Curt Doolittle

Theme: Crisis

  • The Economist: Why Are Companies Hoarding Cash? My Answer: Uncertainty.

    THERE is a new question posed to our panel in the Economics by Invitation section:

    Much of the recent increase in private-sector saving comes from businesses. What explains the rise in corporate thrift? How long will it last, and what policies might reduce it?

    As an article in this week’s edition explains, the build-up of cash by the private sector can affect the recovery.

    If cautious firms pile up more savings, the prospects for recovery are poor. Economies will be stuck in the current—and odd—configuration where corporate surpluses fund government deficits. If firms loosen their purse-strings to hire workers and to invest, that will allow governments to scale back their borrowing.

    Economist Xavier Gabaix believes that the fear of another shock down the road is making firms cautious. Hal Varian thinks that firms are not investing because they see no signs of demand picking up anytime soon.

    Firms are not investing because they don’t see much demand for their products now or in the near-term future. And, of course, we end up with a self-fulfilling prophecy. One possible strategy would be to offer a temporary investment tax credit or accelerated depreciation allowance.

    They are hoarding cash be cause of uncertainty. Regime uncertainty. Economic Uncertainty. Even cultural uncertainty. There are so many layers of uncertainty that businesses don’t even know how to advertise. What products to bring to market. What trends can or might emerge if they help them.

    [callout]Big businesses are starting to spend BECAUSE they have cash. But recessions and job recovery are led by SMALL BUSINESS and small business cannot get credit. Credit for small business is speculative. It’s all speculative. And small business owners have nothing to borrow against. Nothing. Any hard asset is now questionable in value.[/callout]

    Big businesses are starting to spend BECAUSE they have cash. But recessions and job recovery are led by SMALL BUSINESS and small business cannot get credit. Credit for small business is speculative. It’s all speculative. And small business owners have nothing to borrow against. Nothing. Any hard asset is now questionable in value. To move the economy, consumers have to show that they’re spending. Companies have to show that they’re taking risks (investing). Any reference to demand is an antiquated method of looking at an economy. There isnt’ a demand problem unless there isn’t an uncertainty problem. Right now there is an uncertainty problem, so there isn’t room for a demand problem. To eliminate uncertainty, and to create jobs, we have to loan to small business despite their weak balance sheets. That’s the problem. In a nutshell. That’s the problem. Some of us are trying to figure out how to fund small businesses. But politically,, it seems impossible.

  • Postcards From Hell: The Reason For Failed States

    Postcards from Hell

    A terrifying photo essay from Foreign Policy on the world’s failed states. Note that with just a few exceptions, the 60 or so states the magazine had determined to be “failed” are located in tropical climates. Someone recently sent me this fascinating video related to the new book by sociologist Philip Zimbardo (of the Stanford prison experiments fame–or infamy, I guess). The theme of Zimbardo’s new book is the way time is perceived among different cultures. Of relevance to the Foreign Policy essay is the idea that populations and cultures in northern climes have adopted a future-oriented timeframe, likely because it’s necessary for their survival. You have to stock food, fortify shelter, and so on to prepare for the winter months or you’re going to starve. Or freeze. Tropical populations have a more present-oriented concept of time. Food is available year round. There’s no winter for which they need to prepare. I’ve read some interesting commentary on how these differing concepts of time might explain why warmer countries have been slower to develop than cooler ones.

    The reasons for the under-development of Tropical States are as as follows: 1) Disease gradients are lower (safer) in the cold and higher (harsher) in the warm. 2) Physical effort is difficult in hot weather, which hampers the creation of built capital. (core body temp also affects iq during exertion) 3) Agrarian cycles in the north encourage cottage industry in winter, farming in spring and fall and war in summer. This creates certain social orders that foster human, built and technical capital accumulation. Compare to the brutal survival farming of the Chinese and their 360 day-a-year discipline of rice farming. 4) Rivers or seas, but rivers in particular provide safe, easy and low cost product transport. The opposite is true: some areas are simply geographically resistant to trade. 5) Unequal distribution of useful plants and animals favors certain regions. As well as agrarian productivity. 6) Access to trade means access to knowledge, and greater availability of resources and technology. This increases the probability of innovation, and the development of ‘virtues’ as we understand our commercial and moral code.

    [callout] The abstract thing we refer to as society, that ‘thing’ that is embodied in the accumulated habits that we call ‘social order’, are the most important and expensive forms of human capital. [/callout]

    7) The abstract thing we refer to as society, that is embodied in the accumulated habits that we call social order, are the most important and expensive forms of human capital. These habits define the unspoken normative goals that define cooperation and coordination. (The set of things that we don’t do: the opportunities we do not sieze. We pay for social institutions by forgoing opportunity, we pay for infrastructure and governance with the results of trade.) These institutions include our different definitions of public and private property, manners, ethics, morals and rituals. These require political institutions that perpetuate them one adopted. 8) General technical knowledge. (how to craft things) General systemic knowledge (how the natural world operates). We often confuse education with practical knowledge and scientific knowledge. ( the Muslim world is full of Islamic studies which do nothing except persist in resisting ignorance. the sub Saharan world is still in the embrace of magical thinking. ). Commerce not education (imitation of practice) is the primary means of knowledge transfer. 9) Concordant technologies. Civilizations need to accumulate a greatdeal of human capital in order to adopt certain technologies before they can adopt others, else these technologies are not disruptive, and do not increase the division of knowledge and labor. Otherwise tyrants simply use it to institutionalize corruption and profiteering. This isn’t any different from children but on a larger scale. If people do not forgo the opportunity to misuse a technology, they will never be able to gain its productive benefits. You don’t give a child a gun. 10) Social orders. The west was built by fraternal orders of city/market joint stockholders, partly because of the high cost of equipment and training. This is the source of our republican sentiments, as well as our tools of argument,reason and science. Other societies have not been so lucky. Now we get to how westerners hurt some cultures: 1) Creating political boundaries across tribes destroys their ability to create human capital because it over stimulates the need for group persistence and impedes the development of common market habits. Thievery and tribal banditry is much easier and cheaper than creating trade and infrastructure. Even today, there is no small sentiment among males that suggests civilization has limited their potential access to mates. 2) Colonialism under England was effective in creating stability. In fact the hallmark of the Anglo model is stability and stability fosters the accumulation of all forms of capital. If you were colonized by someone else, then you will suffer for it. Anglo social technology is as important as the development of Greek science and reason. That technology, unbenknownst to most of us, is the development of abstract principles that allow calculation and coordination. ( this is a very complex topic.). French colonies are a disaster. 3) Economic interference, and in particular the crime of Charity. Ths is a hotly debated problem. But individual and locals assistance by devoted people seems to make a difference, while insertion of capital is extremely harmful to developing economies that must transform from tribal to market economies. Unpleasant realities :

    [callout]IQs are unequally distributed in different races, and in clases within those races. And that all people are racist in that they prefer acting within and in cooperation with people of their race. And this will never change, ever … [/callout]

    And the one factual reality that the vast body of people will fail to accept in the face of universal, overwhelming and scientifically evidence: that iqs are unequally distributed in different races, and in clases within those races. And that all people are racist in that they prefer acting within and in cooperation with people of their race. And this will never change, ever, simply because of the imitative nature of man, his need to learn, and his desire to learn from those he most easily can imitate. And the consequential need for, conceptions of status in order to choose who to imitate.

    [callout]While economic classes are semi randomly plastic, social classes are decidedly inelastic.[/callout]

    When the hard reality is that women are hypergamic (marry up), while men have a wider iq variance than women, it presents men with the need to compete for mate selection. And this system requires a diverse economy of status symbols within each race and class that guarantee the eternal search for demonstrable differences in status in order to pursue both mates and opportunities for alliances.. Racism is permanent as is classism. The dirty secret of the human genome project is that class is genetically determinant. While economic classes are semi randomly plastic, social classes (which are readily evidenced in the postings on this and other blogs) are decidedly inelastic. (spoken as a member of the upper middle class). Furthermore IQs are different in consequence between groups. A white, Jew or east Asian with a sixty iq is perceptibly broken. A sub saharan African is not – he or she just has a higher barrier to the learning of abstractions. In general, To maintain machines requires a 105 IQ. To get a liberal education requires an IQ of 110. To design machines requires an IQ of 122 . To design abstractions requires an IQ above 130. To innovate upon a system of thought requires, it appears, above 140. Everyone else simply uses the tools created by others. It is demonstrably true that the top quintile has more influence on productivity of the society than all the rest combined. Since all societies are run by minority elites (even ours) the composition of elites in government, intelligence in the middle classes, and capable mechanics in the proletariat determine the competitive rates of innovation and change in a society. There are also ways to manufacture ignorance. Some religions are regressive. In fact it could be reasonably argued that many are simply dangerous. The reason one is out gunned out germed and out steeled, so to speak, is a function of a culture’s willingness to adapt disruptive technologies. Luddites perish. Most of the scriptural religions are Luddite systems of thought.

    [callout]… it does not take a genius to run a market economy. As our politicians demonstrate daily.[/callout]

    Despite these iq distribution differences, it does not take a genius to run a market economy. As our pliticians demonstrate daily. What is important is that in any sufficiently large body of people exist sufficient numbers to adopt the rule of law, the intitutions of trade, and some form of capital production. The problem is one of numbers: getting the barbarians and potential corrupt bureaucrats to forgo opportunities for personal gain in order to fund the development of their human capital. The problem of coordinating production in a division of knowledge and labor requires a great deal of sacrifice. It is the is a sufficient set of principles govern the progress and adaptability of cultures. As other readers have commented, colonialism is perhaps the greatest determinant today of the relative state of failed nations. I hope this was helpful in providing food for thought.

  • Krugman Watch: Paul’s Beginning To Admit Failure And Here Is Why

    In a series of recent posts, Paul Krugman is starting to admit that he’s failing to be able to use his pulpit, position and his credibility to encourage government spending. What I find most interesting is that he argues that proletariat sentiments of inequality (injustice) are the driving social force, while failing to understand that middle and upper middle class sentiments of injustice (inequality) are an equally driving force. Paul:

    [callout]What I find most interesting is that he argues that proletariat sentiments of inequality (injustice) are the driving social force, while failing to understand that middle and upper middle class sentiments of injustice (inequality) are an equally driving force.[/callout]

    I think you are failing in your effort as a public intellectual, that you are aware that you’re failing, and that twenty years from now, it’s going to be clearly evident that you failed to encourage borrowing (debt) and spending (investment) that WOULD have made a difference, and WOULD have assisted us in getting out of this long term stagnation. And you’re failing because you can’t envision HOW to put money to work in the economy, and you can’t do that because of your personal biases and fantasies. But I suspect that you will go to your grave holding desperately to your desperate convictions – convictions held by the fantastical beliefs of a frustrated minority. A minority that has not in two thousand years, been able to obtain and hold onto land, and as such fails to understand peoples that DO hold onto land, and why they are able to hold it. And in particular, why they are wiling to pay very high social costs, in order to hold it. But the social engineering you think that you can accomplish with economic policy runs too counter to human behavior to produce your desired ends. A heterogeneous people will NEVER act as you desire them to. A ‘CREATIVE CLASS’ will never work to produce your desired ends. Because a creative class must take RISKS, and they take risks with people with whom they TRUST. And they trust people with whom they can best how to trust. And they best understand people who are LIKE THEM. The diasporic english, armenian, chinese, hindu and jewish people are the most competitive and innovative, but aside from the english, the rest tend to work intra-race. Even within races, people cooperate within CLASSES. They may work or consume across lines but they do not RISK across lines, and RISK is what generates jobs, and jobs are what generate consumption. Government spending does NOT ‘inform’ risk takers. It actually makes them angry, because they see the state as a competitor that deprives them of opportunity, and a predator that deprives them of choice. More importantly, all productive creativity requires some sort of technological innovation. It is a product of material manipulation of the physical world. Creativity is not in the capitalist class but in the entrepreneurial middle class. Something must be invented before it can be profited from. So some groups are more effective at mobilizing their middle classes than others. The USA had prosperity to share because of external, not internal factors. Anglos had a new continent to sell off, the only form of government capable of distributing the work of it, (And after the Louisiana Purchase, a government invented specifically for it). Aggregate but temporary technological advantage over much of the world. The inexpensive acquisition of british sea ports. The ability to sell ‘dollars’ internationally because of adopting those ports and the ensuing projection of military power. The collapse of or absence of competitors – particularly those under communism. The conversion of vast numbers of laborers and farmers to suburbanites made possible by low cost of energy, energy distribution and manufacture. The use of print, television and radio advertising to stimulate class-advancement incentives in vast numbers of people by the accumulation of basic consumer goods many of which freed women from the need for dedication to household labor and allowed them to enter the work force and increase productivity. These external factors are MORE INFLUENTIAL than monetary policy. Demographic (distribution), Race, Culture and Class factors are MORE important than monetary policy in determining risk-taking, and risk-taking is what creates jobs. These cooperative frictions DECLINE under wealth because of less need for group persistence, and they INCREASE under duress. In fact, we are seeing a national moving pattern that is the ‘flight from diversity’. And we are witnessing the US adoption of the south american model of a defensive white urban elite, an increasingly minority poor suburban ring. And in those cities where this situation cannot form, flight. Because diversity is an economic disadvantage. Cheap labor may not be. Diversity is. And we have known for a very long time that tribes may integrate into the legal and property system, but they do not integrate into the political and cultural system. Any integration is an illusion of our winner-take-all two party system. Minorities and majorities demonstrate group-persistence strategies. They do so because status determines mate selection, access to opportunity as well as serves to provide people with feedback signals, and status is easier to obtain within group than without. This status-economy is MORE important than pricing signals EXCEPT under absurd conditions. The US interwar period is an ABSURD condition. The euro-atlantic expansion is an absurd condition. The western dalliance with integration of cultures is the product of ABSURD conditions.

    [callout]our government, has built an empire rather than a nation. … [Empires] only survive when a minority has political control over the empire, and where that minority allows economic freedom, but specifically prevents political freedom.[/callout]

    Under these conditions of absurdity, our government, has built an empire rather than a nation. Empires are not egalitarian, they simply consolidate trade routes and reduce the friction of trade while increasing the size of the market. They are anything but egalitarian. And they are only beneficent, and they only survive when a minority has political control over the empire, and where that minority allows economic freedom, but specifically prevents political freedom. You are not going to get what you fancy. You’re going to fail as a public intellectual. And you’re going to fail as a public intellectual because of your own class and cultural biases. It’s not that we don’t need spending. It’s that we must invest in production not consumption. And that your underlying desire is really redistribution, and fulfillment of your frustrated cultural and racial ambitions, not increases in production. And you will not get the body of people to borrow and invest unless you abandon those fantasies. But people never do. You won’t. And so you’ll fail. And all your efforts will be wasted.

  • Krugman Watch: Paul Thinks It’s Envy. (What is it with these people?)

    Paul Krugman argues that envy and inequality pop the bubble. He asks “Correlation or Coincidence?” To which I reply: …. or completely unrelated causality. I don’t think you’re making any argument and I think you’re inventing a correlation, and hoping it sticks via the contrivance of sentimental association rather than reason. The cause isn’t income difference. It’s distortion of pricing and demand by irrational access to, and consumption of credit. And no small part of it is the recursive distortion of credit once it enters the system. Then, when Mom and Dad’s seven-eleven clerk talks about real estate investment, the average person starts to see irrational feedback and develops cautious sentiments. This effect undermines confidence, and after enough feedback from their network, mom and dad start retrenching. Shocks, like the spring oil crisis, confirm their sentiments, and the process accelerates. How about another feedback loop: once enough credit has been available that individuals exhaust their inventory of readily comprehensible wants (as determined by their class and peers), they must stop acting to consume until they can identify new status consumables. Something which means expanding beyond the familiar. This is a marginal illustration but an important one. There is a lot of saturation of the middle class’s consumption. They know it. This provides additional feedback on top of the dissociative feedback of the gas-pumping proletariat investor. Instead of this rational behavior due to the presence of overwhelmingly obvious-to-the-consumer information, you are arguing that **envy** by the lowest classes has a greater impact on confidence than does uncertainty due to omnipresent, obvious, sometimes absurd, irrational feedback. And for the lower proletariat, that sentiment is undoubtably persistent, doctrinal, and inherited. But everyone is just demonstrating observation and rational behavior. Or are you arguing that we can tell that there is a distortion of pricing in the economy because the differences between class consumption simply indicate that credit is out of hand? The question is instead, how much of this distortion remains after the bubbles burst? (Some, but losses are disproportionately allocated to those with paper wealth, and unemployment disproportionately allocated to those in least productive industries.) And the problem is, that the proletariat now foots the bill, with long term interest, for the expansionary credit, unless it is recovered through inflation. This is the damning critique, not that of inequality. The cause is not disparity or inequality. It is not envy. It is simple feedback from observations of irrational information. And that feedback occurs because the state has used credit and fostered consumption in lieu of investment that obtains increases in productivity, and the differences in instability are between thse resulting consumer and producer economies, and the rapidity with which they react to shocks. (Consumption is NOT STICKY when compared to production.) Furthemore, your efforts seem to think that there is an endless supply of entrepreneurial innovation availalbe that can yield increases in production. And that isn’t true. It is clear that you wish to ignore the reality of inequality, the reality of the unwillingness for people to redistribute to others who they feel disagree with or undermine their value system, and the reality of social status as a permanent, and *epistemically necessary* component of the system of human cooperation and coordination. Let alone the mating ritual. Envy isn’t the problem. General liquidity used for consumption rather than productivity is the problem. People have cognitive biases. Plenty of them. But they also are not oblivious to social economic and status signals that are irrational, and tell them ‘something just isn’t right here’. The shift to Friedman was the only one available to the conservatives who wished to reverse what they saw (accurately) as a decline in their civilization due to prior policies. That Friedman was partly wrong, as was Keynes partly wrong, is immaterial. Our problem is that we do not know the answer. The philosophers of the thirties failed. And so has everyone else since then. And they have failed largely due to the myth of equality. People simply do not, and will not act that way in a heterogeneous society. They do the opposite. The status economy with its class status demands, and its racial status preferences, and its group persistence preferences will not permit the purely economic homogenous model you fancy. In fact, research shows that people will gladly undergo hardship in order to ‘fund’ their social preferences, and in particular to preserve their status. And so you will never create the levers that you seek to manipulate. We are instead headed toward the south american model of geographically separated classes, and likely races, forming permanent classes in rings around urban centers, and systemic corruption necessary to preserve group solidarity. This demographic movement is already suggested in moving patterns. Be careful what you ask for. (PS: I swear. Left-Jewish egoism is a cultural if not genetic cognitive bias. Unbelievable. Krugman is just as out there as his conservative mirror image Paul Gottfried. )

  • Another silly season: A sure sign of recession or recovery? Divorces and breakup

    Another silly season: A sure sign of recession or recovery? Divorces and breakups. Yet another animal spirit, cognitive dissonance, epistemic failure from our inability to isolate environmental signals. People breaking up is an illustration of the change in sentiments. Seems like it’s the season. Next signals to look for? Coalescence around a new hierarchy of status symbols. Emergence of new myths.

    Source date (UTC): 2010-06-12 13:14:00 UTC

  • The Euro. What Will Happen?

    Germany Moves East Germany and Russia are now more politically aligned because they are now economically aligned. Europe will have: 1) the German-Russian block, which will reclaim the eastern block countries. 2) the France and PIGS block (latins – portugal, spain, italy and greece over whom it can feel superior) 3) The UK trying to figure out if it’s part of the Anglo-american, French or German block, and becoming irrelevant unless it simply becomes the world version of switzerland -weak but trustworthy with your money. The European left-coast lost. And the USA can’t protect anyone any longer.

  • Payback Time? But what’s the fee?

    Entitled “Payback Time”, this NYT article by Steven Erlanger states that “Crisis Imperils Liberal Benefits Long Expected by Europeans” I’d like to clarify this argument a bit with the following points: 1) It will take somewhere between 3-5% of GDP to correct the retirement funding problem given the current ratio of prices and payments. 2) The problem with any policy is in determining the degree of uncertainty with regard to the future state of production (how much the productive people in any society will earn without the historical advantage that west has had in capitalist political and economic systems.) This means that the 3-5% number could be about the same, or it could be as much as twice that amount. 3) Most of the world, Europe in particular, will need to increase military expenses as the US loses it’s ability to project the power needed to police world trade routes, and it’s citizens lose the will to do so. We do not know what this cost will be. For european countries it will likely be on the order of 10% of GDP if history is any measure, that will mean roughly doubling the wealthier countries in europe, and quadrupling the spending of the eastern fringe countries.

    [callout]The fact that this economic instability is going to be caused by demographic changes, much of which will be caused by immigration of non-integrating subcultures, will remain the unspoken elephant in the room for years to come.[/callout]

    4) Most of the developed world will have to increase expenses on infrastructure due to aging populations. We do not know this number. Health care in particular will need to be rationed further as the cost of prolonging life continues to climb. 5) Cost of government is increasingly expensive and burdensome as productivity declines. 6) demographic changes underway, the increasing differences between american super-regions, and the lack of integration of immigrants, and the rising racial tensions, will lead to the increasing potential for political upheaval, somewhere in the 2015 – 2025 range, which would put extraordinary financial burdens on the world as regional power vacuums forced rapid reallocation of resources worldwide. The conservative position would argue that the world system is much more fragile than we assume, and that it’s prudent to cautious in our expectations of the future. The libertarian position would be to change from speculative policies that rely on growth and government, to calculable policies that rely upon saving and productivity, and in doing so, create both security and prosperity rather than worrying about the degree of risk we’re taking on. The likely cost then, is somewhere between a low of 3% assuming stability, and a high of 15% of GDP over the next ten years. The fact that this economic instability is going to be caused by demographic changes, much of which will be caused by immigration of non-integrating subcultures combined with aging dependent generations will remain the unspoken elephant in the room for years to come.

  • Krugman Watch: On The Right’s Level Of Agitation

    The right is very angry right now, even more angry than the early Clinton years. And they are only going to get more agitated. De -masculinizing the military was Clinton’s only real mistake, as the military fraternal order and its meme of group-persistence are conservative’s most agitating sentiment. Obama’s transfer of risk from the poor (unenfranchised risk creators) to small business owners and professionals (enfranchised risk takers), and his general attack in word and deed on the right’s social status and values, plus the sentiment that the ‘rules of the game’ (the constitution, which is the core value of The Classical Liberal wing of Conservatives) were violated to pass the healthcare bill over the will of the populace, have inflamed them. Furthermore, the right lives in a consciousness of the status-economy, which consists of accumulated sacrifices in order to achieve status, and status which increases the probability of opportunity, and opportunity which when combined with risk, create wealth and security. This status-economy is universal, permanent, and material, and vastly amplified in any heterogenous empire. (Conservatives don’t wear funny hats as identity symbols, everyone else wears Conservative hats in order to enter the conservative status-economy.) Just like taxes which are a cost, there is a maximum amount of wealth transfer that a group will tolerate. The political problem is no longer money. It has become a status problem in a heterogenous empire. Empires break because of such differences. (Empires break for two reasons: excess cultural heterogeneity and insufficient institutional calculability: religion and law are insufficiently marginal influences in heterogenous urban societies. No civilization has survived the transition from homogenous to heterogenous density, because it ceases to be in group interests to pay the opportunity cost of respecting institutions whose underlying causal pressure to conform to them diminishes with anonymity. And for your side, the left, it would help if one did not confuse preferences with truths. Because equality, as a value, is contra-logical to the status economy. There is no evidence that people are equal, nor that equality can persist for any period of time. There is a minimum interpersonal, and inter-class, status delta that is tolerable in any society, and the more diverse that society, the more exaggerated must be the delta. This is as much a law, as is supply and demand. And only silly people think otherwise. As for exemplary European models applied to the US, and perceived happiness thereof as a metric, the power-and-weakess discount must be applied to europeans, as demonstrated by the written record of migrants, almost all of which choose the USA model over the european simply because of decreased costs. The opinions europeans hold of their policies are not met by the opinion of european and american expatriates, who actually possess the information to make such a valuation. The popular opinion is nothing but the reversal of power and weakness postwar. Combined with the homogeneity of the germanic countries, this creates an opinion-bias that makes european opinion irrelevant to American policies. The problem for our nation, is that we are an empire that used to be 80% homogenous, becoming an empire whose cultures are increasingly at material odds. In particular the status-discount whites have been paying is reaching intolerable proportions. Why? Because there is a maximum cultural delta, not the least of which is driven by IQ variances. But primarily driven by the human preference for similar-looking and similar-acting people. That preferences is material because of the STATUS economy experienced by people who compete across racial and cultural boundaries. In other words, for the majority, there is a status advantage, and therefore an economic advantage to group identity. In other words – Cultures do not integrate when status deltas reach a cliff-effect. Instead, they hunker-down in tribes. The data is becoming quite clear that the american melting pot was a myth post-european integration. It is a myth here, and will be a myth here and everywhere. And when people do not integrate, they do not tolerate redistribution. It’s funding you’re opposition. This is the reality of human existence. As for the popularity of leftist sentiments versus conservative sentiments, the country is vastly center right. But our universities, are vastly left. Our business community is vastly right. One of these communities is an outgrowth of theology. The other operates using practical techniques. Conservatives never forget this. Liberals (the left kind) always choose to.

  • Yes We Could Have Prevented The Suffering Of Citizens

    Rebekka Grun, on The Growth And Crisis Blog writes that we could have protected the consumers rather than the banks, in her posting Conditional Individual Bailouts – a Potential Anti-crisis Instrument

    Why not save the individuals that went bust rather than their banks? Unconditional bailouts, of course, would generate the wrong incentives (for the banks as well, by the way). It is therefore important to attach smart conditions to discourage free riding. For example a course in financial literacy and commitment to a program of (maybe painful) debt restructuring, and possibly further measures to improve the education or health of the affected individual or family.

    Your sentiment is correct even if you haven’t done the math on it. In general terms, there is a simply technique for doing exactly what you’ve suggested, but we lack the infrastructure for it. The arguments against the solution at the time were that we didn’t know how far prices would fall (I’m not sure, I think we were about right), and that it would make very visible that the government was the source of the problem (true), that it would have geopolitical impact on the value of the dollar (of course, but so would the alternative), and that it could be unfair to people who had behaved well (that would be fixable), and that it would encourage a bubble (this is false). THe primary problem with distortions is that the distortions are in PRICING. Libertarians would call corrections ‘repricing’. The problem is that human beings must suffer a great deal and absorb a lot of stress to conduct that ‘repricing’. When the state, as the creator of the distortion by the manufacture of cheap credit, could easily reprice major (home) assets by repricing the DEBT of those assets. In other words, we could have easily corrected the economy by bypassing the banking system, and giving money directly to the citizenry as buy-downs on their mortgages, which would have provided them with cash to spend or to put into banks. Doing this is fine if you do it FAST. In other words, the state created both the BOOM problem and the CRASH problem because it relies on the irresponsible tool of providing general liquidity – easy money. In hindsight this is more obvious than it was at the time. Those of us who made this recommendation were the smaller voices, because the banks and the financial industry were so terrified and the impact on the economy if they failed, so severe. The problem for our country is to put this system in place, so that we are insuring citizens AGAINST their bankers, so that we can use the market to PUNISH bad bankers and their investors, rather than the citizenry. I’ve worked the mechanics of this process out in some detail, and it’s quite simple. It’s just novel. And it’s anti-bank. And that makes it dangerous to a lot of people in one of our biggest industries: finance.

  • Germany Should Exit The Euro And Return To the Mark

    THe NYT Opinion page includes recommends Germany leave the Euro? (Referring to a posting elsewhere.) Yes, it makes sense. Earlier last month I wrote a series of letters and posts recommending Germany pull out of the Euro myself. Mediterranean Europe and Germanic europe are too different in culture, social structure and values. Restore the DM. Leave the Euro to the southern countries who need it, and have similar social values, and are willing to fund those social values. Currencies as they are currently used, are the primary means of social insurance and redistribution. People are naturally gregarious to their own ethnic groups, and are naturally not gregarious with what they see as competing groups, and in particular, groups that they see as a permanent drain on their resources. Because currencies are a means of social insurance they are inseparable from the social orders that employ them. Countries need their own currencies. The spanish, italians and greeks can then maintain their historical poverty born of their less productive lifestyles, without impoverishing the north. Besides, the north has a new permanent semi-revolutionary underclass it is supporting at home to deal with. THe USA has a similar problem. It is a domestic empire over somewhere between four and six separate cultures, with entirely different economic interests, and cultural interests, and political friction between them is becoming intolerable. The only reason that america government has functioned since the 1900’s, is because of the two party system, and the south’s rejection of the republican party. With the south now more pragmatic, this prior balance has been shattered, and the country is increasingly a north and west against a south and interior. For exactly the same reasons as europeans face these problems. It is all well and good to believe in the myths of egalitarian secular humanism, while you’re living in a temporary era of post-war, then post-soviet prosperity. But western civilization no longer has it’s economic advantage over the rest of the world. The west will be permanently poorer, even if retaining it’s ordinal status, for some period of time, simply due to the northern european people’s ancient tendency to eschew corruption. Since a currency is a reflection of social values, nations need their own currencies. The euro was a failure. Return to the DM.