatory capture and jurisdictional arbitrage), and basically says, "So the politicians should avoid those pitfalls when saving the world."

* Have you ever wondered how economies got out of liquidity traps before the advent of wise countercylical fiscal policy? Krugman explains in this post. Apparently what happens is that the capital stock wears out and thus businesses have no choice but to go invest. (BTW Krugman links to this New School outline of Keynesian Business Cycle Theory, which I haven't read but looks like it might be interesting.)

* Here's a disgusting story of two Pennsylvania judges who took payoffs from "private" juvenile prison camps--that's my term, but it's what they were!--in exchange for finding defendants guilty and shipping them to the companies. (Presumably the companies got paid per "criminal" processed.) I am sure a lot of leftist prisoner advocates are going nuts about this, saying that you can't bring in the profit motive to something like justice. But on the contrary, this just shows how screwed up the government is. It was the government judges who abused their awesome power over these kids' lives. To switch contexts, suppose it turns out that the owners of that Georgia peanut butter factory paid off the FDA inspectors to look the other way. Would that prove profits and peanut butter don't mix, and that the government should nationalize Skippy and Jif along with Bank of America?

* Wintery Knight has an interesting follow-up discussion to my post from last Sunday. I had wondered why Jesus spoke in parables (rather than plainer language), and Wintery Knight discusses God's "hiddenness" more generally.

Longtime readers know that I care little for the Bureau of Labor Statistics' "seasonal adjustments" to their data. If you know where to look in their latest report, you'll see that the unadjusted index of consumer prices rose 0.4% from Dec 08 to Jan 09, which is an annualized increase of 4.9%.

As I said with regard to the PPI numbers yesterday, a single month's numbers don't mean all that much. But I think this is the beginning of the Great Reflation of 2009.

I'm starting to notice a pattern... Anyway, gold broke $1,000, though as of this post it's down to $990. And the S&P 500 right now is down about 1% for the day. It's down 43 percent from a year ago.

I think the investors of the world are finally starting to read this blog.

Folks, you don't understand that my dissertation chairman Mario Rizzo is normally a low-key guy. He has been summoned into the policy debate much as Batman heeds Commissioner Gordon's signal.

Anyway, here's Rizzo's talk to the Club for Growth meeting. It's really good. An excerpt:

To create value, stimulus will have to steer clear of a number of problems.

First, it will have to attract resources that are currently producing less value than would be produced in uses engendered by the stimulus package. Given that more than 90% of the labor force is currently employed, and that leisure does have a value, this is not obvious. The areas stimulated by government spending will not conveniently use only unemployed resources.

Second, the actual activities promoted by new government spending would have to be of positive value, especially in the aggregate. This problem will be exacerbated by the political reality that areas in which misallocations are already greatest will experience the greatest pain, thus attracting compensatory spending.

Third, the debt created to finance this spending will require either higher taxes in the future or it will generate inflation. In either case, future wealth will be lost as productive activities will be penalized. Will the wealth created today, if any, be worth the cost of future losses in wealth?

Details here. An excerpt:

En conclusión, los críticos del plan de “estímulo” de casi un billón de dólares tienen razón en apoyar recortes de impuestos antes que aumentar el gasto público. Sin embargo, muchos de éstos justifican su crítica de tal forma que ellos mismos demuestran la superioridad del gasto gubernamental. Un correcto análisis muestra que es mejor permitir a los contribuyentes que mantengan su dinero, incluso si dedican el 100% para amortizar sus deudas. No hay nada mágico en el consumo para pensar que nos saque de ésta. De hecho, fue el exceso de consumo lo que nos metió en la crisis actual.

This was all over the internet yesterday, but just in case you missed it: CNBC's Rick Santelli goes nuts from a Chicago trading floor. The anchors back at the station keep chuckling and making dumb jokes; I can't tell if they were really thinking, "Whoa, Rick, tone it down!"

Now you never want to put too much into a single month's readings, but if you--like me--have been wondering when the serious price inflation is going to start kicking in, the latest PPI report is sobering.

If you take the raw numbers--i.e. not the "seasonally adjusted" ones--the following shows the monthly and annualized percent change in producer prices in the following stages, going from Dec 08 to Jan 09:

Finished consumer goods ====> +1.1%, or 14% annualized
Capital equipment ====> +0.5%, or 6% annualized

Are the floodgates finally opening? Are people ready to accept that you can have rising prices even with high unemployment?

I knew that if I overlooked his ill-conceived attacks on Jeff Tucker and me, that Robert Wenzel would eventually justify my daily visit to his site. And he did not disappoint. Really, you need to read this whole blog post. Wenzel points out the government's deception regarding money market fund withdrawals in September 2008, and gives decent evidence showing that Bernanke panicked that month. And then Wenzel ends with this:

Since the Congressman Kanjorski comments about the panic withdrawals, the Fed has obviously decided, given that we live in the the age of the internet, to simply go with the flow and act as though it was a known fact about heavy mutual fund withdrawals across the board. It wasn't. I was looking for such stories back in September because of the problems at Primary Reserve. They weren't there. But more important than acknowledgements of the withdrawals, is the panic it caused. It completely reversed Fed policy. The problems at Bears Stearns didn't do this. The problems at Lehman didn't do this. Not even the sub-prime mortgage crisis caused such panic. Congressman Kanjorski is right. It was an electronic run on the banks. If it had been allowed to continue, it would have resulted in trillions in withdrawals, the system would have collapsed. That's what caused Bernanke to within a matter of a couple of days completely change Fed money growth policy. The problem now is that he can't stop printing or the same threat comes back. He's trapped in a major monetary inflation spiral that will ultimately lead to a huge price inflation spiral.

Gold has been going up for a reason. My guess is the players, the Paulson's and Rubin's know what is coming and while they have "The Kid" Geithner run distraction plays, they are loading up on the yellow metal. It's the one thing that will survive the financial panic ahead. Gold won't melt in an overall financial meltdown. I hope you own some.

Unfortunately you can't hear my jokes. I would've asked them to mic me if I realized Walter was going to be dishing so many questions my way.

Here's a great article on Mises.org discussing the sickness and finally death of the Bretton Woods world monetary system. It was always awkward for me to discuss this, because the conventional graphs of gold prices make it look as if the Fed did a good job for a few decades:



But if you read the article linked above, the author (John Paul Koning) explains what was going on during that apparent period of tranquility when gold traded at $35 per ounce.

Here is an email I sent to a Listserv:

Dear List,

On the way to work this guy on the radio was talking about American Idol, and it reminded me of a possible paper topic. I don't even have a TV and I can proudly say I never watched the show, but for those of you who have, this could be a fun paper:

I think you could show that the rock stars chosen by the evil music industry are much better than those chosen "democratically" by the American people. Done correctly, I think you could convince most Americans that if they had to choose between the entire menu of rock stars produced from one or the other, that they would much rather stick with what the rich elites "tell them" to listen to, as opposed to the people's choice as produced by the American Idol process.

You could neatly deal with possible objections like, "A musician with real talent won't hurt his image by going on American Idol." Right, and nobody in his right mind would run for senator either, and have the press interviewing his old girlfriends etc.

Although I haven't watched American Idol, I am betting that people (in the early rounds especially) have to do really "obvious" things like make their voice wave around, even though that is amateur stuff to a true musician. I definitely noticed that in some of the comedy shows where they have to give a 2-minute routine in the early rounds and then the audience votes to see who advances. Somebody like George Carlin would probably get knocked out early on because some other guy has a really funny impression of Bill Clinton, but that's all the guy has. But his 2-minutes are funnier than Carlin's two minutes (if you've never heard of him before), and so Carlin ends up as a cranky janitor.

One last point: Is it a coincidence that (what my dad would call) the golden age of rock and roll coincided with payola? If you've got a few rich recording studios, and they think they've spotted someone with real star power, they can pay the radio stations to play that song a million times. People think that's awful and manipulative, but you could say that about any advertising campaign.

Bob M.

All right this confusion with multiple Bob Murphys is really getting out of hand. I was just talking to my boss about media training and he said, "Of course, we really need to polish the karaoke." So I just laughed, figuring he'd heard of my antics at Mises University. But then he said, "For one thing, that was a really hard song you picked."

I said, "Wait, what are you talking about?" It seems someone posted it on YouTube without telling me.

Now I just want to say one thing: Below was a song I picked as a warm up, the first song of the night, when the bar wasn't even half full yet. OK? I had never done it before, and I was curious. When more of the students showed up, then I unloaded with the stand-bys that I have practiced several times.

Folks, it's no fun being a critic of the government when they do stuff like this. C'mon people, you need to wake up and start asking questions, so that I can turn up the investigative reporting. In the meantime, I am reduced to pointing out the absurdities of this CNBC article:

President Obama unveiled his much-anticipated plan Wednesday to fight the housing crisis, pledging up to $275 billion to help stem a wave of foreclosures sweeping the country....

A total of 8.1 million U.S. homes, or 16 percent of all households with mortgages, could fall into foreclosure by 2012, according to a report by Credit Suisse....

An Obama administration official said the total plan commits up to $275 billion for housing, including $50 billion from funds already committed in the country's financial sector bailout. It aims to help up to 9 million American families.
...
The Obama administration's summary of the plan said the plan could offer a buffer of up to $6,000 against value declines on the average home.

So do I need to spell it out? I didn't realize postage (for the government checks) was so expensive these days.

Holy cow, it's Calvin Coolidge railing against Big Government. But guess what? Coolidge actually slashed taxes enormously and ran a surplus every year in office. (HT2PB)

In the beginning it's a bit slow, but then it picks up. And be sure to watch Coolidge's smooth delivery in the beginning. You almost forget the note cards are there.



What a concluding line! "One of the greatest favors that can be bestowed upon the American people, is economy in government."

Despite a campaign that certainly led you to believe otherwise, the Obama Department of Justice has not altered the Bush position on whether victims of rendition could sue the Boeing subsidiary that facilitated their torture. GG is fuming, and rightly so. (HT2SR)

Here's a great part in one of the updates:

It's really remarkable what happened. One of the judges on the three-judge panel explicitly asked the DOJ lawyer, Doug Letter, whether the change in administrations had any bearing on the Government's position in this case. Letter emphatically said it did not. Instead, he told the court, the new administration -- the new DOJ -- had actively reviewed this case and vetted the Bush positions and decisively opted to embrace the same positions.

There's no doubt about that....This was an active, conscious decision made by the Obama DOJ to retain the same abusive, expansive view of "state secrets" as Bush adopted, and to do so for exactly the same purpose: to prevent any judicial accountability of any kind, to keep government behavior outside of and above the rule of law.

Finally, Wizner noted one last fact that is rather remarkable. The entire claim of "state secrets" in this case is based on two sworn Declarations from CIA Director Michael Hayden -- one public and one filed secretly with the court. In them, Hayden argues that courts cannot adjudicate this case because to do so would be to disclose and thus degrade key CIA programs of rendition and interrogation -- the very policies which Obama, in his first week in office, ordered shall no longer exist. How, then, could continuation of this case possibly jeopardize national security when the rendition and interrogation practices which gave rise to these lawsuits are the very ones that the U.S. Government, under the new administration, claims to have banned?

I suppose the die-hard Obama fans will say that he needs to placate the right on civil liberties, in order to push through his trillion-dollar spending spree. But notice that's exactly how Bush partisans excused his capitulation on prescription drug benefits and spending in general: Bush "had" to go along on those matters in order to get the Democrats to go along with national defense.

Wouldn't it be great if the parties compromised the other way? For example, the Democrats say, "OK we'll support tax cuts, but only if you join us in insisting that the FBI gets a warrant before tapping an American's phone." And the Republicans would say, "OK fine, we'll have all the troops out of Iraq by 2011, but only if you agree to abolish the Department of Education by the same deadline." Ahhh...

David Henderson tips us off to these hilarious interviews by some guy Jan Helfeld. Two of David's favorites are below. The first is Nancy Pelosi explaining why she doesn't pay her interns minimum wage, and the second is Harry Reid explaining that taxes are voluntary. (Note: If you get bored during the first one, at least check out the ending--it's pretty testy.)

This gentleman John Steinsvold emailed me this self-described utopian article, on the wonders of abolishing money. I told John I would post it here, so long as he agreed to go at least a few rounds in debate. I also assured him that I would keep any comments courteous. So by all means, tell John why you think he is wrong, but we don't want him feeling like this at the end.

For my part, I'll just criticize a few things and leave the heavy lifting to readers who care to cross swords with John.

Here John describes the alleged evils of society's reliance on money:

Needless poverty, unemployment, inflation, the threat of depression, taxes, crimes related to profit (sale of illicit drugs, stolen IDs, muggings, bribery, con artists, etc.), conflict of interest, endless red tape, a staggering national debt plus a widening budget deficit, 48 out of 50 states in debt, cities in debt, counties in debt, skyrocketing personal debts, 50% of Americans unhappy at their work, saving for retirement and our children's education, health being a matter of wealth, competing in the "rat race", the need for insurance, being a nation of litigation, being subject to the tremors on Wall Street, fear of downsizing and automation, fear of more Enrons, outsourcing, bankruptcies, crippling strikes, materialism, corruption, welfare, social security, sacrificing quality and safety in our products for the sake of profit, the social problem of the "haves" vs. the "havenots" and the inevitable family quarrels over money.

So my first question is, which of the above problems are due to money per se, and which are just related to simple acquisitiveness or greed? For example, right now a heroin addict might break into your house and swipe your wedding ring, in order to get the money with which to buy heroin. But OK, suppose there is no money. Won't the addict still want to steal my ring to trade for his heroin? Or are you proposing the abolition of trade itself, not just trading with a medium of exchange?

But let's get back to John:

Yes, everything will be free according to need. All the necessities and common luxuries will be available on a help yourself basis at the local store. Surely, this country is capable of supplying the necessities and common luxuries for everyone in this country many times over.

I would like John to clarify his reasons for this belief. Of course the economy is physically capable of cranking out more necessities, but only if it produces fewer units of other type of goods. I.e. unless he is also going to accuse the capitalist system of wasting resources (and maybe he will take that tack), then in order to increase the amount of bread and milk produced, we will have to make due with fewer plasma screen TVs and yachts.

So now, if John agrees with me so far that more necessities will imply fewer "luxuries," then the question becomes: Why are the current people who bust their butt going to put in so many hours? It is true that many people currently acquire their wealth in order to wear as a badge of honor around their peers. But whatever their motivation, many of these people put in insane hours (at law firms, hedge funds, etc.).

In John's world, I imagine that most parents don't choose to put in 100 hour work weeks. So the total amount of focused labor is going to go way down. Is John still so sure that the basic necessities will all be easily produced?

To repeat my argument: It's not enough to look at "total output" right now, and realize that a slight change on the margins will allow enough of the necessities to be produced. Because one of the main things supporting the level of "total output" right now are the incredible hours and other energies some people devote to their jobs, when it is possible for them to amass far more wealth than their neighbors. These people might become poets in John's world.

My other big question for John is: why do you still have Congress in your world?! We're going to be so utopian and dreamy, that we're disposing of money in a few paragraphs--and yet you can't also imagine people interacting without an institution of organized violence?!

I should make clear that I am open to the possibility that a truly voluntary shift in people's perspectives might allow something that "looked like" the abolition of commerce. For the sake of argument, suppose I am so persuasive that I convert 99.9% of the world to Christian pacifism. Since no one supports the use of violence to achieve political goals, everybody stops voting. But new, despotic governments don't rise up in their place, because only 0.1% of the population is willing to use violence, and that's not enough people in any given country to really setup a system of exploitation.

So anyway, in this incredible world, there are no taxes or other government distortions with the economy. So there's unbelievable economic growth. But at the same time, you also don't have all of the things generating crime. (You don't have a drug war, government welfare systems, minimum wage laws, government schools, etc.) And because there is no threat of "war" (the people would forget what that word even meant after a few generations), everybody would be very very relaxed.

Now in that context, it is entirely possible in my mind that those people would be so incredibly wealthy and yet at the same time so spiritually strong, that from our perspective it would appear that they had abolished economic scarcity.

The theorems of economics would still be valid, they just would no longer be applicable. The very first assumption of economics is scarcity, the fact that consumers have unlimited desires but only limited resources.

However, in the idyllic world I am describing, perhaps desires would be so utterly different, and the material "production possibilities frontier" would be so incredibly large, that the blessed creatures of that era would no longer agree that people had "unlimited desires, limited resources."

But anyway, even if that were possible, it doesn't require the conscious abolition of money. That would happen naturally, as the deeper motivations of people changed.

Here is George Selgin discussing good vs. bad deflation. Selgin says that good deflation occurs when businesses cut unit production costs, allowing them to charge lower prices. If this is what's driving falling prices, then none of the typical fears will materialize. On the other hand, Selgin says that a "bad" deflation occurs when the money supply contracts as in the 1930s, due to a collapse in bank loans (in the midst of a fractional reserve system). In the big picture view, Selgin says that supply-driven deflation is good (same amount of money chasing more goods), whereas demand-driven deflation is bad (much less money chasing fewer goods).

I have now become so radical (due to my work on the forthcoming Depression book) that I won't even follow Selgin in calling the price deflation of the 1930s bad. At worst, I think that's like calling the headache you get when you have a fever bad. I.e. it's still a symptom of something deeper, and in fact is related to the economy's attempt to cure itself of the fundamental problem. (And yes yes, you purists, Selgin is using "deflation" to mean falling prices.)

* * * * *
Now here's an article that almost lost me in the beginning, but then about halfway into it I decided the guy was a genius. I want to draw your attention to this chart:



Now here's what the author--Daniel Amerman--has to say about the above chart:

If you’re concerned about a new US depression leading to unstoppable price or monetary deflation because of what happened in the 1930s, let me suggest that you study and remember the graph above. When you get worried about monetary deflation – take another look at March of 1933. Remember as well the one near universal lesson from the long and convoluted history of money: every time the rules governing a currency lead to a problem that causes too much pain for a government to bear – the government just changes the rules....

[W]hat the Great Depression of the 20th century in the United States historically proves is not the unstoppable power of deflation, but the opposite: that a sufficiently determined government can smash deflation at will, virtually instantly, even in the midst of depression, and replace it with inflation.

I explain here. The intro:

In their zeal to oppose the lunacy of the so-called "stimulus" plan, many radio talk show hosts and other pundits have fallen into the Keynesian trap. Rather than the politicians spending nearly a trillion dollars, they argue, it would provide much more stimulus if the government gave massive tax cuts. This would "put money back in the pockets of average Americans" and they would go to the mall and "get that money into circulation and boost the economy."

Although the instincts behind such arguments are sound, they often betray an underlying Keynesian mindset. By justifying tax cuts on the grounds that the taxpayers will go out and spend the money, these critics actually concede the entire case. After all, why take a chance on those fickle taxpayers, who might selfishly decide to pay down some debt or to stick the extra cash under the mattress? If buying stuff is the way to promote recovery, then nobody can top the DC politicians.

This is getting ridiculous. Besides the golf announcer, a million athletes, and a Boston College economics professor, there are just too many of us Bob Murphys walking around. I came across this blog post and was getting really upset when it said:

Perhaps, argues Bob Murphy, Greenspan was motivated by his Objectivist beliefs to act like the perfect unrestrained Keynesian in order to show us that Keynesianism does not work. He was deliberately trying to break the system instead of thinking, as his admirers did during his tenure, that he was trying to find the winning combination that would result in unending prosperity.

I was thinking, "What in the HECK did I write, that led this blogger to so completely misunderstand my position?!"

But then I followed his link, and it was to, um, some guy named Robert Murphy who did indeed advance that theory about Greenspan.

Glad I did 2 minutes of due diligence before leaving a sarcastic comment!

I think it is clear that I need a stage name. "Vanilla Ice" is taken, so I don't know that we should even strive for coolness at this point, and instead we should settle for clarity.

Last night I read a certain passage that had always puzzled me, and for whatever reason it clicked into place on this latest reading. In Matthew 13 Jesus gives the "parable of the sower" to the masses:

Behold, a sower went out to sow. 4 And as he sowed, some seed fell by the wayside; and the birds came and devoured them. 5 Some fell on stony places, where they did not have much earth; and they immediately sprang up because they had no depth of earth. 6 But when the sun was up they were scorched, and because they had no root they withered away. 7 And some fell among thorns, and the thorns sprang up and choked them. 8 But others fell on good ground and yielded a crop: some a hundredfold, some sixty, some thirty. 9 He who has ears to hear, let him hear!

Now the part that had always puzzled me. His apostles ask him, "Why do you speak to the people in parables?" and Jesus answers:

Because it has been given to you to know the mysteries of the kingdom of heaven, but to them it has not been given. 12 For whoever has, to him more will be given, and he will have abundance; but whoever does not have, even what he has will be taken away from him. 13 Therefore I speak to them in parables, because seeing they do not see, and hearing they do not hear, nor do they understand. 14 And in them the prophecy of Isaiah is fulfilled, which says:

‘Hearing you will hear and shall not understand,
And seeing you will see and not perceive;
15 For the hearts of this people have grown dull.
Their ears are hard of hearing,
And their eyes they have closed,
Lest they should see with their eyes and hear with their ears,
Lest they should understand with their hearts and turn,
So that I should heal them.'

16 But blessed are your eyes for they see, and your ears for they hear; 17 for assuredly, I say to you that many prophets and righteous men desired to see what you see, and did not see it, and to hear what you hear, and did not hear it.

Now maybe it was just because of a different translation I had used on earlier readings, but for whatever reason, I always thought that Jesus was saying that He was purposely hiding the true meaning of His words from the masses. And there definitely is some of that going on in the above, especially verses 11-12.

But at the same time, it is clear that these people choose to be "dull." They are not willing to put in the effort to really understand the ways of the Lord. And thus, for these people, Jesus is speaking in parables to teach them as best He can, given the limited effort they will make to meet Him.

However, Christians need to keep in mind the other interpretation, namely that from the beginning of time, these people didn't stand a chance of knowing the mysteries of God; it was not "given" to them.

Here we butt up against another of the thinking Christian's conundrums, namely the reconciliation of free will (and hence moral accountability) with God's sovereignty. If God designed every last quark of the universe, and everything that has happened since the beginning has unfolded exactly in accordance with His will, then it's a bit weird to get worked up about the Pharisees, or to respect the courage of John the Baptist.

I will tackle this (humongous) issue in a future post. For now, let me tease you by pointing out that it makes NO SENSE to say, "I'm not going to worship this 'Yahweh' or accept this so-called 'Jesus' into my heart if we don't have free will anyway, according to this worldview. That makes no sense."

Now, the reason THAT statement makes no sense, is that it presupposes the existence of free will. In other words, if everything really were merely the blind laws of physics, with no higher "meaning," then the people urging you to read the Bible are just globs of cells interacting in ways likely to produce copies of their DNA, and thus there is no "reason" that "you" (whatever that means) should respond one way or the other.

Let me try to make the point a different way: When I was an atheist, certain Christians in my college would say stuff like, "Well that's so bleak. According to your worldview, I shouldn't even look before I cross the street, because I can't control my actions anyway. It's an illusion to think that I can affect whether I get hit by a car."

Now for you atheist readers, can you see why THAT was a ridiculous objection to my atheist worldview? The person was telling me that he was going to CHOOSE not to choose to strive for his survival, because in my worldview choice doesn't exist. But that is a complete non sequitur. If free will really is an illusion, then "choosing" to look or "choosing" to dash headlong into the street, are equally illusory expressions of a collection of cells' metaphorical choice.

Anyway, to wrap up this whole post, let me reiterate: Jesus used parables to get across a watered-down version of His true message, because the masses were not prepared--as His apostles were--to literally discard their old lives and follow Him 24/7. So they couldn't possibly understand what His mission really was.

However, at the same time, Jesus was acknowledging that their decisions were preordained from before they were born. Part of the story God wanted to tell, involved most people not really appreciating who Jesus was even as He cured the lame before their very eyes.

In another great article, GG takes an apparently innocuous statement by David Brooks:

What I’m really annoyed by, though, is the withdrawal of Tom Daschle. What are we, a nation of virgins?...Of course, Obama asked for all this with his cynical promise to ban lobbyists from his administration. There’s a word for lobbyists: experts. Some are sleazy and many are quite admirable, but the idea of trying to run Washington without them is absurd.

GG then quotes Brooks who also said:

I assumed Obama understood all this [that lobbyists were good and necessary] and the campaign blather was just for show. But it turns out he’s created a climate of Puritanism in which any error is grounds for disqualification.

Now had I just read Brooks' quote on my own, I would have thought it ridiculous. But GG really drives home just how revealing it is:

Those with rewarding positions inside an imperial court (such as Brooks) naturally view the masses outside of the court with condescension and contempt -- as ignorant, dirty, irritating rubes who need to be pacified with empty, deceitful words ("campaign blather," as Brooks admiringly calls it), in order to keep them placated and believing (at least enough to enable hope) that the imperial court actually cares what they think. But all Serious, savvy, sophisticated royal court members know that none of that is supposed to matter. Not only do political elites have the right to ignore the claims they make to pacify the masses, they have the affirmative obligation to do that. That's how the worst nightmare of the political establishment is avoided: namely, having mass sentiment affect and infect what they do.

It's amazing how explicitly Brooks here is endorsing -- and demanding -- deliberate deceit of the public. There is, for obvious reasons, extreme anger among the American citizenry towards the piggish sleaze, systematic corruption, and wholesale destruction permeating the political establishment and our political and financial elites. In order to pacify those sentiments, political elites tolerated, perhaps even desired, a presidential candidate with credible outsider pretenses who claimed to empathize with that popular anger and who wanted to combat the political elites who were the targets of it -- but only on the condition that he didn't really mean any of it, that it was all just a means to deceive people into believing that they still live in some sort of responsive democracy and they retain even a minimal ability to shape what the Government does. The anti-Washington rhetoric Obama was spouting was tolerated by media elites only to the extent that none of it was sincere.

...in the energy movement. I gather that he will have more posts on this topic in the future.

Also, I want to once again give a generic plug for MasterResource. If you scroll down the main page, you'll see they have all their big guns in the rotation now.

Seriously, can you imagine if the Chinese implemented Schiff's scheme (HT2 Tim Swanson)? (You don't need to watch the whole clip; you'll hear it in the beginning.) The Saudis couldn't do it realistically, because they can't repel a US invasion if push comes to shove. But nobody's invading China in the next ten years.

Sometimes I think it's useful to drop our abstract theories of social hierarchies and naively look at the world. In that spirit, check out the photo below from a WSJ story about the drug war in Mexico.



Now if you didn't have any other information to go on--or better yet, if a visitor from the past or future came to our time and saw this scene--which group of people in the photo seems to pose the clear and present danger to peaceful society?

In Amazon's economics category (HT2LRC), beating out Krugman, Galbraith, and all my friends. Of course, Krugman's book has been out for a while, and I think Galbraith's was written before Lincoln was shot.

Still, good job, Tom and Burt!

On Thursday night I reappeared on the Pete Kaliner show. Here is the link where you can play the audio.

Also, there is a point where he accidentally hangs up on me, and when I come back I say, "I thought maybe the Obama Administration didn't like the way the conversation was going" (or something). I just want to make sure you catch my funny, because it's hard to hear.

Lately Arnold Kling has been fending off accusations of being a racist, because he (foolishly) had a blog post saying the stimulus bill was really about "reparations" and then at a Heritage Foundation/Club for Growth event, he called the Obama crew a bunch of thugs. Here is how Vanity Fair blogger James Wolcott described it:

A few days ago notice was taken...of economist Arnold Kling's contention that the Obama stimulus plan was actually "reparations" in disguise. Given the complexion of our new president, this was interpreted as injecting a needless bit of race-baiting into the economic debate...

And there the matter might have rested had not Kling surrendered to heat of candor today at a Heritage Foundation/Club for Growth confab and decried, "Barack Obama is destroying my daughter's future. It is like sitting there watching my house ransacked by a gang of thugs."

Now if Kling can't comprehend the implication of racial menace encoded in daughter-gang-thugs/home invasion, he's either fatuously clueless--too innocent for this wicked world--or weaselly disingenuous, and a drama queen either way. Did he feel the sanctity of his home was being violated when the costs of the Iraq war shot into outer space? Did he picture marauders smashing cherished mementoes when Hank Paulson introduced TARP? Anytime Obama's name and "thug" are thrown in close proximity, it's a pretty sure bet that the speaker or author intends to fan the anxiety and animosity of those who think Obama's presidency represents black grievance gloved with the iron fist of the state--and out to punish whitey.

But if you watch the first 70 seconds of the clip below, you almost feel embarrassed for Wolcott. Oops. I'm sure the apology will come out after the long weekend.


BTW, Kling mentions here that Krugman repeated the quote. Incidentally, I personally have no problem with the Times not "fact checking" an op ed columnist's quotes. But if Krugman doesn't post a clarification--not necessarily an apology--on his blog, well, I don't know what. I'm already not his best friend.

This CNBC story explains that because of the stimulus hijinx and other skullduggery, fund managers are acquiring larger exposure to gold, often through ETFs such as GLD. The Exchange Traded Fund allows an investor to buy a stock (e.g. x shares of GLD) rather than buying physical gold bars and storing them somewhere. The people running GLD, in turn, go out and buy more bullion when more people pile into their ETF.

However, unless there are tax considerations--like if you are trying to shuffle around your 401k and need to buy shares of stuff to avoid withdrawal penalties--I don't think you should put your money into a gold ETF. If the really horrendous inflation comes that I think is a real possibility, it would be perfectly consistent for the U.S. government to void all ETF shares and issue some paltry payment in dollar bills to the investors. They would give some bogus justification like "preventing a run on the dollar" or "battling the instability of hoarding."

If you are concerned about massive price inflation and want to hedge yourself with gold and silver, I strongly recommend that you personally acquire the physical metals. And if you're really paranoid, don't put them in a bank.

Yesterday's article in the WSJ is basically a less hysterical and more detail-oriented regurgitation of my Daily Reckoning article from the end of January (and which I actually wrote in December). I explained in that article that Bernanke had painted himself into a corner, because the Fed's balance sheet had grown enormously, meaning massive price inflation had been built into the system once things calm down. But, since that build-up in the balance was designed as life support for the banking sector, how could Bernanke pull the rug out once a tepid recovery begins?

Here is how the WSJ article describes the situation:

A day after the Obama administration announced plans for a massive expansion of a joint-Federal Reserve and Treasury program to revive consumer lending, signs are emerging of challenges facing the central bank.

A growing number of the dollars the Fed is lending out to revive markets are long-term loans. Those long-term commitments could be difficult to pull back when the economy recovers and the Fed wants to drain the financial system of cash to raise interest rates.

When the Fed believes the time has come to raise interest rates, it would seek to pull cash out of the financial system by reducing the size of its massive portfolio of loans and securities. But if it is loaded down with long-term commitments, that could be tricky to pull off....

Because the Fed worries about preserving its monetary-policy options, it could be hesitant to push much further on long-term lending. Selling off such holdings down the road "could be a problem in thin and illiquid markets," said Vincent Reinhart, an American Enterprise Institute economist and former Fed staffer.

Incidentally, I agree with Jim Chappelow--in the comments of my post on collapsing borrowing from the Fed--that the drops in base and other measures is probably just a temporary blip, while Bernanke gets his ducks in a row for the massive injections that are going to be necessary to keep all of Obama's plates spinning. The Fed is going to have to "help" with just about every economic initiative being discussed, and I think when the optimistic scenarios fail to materialize (and they will), everyone will say, "Ah forget it, Ben, just print it."

It's nice that these details are trickling out. (HT2 Drudge) (You can move the pointer to 2:00 and start there, but the beginning is good to see him get phone-slapped by an irate lady.)

I thought these two graphics for this WSJ story on Geithner's underwhelming financial bailout plan were hilarious:

(1) I recently re-watched the original Austin Powers to see how good it was. Eh, I only laughed out loud in the bathroom scene with Tom Arnold ("Who does #2 work for?"). The other funny part I had forgotten was when Austin is trying to do an 84-point turn in the narrow corridor with the bad guy's vehicle. But what was really interesting is that Dr. Evil comes back from outer space and doesn't have a feel for money. Holding the whole world hostage, he first asks the world leaders for $1 million, and they bust a gut. But then he ups it to $100 billion, and they're alarmed. I remember seeing that scene when the movie first came out, and thinking that yeah, $100 billion would be tough for the world governments to come up with as ransom. My oh my.



(2) Just watched Michael Clayton last night. The previews were scaring me (i.e. they weren't movies I wanted to watch and so I wondered what the heck I had rented) but it turned out pretty sweet. I like George Clooney when his ego is in check, and it certainly is in this one. Plus, how can you not put a Sydney Pollack movie in your Netflix queue? (BTW I am not discussing plot because that's dumb. I am merely nudging people who are on the fence about a movie. If you get burned by a few of my nudges, then you will know to not rent movies I push.)

(3) The CNBC headline above the stock ticker currently reads, "Stocks Skid as Stimulus Worries Smack Banks." Perhaps because of my recent heroin analogy to the stimulus plan, I misinterpreted this at first.

I am not mocking Tim, I really can't figure out what his thesis is in this piece. He does some sort of "I'm explaining what the Chinese official is thinking--no wait, this is Tim talking, no wait, this is Tim discussing Schiff's views" stream of consciousness. (I didn't get Finnegan's Wake either.) But as always, the photos Tim puts up are worth the click-through. For example:

One of the central myths of our financial system is that the Federal Reserve enjoys "independence" from the federal government. The public can trust Bernanke to create hundreds of billions of dollars out of thin air, and give them to whomever he pleases without even telling Congress the details, because the Fed chair is a pure scientist and technician, uncorrupted by politics.

Yeah right, and Greenspan admits it in this interview (HT2EPJ):

“If we tried to suppress the expansion of the subprime market, do you think that would have gone over very well with the Congress?” Mr. Greenspan said. “When it looked as though we were dealing with a major increase in home ownership, which is of unquestioned value to this society — would we have been able to do that? I doubt it.”

I loved this excuse too:

The Fed’s “easy money” policy created an excess of cash that inflated equity and asset prices, leading to both the technology bubble of the late 1990s and the housing bubble in this decade.

While Mr. Greenspan acknowledges that he could have done something to avert the housing crisis, he contends his hands were tied.
...
Mr. Greenspan said that if he had taken steps to prevent the crisis, the outcome would have been painful.

“We could have basically clamped down on the American economy, generated a 10 percent unemployment rate,” he said. “And I will guarantee we would not have had a housing boom, a stock market boom or indeed a particularly good economy either.”

Is the economy "particularly good" right now? Does Greenspan go to the dentist when he has a toothache, or does he take an aspirin and explain that those office visits are painful?

So says Paul Krugman. Here's the context:

And the argument that our culture won’t stand for nationalization — well, our culture isn’t too friendly towards bank bailouts of any kind. Yet those bailouts are necessary; and even in America they may be more palatable if taxpayers at least get to throw the bums out.

Oh, and not a week goes by without the FDIC taking several smaller banks into receivership. Nationalization is actually as American as apple pie.

Now, here we're on terrain that all Americans can understand. You get what Krugman is saying, but at the same time, he is totally wrong and borderline lying with this absurd claim.

Well, that's exactly what he does with his glib pop statements about economics, only you wouldn't be sure unless you've got a PhD in the subject.

I don't know if this is just some kind of blip, but I was checking the latest numbers and saw this:



I'm not sure what it means. How's that for Free Advice?

Anyone? Bueller?

Sheldon Richman links to the below video, but advises his readers against watching it. But I must disagree; Rachel Maddow's commentary is beautiful in its clarity, its confidence, and its idiocy. It's about 8 minutes, and I know that sounds like a long time, but I urge you to just click the thing and watch it. You really need to hear the build-up, in order to see how she can so smugly utter the following climax as if it's self-evident: Maddow explicitly says that citizens should oppose tax cuts, as opposed to the spending components of the stimulus bill, because getting tax rebates would be wasting the taxpayers' money. Let me repeat: Maddow urges citizens to reject tax cuts in favor of politicians spending the money, on the grounds that this will prevent the waste of taxpayer funds.

Crazy, I know, but you really should watch the video to see why she is so sure she's right.

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