Defenestrating Thoughts from the Bivouac

This video is from 2 years ago; it’s your typical business talk show with analysts.

In the video, Peter Schiff is spot on. He was able to see this mess coming. And everyone else? Listen to them laugh at him.

Keep this in mind when you try to figure out what you think.

Are you listening to the guys that saw this coming? Or are you listening to the guys that were blindsided by this?

Remember, the White House, Paulson, and Bernanke were just telling us a few weeks ago that the economy is strong!

Austrian economists, however, saw this coming. They also saw the Great Depression coming. Maybe we should listen to them now.

Ron Paul saw this coming for a long time. Here’s what he said about Fannie and Freddie in 2003 (read the whole article):

Ironically, by transferring the risk of a widespread mortgage default, the government increases the likelihood of a painful crash in the housing market. This is because the special privileges granted to Fannie and Freddie have distorted the housing market by allowing them to attract capital they could not attract under pure market conditions.

…

Like all artificially created bubbles, the boom in housing prices cannot last forever. When housing prices fall, homeowners will experience difficulty as their equity is wiped out. Furthermore, the holders of the mortgage debt will also have a loss. These losses will be greater than they would have otherwise been had government policy not actively encouraged over-investment in housing.

And here’s a link to his explanation of what happened and how to fix it.

No bailout required. :-)

As the nation is closely watching the big $700B bailout fiasco, Congress is very quietly bailing out the US automakers:

[Ford, GM, and Chrysler] receive up to $25 billion in low-interest loans to help them develop technologies and retool factories to meet new standards for cleaner, more fuel efficient cars.

…

The secretive deliberations … seemed to ensure that the spending measure would have a low profile.

The US automakers get a $25 billion loan??? On top of that, the low interest rate and high inflation mean that the automakers will pay back fewer real dollars then we are lending them!

In other words, we’re giving them 10 loafs of bread now, and in a few years, they will give us 8 loafs of bread back. Would you agree to that? No? Too bad, Congress agreed on your behalf.

The reason that a lot of people dislike government spending is that government spending is a misallocation of capital.

Simply put, if left to their own devices, would people (e.g. the market) give money to Ford, GM, and Chrysler in return for less money later? I would guess no. And why? It’s stupid. I have better uses for that money.

But the government does it anyway.

There are two reasons for this. (Well three, if you count the fact that our politicians have been bribed, I mean, lobbied for this.)

First is the simple fact that people are less careful with someone else’s money. If Congress was using their own money, would they have lent it out?

Second is the that people are not smarter than the market. People cannot allocate capital as efficiently. This is why all those Communist states keep failing. Central planners, no matter how smart, cannot possibly make decisions better or faster than the market.

You know how corn based ethanol turned out to be a bad idea? The government didn’t get the memo; they are still subsidizing it.

Another indication that this is misallocation of capital is the fact that the market would not do this. Ford, GM, and Chrysler couldn’t get a loan with these terms on the open market. Why? No one felt it was in their best interest to do so.

A simple way to say “misallocation of capital” is “waste of money”.

Now, undoubtedly people will say that this is necessary to keep American institutions and American jobs safe.

And that is completely wrong.

First of all, American jobs? I drive a Japanese car and it was built in Tennessee by Americans. And I’m pretty sure it has at least as many parts made in America as the “American” cars.

Second, bad companies need to fail. This makes room for good companies that will fill the void. And the fewer barriers to entry the government throws in the way, the faster newer companies will show up. And those companies will make better products, sell more cars, and, as a result, employ more people.

Why do Ford, Chrysler, and GM need help? These are bad companies. They make stupid decisions — agreeing to untenable labor contracts, betting the business model on pickup trucks and large SUVs as gas prices are skyrocketing, and not improving the quality of cars, to name a few.

As a result, they keep needing to be bailed out.

It’s better for the country if bad companies are allowed to fail. If a country bails companies out indefinitely, the country is basically nationalizing industries. At that point, the country itself is guaranteed to fail; it will in aggregate be spending more money than it is making. Just like all the communist nations that keep failing.

Is it any wonder that Congress passed this bill as quietly as possible?

So, there’s a lot that I want to say about the current economic conditions and the idiotic plans coming out of Washington. But for now the one thing that I wanted to talk about is the amount of simple fallacies in all these discussions and how the media and analysts repeat them without realizing how stupid they sound.

Consider “Bernanke: Recession certain in absence of bailout“. Um… a recession is coming no matter what. Unless you can figure out a way for homes to go up 10% a year while wages stay stagnant indefinitely, we’re in an asset bubble caused by loose credit standards. Home prices have to come back in line with wages. This isn’t speculation, it’s basic economics.

A recession is inevitable no matter what, even with the bailout. Notice the headline doesn’t say that the bailout will prevent recession, it just says, without it we’ll have a recession; that’s a nice lie of omission.

The headline may as well read, “The sun rising in the East is certain in absence of bailout.” or “Recession certain in absence of Vijay being named King of the World.”

Another one that’s annoying me is, “If we don’t pass this bailout, things will get a lot worse.” That’s just classic false dilemma. That tactic frames the discussion as just two choices: this bailout or nothing. Well, that’s just wrong; there are plenty of options.

Framing the discussion this way is disingenuous. When you have to resort to these tactics, your position is probably wrong.

Last one I wanted to mention for now is part of Obama’s four point plan. It’s not so much a fallacy as just stupidity:

Mr. Obama proposed a new “financial stability fee” on the entire financial service industry to repay any losses that affect taxpayers,

On the entire industry? So every bank is charged this fee? So the cost of business for every firm went up. And guess what? They will pass the cost on to their customers. So Americans will pay more for banking (more fees, etc.), the banks will take the extra payment, give it to the government, and they will give it back to us?

In the end, we pay for our refund!

Um, Obama? You graduated from Harvard right?

Apparently the vaulted Ivy League education is vastly overrated.

The flaw is the “entire” part of the proposal. The banks that should pay the fee are the ones that used the program. Not everyone. New banks and banks that didn’t take the bailout (if any) don’t have to pay the fee and can pass those savings up to the customer. This way the bad banks that take our money are punished and the good banks are rewarded.

It’s called free market economics. Apparently it’s not something presidential candidates need to know.

I found this article a while ago and thought it was interesting; specifically this line about people graduating with engineering degrees: nowadays “chances are that [they will] be going to work for the likes of Microsoft or Google,” as opposed to a defense contractor.

Hey, that’s me!

When I graduated, my top job offers were from a couple of prestigious R&D firms for the DoD, and from Microsoft. Given the option between building weapons or working for the Evil Empire, I went for the latter. My reasoning was that, despite what you might think of Microsoft, Windows doesn’t kill people.

At least, that’s what Corporate PR told us to say. :-P

From Reason Magazine.

The Sad State of Political Discourse in America is so easy to write about; so you knew that I’d have more to say. :-)

Let’s take a look at the campaign slogans. For Obama, he offers voters one word: “Change.”

Keep in mind, Obama has voted to fund the Iraq war, voted to reauthorize the Patriot Act, saber-rattles against Iran, and in his two years as a Senator, he has demonstrated absolutely no inclination of the “Change” he professes to represent.

Now suppose we have the audacity to ask “Change what?” the Obama camp will often get confused and eventually brighten up and say, “Hope!”.

And if you ask “Hope for what?”, it will take a minute before they gleefully say, “Hope for Change!”

Obama’s message is completely unspecific and devoid of any political philosophy

McCain’s slogan is “Country First.” Like Obama’s, it is completely unspecific, but it does actually indicate a political philosophy. But, I imagine it’s not the philosophy that McCain intended for. :-)

From the Merriam-Webster dictionary:

Fascism (emphasis mine): a political philosophy, movement, or regime (as that of the Fascisti) that exalts nation and often race above the individual and that stands for a centralized autocratic government headed by a dictatorial leader, severe economic and social regimentation, and forcible suppression of opposition.

All those folks chanting “Country First! Country First!” at the convention, may as well have been chatting, “Fascism! Fascism!”

:-)

(I still can’t stop chuckling about this.)

With the giant pep-rallies, I mean, conventions, finally behind us, we can now get to some of the issues facing our country and the world today:

• The nationalization of Freddie and Fannie Mac is the largest nationalization in the history of the world. Larger than anything the Communists in the USSR or China have done. And by doing so, the US government has doubled the national debt in a matter of seconds, placing a unfathomable burden on the taxpayer.
• This nationalization has caused all much of the financial industry, the US automotive industry, and many more to get in line for a handout.
• We are mired in two wars and looking to pick a fight against Iran. And now also against Russia.
• Between the Patriot Act, the Military Commissions Act, and the FISA legislation, we’ve lost an unprecedented amount of civil liberties.
• We are looking right into the teeth of a large recession, with unemployment skyrocketing, commodities fluctuating wildly, and little stability in currency.

Here’s what the two campaigns have been talking about:

• Is McCain the pig? Or is Palin the pig?
• Can McCain even use a computer?
• Is Obama a terrorist sympathizer?
• Was the Republican convention, with its dearth of minorities a big KKK rally?

So basically the two campaigns are the equivalent of fifth graders on the playground.

The media is above the name calling; they are busy interviewing the husbands, wives, siblings, parents, perhaps soon, the pets of the candidates.

Breaking News! Biden’s sister says he’s a “born leader”!

Whew… I’m glad we settled that.

I stopped by Mom and Dad’s house on the way home from work the other day and as usual, I brought in their mail. In addition to the usual mail, there was a small ad (like 3 by 5 inches) torn out of a newspaper for a charity that will take your old car.

This didn’t come from the post office; this was placed in the box by one my parent’s neighbors.

Why? Well, Mom and Dad have an old car parked in the driveway. It’s a 1985 Camry that’s in good shape and still runs great. And they use it from time to time when one of their cars is in for repairs or when we have someone visiting that needs to borrow a car.

But, apparently its existent is offensive to one of the neighbors. Apparently Boulder, home of easy-going, fun-loving, mountain-climbing hippee is being slowly taken over by people who wish they lived on Wisteria Lane.

Two things annoy me about this. First is, who cares if your neighbor has an old car? Second, what’s up with the passive-aggressive note? If you don’t have the conviction to be honest, and have to hide behind anonymity, you probably don’t have much of a case.

I imagine if the neighbor was honest, they would come to the door and said, “Hello, I just wanted to tell you that my friends came over the other day and they saw an old car in your driveway. Because that car is in my neighborhood, my friends thought I was poor and now I’m not being invited to the good dinner parties. Can you please get rid of the car? My self esteem is suffering.”

Sheesh, what a sad world some people live in.

This election is all about change. As you know, I’m far from convinced that either party with their establishment players can actually enact meaningful change. After all, these guys have all been in power for years; why would they have suddenly changed?

If we want real change, we need real choice; specifically we need more choices. The US-moderated elections in Iraq had 111 political parties to choose from. We basically have 2.

The first step to fixing this is to have a legitimate 3rd party. But the ballot access laws make it tough for a 3rd party to have a shot. Not to mention that the presidential debates are impossible to get into; the rules for getting in are set by the Commission on Presidential Debates, which happens to be run by one Republican and one Democratic.

The barriers of entry for any party to be established is fundamentally too high. A great example of this is a Superior Court ruling back in May about 3rd party ballot access, when the judge said: “there is no fundamental right for a voter to vote for the party of their choice.” Why?

“The more parties there are that are recognized by the State and that place candidates on the ballot, the greater the chance there is for ballots that are so long as to be unwieldy and to risk voter confusion and frustration of the electoral process,”

Oh, so we’re too stupid to figure out how to vote?

What we need is a coalition of 3rd parties. The parties could agree decide on a platform for a single term and back a common candidate.

There are two favorable consequences to this:

• All those small percentages of support get added together into something immediately significant. This will give the candidate access to the media and the debates. This is essential for a candidate to build on his support.
• The Coalition’s platform, by definition, will be very appealing to many voters. After all, the platform would have attracted a broad coalition.

Imagine a platform like this. The Coalition agrees that these are the legislative priorities and promises to accomplish them in 4 years:

• End the war in Iraq
• All bills in Congress must be single issue. No more riders like farm subsidies on a funding bill for veterans. Let’s see some straight-up voting.
• Open up the electoral process to allow for more than two parties. Specifically fix ballot access and access to the debates.
• Clear disclosure laws, so that we see who’s taking money. This includes straight forward lobbying and hidden things like “free trips” on private jets and lucrative jobs for relatives.

There are probably a lot more things that could you list here.

So the platform would attract a wide swath of 3rd parties and lots of people. I could easily see the Reform Party, the Libertarian Party, the Constitution Party, and even the Greens getting behind this.

All we need is the catalyst to make this happen. Someone with some name recognition and some wealth. And if they started at day 1 with 10% of the vote, all you need is each supporter to convince one more person. And then you’re at 20% of the vote.

Sadly, it’s probably too late for this to happen this time. But, after 4 more years of the same old politics, who knows?

Well, it’s election season and I’m back in a battleground state, so you knew this was coming. :-)

I’d really like to see both John McCain and Barack Obama lose. I think both have demonstrated pretty clearly that they are not fit to be president.

Let’s start with Obama and those Democrats. Two years ago they swept the midterm elections with a crystal clear mandate from the voters: end the war.

The Democrats have control of both houses, public backing, and the authority granted by the Constitution:

• Article 1, Section 7: All bills for raising revenue shall originate in the House of Representatives; …
• Article 1, Section 8: To declare war, grant letters of marque and reprisal, and make rules concerning captures on land and water; …

So in the two years that the Democrats have had the power and the mandate to end the war, what they done?

Nothing.

Congress could have passed a bill to de-fund the war and bring the troops home. Or Congress could have voted to end the war. Or a multitude of other options given to them by the Constitution.

Some people will say, “Well, if they passed that bill, then Bush would just veto it.” Well, fine. Then impeach him. Again, it’s in their power (Article 1, Section 3, Clause 6).

This isn’t a rant about the war, but about integrity. Whether you support the war or not, the Democrats got elected to end it and they did absolutely nothing.

There are two possible reasons:

• The Democrats are incompetent. Perhaps they never read the Constitution? Or perhaps they are scared to stand up to the current administration?
• The Democrats wanted to keep the war going so that they had an issue they could use to win the White House. If this is true, that means the Democrats are willing to trade innocent lives for power.

So the Democrats are either incompetent or they are evil. Either way, how could you vote for them?

To put it succinctly: Obama claims to be an agent of change. His party has had control of Congress for 2 years. What change has he bought? Why does he deserve more power? He did nothing but sit on his hands for 2 years, while innocent people died, and he expects to be rewarded?

And the Republicans… do I really need to say anything at all? They have been at the helm for the war and the failing economy. There’s a ton of evidence that they enabled or, at least, tacitly condoned rampant fraud in the financial sector, taking the profits and passing the losses to the taxpayer.

All this happened on McCain’s watch. How could you vote to give him more power?

And Palin? She thinks that invading Iraq is a “task that is from God”. And “also urged ministry students to pray for a plan to build a $30 billion natural gas pipeline in the state, calling it ‘God’s will.’”

So, who do you want in charge? People who want war because it’s “God’s will” or people who want war because it gives them more power?

I’m voting “None of the above.” How about you?