A Moment Passes By In Utter Inconsequentiality

Sometimes a tiny detail of daily life, work, or what lies in between will claw its way back from the obscurity of lost memory to intrude once again as the focus of attention.

We read the news on some blog, or in the newspaper, or listen to the radio. Someone wrote that blog post, the wire story, or radio copy. How much work was it? Will they remember it tomorrow?

We drive along the highway, or ride in the bus or train. Who poured the concrete or rolled the asphalt, who laid the rails? Who planned the construction and guided the project along, these many years ago? They may have forgotten doing it by now, or it may be the pride of their life's work, an achievement they tell about to this day.

The sand, gravel, lime, and crushed rock used to make the concrete all came from somewhere. Would anyone remember the day those components were ordered, delivered, or put together?

We dispose of some problem or issue, only to have it return from the grave. The matter is settled, we think, and it leaves our short-term memory, erased from our agenda for all time. But something in the solution to the problem was incorrect, insufficient, or ill-advised. Invisibly, it has clung to existence, waiting for just the wrong moment to spring itself on its erstwhile vanquisher.

A penny lies quietly on the sidewalk. How did it get there? If the penny could write a blog post, would it tell of its glory days as part of the change back from a Happy Meal? Or would it lament that, with the minimum wage what it is, it now would be unprofitable to hire someone to pick up pennies even if the ground were strewn with them?

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The Health Insurance Mistake We're Going to Make

In any market, there has to be the freedom not to participate. Without that freedom, there is far less downward pressure on prices, and less incentive to compete.

What the Democrats will do instead is to enforce price controls on the market. They will say, as they do now with Medicare and other services, that a doctor must bill the government no more than what they bill other insurers for a given procedure or service.

That will cause doctors to do what every other regulated group has ever done: they will find ways around the regulations. They will find new services to provide -- or new labels for old services -- and bill whatever the market will bear. Prices will zoom out of sight.

In addition, if everyone has insurance, everyone will go to the doctor. People with head colds will line up for treatment, which will not be forthcoming. But they will still show up, and insist on being fixed.

I know this, because I've been to a hospital emergency room.

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GM Bankruptcy: Toldja.

On November 11, 2008, I said:

• The former Big Three are hemorrhaging cash, which an infusion will not stop.
• They'll have a larger debt load.
• Strings attached to the bailout will include limits on executive compensation and, possibly, government mandates to produce smaller, more efficient cars.

Since the Big Three lose money making smaller, more efficient cars, making more of them in itself won't help profitability. Since a big problem with the automakers has been poor management, limits on executive compensation will only cause the best managers to leave for more pastures which are perhaps less green, but more golden.

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Who Wins With Inflation?

Debtors with real assets.

That class includes homeowners with fixed rate mortgages. Homeowners without mortgages will get a big payout if they sell, but in the mean time there will be mean times.

People who own other hard assets (such as gold) will also benefit, but few people hold gold as a large part of their financial portfolio. A lot of people are over-invested in their houses. Which is fine, because you can't live in gold.

With significant inflation, the denominated value of a real asset (like the sale price of a house) goes up. Wages go up, though usually not as fast as the cost of living. If the loan amount stays the same, it begins to shrink in comparison to the amount of money available to the debtor.

Another big winner is the Treasury, which is the biggest debtor of all.

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Permissive Parents, Leftist Children?

I have an hypothesis. It is that children of permissive parents grow up to be liberals, while children of strict parents grow up to be conservative.

I'm sure, before I even start, that if my hypothesis is true it is only a matter of degree, a question of percentages and leanings.

What I know for certain is that liberals generally act like spoiled children, and never want anyone to suffer consequences for their actions (nor to be rewarded for hard work).

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Hammer, Nail, Assembly Required

U.S. News and World Report's Peter Rolff puts steel to work:

It is true that the U.S. economy was in bad shape when Obama came into office. But he and his top appointees want us to believe that their preferred solution—pushing huge increases in federal spending in his so-called economic recovery act and his budget for the upcoming fiscal year though Congress to prime the Keynesian pump, putting money in the hands of their political constituencies—are in no way related to the just announced record $1.8 trillion federal deficit.

Perhaps the worm is turning. RTWT.

w/t TPM

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Obama To Make Draconian Budget Cuts

President Obama, after spending a mere trillion dollars on government growth in an effort to "stimulate" the economy, and pushing dramatic leaps in Federal spending in his budget, has laid out a bold plan to cut as much as $100 million.

Budget:	$3,000,000,000,000
Stimulus:	$900,000,000,000
Cuts:	$100,000,000

How can he make these awful cuts, while spending in other areas barely keeps pace? Is he going to order women and children to starve in the street, while AIDS patients are left with no medicines, and senior citizens choose between paying the light bill and buying cat food to eat?

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One Trillion Dollars

(orig)(Jonah Goldberg)

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Tax Loopholes

Tax loopholes are measures enacted by Congress to achieve some policy goal, like encouraging oil production or getting people to move back to central urban areas from the suburbs.

Tax loopholes are evil economic manipulation, I think.

But closing a loophole doesn't help the economy, generally. All it does is remove the incentive it was put in place to provide, so discouraging the activity it was designed to foster. Generally there isn't a lot of money for the government to gain.

Another effect of closing tax loopholes is to raise the general level of economic uncertainty. What is a good business activity? Companies and individuals don't know what the rules are if they keep changing.

Similarly, the more loopholes that are created and subsequently removed, the less effective tax policy will be.

But I guess in the end, any business which bases its activity on the presence of a tax loophole for it deserves what they get when the loophole goes away.

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More Proof Robert Reich is an Idiot

As if more proof were required to verify his status as world-class moron, Robert Reich provides it:

We're in a deepening recession, in case you hadn't noticed. The biggest challenge is to ramp up aggregate demand. Yes, we have to borrow lots from the Chinese and Japanese to do this, and, yes, it's costly in terms of additional interest payments to them. But there's no choice. In fact, if the slump gets worse -- and I have every reason to fear it will because that's the direction we're heading in as fast as you can imagine -- we'll probably have to have a second stimulus. And if the second isn't enough, a third. And so on. FDR's biggest mistake was doing too little until World War II. (No one should interpret this as a recommendation for more military spending -- I'm just saying Obama will probably have to think and do much bigger than the $787 billion stimulus so far.)

Shorter Reich: A never works, B has worked before, and there is no C. Let's do A.

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Santelli Gets To Obama

Robert Gibbs, the partially sentient White House Press Secretary, lashed out in an ad hominem attack at Rick Santelli.

My, what thin skins these Obamians have.

Mr Santelli had the audacity to say that if the Keynesian multipliers were above 1.0, that is, if every dollar of government spending yielded more than a dollar in private sector growth, then why do we need to worry any more? Just keep spending, and spending, and spending as we have been, and everything would be fine.

But the fact that no sane policy maker would do that, shows that the "multiplier" is not above 1.0. Instinctively, we know that to be so.

In fact, the multiplier is not a constant number at all, but a variable depending on a number of factors we don't even fully understand, and cannot predict. The multiplier is a random function, rather than a constant. The effect of government spending is not linear, but decreases after some maximum point.

But Mr. Gibbs did not address that point. He merely attacked an American citizen who dared to speak out, to raise his head up from his miserable work to question the One.

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Nannyconomics

We have reached the point in the US at which pain is treated not as a useful spur for individuals to accel, but as a barrier to be avoided or defeated.

The trouble is that economic problems are not fixed objects. If the government tries to cure the problem of increased home foreclosures by borrowing money to give to lenders or borrowers, the only possible results are increased home prices and a worse problem in the future.

A collapse in home prices, or a glut of homes on the market, make homes more affordable. Isn't affordable housing what the liberals claim to want? Home prices will fall until people start to buy houses. They won't fall while the government is promising to subsidize prices.

More generally, any time the government offers money for people to buy something, look for prices of it to increase to match the offer.

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America Is Useless and Doomed Without Obama

This recession might linger for years. Our economy will lose 5 million more jobs. Unemployment will approach double digits. Our nation will sink deeper into a crisis that, at some point, we may not be able to reverse.

It's not polite to call the President of the United States a liar.

So I'm impolite: Barack Obama is a liar, and a fear-mongering liar, at that.

An irreversible recession? The American economy does not depend on the skill with stimuli of the politicians in Washington. It depends on the hard work of Americans. It will recover, despite Obama's best efforts to destroy it.

All of this is a sham, anyway. He knows it will recover. He's just bad-mouthing the economy until some kind of "stimulus" package passes. After he gets his economic program through, he will become a cheerleader. When the economy recovers, which it is bound to do by its very nature, he will take credit.

What a disingenuous, self-serving piece of work that man is.

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Bottom-up, or Craniorectal Inversion?

During this year's presidential campaign, Barack Obama posited that the economy should grow not from the top down, but "from the bottom up".

After the election he is showing his true big-government beliefs in action. Only government can solve our problems, he says.

Clearly, he's a top-down kind of guy.

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I don't do stock tips.

And I don't play the market. I don't know anything about banks, except that they keep money there.

But these guys turned down TARP.

At least five banks said this week that they had decided against selling preferred stock to the government. They included United Bankshares Inc., which was approved for $197.3 million in aid, and Bridge Bancorp Inc., which was approved for $15 million

Buy their stock. You'll be glad you did.

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Fisking the White House Bailout of GM and Chrysler

President Bush has decided to give some number of billions of dollars of TARP money, which was supposed to be used for financial firms, to two failing car companies.

In doing so, he said ... well, let us fisk, shall we?

Bush said in normal economic circumstances

What are "normal" circumstances? Is there any set of circumstances that we could call "normal" that would cause companies the size of GM and Chrysler to fail, while other companies are not failing? Or would the fact of two of these companies failing be considered evidence that circumstances were not "normal"?

he would not intervene to save the automakers

Intervening is one word, "meddling in private business by Executive fiat to favor two companies over their competitors with an unconstitutional bill of attainder" describes it better. And saving the automakers may be what he says he's doing, but it's really his own image he's worried about. "Something must be done, this is something, therefor this must be done." These steps are neither necessary nor sufficient to save the automakers from anything except a painful, newsworthy Christmas. In these times of pain avoidance, Mr. Bush is just doing the expedient thing: borrowing money to loan to people who have no clear means to pay it back.

but "in the midst of a financial crisis

The financial crisis has very little to do with the automakers problems, except that their problems were caused primarily by the run-up in oil prices, making people unwilling to buy inefficient but high-markup trucks and SUVs that they had previously wanted as toys and status symbols.

To the extent that the financial crisis is a cause of the GM and Chrysler problems, it's because they have continued to make ever-more-expensive vehicles believing that people would continue to buy them on credit. When people suddenly became credit-wary, realizing the foolishness of taking a loan against a depreciating asset, the car makers were sunk.

But now that people have realized that it's foolish to pay interest on something which is losing value, no amount of Federal credit assistance is going to rescue the car companies.

"and a recession,

Again, would there ever be a car maker failure during some other economic phase?

"allowing the U.S. auto industry to collapse

The collapse bogeyman, too big to fail, etc. If these companies cannot make it, they should be allowed to fail now before we dump huge amounts of money we don't have into propping them up. We will be paying the interest on the debt we incur propping up the failing companies long after they go under anyway.

"is not a responsible course of action."

Saying it doesn't make it so. The responsible thing is to let people face the consequences of their actions. Call it compassion, call it anything else, but responsible it is not.

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What Bothers Me About The Bailouts

I do not care about the ripple effect of automobile maker failure, bankruptcy, or other harm.

I do not care about my 401k, Midwest tax revenues, or any other alleged effect that even the total loss of GM would engender.

What I care about is our economic system, which is being destroyed by socialism, to the crocodile tears of the supposed capitalists on Wall Street and in Detroit. They are selling their souls for the sake of a temporary respite, and we will all suffer for it.

From where is this $34 Billion going to come? We’re going to borrow it, at interest. How is that interest going to be paid? By borrowing at interest. And so it would continue, ad infinitum, until the money supply is so inflated that it will take an illegal dump truck to carry enough money to the illegal gas station to illegally fill it up.

We’re worrying about ripples from spitballs while dropping boulders into the pond.

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The Coming Incorrect Response to the Wrong Problem

In all likelihood, when the Electoral College of the United States meets in December, Barack Hussein Obama will be elected President. Despite his unproven eligibility, Obama is very good at behind-the-scenes political arm-twisting and race-baiting, and will probably garner enough votes push aside his closest competitors.

But leaving aside how we got to this point, Obama will live in the White House.

So what is he going to do? He's going to respond to the economic "crisis" as FDR responded to the depression of 1929: spend like mad, in an effort to get reelected. But as Yid With Lid puts it, that won't help us recover:

As late as 1938, nine years into the depression, almost one out of five workers remained unemployed. What the government gave with one hand, through increased spending, it took away with the other, through increased taxation, and the increased power of labor. But that was not an even trade-off. As the root cause of a great deal of mismanagement and inefficiency, government was responsible for a lost decade of economic growth.

And this is not the depression of 1929, or even 1932. It's a crisis in credit confidence brought on by years of systemic government over-regulation and intervention.

Companies have been burdened with reporting requirements that cost them millions in accounting charges, for little tangible benefit. Compliance with the Sarbanes-Oxley rules alone costs a business about a million dollars a year, and for the small-to-medium businesses that are the backbone of the economy -- where the jobs are -- that's a serious hurdle. And it's for nothing more than paperwork.

After forcing banks to make loans to people who couldn't afford them, Congress and the Obama-led forces of political correctness are now going to double down to keep people in the homes they still can't afford, in the name of pain avoidance. It will lead to the same place it did before: default and crash.

Now as each new company deemed too big to fail teeters on the brink of failure, rather than allowing them to fail and trusting that the system which has worked for hundreds of years will continue to work, we assume that we are smarter than our forbears. We can succeed in directing from Mount Etna the affairs of men. Yes, we can.

So rather than admit the failure of the Community Reinvestment and Sarbanes-Oxley Acts, we expand government without care or concern as to what the long-term effect of doing so may be.

It's a crisis!
We must to something!
This is something!
This must be done!

In reality we are not addressing the same problem they were faced with in 1929 or 1932. Even if we were faced with the Great Depression, imitating Hoover and Roosevelt would not solve it. The only answer is to first stop doing, with excessive intervention and regulation, the damage we are doing, and allow the natural wonder that is the American economy again to display its awesome powers.

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When in Doubt, Blame Bush

Prediction: even though the stock market lost over 20% of its value, from 9600 to 7600, in the 16 days following Barack Obama's election, what will be reported is the big run up it will make getting back to 9600. It will be the Obama Bull Market.

You watch.

But when anything bad happens, it will be blamed on President Bush.

After the idiocy of the bailout mania under Bush and Paulson, I'm not sure I'll even disagree.

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Bailout Mania

More banks are being bailed out, with the government becoming a bank holding company.

Where is that in the Constitution? Nowhere.

It's as criminal as it is ineffective.

Writing at Cato, Andrew J. Coulson says:

A Pew Research poll conducted more than a week ago found that 57 percent of Americans are terrified by Bailout Mania 2008. That was several days, and many billions of dollars, before Bloomberg reported that U.S. taxpayers are now on the hook for $7.7 trillion in bailout bucks — half of the nation’s entire GDP for the past year. At this point, not even Carl Sagan could get a handle on the numbers we’re talking about.

Ya think?

But I maintain that the economy grinding to a halt is on balance good. There will be pain, and real people will have difficult times. But that pain is unavoidable. Better for it to happen now, before the government spends trillions trying to fix it, than afterward when all those trillions will need also to be repaid.

What's that you say? It's already happening? Even so, even so.

We have become a nation with an economy driven by debt. That is unsustainable, as we are seeing. Our chickens, as they say, are coming home to roost, and there's nothing we can do to avoid it.

But we can make it worse. We can have the government buy shares in banks, buy up bad loans, dictate maximum interest rates, and take any other stopgap measure aimed at avoiding the short-term pain. All any of that will do at best is stave off the pain to a later date; it will not avoid it. At worst? I think we may be seeing it.

The way to avoid this kind of situation is to encourage saving, not spending, both for the government and for individuals and businesses.

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