Friday, December 18, 2015

Look Up, America


Think the above meme is over-the-top?  Think again.

Remember the IRS scandal?  The one where the Obama IRS was (and still is) targeting conservative groups and persecuting them with exemption delays, audits, and ridiculous document requests?  Well, one of the things they required of a particular Christian group was that they reveal the content of their prayers.
  
Meanwhile, just this week in the wake of the San Bernardino terrorist attack we learned that Tashfeen Malik, the terrorist immigrant wife, had been posting jihadist material on social media but DHS had a policy that protected her privacy.  She was not an American.  She wanted to kill Americans.  Yet according to the Obama-ocracy, her imaginary right to privacy trumped the right of American citizens to continue living.

The average American knows nothing of this but can easily name every single member of the Kardashian family, and thinks it would be really neat to have a female president replace the first black president.

Maybe this is why the level of divisiveness and passion is so high for this election cycle.  Some see the headlights of a train coming, while others are mesmerized by the light gleaming off the shiny tracks.  

Wednesday, December 16, 2015

The Fed Finally Moves


Now that Janet Yellen and the Fed have finally gotten off the floor, it's time to review a brief history of Fed tinkering and its consequences.

Below is the Fed Funds Target Rates for the last 15 years.  (2010 -2015 = 0.0%)


During the period 2001 - 2004 the Fed lowered rates eventually down to 1% to boost a sagging economy and in response to 9/11.  This had an important side effect.  The already emerging housing bubble got a massive new injection of easy money.  The housing bubble was originated by alternative government mortgage policies dating back to the 1990s which upended thousands of years of sound lending practices.  This included mandates for Fannie and Freddie to buy the bulk of the new alternative mortgages.  Then came the Fed.  By lowering rates to historically low levels, the housing bubble was put on steroids.  Along with all the new easy Fed money came the mortgage derivative monster that Hollywood loves to focus on.  This was how the bubble got so big and so dangerous. Fed tinkering, no matter how well-meaning, played a big role.  But the real damage came when the Fed violently burst the bubble it helped create.        

Ben Bernanke became Fed Chairman February 1, 2006 when the Fed Target rate had already been raised by Alan Greenspan to 4.25% from 1%. The day Bernanke became Chairman, he raised the Target Rate to 4.5%, but he didn’t stop there. He kept raising until July 1, 2006 when the Fed Funds Target hit 5.25%. So from July 1, 2004 to July 1, 2006 the Fed raised it’s Target Rate from 1.00% to 5.25%, an increase of 425% in 24 months.

Imagine if food or gasoline went up by 425.00%! Can you picture the carnage?

What effect did all those rate increases have on the yield curve and why would that matter? Well, as most economists will tell you, nothing screams recession quite like an inverted yield curve (when long term rates are lower than short term rates).  Forcing a negative yield curve is economic poison.

In January, just before Bernanke became Chairman, the yield curve was essentially flat with a slightly positive bias, but that quickly changed. Bernanke’s first raise to 4.5%, resulted in a slightly negative yield curve and again, he kept raising the Fed Target all the way to 5.25% by July 1, 2006. By November 2006, there was a clear downward trend in yields. (see chart below).


Why did Bernanke's Fed keep raising interest rates in the midst of a housing bubble with a midterm election coming up in November 2006 and a yield curve already threatening negative by late 2005? Why did they persist and force the yield curve decidedly negative by mid 2006 thus throwing us into recession and crashing the housing market?  Only they know, but their tinkering turned a bubble into a financial crisis.  

The collapse of the housing market quickly inspired the Fed to lower once again - all the way down to zero this time.  That's where it's been for about seven years.  No President in Fed history has enjoyed an economy for his entire term boosted by 0.0% Fed funds rates as has Barack Obama.  So what side effects are we experiencing this time?

That's the funny thing about interest rates; the side effects of Fed tinkering only reveal themselves over time.  Consider this:  During the Obama presidency we have been able to borrow and print over $12 trillion including QEI, II, and III - more than every other U.S. president - combined!  We have financed that spending spree with cheap money that will not last.  When rates normalize, it will consume the federal budget in a way we have never seen before.  This government borrowing bubble will make the housing bubble seem like small potatoes in comparison.

Janet Yellen and Barack Obama hope they will be long gone when that happens.    

    

 


 

Wednesday, December 9, 2015

Is Islam just a Religion?


I do not take Donald Trump seriously, and have not since he entered the race.  Despite his consistent lead in the polls, I stand by what I wrote months ago :

Donald Trump is the Howard Stern of politics.  He’s a shock jock in a field of politicians who sound like boring newsreaders in comparison.  He opens his mouth and out comes ego, shameless self-promotion, outrageousness, braggadocio, and downright meanness towards his detractors.  But there are other things too which endear him to his audience.   He’s fearless, confident, unapologetic, and says things no one else has the cojones to say.   And he's entertaining.  In other words, he’s exactly like Howard Stern.  His fans are the same too.  Listen to them talk and you'll find yourself expecting them to blurt out “Baba Booey!” any second.  
Donald Trump is a serious candidate for President the same way Howard Stern was a serious candidate when he ran for Governor of New York in 1994.  Stern didn’t win.  Neither will Trump. 
      
That said, Trump does create opportunities for serious discussion as he has most recently with his seemingly extreme position on a pause in Muslims being allowed into the country.  The reason this is so controversial is that we have two definitions for Islam in the West.

If you deplore Trump's proposal, chances are you think of Islam as just another religion.  Every other religion in the world has its fanatics and orthodox observants.  Islam is no different.  Singling out a religion on any level seemingly violates the principles on which we were founded.

However, if you believe Trump's proposal deserves a fair hearing, chances are you think of Islam, particularly the Salafist variety, as a treasonous and murderous political movement inseparable from a religion.   Our constitution specifically defines treason as a crime and grants the legislature the power to deal with it accordingly.

In other words, everything hinges on one's knowledge of Islam and whether it is seen as just a religion, or as a treasonous political movement.  Neither side is crazy.  Neither side is being un-American. Neither side is morally inferior.  It is a disconnect based on different understandings of Islam.  A majority, including many Republicans from Dick Cheney to Paul Ryan, apparently define Islam as just a religion.  A minority believe that's naive.

I wonder how those whacky nut-jobs Thomas Jefferson and John Adams would see it given the recent power of Islam to project its power within our borders?

(Hat tip to The Wall Street Journal for today's "Notable & Quotable" column which featured the above Adams and Jefferson quote today.)



   

Thursday, December 3, 2015

Obama, Guns, Islam, and San Bernardino



In a case of galloping irony, I picked-up my newspaper today and saw two stories on page one :  The massacre by Muslims in San Bernardino, CA, and the U.S. is set to lift sanctions on Iran.

Meanwhile, Obama's message after the massacre in CA was, of course, about...gun control.

So, over a hundred billion dollars goes to the people who desire nuclear weapons, ICBMs, and chant "Death to America", and law abiding Americans have their constitutional right to self defense taken from them.

Is it any wonder some people think Donald Trump would be an improvement?  I believe my labradoodle would be an improvement!

ICYMI, this one says it all:




    

Tuesday, December 1, 2015

The Syrian Refugee Problem - Part 2



In Part 1, I posed the following questions regarding the problem of Syrian Refugees:

  • Are the refugees fleeing a war?
  • Are they coming here for a better life?
  • Do we owe them a better life? 
  • Are they coming here to conquer us?  
  • Is coming here the best way for them to have a better life?
  • Can we know they are not terrorists?
  • Can we discriminate against refugees based on religion?
  • Does the West have an obligation to absorb every civil war torn population?

These Muslim refugees are not innocent victims fleeing a war.  There is no war in Kosovo, and the majority were Kosovars in early 2015.  Even now, the majority of Muslim refugees are from countries other than Syria and without wars.    

Of the minority fleeing Syria lately, the majority of them, 72%, are fighting age men.  And they are Sunnis, not the more endangered Christians and Infidels.  These men are the rebels who tried to overthrow Assad and failed.  If they stay, they will likely be imprisoned or worse by Assad.   Assad's ally, Russia, is now actively involved in the fighting and that is a game changer.  As Russia swooped in, the Sunni rebels swooped out.  It's that simple.  The Syrians who are seeking refugee status are fleeing a war they started and now have lost.    
  
And yes, most refugees are seeking a better economic life than the one they currently have.  They are aggressively seeking out countries that have the best welfare programs and job opportunities, which is why they insist on getting to Germany and the US for example.  

But, do we owe them a better life?  We have historically been very welcoming to immigrants in the U.S.  Much of this occurred before we became a welfare state.  Now that we are a welfare state though, it is increasingly expensive and politically divisive to welcome unlimited numbers of needy immigrants.

But these immigrants present a new question:  Are they coming to conquer us?  Islam has a word, hijrah (hejira, or hijra, etc.), which means emigration jihad.  In other words a holy war conducted through demographic overthrow.  The idea is to infiltrate the West and conquer it from within.  The history of Islam is replete with such conquests, many of them successful.   So yes, they seek to conquer the West.

If a better life is all they seek, is emigrating to the West the best way to achieve that?  A better way is to create a better life for them in their homelands.  It is actually cheaper too.  This seems obvious, but there is no will to pursue this in the West, or from those engaged in hijrah.

Can we know they are not terrorists?  Of course there is no way to screen terrorists, or potential terrorists from this wave of hijrah.  

Which brings us to the real question:  Can we discriminate against refugees based on religion?  This is really an interesting question when it comes to Islam because Islam is not just a religion - Islam is also a violent political system.  These two aspects of Islam are, in current practice, inseparable.

Of course in the U.S., we don't care which God you pray to or what holidays you observe.  But if your religion is hell-bent on denying others their rights to life, liberty, and the pursuit of happiness, we ought to discriminate against you.  If your faith imposes it's ideology on others against their will, we ought to discriminate against you.  But the duality of Islam is a paradigm we cannot wrap our minds around in the West.  We are incapable of understanding the difference between a mere religion, and a religious political movement which incites violence.

The grey area in the U.S. is what constitutes "inciting violence".  Courts have given wide latitude for hate speech in the U.S. and even allowed some speech which clearly incites violence.  In other words, an Imam at a Mosque in the U.S. can basically implore his congregants to blow things up and kill thousands in the name of Islam, but as long as he chooses his words carefully, we cannot legally stop him.

Finally, does the West have an obligation to absorb every civil war-torn population?  When the option of engaging enemies abroad is taken off the table, and when we are unwilling to identify the enemy amongst us, we have painted ourselves into a dangerous corner.

This is how democracies commit suicide.                    
     

Tuesday, November 17, 2015

The Syrian Refugee Problem - Part 1

Battle lines have been drawn on the issue of Syrian refugees.  (Whether or not the refugees are actually from Syria is beside the point.)  The questions everyone is struggling with are these:


  • Are the refugees fleeing a war?
  • Are they coming here for a better life?
  • Do we owe them a better life? 
  • Are they coming here to conquer us?  
  • Is coming here the best way for them to have a better life?
  • Can we know they are not terrorists?
  • Can we discriminate against refugees based on religion?
  • Does the West have an obligation to absorb every civil war torn population?

All good questions.  Before I answer them, please watch some Syrians sing about one of their favorite events:



I'll answer the questions in my next post - Part 2.

Saturday, November 14, 2015

Déjà vu à Paris

I wrote the following in March of this year:

Kinetic Islam Déjà vu 

In March of 2001 Mullah Omar and the Taliban destroyed two 1700 year-old stone Buddahs in Afghanistan.  One of them stood 165 feet tall.  At the time few westerners understood that act.  Six months later when the twin towers of The World Trade Center were destroyed we all got an education in how kinetic Islam feels about infidel idols and symbols.  

Fast forward to today and the exact same thing is happening in Iraq.  Islamic State, or ISIS, or ISIL, is summarily destroying ancient churches, statues, artwork, and symbols of the infidels.  This time we have some perspective on why this behavior is occurring – Islam, or at least a fundamental interpretation of Islam, leads its followers to destroy these symbols.  It turns out the Quran, like the Old and New Testaments, contains a fair amount of idol destruction.  The difference is Christians and Jews do not go about re-enacting these verses from the early days of monotheism.  Muslims do, particularly the kinetic radical fundamental type. 

What scares me is the timing of all this.  Six months after the Buddahs came down we got 9/11.  I hope kinetic Islam has a different schedule this time.

Thursday, November 5, 2015

Anatomy of a Myth - Democrats are Better for the Economy!

The Wall Street Journal published a letter Nov, 3rd from two Princeton Professors, Alan Blinder and Mark Watson, defending Hillary Clinton for saying, "The economy does better when you have a Democrat in the White House!"  They have written a well publicized research paper proving her assertion.  Alan Blinder is a Clinton advisor.

Robert Reich, (no relation), is another one who has written extensively about the miraculous economies of Democrats, particularly in the years after WWII.   Robert Reich served in the Bill Clinton administration.

The New York Times ran a related piece in 2008,  right before the election,  about how the stock market does much better under Democrats than under Republicans.  The New York Times is a long time supporter of both Clintons. (I refuted the NYT piece thoroughly at the time here.  I highly recommend reading it.)

We can expect much more of this as the 2016 election approaches.  Having studied these claims for years, I find this is all carefully calculated political sophistry, but very weak economics, and void of logic.      

The GDP assertions are of two types:
  • Democrat presidents have a better record of growing GDP since 1947.
  • During some of our best GDP growth periods we had much higher tax rates and a highly unionized workforce.  
Both assertions are factually correct - and meaningless at the same time.

It is true that Democrat presidents have a better record of growing GDP.  After all, Democrats are the party of growing government, and GDP includes government spending.  Ergo, when government grows, GDP grows.  Barack Obama borrowed and printed fourteen trillion dollars, all of which added to GDP, but must be paid back at some future time.   GDP doesn't account for that. It is a one sided account entry.  If you take away the fourteen trillion in debt and QE under Obama, growth is about ten trillion...negative, since he took office.  But that's not how GDP growth is reported. It should be if we want the whole story.   

Another factor is that Republican presidents have had two hands tied behind their backs when it comes to economic policy: power and interest rates.  No Republican president since 1947 has ever had full robust control of both houses of the legislature.  Democrats, on the other hand, had either filibuster power (40 votes) or complete control (60 votes) of the Senate every second since 1947. Democrats had complete control of the executive and legislative branches for 20 years since 1947. Republicans had all of 4 years.  Moreover, Republican presidents have had an interest rate headwind averaging about 38% higher rates since the Fed began setting rates.  Albeit, most of that discrepancy comes from the historically low rates from the Obama years. 

Additionally, presidential party affiliation has almost no correlation with economic policies over time.  JFK, a Democrat, was a tax cutting supply-sider like Reagan, and nothing like Hillary Clinton or Barack Obama.  Richard Nixon, a Republican, instituted wage and price controls, something Ronald Reagan would never have done.  Bill Clinton ended up as a free trader and a capital gains tax cutter.  The list goes on.

Finally, economic policies do not reveal themselves instantly.  Medicare, Medicaid, and Social Security were passed by Democrats long ago, but only now threaten to explode in our faces.  George W. Bush was saddled with the 2008 sub-prime disaster, yet Bill Clinton and the Democrats set that disaster in motion in the 1990’s when they thought it was a good idea to offer mortgages to unqualified people.  Sub-prime boosted the economy smartly until it blew-up over a decade later. Barack Obama likes to claim victimhood for inheriting the sub-prime mess, yet he was a key supporter all the way back to his community organizer days.  He continued that support while in the Illinois state senate,  into the U.S. Senate in 2008, and continuing even to this very day as president.   

Alan Blinder asserted in his letter that the economy is healthier today than it was in 2009.  I calculated that if we had just given every family in the US the money added to the debt since 2009, plus the Fed’s Quantitative Easing under Obama, each household could have been gifted $120,000.  My Labradoodle could have improved the economy if you gave him $14 trillion to re-distribute!

Robert Reich waxes nostalgic for the halcyon days after WWII when tax rates and unionization were high and the economy grew like topsy.  He is making a classic "post hoc" fallacy mistake.  ("post hoc, ergo propter hoc" is latin for the logical fallacy, "after this, therefore because if this.") Correlation is not causation.  Yes, the post war economy was very strong for decades, but that strength had nothing to do with high taxes and unionization.   In fact it was in spite of that.  WWII left us the only intact industrialized country in the world.  Japan, Europe, and the USSR were smoldering ruins.  China was still in loincloths.  South Korea was on the verge of its own war.   Of course we grew!  We could do no wrong with that tailwind.

Despite being convinced that Democrats are not superior stewards of the economy, I cannot make the claim that Republicans are.  There's just too much noise in an economy.  Too many moving parts. And party affiliation is too weak an indicator of historical economic philosophy.  

It all comes down to where the parties are at a given point in time.  Today's Democrat party is a Demand Side Economics party, and there's one thing I know in this life; nothing good ever comes from a Demand Side Economy.  

(For my definition of Demand Side Economics see this.  And this.)    

Friday, October 30, 2015

Ted Cruz is Awesome! VIII




Watch for as long as you like, but the whole thing is worth seeing.
At least to this classical liberal observer, this may be the best political speech I've ever seen.

Here's the link in case the embed doesn't work properly. Remember, this is C-SPAN, a government operation.
http://www.c-span.org/video/?328980-12/senator-ted-cruz-budget-deal


Ted Cruz is Awesome! VII



I heard Ben Carson refer to this as a "Cruz Missile".  I like that.

Search for Ted Cruz in the upper left search box for the other six "Ted Cruz is Awesome!" posts.

UPDATE: I tried to upload my own version of this exchange from CNBC but was blocked by NBC for copyright infringement.  I intend to file a claim based on this being a public matter that is now in the public domain.  If they continue to fight, I will research whether they are as strict with Democrat content, because if not, that constitutes an in-kind unreported campaign contribution to the Democrat party.  As Saul Alinsky said, "Make them live up to their own book of rules."  This will be interesting...

UPDATE2: They capitulated, and the above clip is now my version.  

Monday, October 26, 2015

Happy Birthday, Hillary!

On the occasion of Hillary Clinton's 68th trip around the sun, I offer two videos I made just for her, because everyone knows store bought gifts are never as cool as hand crafted ones.  Please enjoy and share!



Thursday, October 22, 2015

Dude, Benghazi Still Matters!

(Originally posted May 7, 2014)

According to the “Obama-Is-Awesome” crowd, Benghazi doesn’t matter.  It’s old news, the election’s over, Fox is the only network that cares, nothing can bring back those who died, it’s all about politics, what difference does it make, move on dot org, let’s focus on jobs, look, the Koch brothers, and go Hillary 2016! 

Dude, Benghazi still matters.  Some are calling the Ben Rhodes email a smoking gun.  Yes it is, but not just for what it says.  The Ben Rhodes email proves illegal activity on the part of the Obama Administration.  Remember, this email was part of a previous subpoena but was withheld by the administration.  A judge forced its release as part of another subpoena from a private lawsuit.  At this rate there could be hundreds of such documents. This renders all previous hearings and investigations null and void.  It is abundantly clear that there has been a twenty-month campaign by the Obama administration to stonewall and cover-up the truth.  Innocent parties don’t behave this way.  And it is illegal to ignore a subpoena.

The content of the withheld email along with recent testimony contradicts everything the administration has been telling us.  They were involved in pushing the YouTube video story.  They did edit the talking points.  They did know an al Qaeda affiliate called Ansar al-Sharia was responsible.  They knew there was no demonstration about a video in Benghazi.

Moreover, they have never revealed why requested security was denied and who was responsible.  They have never told us why Chris Stevens and the CIA were in Benghazi.  They have never explained Barack Obama’s whereabouts during the attack and involvement in the decision not to attempt a rescue.  They still have not brought justice to the murderers - no one has been captured or punished - despite several journalists being able to locate and interview the perpetrators.  A filmmaker was jailed for a full year as a result of this alleged deception.  $70,000 in taxpayer funds was spent on ads in Muslim countries to apologize for a YouTube video. 

The Presidential oath of office begins with the line “I do solemnly swear to faithfully execute the Office of The President…”  The definition of faithfully is “in a manner that is true to the facts…”  Just in recent history Richard Nixon lost his job because he did not act in a manner true to the facts.  Bill Clinton was impeached for the same offense.  No one died in either case.  Did Barack Obama know the truth about Benghazi and then lie to the American people to cover-up his incompetence in the face of a re-election campaign?  This matters, and Presidents have lost their jobs over it. 

The second line of the Presidential oath regards the obligation to “preserve, protect, and defend the Constitution…”  If the YouTube video was a deception to cover-up incompetence, then jailing a filmmaker to support the deception clearly violates the Constitution.  If the video was a deception, then the $70,000 spent on running ads in Muslim countries was a theft of taxpayer funds for purposes of winning an election. 

Hillary Clinton aspires to swearing the same oath as Barack Obama.  She swore a similar oath as Secretary of State. 

Dude, Benghazi still matters, and learning the truth is the right thing to do.

(UPDATE:  Since 5/7/14 thousands of illegally hidden emails have been discovered pertaining to this matter.  There are still thousands more illegally withheld as part of the stonewall put up by Hillary Clinton and Barack Obama.  What they are hiding is the subject of these hearings, and it should be.)    

Monday, October 12, 2015

Why Socialism is Chic, and Capitalism is Not (ICYMI)


Socialism is chic in 2015.   But, just a few short years ago Obama voters would mock and charge racism when anyone likened his ideology to socialism.  Now Bernie Sanders, an openly socialist candidate, is leading in some key polls of those very same voters!

Why is this happening in a country which enjoys the highest standard of living of any large diverse country, and one which uniquely earned it's place due to its historic reliance on free markets and constitutionally limited government?  Part of this is a triumph of deliberate indoctrination which has been going on for at least half a century.  Another part, and the most recent part, is a deliberate deception regarding the financial crisis of 2008.

Pop quiz:   
  1. Who is the father of modern socialism/communism?  
  2. Who is the father of modern capitalism? 
Odds are you will be able to answer the first question correctly, and can name Karl Marx as the father of modern socialism/communism.  You probably can do a decent job of explaining Marxism without even looking it up on Wikipedia.  You may even be familiar with the Marxist slogan, "from each according to his ability, to each according to his need".

Conversely, if you are asked who the father of modern capitalism is, odds are you'd either draw a blank or be mostly wrong.

You may not realize it, but socialists have been influencing you your whole life. Prior to the 1960's there were prohibitions on government workers joining organized labor.  That's because there was an obvious conflict of interest; organized labor and socialism have been synonymous throughout their shared history in the U.S.. But that changed in the 1960's under Democrat John F. Kennedy, and since then, government workers including school teachers have flooded into organized labor.   Most likely every teacher who taught you in a U.S. public school was a member of organized labor.  Of course, not all teachers, nor members of organized labor, are socialists, but the politics of organized labor in the U.S. leans undeniably in that direction.  

"Hold on!", you say, "Just because public schools are unionized and organized labor leans socialist doesn't mean it has had any real impact on our country!"  Actually it has.  After half a century of this, Karl Marx is the most assigned economist at U.S. colleges today.  By far.   


So how did you answer the second question?  In one sense the answer to that one is again... Karl Marx.  Yes, Karl Marx is both the father of modern socialism AND the father of modern capitalism. Karl Marx was the person who defined capitalism for the masses in his scathing critique of 1860s capitalism called "Das Kapital".  He constructed a convenient dichotomy between socialism and capitalism based on his own definitions to support his theories .  Of course Marx's preferred ideology, socialism, was defined in the most glowing light, while his version of capitalism was defined in the most sinister.

Many scholars credit a Scotsman named Adam Smith as the person whose ideas most influenced our economic system.  Adam Smith’s book, “An Inquiry into the Nature and Causes of the Wealth of Nations”, was actually published in 1776.  (That date rings a bell, no?)  But the word capitalism didn't exist in Adam Smith’s day.  He never used it.  We mistakenly call our economic system capitalism because that's what Marx and the critics called it.  The name unfortunately stuck. 

If everyone knows what Marxism is, why doesn't everyone know what Smithism is?  Because it’s not taught.   Except to select economics majors.  "Smithism" never became a word.  Marxism is taught everywhere all the time, and not just to economics majors.  If you want to learn about Adam Smith, you most likely have to do it on your own.  You can go through K-12 and well beyond in schools in the U.S., and never hear the name Adam Smith, never learn about his ideas, and never understand the influence those ideas had on the founding of our country.  If you go to Wikipedia and look up Marxism, you’ll find plenty.  If you go to Wikipedia and look up Smithism, you’ll get crickets. 

How about a more modern term, like Supply Side Economics?  You are probably familiar with that term, but can you accurately define it?  Can you define its opposite, Demand Side Economics?

·         Supply side economics is the theory that people will SUPPLY (create) more value if they are allowed to function in a free market.
   
·         Demand side economics is the theory that people will DEMAND (consume) more value if wealth is redistributed to them.    

These are opposite approaches for achieving different economic goals.  Supply Side seeks to optimize overall economic vitality (Smithism).  Demand Side at times seeks to stimulate consumption (Keynesianism), or at times to achieve egalitarianism (Marxism).

If you look up supply side economics on Wikipedia, you’ll find a thorough entry along with plenty of criticisms.  If you look up demand side economics, you’ll get zip.  The language in this case does not favor the socialist demand side ideology.   Hence, it is not even defined.

No event has had a more profound impact on this country's recent tilt towards socialism than the financial crisis of 2008.  It is said that history is written by the victors.  That has never been more true than in the wake of the financial crisis.  Democrats controlled the government commission that wrote the post-mortem.  Barack Obama won the presidency.  Democrats had both houses of congress.  And liberals made the movies and wrote the books explaining the crisis to the masses. Unfortunately, everything they told you was a deliberate deception designed to exonerate socialism, and scapegoat capitalism.   

The fact is the financial crisis of 2008 was a perfect demonstration of the failures of socialism. Redistribution of wealth, in this case redistribution of mortgage credit, was at the heart of the financial crisis.  At times, the support for this redistribution was bi-partisan, but the ideology behind it was socialist regardless of who was advocating.

It all began with the affordable housing goals promoted by Democrats in the early 1990s, which lowered mortgage requirements.  It accelerated in the mid 1990s under Democrat Bill Clinton with further loosening of mortgage standards, pressure on banks to write loose loans, and mandates for government backed companies FNMA (Fannie Mae) and FHLMC (Freddie Mac) to buy all the new mortgages.  It finally reached it’s apex in 2007 under Republican George W. Bush, while Democrats, including Senator Barack Obama, ran both houses of congress.

All the risk from this socialist redistribution was supposed to be assumed by the federal government in the form of the afore mentioned government backed companies.  Fannie and Freddie were ground zero for the financial crisis.  No government official took more money from these two companies, and at a faster rate, than the junior Senator from Illinois named Barack Obama.  His closest competitors in that money grab included Barney Frank, Chris Dodd, and Hillary Clinton.  If this is news to you,  it's because they wrote the history.

What they told you was that it was a perfect storm involving greedy bankers, deregulation, and the natural flaws of capitalism.  It was a plausible argument designed to deceive.  Bankers today are no greedier than their banking forebears.  So why did they suddenly engage in subprime lending for the first time in history in such large numbers? Because they were coerced to do so by their government.

Deregulation also had nothing to do with it.  Canadian banks are lightly regulated compared to their U.S. counterparts, and none of them failed.  Are U.S. bankers so much greedier than their Canadian counterparts that they drove their banks into insolvency while their less regulated neighbors to the north did not?  No, it was U.S. government regulation in the form of a socialist housing policy that caused the financial crisis.  Unfortunately, when the scheme went bad the damage spread to the private banking and investment sector bringing the entire global financial system to its knees.

The deceptions about this animated the Occupy Wall Street movement, got Barack Obama elected twice, and are responsible for the acceptance of openly socialist candidate Bernie Sanders today.   They are also part of the continuing campaign that has mischaracterized the mortgage market as an example of failed capitalism.

The frightening thing about this is, if history is written by the victors and they engage in deception, aren't we doomed to repeat it?  We are.  Fannie and Freddie own just about every new mortgage written since 2008, and the socialist policies promoting home ownership and borrowing have accelerated under Barack Obama.  We are in the process of building a second real estate bubble. Adding to that scenario is a socialist national debt bubble, student loan bubble, auto loan bubble, and equity bubble.

You might be saying, "OK, big deal, I'm a socialist.  Lots of countries are socialist, and some of them seem to be doing just fine.  What about the Scandinavian countries?  Why can't we have what they have?  Free healthcare, free college, and lots of benefits sounds pretty good to me!".  Scandinavian success came before their experiment with socialism.  They were happy, healthy, productive, and prosperous prior to the 1960s when they made the turn.  Fifty years of high taxes has slowed their growth and momentum and now they are "feeling the Bern".  Sweden and Denmark currently spend more than 100% of their private sector income on government services.  This is obviously unsustainable.  Socialist Europe is failing and is increasingly freeing their economies in response.

Here's the thing:  National socialism has never produced anything long term other than misery, starvation, poverty, and authoritarianism.  That's at the national level.  And long term.  At the local level, socialism can survive a bit longer.  Local socialism does not eliminate the incentive killing aspects of socialism, but it does delay the inevitable monetary collapse.  That's because local governments cannot create money. State and local governments must be more disciplined or risk imminent collapse.  Therefore, they tend to be more fiscally responsible.  National governments can hide their insolvency much longer, plunder future generations, devalue currencies, manipulate interest rates, and cause much bigger problems down the road.

This is an important point that deserves repeating;  socialism cannot work long term at the national level.  The national level is where money is usually created and controlled.  The Euro countries are a recent exception now that money is no longer controlled by the individual countries.  The Euro is controlled by the European Central Bank, which is a consortium of 19 Eurozone countries .  It's almost like they recognized the fatal flaw and are trying to work around it.

But in the U.S. we have no such arrangement.  We borrow and print money at the federal level. Our system was never designed to be a socialist system.  The constitution implied that the states were the proper place for redistributive experimentation.  At the national level, the conflict of interest is just too great for elected officials.  National politicians will eventually destroy the currency, borrow too heavily, undermine the work ethic, and undermine national defense in an attempt to gain and maintain power today.  The founders knew that.  It's happening today. We have doubled our national debt in just the last seven years.  Interest rates have been artificially held near zero for that entire time.  If and when rates normalize to historical levels, the debt service alone will cause the kind of pain socialist nations have felt throughout history. We are not immune.
  
In summary: You were indoctrinated to be a socialist. You were indoctrinated to call our system capitalism.  You've been deceived about the benefits of socialism.  You've been deceived about the evils of free markets.  And you've been deceived about the perils of national socialism.  If you still think socialism is chic after all that, that is your right.  Just keep it local, and maybe - just maybe, it won't collapse until after your kids inherit the mess.

Saturday, October 10, 2015

Why we do Redistribution all Wrong, and how to Fix It

Redistribution goes back a long time.  The first undocumented case of redistribution was back in caveman times when a particularly disciplined and skilled hunter, let's call him Grok, managed to kill more food than he and his family could immediately consume.  In stepped the tribal leaders who, realizing that others in the tribe were hungry and somewhat envious, confiscated the bulk of Grok’s food and redistributed it to the others.  Of course, in a tradition that would be forever etched in stone, the tribal leaders took a huge chunk for themselves.  Redistribution, in one form or another, has gone on unabated ever since. 

Naturally, in the wake of this redistribution, Grok decided to spend less time hunting and more time on his hobby, which was etching pictures on cave walls.  His family was soon as hungry as the rest of the tribe, and as history has shown, such is the fate of an artist’s family. 

When tribal leaders redistributed Grok’s food, they were doing more than just redistributing his wealth.  They were redistributing his power, responsibility, and rights too. Grok’s power to provide for his family's future was taken from him as was his right to his own work.  Meanwhile, the responsibility to feed others was redistributed to Grok.  Anything can be redistributed and is in modern societies.  Life, Liberty, and the Pursuit of Happiness included.  Redistribution can be any coerced transfer of wealth, power, or rights from individuals or groups for the explicit purpose of benefiting other individuals or groups.

Neither Karl Marx, Vlad Lenin, Mao Zedong, or even Barack Obama are innovators in redistribution.  They just took it to relatively new levels in their societies.  Every society, from the most democratic to the most autocratic, does some kind of redistribution.  No politician, particularly in a democracy, can afford to oppose redistribution in its entirety, even though many are philosophically opposed to coercing one person to provide for another.  Blame it on the collective will.  Universally, the people allow and desire some redistribution to satisfy needs and envy within the society.

Yet, redistribution is our nemesis too.  It is the opiate of the people.  Free stuff paid for by others.  Rights granted by denying others theirs.  Costs passed to the unborn.  It has led to deficits unprecedented in human history.  It has ruined societies right in our lifetime.  It kills incentive.  It was the primary cause of our recent financial collapse, which was precipitated by a giant redistribution scheme that gave easy money to marginal homebuyers.  And yet, neither party has satisfactorily figured out exactly where to draw the line.   Both parties played roles, albeit to varying degrees, in the recent crisis.  Amidst this confusion, the default position of the voters has been - redistribute more, and redistribute it to me!

In the US, the two political parties are not far enough apart on redistribution.   It is safe to say that one party advocates progressively more redistribution than we have at any given time, while one party advocates less.  But that puts them both firmly in the redistribution camp only with varying degrees.  This results in an arbitrary and nebulous difference between the parties.  Hence the claim by some that there’s not a “dimes worth of difference.”  As one party just found out, this can result in voter apathy.  History has proven it also leads to runaway deficits regardless of which party resides at 1600 Pennsylvania Avenue.

What I propose is a policy that will create a bold distinction for politicians, win elections for them, and insure that redistribution is done responsibly, all the while acknowledging the undeniable human instinct to redistribute.  This can be done by opposing all redistribution at the federal level, and at the same time recognizing that redistribution is essential at the state level.  This is not a contradiction.  In fact, the Founders showed us how.  The problem is not redistribution per se.  The problem is only federal redistribution.  State and local governments must be free to redistribute as they please. 

But states are not able to print money, and thus market signals will ensure redistribution is done with discipline.  This is essentially what the constitution prescribes.  By articulating this distinction, responsible politicians can both side with voters, who want redistribution, and be 180 degrees opposed to the irresponsible redistributors who want to continue doing it the unsustainable way we have been doing it.

I believe separating redistribution from the federal sphere is the system we were given in 1789.  For one, the constitution limits the power of the federal government to a few things and redistribution is not one of them.  For two, one of the things the constitution does grant to the federal government is the power to create, borrow, and manage money.  Redistribution combined with the power to control money is a formula for disaster.  This sets up a massive conflict of interest for politicians who can use redistribution to endlessly buy votes with borrowed and printed money.

Politicians who run nationally and vow to redistribute less are seen as party-poopers who want to remove the punch bowl.  The austerity approach has been, and will continue to be, a losing one.  Nor has it been an effective one at stopping the problem.  Fiscal conservatives (few though they are) have only been able to slow the acceleration of the fiscal train wreck, but the train has continued to accelerate.  I don’t see voters voluntarily removing the punch bowl either. They like the punch.  It makes them feel good.   They are not going to stop drinking because they have been shielded from the hangover.

I have heard the argument that the constitution twice mentions the term “general welfare” and thus the founders wanted the federal government to be the provider of “welfare”, or redistribution.  This is a canard.  Both mentions of “general welfare” in the constitution refer to the federal government, not to “the people”.  Thus the phrase is not about redistribution, but rather about having roofs over government buildings, paying government workers salaries, arming soldiers, providing adequate courthouses, and the like.  It is about running the government properly and seeing to its general welfare.  General welfare was never intended to mean satisfying the needs of individuals in society.

The constitution however, does enumerate the powers of printing, borrowing, and managing money to the federal government.  As the world’s current lone superpower and issuer of the world’s main reserve currency, we are in a unique position to print and borrow money at little or no present cost.  But that’s just how it appears in the present.  As Milton Friedman was fond of saying, “There is no such thing as a free lunch”.  Someday, the real cost of borrowing $20 trillion and printing trillions more will rear its ugly head. 

What have we done with all those trillions?  We used it to redistribute wealth from future individuals to present ones, with the express purpose of obtaining votes in the present.  This is the “fatal deceit”, to paraphrase a term, of our deadly mixture of federal redistribution and federal borrowing and money printing.  We must separate these functions and eliminate the conflict of interest if we hope to have a sustainable future.

No, we did not spend 20 trillion dollars on “unfunded wars”.  No war in history was ever fought without being financed.  In other words, no wars are “funded” with current receipts.  Our debt and printing issues are the demographic result of the above conflict of interest.   Politicians can only boost revenues temporarily to keep up with our runaway redistribution.  But revenues always fall back to the average of 18% of GDP while the redistribution climbs ever upward.  Even in the 90s, when many people claim the budget was balanced, unfunded liabilities were never included and it was in the 90s when the seeds were sown for the recent financial crisis.  The high revenues in the 90s were short-lived and based on bubbles in technology, housing, and lowering of the capital gains rate.    

Why is it that the party of less redistribution is more successful at the state level (they currently hold 30 out of 50 governorships and 27 legislatures to the other party’s 17), yet they have struggled at the national level?   I would argue the key difference is the seemingly unlimited ability of the federal government to print and borrow money and thus obscure the true costs of its redistribution.  States must function in the real world of finance where choices have consequences and redistribution must be paid for.

One argument would be, “Well, what about California, Illinois, and New York, etc.?  States aren’t so good when it comes to managing their own finances!  Why should we have them run all the redistribution programs too?”  To that I would say, yes some states are a mess, but others are in good shape.  It’s about 33% bad and 67% good for states.  The federal government is a 100% mess!  The states are way better overall, and the ones in trouble are about to have to reckon with their spending because they are bleeding population, businesses, high earners, and cash.  The market is giving them signals, signals that do not exist at the federal level. 

One reason a third of the states are a mess is that they currently have a limited stake in managing their own redistribution.  That’s because, although states manage many of their own redistribution programs, one third of the money comes from the federal government.  The incentive for state politicians is to be as generous as possible, kiss up to the federal government, and tap federal taxpayers somewhere else to pay for their largesse.  But there are limits, which is why a majority of states get it right.  Every state has some form of balanced budget law except tiny Vermont, which is small enough to have a bake sale to make-up any shortfall!

Look at the European example:  The Euro has only been in existence for 12 years, yet thanks to the inability of the PIIGS (Portugal, Italy, Ireland, Greece, Spain) and Cyprus to revert to the printing press, market signals have exposed their bad habits.  Discipline is sweeping the Euro zone, not without some pain, but the result should be a sustainable future.  We in the US currently have no such market signals warning us of our trajectory. 

Again, I’m only talking about eliminating federal redistribution.  Politicians at the national level should not oppose redistribution at the state or local level.  They should be consistent with the constitution and the constitution leaves this up to the states and the people.  Societies want a safety net.  That much is axiomatic.  Voters want a certain amount of welfare, food stamps, subsidized healthcare, free contraception, subsidized mortgages, etc.  Politicians at the national level must defer to the states and support the will of the people.   States and individuals must decide the proper level of welfare and redistribution they desire.  But this can be done much better by the states, with correct feedback signals, than it can at the federal level without them.  State taxpayers will have to make the hard choices and decide the proper level of the safety net they are willing to fund.  No magic money involved.  They also will be in a better position to eliminate fraud and abuse.  (Did you know that the states administer Medicaid, but the money comes from the federal government?  Neither party has an interest in stopping Medicaid fraud: the state because it costs them nothing, and the Feds because it’s not theirs to administer!)

Of course, taking this stand will require transitional details.  How do we turn Social Security, Medicare, ObamaCare, and Medicaid, over to the states?  In fact, any federally coerced transfer from individuals for the explicit purpose of benefiting other individuals would have to be turned over to the states along with the revenue stream which funds it. Federal taxes and spending would go way down, while state taxes and spending would go up by a commensurate amount.

We would also need to address the backdoor redistribution schemes.  This is the type that got us into the financial crisis in 2008.  The federal government mandated that banks lend money to anyone, regardless of ability to make payments.  My Labradoodle could have gotten a mortgage.  Then the feds bought up many of the bad mortgages through government-sponsored creations like Fannie Mae and Freddie Mac (FNMA & FHMLC).  No one's taxes went up.  No wealth was redistributed initially. It was all done through the backdoor in the form of a "redistribution of risk".  All of the explicit redistribution, as well as this backdoor type must go to the states.  

The actual details of the transition are beyond the scope of this proposal.  I’m proposing this as a policy stance for politicians and voters who agree that:  a) Our current debt path is unsustainable. b) Austerity is not a politically viable solution. c) The root cause of our unsustainable path is a conflict of interest. d) The conflict is the result of redistribution combined with our ability to print and borrow money with little or no present cost. e) Voters and most politicians have little incentive to fix this because it benefits them. f) There is, however, a passionate group of politicians and voters who want to fix this. g) The above proposal is a viable strategy to fix it.  Those that agree and know the system best can work out the details.

By standing against all federal redistribution, and simultaneously standing for the rights of states to redistribute as they choose, politicians can draw a clear ideological contrast with their opponents and still be aligned with voters. The only reason politicians will oppose this is because it will interfere with their ability to buy votes.  Smart politicians will smoke them out, and put us on a sustainable fiscal course.  

Thursday, October 8, 2015

Oregon Shooting Coverup?



The Oregon shooting is looking more and more like a terrorist attack.  Consider the following:

Meanwhile, the federal government has taken down all social media relating to the Oregon shooting, and Obama and the Democrats want everyone to focus on...  guns.  

This looks an awful lot like a diversion.

(UPDATE: Sacramento officials are all over the airwaves declaring no terrorism in the stabbing of Spencer Stone.  Similarly, federal officials are denying any terrorism in the Oregon shooting.  I am not a conspiracy guy, but I have developed a healthy skepticism when confronted with strange coincidences and government denials.  "Workplace violence", anyone?

This is especially curious in light of the recent revelations that another Democrat administration, that of Bill Clinton's, covered-up Iranian involvement in the 1996 Khobar Towers attack in Saudi Arabia, which killed 19 U.S. servicemen.   Bill Clinton was successful in hiding this information from the American people for twenty years!

UPDATE2: Stone may have been protecting a woman from attack.  So maybe a coincidence after all?)      

Wednesday, October 7, 2015

Ted Cruz is Awesome! VI

Just watch the whole thing... (This is number six in a series.  Search for "Ted Cruz" on this site for the others...)



I would also note that our planet has been warming and glaciers melting since the last ice age 15,000 years ago.  Our sun varies in output according to certain vague and unknown timed cycles.  About 99% of the energy absorbed by our biosphere comes from the sun.   Our solar system circumnavigates our galaxy once every 250 million years.  We know very little about the climatic effects of any of this.  Period.  The science is largely unknown at this time.  Run from anyone who tells you otherwise.

Tuesday, October 6, 2015

Oregon, Guns, and Obama




The Oregon massacre was bad enough.  Barack Obama made it even worse.  Before anything was known about the event, he got in front of the cameras to politicize the tragedy and blame it on the tool used by the killer.  That would be like blaming the holocaust on gas chambers, 9/11 on box cutters, and ISIS on scimitars.

There is a "first law of Obama", much like there is a first law of physics:  "for every negative event, there is a politically convenient scapegoat to attack, which is designed to rally the liberal base but solve nothing. " For Oregon it's guns.

Not only did Obama attack guns as the culprit, he also attacked the country he leads as being the only developed country that experiences such events.  He must not consider England, France, Norway, Switzerland, Russia, Finland, Germany, or Canada developed.

He may really believe our legal right to own guns makes us more violent.  He seems blissfully unaware that we've always had guns, but we didn't always have this kind of violence.  He's also blissfully unaware that some of the highest homicide rates, 1000% higher than ours, are in Central American countries that have no 2nd amendment and very few guns.  Countries like Honduras, El Salvador, Guatemala, Nicaragua, Panama, and Mexico are some of the most violent in the world.   Good thing Obama is not importing illegals from these countries.  Oh wait, that's exactly what he's doing!

Look, I could talk about how Obama's disregard for life (ie: late term abortions) has contributed to a cheapening of the value of life and led to more violence, but that would be theoretical.   What's not theoretical is that in Obama's first term, he and the Democrats had filibuster proof control of the entire government. They could have passed a total ban on guns if they wanted to.  They did not, because even most Democrats know guns are not the problem.

The fact is we have some violent and insane people in our country, and their violence will not magically disappear if guns magically do.  Ironically, the best way to minimize gun violence is to deregulate them.  It is not a coincidence that killers like the Charleston guy, the Batman guy, the military base guys, and the school guys, all sought out gun-free zones to accomplish their evil.    

Obama knows this, but sees a political opportunity.  The damage that this cynical, petulant, arrogant, and divisive man is inflicting on our nation proceeds apace.

(This piece is a re-post of what I wrote after the Charleston shooting.  I basically just changed the place-name to Oregon.)


Monday, October 5, 2015

The Star Wars Solution to Gun Violence



A liberal friend posed this question on Facebook.  Of course, I took the bait:

Ok, I have a question. I’m going to put this out to republican legislators, and republicans in general. Let’s imagine for a brief second that you all have the power to enact and enforce laws to make our country a better place. Oh wait - you already have that power.  Ok, let’s just suppose you’re willing to use it – for actually improving the quality of life in this country? That is the goal, correct?  My question is: What would you suggest is a possible solution to this current crisis of mass shootings? They’re not just killing children of liberal families. Surely, you must agree that this affects us all? So, what do you suggest we do about it? We all can hear very clearly the objections to virtually any sliver of a mention of gun control, or regulation. We get that having an unfettered right to a gun, to any gun, is way more important to you than any reduction in senseless deaths.  So, come up with another solution. Anything. We would love to hear how you all would solve this. You blame mental illness? Well, what would you do about that? What mental health initiatives are you willing to pay for? When can we start?  I’m not even being rhetorical. I’m serious. What will you all do about this, other than to get in the way of fixing it? 

My response:

Can't speak for Republicans, but I am familiar with the libertarian (small "l") solutions for this. Let me start by saying, "Long ago in a galaxy far far away..." Wait, before I get to that, some of your premises need correcting: Republicans cannot make laws. They would need 61 votes in the Senate which they've never had in modern times. Democrats however, did have that for Obama's first two years and they did...zip. Also, you are right, gun violence doesn't care which party you vote for, but the vast majority of gun violence is in Democrat cities. (Chicago, New York, Detroit, it's all the same street... add Baltimore, Nawlins, DC, etc.) OK, back to Star Wars: Think of Darth Vader as the guy who brings a big gun into a movie theatre intending to take out as many innocents as possible. Who stops him? Not just the cops. No, an ordinary cat with a fast car and some big guns of his own, named Han Solo, has the assist. In other words, qualified regular Joes (like that guy Mintz!) with concealed carry permits could turn a mass casualty gig into a less bigger deal. Still gonna have them though. (There will always be idiots like the "I shot a man in Reno just to watch him die" type.) Libertarians would also say, every one of these incidents has an SSRI component, so prosecute any doctor as an accomplice who prescribes SSRIs, or any mind altering drug, to a guy with an arsenal and a penchant for first-person-shooter games (Another correlation). Also, libertarians would say if you have private property and want a gun free zone, fine, but public spaces should never be gun free. 

UPDATE:  Obama and Democrat response using the Star Wars analogy:  Vader still gets his Death Star (the bad guys always keep their weapons!), and the rebels (cops) still have their Xwing fighters. Only Han Solo (the private citizen) has his guns confiscated.  Under that scenario, Luke dies, the rebels are decimated, and the Death Star kills all the good guys.  Obama, Democrats, and the gun ban advocates are naively taking Vader's side.