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Greenspan Speaks Out (Finally)

There are at least two broad and competing explanations of the origins of this crisis. The first is that the “easy money” policies of the Federal Reserve produced the U.S. housing bubble that is at the core of today’s financial mess.

The second, and far more credible, explanation agrees that it was indeed lower interest rates that spawned the speculative euphoria. However, the interest rate that mattered was not the federal-funds rate, but the rate on long-term, fixed-rate mortgages. Between 2002 and 2005, home mortgage rates led U.S. home price change by 11 months. This correlation between home prices and mortgage rates was highly significant, and a far better indicator of rising home prices than the fed-funds rate.

See the whole thing (probably requires subscription)

And it’s always a pleasure to see Friedman quoted.

Posted 11 March 2009 † Fritz § Financial Crisis ‡ Comments (0) °

Who’s the Villain, Really?

If a detailed, factual study were made of all those instances in the history of American industry which have been used by the statists as an indictment of free enterprise and as an argument in favor of a government-controlled economy, it would be found that the actions blamed on businessmen were caused, necessitated, and made possible only by government intervention in business. The evils, popularly ascribed to big industrialists, were not the result of an unregulated industry, but of government power over industry. The villain in the picture was not the businessman, but the legislator, not free enterprise, but government controls. - Ayn Rand, “Notes on the History of American Free Enterprise” - Capitalism: The Unknown Ideal

Posted 11 March 2009 † Fritz § Govt at Work ‡ Comments (0) °

Recipe for Destruction

New York Governor David Paterson writes yesterday in the Wall Street Journal

What is sometimes lost in the public discussion of our current economic crisis, amid the $787 billion stimulus package and the multibillion dollar bailouts of banks and insurance companies, is the root cause. The economic downturn began as a mortgage crisis and will not end until we solve that problem.

What is usually lost in the public discussion is the real root cause…

Here’s a government recipe for distorting (destroying?) the marketplace:

  • Start with the CRA instructing banks to do what they otherwise wouldn’t do.
  • Enable community organizers to stage protests or initiate lawsuits that pressure banks to provide loans to the unworthy.
  • Provide a path to offload the questionable loans by creating a quasi government bank to bundle them as securities.
  • Call the securities triple A and feed them into the market.
  • Blame the market and demonize the banks when the real contents of the securities are discovered.

Why is anyone surprised by the result? The path of least resistance is just another government induced moral hazard.

And now Mr. Paterson wants to force the banks to renegotiate their contracts. I’m guessing none of the renegotiations will favor the banks.

Posted 08 March 2009 † Fritz § Financial Crisis ‡ Comments (0) °

Why He Must Fail

It seems like the current administration thinks its proposed collectivist policies should be exempt from criticism. I get the sense that their position is the same for which they derided President Bush: “If you’re not with us, you’re against us.” Does he expect us to stand behind his proffered policies just because he can orate them slickly from a teleprompter?

Sun Tsu wrote a treatise on how to prevail. As a corollary, we might say his work was about how to cause your opponent to fail. It has been a significant document ever since (2500 years ago), much followed by military strategists over the centuries. More recently it has been openly cited as a source for developing effective corporate strategy in the marketplace.

Is striving to win no longer appropriate?

When you go to a football game and root for your team to win, don’t you want the other team to lose?

When you buy gold and take possession, you must be expecting that it will be a store of value. If its value increases, that implies our currency has lost value. So if you buy gold, are you wishing for the currency to lose value?

If you buy a stock short, are you wishing for a company to fail, or are you betting, based on observable activities in which the company is engaged, that it’s price will fall. It would be silly to think that you are really betting one way, and hoping, say, for the sake of the people who are employed at the company, that it will actually improve its performance.

If you opposed Fidel Castro when he took over Cuba, you probably hoped he would fail. To the extent that he succeeded, Cuba is obviously a failure.

I don’t know whether Obama is trying to hurt America on purpose, but it seems pretty clear that what he’s doing or hoping to do isn’t helping.

In light of that, I want liberty to win, which means, of course, that I too hope Obama fails.

To support him I would have to see him dismantle the government stranglehold over healthcare that has created the healthcare problem. I would have to see him simplify the tax code so it can appear on a post card. He would end subsidies, tariffs, tax preferences and tax incentives across the board. He would end federal involvement in education and stand behind vouchers for all kids so they can go to any school of their choice.

Do I want America to fail? Of course not.  But since I think Obama’s policies will lead to America’s failure, I naturally want to see those policies defeated. That is, I want to see Obama fail.

I’m playing for America to win. Are you?

Posted 05 March 2009 † Fritz § Obama ‡ Comments (0) °

Does he know what he’s saying?

This crisis is neither the result of a normal turn of the business cycle nor an accident of history. We arrived at this point as a result of an era of profound irresponsibility that engulfed both private and public institutions from some of our largest companies’ executive suites to the seats of power in Washington, D.C. - Barack Obama, Feb. 26, 2009

I think he’s right. The irresponsible protection racket has got to stop.

To avoid competing in the marketplace, business executives from “our largest companies” have bought special political considerations in the form of regulatory concessions, tax breaks, creating barriers for their competition, or simply transferring their downside risk to taxpayers. Never mind that so much of their resources (and the country’s) are squandered in this dead-weight-loss proposition. When businesses assess their “external environment” and discover political power is the only way they can compete with other companies, how can they be faulted?

As such, the “responsibility” rests entirely with the “seats of power in Washington DC,” and is, of course, delegated to them by the taxpayers. Why continue the charade that we operate within the constraints of a constitution? Now, instead of correcting the root of the problem and reducing the size, power and reach of the federal government, the democrats aim to make themselves all powerful.

It reminds me of Jafar in the Disney film Alladin, who, in his quest to be most all-powerful Leviathan, overlooked the tiny detail that his powers were ultimately authorized by the owner of the lamp. The democrats seem to have overreached so far and so quickly that the owners of the lamp could put them back in for a long while.

We can only hope.

Posted 28 February 2009 † Fritz § Govt at Work § Obama § regulatory burdens ‡ Comments (0) °

More and More is not Better and Better

Obama said to McCain during Monday’s fiscal summit:

“And one of the promising things is I think Secretary Gates shares our concern and he recognizes that simply adding more and more does not necessarily mean better and better…” “…Those two things are not — they don’t always move in parallel tracks, and we’ve got to think that through.”

I only wish this sentiment could be embraced by every cabinet. My first thought was the Department of Education.

Posted 24 February 2009 † Fritz § Govt at Work § Obama § regulatory burdens ‡ Comments (0) °

Wanna be a barber?

Looks like some state governments are reducing your access to a barber.  Regulations have combined cosmetology (cosmotology?) and barber boards (are there really state sanctioned boards for these?), forcing barbers to learn and provide things they will never need. Who’s joke is this?

A perfectly respectable vocation now gets cluttered with onerous regulation that creates ridiculous burdens on small one or two man shops, reducing the number of barbershops. And this is good for whom?

Posted 23 February 2009 † Fritz § regulatory burdens ‡ Comments (0) °

Collection of Individuals

Obama said last night that we’re “Not a collection of individuals.”

Watch out. If we’re not a collection of individuals, than we’re a “collective mass.” This is not an auspicious beginnning.

Posted 05 November 2008 † Fritz § Obama ‡ Comments (0) °

What’s this “My President” silliness?

Roger Kimball over at PM is quoting Andrew McCarthy trying to separate himself from those who would “tear down the country…” to which I responded:

Your post is correctly conditional, but I’d make it more so. I have no intention to tear down the country, but perceive that Obama plans to do just that. If Obama wins by 10 points, then we should indeed become the loyal opposition. But if he wins only by one or two, then there will be undeniable questions about his legitimacy. Without a “clean” result, amid such obvious election fraud and intimidation, how can we lose gracefully? I just hope McCain is willing to put up a fighter’s fight for America to make the election legitimate.

But why don’t we go even further? How do we demand a fair accounting?

ACORN has been front and center in the news (at least the right-leaning news) this season. I also read that people are using absentee ballots to vote twice. And black panthers are intimidating people with billy clubs. Winning has evidently become so important that it doesn’t matter how the game is played.

We can’t accept it. We can’t concede. The cheating has to stop. It has to be fair. And that has to start with laws that are enforced. And real journalism.

The only thing worse is that the cheater in this game is going to get a shiny new set of guns to come after what is ours. And they will because all their promises say they have to. Since liberty is so dangerous, they plan to round it up and put it in a corral.

Posted 04 November 2008 † Fritz § conceding ‡ Comments (0) °

Crisis Managed for Gain

Do you want Obama to be elected?

What better way than to make the economy look worse just before the election. Does that sound pretty cynical? Note how we have a finance committee led by democrats. These guys, we’ll assume, know something about finance. They would know, for instance, that large government expenditures on all sorts of projects are simply a future drain on investment and consumption. (Y=G+I+C)

The larger each proposal gets, the more the market adjusts downward to compensate for the recognition that investment capital (and consumption) will be reduced or displaced in the future. So the democrats continue to promote and pass expensive pork laden legislation in the name of crisis rescue, making certain the market reacts in a way that discourages people at the polls, while Obama blames it on the bad economic policies of the last eight years.

You go.

Posted 03 November 2008 † Fritz § Financial Crisis § Obama ‡ Comments (0) °