Archive for October, 2010

If Obama’s coalition folds on November 2?

October 31, 2010

It appears likely that the Republicans will retake the House of Representatives and that they will draw close to equality in the Senate following the November 2 mid-term elections. If so, the GOP will have to make some hard choices on economic policy. The alternatives are clear but each is difficult to effect:

1. Policy Inaction:  This would be disastrous for the long-term success of the GOP. Of course, they could simply stymie all of the President’s legislative initiatives and harass him  with respect to his regulatory initiatives. Such a position would be harmful to the country and disastrous for the Party as 2012 approaches.

2. Compromise with the President  by securing permanent support for the Bush tax cuts in return for Stimulus IV:  This would be harmful to the country, given the size and projected rate of growth of the national debt as a percent of gross domestic product. It would place narrow party goals above the preservation of the American Dream.

3. Compromise with the President, requiring him to abandon card check and cap and trade legislation, together with any further fiscal stimuli in return for a fully-fledged reform of income taxes, along  flat- rate lines, without exemptions, designed to lift overall federal taxes to 20 per cent of gross domestic product, and for harsh  public sector cuts, designed to reduce federal spending,  inclusive of entitlements,  to 20 percent of gross domestic product by no later than 2015:  This is the responsible option. It would return the GOP to its Barry Goldwater roots of reducing the size of the state and overall budget balance. It is also the successful option, both for President and GOP, since it is likely to guarantee both re-election in 2012.

Public choice suggests that Option 3 will not be chosen, by either President or by the GOP, because it offends against the principle of pandering to concentrated interests while offlaying the costs onto the dispersed general population. Sometimes, however, divided government succeeds where unified government cannot, in achieving welfare-enhancing outcomes.

This is not a monetary problem 2

October 30, 2010

This column is a response to remarks posted on yesterday’s column by Bill Woolsey, whose contributions I greatly respect and admire. While he does not suggest that my column is ‘vulgar Keynesianism’ he surely suggests that one of my sources for the column is. I cannot read the mind of the investment analyst concerned. But I certainly can read my own. So what follows is my understanding of the issues that underpin the sluggish economic recovery from the financial crisis of 2008 and that under-score my contempt for the behavior of the Bush and Obama administrations, the Republican and the  Democratic-controlled Congresses and  the Greenspan and Bernanke-chaired Federal Reserves.

The financial crisis of September 2008 was caused by the poor economic policies pursued by President Bush,  three Congresses (two-Republican and one Democratic)  and two Federal Reserve Board chairmen  (Greenspan and Bernanke) over the period 2001-2008. A mixture of vulgar Keynesian fiscal policies and crude money supply over-expansion flooded the U.S. economy with large fiscal deficits and loose money, while promoting an unsustainable binge in consumer spending, significantly on housing and its ancillary markets. The Peoples’ Republic of China unwisely supported this binge by buying up U.S. Treasury notes and by supplying commodities cheaply to the U.S. market-place. Excess capacity in the Rest of the World protected the U.S. economy from the inflationary consequences of loose money policies.

However, the protection was far from absolute. Inflation surged into the U.S. stock market and into the U.S. housing market, driving prices upwards in focused bubbles. Both bubbles burst, first in the housing market in the third quarter of 2006 and then in the stock market in April  2008. Few analysts noticed or cared, until their portfolios were ripped apart in the aftermath of the justified failure of  Lehman Brothers, when CEO parasites, like Lloyd  Blankfein of Goldman Sachs, Kenneth Lewis of  Bank of America, and Richard Wagoner of G.M., began to creep around the Treasury Secretary, Henry Poulson, bleating for socialism and the termination of laissez-faire capitalism in America.

The policy reactions of Bush and then Obama, and of the Fed and its acolytes truly were a mixture of Lenin-type socialism, Keynesian indulgence and banana-republic politics. In every significant respect these policies were recovery-retarding and unemployment creating.

The problem started in the housing market. Self-evidently, recovery would begin only when the price bubble was completely eradicated, when households unable to maintain their mortgage payments were back in rental accommodations, and when a lower-price equilibrium had restored market balance between the supply and demand.  Instead, government policy was driven by an unachievable desire to keep house prices high, avoid foreclosures, and compound the problem. No one apparently had read their history to learn that this was the essence of Herbert Hoover’s reaction to the small downturn in 1929. By 2008-9  I am not even sure that presidents and Fed chairmen could read or write. If they could, surely they did not do so on any policy-relevant dimension.

The agents of the house market bubble, the GSEs and the banks, in many cases were themselves insolvent. The market solution is to allow such failures to  move swiftly into bankruptcy, so that new banks and mortgage lenders can emerge unscathed by any overhanging burden of toxic assets. Instead, the government and the Fed expropriated taxpayers’ wealth to shore up the excrescences that created the housing market debacle. So the market does not clear, and the banks do not lend, and private property investment does not play its customary role in leading an economic recovery.

The financial crisis usefully exposed the flawed position of union-dominated big business in the United states, most notably, but far from exclusively, in the automobile industry. Those struggling corporations should have been left to live or die by their own efforts. Instead, the Bush and the Obama administrations rushed to aid the losers, nationalizing two of the three leading U.S. automobile producers, and thus crippling entrepreneurship in that sector for generations to come. The signal to the market-place of America was as clear as it was disastrous. If you mutiliate yourselves sufficiently, then we will throw charitable dollars into your begging bowls.  The ancient Chinese mutilation begging- model is now center-stage throughout the U.S. economy.

Oh, yes! and those non-performing banks!  Their stress-tests were rigged to show them all as sturdy, when  they surely were and are not. In such circumstances, they dare not take risks by pursuing their traditional function of supplying entrepreneurial capital to small business. Instead, they are allowed to suckle on the Fed’s nipple, borrowing at zero interest rates and  purchasing low-paying but safe Treasury notes, their primary activities all focused within the socialist sector of the economy, while they avoid marking to market their toxic mortgage assets. Oh what a  commercial disaster that ray of sunlight would be, as it illuminated the true nature of their musty vaults!

Not surprisingly, the U.S. economy stagnates in such an unwelcoming environment. The construction industry is all but dead, because the existing housing and commercial pproperty markets are not allowed to clear. Small firms cannot secure bank loans save on the basis of 100 percent collateralization. So they do not pursue profitable ventures. Large firms build up cash reserves, instead of investing,  because they fear the oncoming crisis when the federal government can no longer ignore the size of the national debt. Households wisely save because they know that government subsidies typically go to the well-organized concentrated producer groups, not to dispersed interests. The lame-duck, Democratic-controlled government will not  legislate in a disastrous  election year, even to clarify the January 2011 tax status of  anxious U.S. citizens.

In such circumstances, the Chairman of the Fed decides to go for QE2, to flood the U.S. economy with yet more high-powered money. He does not understand that velocity is down because of the insolvency of the banks, not because of a diminished demand for money. The U.S. economy does not confront a liquidity trap.  Bernanke is an unthinking  Keynesian, who listens to moribund Keynesians, not a Friedmanite.  

Once the supply problem eases, as it surely will once the banks have suckled enough socialist milk, and once  velocity is restored, inflationary expectations will return with a vengeance. And the instruments available to a the Fed to bring down those expectations – open-market operations to the limit of its now largely toxic assets, buttressed by bribing the banks to hold onto high-powered money – will jolt the economy into stagflation, while the long and variable lags work their way through the economy.

That is my understanding of the current economic situation. I do not believe that it is Keynesian in nature.

This is not a monetary problem

October 29, 2010

“Because President Barack Obama and the leaders of both political parties are unwilling to address the housing crisis and the wasting effects on the largest banks, there will be no growth and no net job creation in the United States for the next several years.  And because the Obama White House is content to ignore the crisis facing millions of American homeowners, who are deep underwater and will eventually default on their loans, the efforts by the Fed to reflate the U.S. economy, and particularly consumer spending, will be futile.  As Alan Meltzer noted to Tom Keene on Bloomberg Radio earlier this year: ‘This is not a monetary problem.’ ” The Institutional Risk Analyst, October 28, 2010

“Bagehot’s name has surfaced in a few editorials in recent weeks, but they have invariably focused on the ‘lend freely’ portion of his advice, while overlooking Bagehot’s admonition to impose costs, capital requirements, and other safeguards where public funds are concerned.  In short, liquidity should be available to Fannie Mae and Freddie Mac, but the interest rates charged should be very high.” John Hussman, Hussman Funds, July 2008

Because the United States government is unwilling to recognize that the central weakness of the United States economy is the unresolved collapse of the housing market, three simply dreadful policy interventions continue to be imposed on a shaky economy. First, quantitative easing is doubled and tripled by the Federal Reserve to prop up large banks that show no signs of real life. Instead those poorly performing banks – saddled as they are with toxic securitized mortgage assets – should long ago have been forced into liquidiation by ‘penal ‘lender-of-last-resort interest charges imposed by a Bagehot-respecting Federal Reserve.

Second, all kinds of political pressure are being exerted on mortgage lenders to avoid orderly foreclosure proceedings against delinquent borrowers.  Instead, the government should be encouraging mortgage lenders to foreclose as swiftly and efficiently as possible in order to terminate price uncertainty in the housing market, and to encourage potential new homeowners to enter the market on a correctly funded basis at realistic interest rates.

Third, the Department of the Treasury and the Federal Reserve are conspiring to prop up Fannie Mae and Freddie Mac in the teeth of the market reality that both GSEs are technically bankrupt, and can never recover. Instead, the Fed should be refusing them any access to ‘lender of last resort’ borrowing , even at penal rates, on the ground that they are insolvent, not simply illiquid, thus forcing the Treasury Department  to place them into bankrupcty.

Only when the housing market is restored to equilibrium will  economic stagnation truly end. That was a lesson of the Great Depression that goes apparently unnoticed by a vote-hugging  Obama administration. The housing market will return to equilibrium only when those households that are unable to meet their mortgage obligations, for whatever reason, are confronted with foreclosure, and are returned to the rental markets whence they came, albeit under government mis-representation, if not outright fraud, during the exuberant noughties.

Argentinian beauty loses her beast: blow for progressive socialism in Latin America

October 28, 2010

Nestor Kirchner, President of Argentina between 2003 and 2007, and husband to the current President, Cristina Kirchner, died from a heart attack  on Wednesday October 27, while visiting the southern city of El Calafate. Temporarily, at least, this may prove to be a telling blow against progressive socialism in Latin America.

The Kirchners were an almost perfect example of the power couple, merging their assets in an impressive form of team production. They met in law school in the 1970s, bonding in opposition to the brutal military dictatorship that then ruled  Argentina.  Nestor was viewed as ungainly and poorly coordinated physically, but intellectually able.  Cristina was viewed by her peers simply as the most beautiful student in the law school. And she remains stunningly beautiful as President of Argentina. Both had become consummately effective progressive socialist politicians, she more aggressively so than he. Basically, he was the brain, and she was, and presumably will remain, the mouth.

In a remarkable redux of early postwar Argentina – indeed in a resuscitation of the Peronist Party – Nestor became the epitome of Juan and Cristina of Eva, Peron. The question now hanging over Argentina is how will Evita rule without her Juan?  Will Argentina now forget its new Evita?  Will it soon cry for her impending departure? How effective is the mouth when robbed of its brain?

Like Juan with Evita, Nestor with Cristina built their political base among the poor of Argentina. He was a harsh critic of the  International Monetary Fund, and forced international investors to take haircuts in a ruthless 2005  restructuring of much of Argentina’s default bonds for 30 cents on the dollar.  As he concentrated power in the executive branch and expanded the role of the state, so his administration became plagued with corruption scandals, energy shortages and high inflation – the hallmarks of progressive socialism.

However, in a brilliant move in 2007, Nestor handed off the presidential campaign to Cristina. Her beauty enthralled the Latins, and she  was voted enthusiastically into office. The nation looked for more consensual politics, but failed to check out her earlier political record. The politics of Argentina became ever more divisive, as Cristina lurched leftwards, driving the moderates from her administration, and ratcheting up the level of state intervention.

Argentina once again is enmeshed in the suffocating patronage system of Juan and Evita Peron. Investors are now fleeing Argentina as the country rigs its current inflation rate, reporting at 11 percent a rate widely believed to be 22 percent per annum, and rising. Argentina’s key ally is no longer the United States, even the United States of President Obama,  but rather Hugo Chavez’s Venezuela.

Nestor was widely expected to take back the baton for next year’s upcoming presidential campaign, alternating power with Cristina. With Nestor now silenced, how will Cristina fare?  The Argentian stock market surged on news of her husband’s death in the expectation that a more market-friendly administration waits in the wings.  At this moment, however, Argentina appears to be adrift, full of voice and resonant with beauty;  but adrift of reason.

The collapse of the U.S. dollar: the Black Swan

October 27, 2010

“Our inability to predict in environments subjected to the Black Swan, coupled with a general lack of the awareness of this state of affairs, means that certain professionals, while believing they are experts, are in fact not.  Based on their empirical record, they do not know more about their subject matter than the general population, but they are much better at narrating – or worse, at smoking you with complicated mathematical models.  They are also more likely to wear a tie.” Nassim Nicholas Taleb, The Black Swan: The Impact of the Highly Improbable. Randon House, 2010

By early 2007, the housing market in the United States had peaked on the basis of dangerously highly leveraged mortgages and excessive household debt. The slide in house prices during 2007 and 2008 went largely unnoticed by economists and their associates, who had been seduced by the notion that systemic risk could not apply to the national housing market as a whole. Furthermore, those same economists and their associates remained convinced that even significant difficulties in the mortgage market would not much affect highly diversified investment portfolios in a global economy. Those economists and their friends, of course, were incorrect in forming those judgments…

The U.S. federal government, at this time, has leveraged the national debt to unusually high levels in terms of gross domestic product.  The U.S. Federal Reserve has leveraged its balance sheet to dangerously high levels on the basis of purchases of assets of unknown quality, much of which may be highly toxic.  The U. S. Federal Reserve has leveraged high-powered money to remarkably high levels by historical standards.  Economists and their associates, by and large, are complacent. Even as they see other advanced nations reining in their debt, they puff out the smoke that its international reserve status protects the U.S. dollar from precipitate collapse.

Such complacency ignores the interrelationship between confidence and reserve status.  The rest of the world holds dollars as a store of value and a medium of exchange because they respect the probity of U.S. financial institutions.  However, such probity no longer exists. The Emperor has no clothes.  The Black Swan by now may be paddling into view and shaking the U.S. economy to its very core. Let me speculate:

Let us suppose that on November 2, 2010, the House of Representatives falls into Republican hands, but not the Senate. Let us further suppose that the President does not respond by triangulation policies, but by progressive socialist defiance. Let us suppose that his hired hand, Ben Bernanke, opens up the spigots on  the monetary furnace, while the President threatens to veto all spending cuts for the remainder of his term. Let us suppose that the House buckles, rather than confront a Gingrich-style shut-down of the federal government,  and continues to fund an unsustainable budget deficit.

Now suppose that The People’s Republic of China justifiably loses its nerve, and its patience, and begins significantly to diversify its asset portfolio away from dollar holdings.  Suppose that this action triggers a contagion of dollar sell-offs throughout the global economy. Gold soars to $5,000 an ounce and upwards. Suppose that the exchange rate moves to $5 to 1 euro; then to $10 to 1 euro… Suppose then that inflationary expectations kick in as Americans increase their spending in anticipation of future price hikes…

Is this any less likely than what occurred in September 2008?  Do you trust Ben Bernanke and Timothy Geithner not to smoke you out with their unrealistic mathematical models and with their expensive ties and dark suits?  If so, is your faith based on probabilities. If so, are you not deep-down terrified of what you cannot know, or assess, in probabilistic terms?  Are you not seriously worried about the proximity of the Black Swan?

The Wizard of Oz indulges in global economic planning

October 26, 2010

“Economists are full of bad ideas.  Terrible ideas seem to emerge when the gurus get together to talk about coordinating their bad ideas.  Last week’s public letter from Treasury Secretary Tim Geithner to the G-20 finance ministers is a great example.”  John H. Cochrane, ‘Geithner’s Global Central Planning’, The Wall Street Journal, October 26, 2010

“Under a deal hammered out at a meeting in Gyeongju, South Korea, finance ministers from big industrialized and developing economies agreed to try to maintain trade balances – which are both a reflection of and a determinant of exchange rates – at  ‘sustainable levels’.  Unable to agree on a precise metric, as the U.S. proposed, the ministers agreed only to measure compliance by ‘indicative guidelines’ still to be negotiated.  The International Monetary Fund was chosen as the umpire.” Bob Davis and Evan Ramstad, ‘G-20 Advances in effort To Cool Currency Battles’, The Wall Street Journal, October 25, 2010

When the weakling on the block attempts to impose his will on those who outrank him both in strength and in ingenuity, the outcome is entirely predictable, as was the case in South Korea last week. The only surprise is that  Tim Geithner did not try to locate the G-20 meeting a few miles north of the border where he might have borrowed a few million under-employed troops to force his will on a largely skeptical  gathering. If anyone was qualified to lead the discussion at that G-20 meeting , surely it was the British Chancellor of the Exchequer, George Osborne who has demonstrated that he has a backbone by his courage in confronting the special interests and cutting public spending, not a United States Treasury Secretary like Geithner who has never seen a federal budget deficit sufficiently large to satisfy his insatiable appetite.

The reason why the United States economy is in such a current low growth situation is because its government and its citizens developed  unsustainable appetites for consuming more than they earned. September 2008 was the justifiable consequence of such profligate behavior. U.S. citizens learned their lesson the hard way and are now saving to  find a sustainable route out of personal indebtedness. The U.S. government, with the unfailing support of its Treasury Secretary, is fighting against this endeavor every inch of the way. For every dollar that private citizens save, their wretched government dissaves in multiple numbers.  ‘Spend, spend spend’ , is the  unfailing policy of all the Obamaniacs . ‘Let others take care of tomorrow. The rest of the world owes us a living. We are the exceptional people.’

Fortunately, no one outside the Obama public square places any credence on these exhortations. Most particularly, the wise leaders of China will not be dislodged from their respect for conservative economics. As their people save for retirement, so the government supports and does not counter-act their efforts. China will not wreck its own economy in order to bail-out high-rolling Americans. Specifically, it will not revalue the yuan to open up inefficient U.S. exporters to the Chinese market-place.

So Timothy Geithner attempts to  to introduce the world economy to central planning, American-style. If only every country would over-spend, then the U.S. government will be unchained in its march to progressive socialism. Fortunately for the world, Timothy Geithner carries no more weight than his failing President among global economic leaders. Like the out-of-control drunkard falling from his barstool while exhorting others to pull down another round, Geithner finds himself in a fast-empyting bar while the bartender races to shut down his bar-tab.

“What’s the right policy toward China? They put a few trillion dollars worth of stuff on boats and sent it to us in exchange for U.S. government bonds.  Those bonds lost a lot of value when the dollar fell relative to the euro and other currencies.  Then they put more stuff on boats and took in ever more dubious debt in exchange.  We’re in the process of devaluing again.  The Chinese government’s accumulation of U.S. debt represents a tragic investment decision, not a currency manipulation effort.  The right policy is flowers and chocolates, or at least a polite thank-you note.” John H. Cochrane, ibid.

Elitist Alan Blinder is sightless for the forgotten man

October 25, 2010

“The bubble that encases the New Elite crosses ideological lines and includes far too many of the people who have influence, great or small, on the course of the nation.  They are not defective in their patriotism or lacking a generous spirit toward their fellow citizens.  They are merely isolated and ignorant.  The members of the New Elite may love America, but, increasingly, they are not of it.”  Charles Murray, ‘The tea party is right. The ruling class is out of touch’ The Washington Post, October 24, 2010

“As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X.  Their law always proposes to determine…what A, B, and C shall do for X”  But what about C?  There was nothing wrong with A and B helping X.  What was wrong was the law, and the identifying of C to the cause.  C was the forgotten man, the man who paid, ‘the man who never is thought of” ” Amity Shlaes, The Forgotten Man: A New History Of  The Great Depression. Harper 2007

In a more rational world, it wouldn’t be this way.  Fiscal policy, which packs the power, would be doing the heavy lifting – by combining tax cuts and spending today with credible deficit reduction for the future.  Monetary policy would take the back seat by keeping interest rates low.  But we don’t live in a rational world. And as Donald Rumsfeld might have said, you go to war against recession with the army you have.”  Alan S. Blinder, ‘ Our Fiscal Policy Paradox’, The Wall Street Journal, October 25, 2010

What may look fine and dandy when viewed from an  elitist window in Fisher Hall,  Princeton,  may well look downright disgusting from a grimy apartment window in downtown Little Rock. As Charles Murray rightly notes in his above-cited commentary, professional class elitists like Alan Blinder are way out of touch with regular Americans, who have now found a voice through the Tea Party and other focus groups for those who still value the contributions of the Founding Fathers. Blinder is an unfocused proponent for Manifest Destiny, and for stoking the furnace for unlimited government. Regular folks are much more enamored with making themselves worthy for Divine Providence and for the fruits of laissez-faire capitalism and constitutional government.

Blinder’s policy proposal for 2011 is more of 2008 and 2009. The engine of growth for the U.S. economy should be more temporary big spending and more temporary tax cuts by the federal government, even if the focus of these should now be on state governments. The federal government has spoiled its own fiscal nest; so let us share the burden by spoiling the fiscal nests of all the 50 state governments.

This babbling is yet another repetition of  Aesop’s Fable about the fox who has lost his tail and recommends the benefits of brush loss to all foxes who still parade their splendid appendages.

Princeton University’s Department of Economics appears to be particularly badly afflicted with the disease of elitism. Where Alan Blinder follows, so Paul Krugman leads, in a lemming-like lunge over the edge of the economics precipice. They, together with many of their fellow academics, and legions of elitist undergraduates, pace the sheltered grounds of  a progressive socialist campus, far-removed from the lives of regular Americans. They do not care at all about the economic burdens placed by their foolish policies on C, the forgotten man, whose job prospects dim, and whose future tax burden increases  everytime that  a dirty federal stimulus dollar floats out from Capitol Hill into the grasping hands of interest group  X.

The Blinders and the Krugmans of this world are so personally wealthy, so personally privileged, and so personally protected from the repercussions of their policy pronouncements, that they indulge themselves in a fantasy world where Maynard Keynes still towers, unchallenged by reality, where expansionist fiscal policy can still save a nation, and where private frugality, hard-work and private ambition is to be relegated to snide humor over tea and crumpets and other delicacies served up to the best and the brightest: the  Princeton men and women.

Well, a plague on Princeton University, say I. Go back to the Great Texts Mr Blinder and Mr. Krugman,  learn some better economics from the likes of Friedrich von Hayek, Ludwig von Mises and Milton Friedman, and take a look now and again at the real world beyond those elitist spires and quadrangles. Mr. C deserves your serious attention. For Mr. C puts the tea and crumpets on your table, repairs your toilets, takes out your garbage,  and clears your snow, as you seek  blindly to destroy the wealth of your nation and to break Mr. C’s  back with your evil fiscal levies.

Irrationality at National Public Radio

October 23, 2010

Vivian Schiller’s amazing achievement in becoming the  Chief Executive Officer of National Public Radio indicates how far out of touch that propaganda agency for progressive socialism has truly become.  It would appear that her educational background in Russian studies, and her time spent in Russia as a journalist, have conditioned her to the benefits of media censorship, and to the delights of toying with statistical reality. It certainly has not prepared her for the responsibility of leading a major media organization.,

Let me explain in simple terms why Juan Williams is completely rational to experience the emotion of fear when boarding an aeroplane in the company of a closely-knit group of Muslims, especially young Muslim males.  Are you not aware, Ms Schiller, that for a period of some 40 years, terrorist attacks in the skies, whether hijackings, the use of planes as vehicles of destruction, or attempts to detonate explosive devices, have almost exclusively involved Muslims?  And most especially, have involved young Muslim males. How many instances are on record of such anti-social behavior led by white Christian grandmothers, Ms. Schiller?  Please do tell. I shall not be offended, I truly promise you!

I notice that many parents allow their children to play outside and to ride their bikes around the neighborhood in the City of Fairfax, close to where I live. How many families, Ms. Schiller, do you think allow their children such privileges in Anacostia, or in downtown Detroit?  Why do you think there are such behavioral differences?  Or, to put it another way, if you have small children, do you encourage them to ride out at dusk, unaccompanied, anywhere at all  in the District of Columbia ?  And if not, why not?  Do you think that Anacostia is inhabited by vampires and that Fairfax City is not? 

Why is it, Ms. Schiller, that you and your young family have chosen to reside in Bethesda, rather than in South East DC?  Pray do tell us about the secret of Bethesda’s attractiveness. Could it possibly be…gasp…   the high quality of its schools and the safety of its streets?

Why do you think, Ms Schiller, that families have become increasingly reluctant to allow their small sons to become altar boys in the Roman Catholic Churches of Boston?  Is it, do you think, fear that there is something suddenly unhealthy in the air in such churches; or may there not be a more rational statistical motive underpinning such reluctance?

Why do you think, Ms. Schiller, that millions of  your fellow -Jews desired to flee from Germany during the early years of Hitler’s Third Reich?  Would they have been better employed in consultations with their personal  psychiatrists, rather than worrying about irrational, ethnic-based fears of persecution and talking about such worries on national public radio?

Pull your head out of the sand, Ms, Schiller, look around you, and understand the reality of  ordinary people’s lives. Every individual has a right to life, liberty and property. There are people out there who do not respect such rights. And rational individuals can be guided only by statistical evidence as to who those people most likely are, and where they most likely reside. Yes, if I were out walking late at night in Anacostia and heard footsteps steadily following behind me, I would be a trace more nervous than I would be in Fairfax, Virginia. And this is not a sign of bigotry, but of statistical reality.

If National Public Radio is not prepared to allow decent people to express sensible views on statistical reality, it has no right to government money, and should have little expectation of securing private donations. ‘Off with your head’ Ms. Schiller is the entirely rational response to your absurd, politically correct behavior.

The Scottish Cyclops raids the British Treasury to maintain his Midlothian forge

October 22, 2010

“In the Theogony by Hesiod, the Cyclopes – Arges, Brontes, and Steropes – were the primordial sons of Uranus (Sky) and Gaia (Earth) and brothers of the Hecatonchires.  They were giants with a single eye in the middle of their forehead and a foul disposition.  According to Hesiod, they were strong, stubborn, and ‘abrupt of emotion’. Collectively they eventually became synonyms for brute strength and power, and their name was invoked in connection with massive masonry.  They were often pictured at their forge.” Wikipedia.

“In the end, a political leader has both to manage complex situations and to judge them. Gordon (Brown) might be said to be such a complex situation, and he had to be managed.  And there is a crucial difference between political management and running, say, a company or a football team.  A humorous conversation that I used to have with (Sir) Alex Ferguson (Manager of Manchester United) pinpointed this: ‘What would you do if you had a really difficult but brilliant player causing you problems?’  I would ask.  ‘Get rid of them.’ he would reply. ‘And supposing after you got rid of them they were still in the dressing room, and in the squad?’ I would say.  ‘That would be a different matter.’ he would reply, laughing.’ ” Tony Blair,  A Journey: My Political Life. Knopf, 2010

“Taxpayers will have to pick up the 2.6 billion pounds bill for the controversial aircraft carrier that will never carry jets because Gordon Brown agreed to an ‘unbreakable’ contract designed to protect shipbuilding jobs in Scotland.  Under a 15-year agreement signed with BAE Systems, the Labour government guaranteed work for the company’s shipyards on the River Clyde and in Portsmouth.  This included the 5.2 billion pounds contract to build two new aircraft carriers for the Royal Navy, which David Cameron revealed this week that he was unable to cancel. When the coalition looked at axing one of the carriers to save money, BAE responded that the Government would still have to pay shipworkers to do nothing for the remaining 12 years of the deal…defence industry insiders believe that Labour ministers had a political motive for a deal that would protect shipbuilding  jobs in the party’s heartlands… A senior industry figure involved in the carrier negotiations said:  ‘If  Gordon Brown had not been Prime Minister or Chancellor the carriers would have been cancelled a long time ago.”  David Robertson, Roland Watson, Angus Macleod, ‘Revealed: the truth about the aircraft carrier deal‘  The Times, October 21, 2010 

” In the end, the leaders of our armed forces – or at least those outside the navy – concede that they don’t really need or want these two 65,000 -tonne floating monsters, HMS Queen Elizabeth and HMS Prince of Wales, the joint cost of which was estimated at 3.9 billion pounds as recently as June 2008 and is now well over 5.0 billion pounds.  If they end up costing less than 3 billion pounds each it will be little short of a miracle.” Robert Preston, ‘What a carrier-on’ www.bbc.co.uk, October 10, 2010

The Dis-honorable Gordon Brown is the (now all but invisible)  Member of Parliament for Kirkcaldy and Cowdenbeath in Scotland.  Many of his constituents will live well off this 15-year unbreakable contract . Perhaps Mr. Brown genuinely believes that digging holes and then filling them in is good for the British economy, at least if such activity takes place on the Clyde in his Midlothian District!  Evidently,and thankfully, a majority of the British electorate does not share this risible Keynesian nostrum.

Writing on the wall for the Obama administration

October 21, 2010

“In a bold gambit to tackle its record debt, the British government detailed sweeping spending cuts Wednesday that will hit everyone from welfare recipients to the Queen, positioning the U.K. as a global test case in the argument for choosing austerity over stimulus to repair the economy.” Alistair MacDonald and Jon Hilsenrath, ‘U.K. Embraces Austerity’, The Wall Street Journal, October 21, 2010

“The new Conservative-led coalition headed by Prime Minister David Cameron announced cuts deeper than the ones made by Margaret Thatcher in the 1980s, outlining a plan to eliminate half a million government jobs, slash welfare benefits and reduce $131 billion worth of other public spending on everything from fighter jets to social security to the arts by 2015.” Anthony Faiola, ‘Britain moves to slash deficit’, The Washington Post, October 21, 2010

The British government will impose a 19 percent reduction in overall  government spending over a period of four years. These cuts will take place during the currency of this British Parliament, in which the coalition government has a comfortable working majority. In so doing, public spending in Britain will be reined in from 48 percent to 40 percent of gross domestic product and the overall budget will move approximately into balance by 2014.

October 20, 2010, therefore signals the political will in Britain to bring the era of progressivism to an abrupt end, and to restore the foundations for the re-emergence of a properly-functioning capitalist system.  The writing is clearly on the wall for the United States.

David Cameron effectively is pointing a sharpened dagger at the very heart of the Obama administration. If his policy succeeds in  triggering a new British market miracle, President Obama and his fellow Democratic progressives are dead meat in the United States. As they move into early retirement, let us hope that they are prepared to enjoy the bitter fruits of the President’s legacy to the Medicare program.

In the meantime, the debt-ridden U.S. economy faces a real prospect of being left gasping in the economic dust by a country whose political system is sufficiently flexible as to adjust quickly to changing economic conditions, and to wield the butcher’s knife on the obese flesh of a bloated public sector…and whose electorate, albeit by a whisker, had the courage to vote for strong medicine to cure its insatiable appetite for an ultimately illusionary free lunch.


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