Finance and Free Markets

A very interesting piece in the New Yorker explores the way that finance has begun to swallow up capitalism, sucking money, talent, and bailouts into its orbit, while doing a mediocre job at its most socially beneficial function:  raising capital for productive enterprises.  Increasingly, big banks engage in trading for clients and themselves through the prop desk, while doing much less (and earning much less) from ordinary finance activities like raising capital for companies to expand, invent, and distribute whatever it is they make.

It’s become increasingly clear to me why European conservatives have harbored a certain suspicion of capitalism.  In addition to destroying traditional societies–especially agricultural ones–the big bank capitalism of the last 150 years has often allowed a small group to accrue great power, its leaders have shown little attachment to one or another nation-state, and speculative bubbles of one kind or another have often crashed creating great harm to innocent bystanders, including most recently American homeowners.  Where ordinary businesses, even big ones, rise or fall on their merits, banks are closely tied to big government players and have obtained bailouts and other special favors, while in effect holding the government and the broader society hostage through their infamous powers in the bond market.

Americans of all stripes have long believed in some version of free markets.  But equally dominant in our history is a suspicion of “eastern finance,” as represented in such movements as the National Grange, the support for various protective tariffs in the 19th Century by nascent industries, and the anti-trust movement of Teddy Roosevelt.  Those Americans knew that banking, at best, was supposed to be a modestly paid middleman, and not the hyperdominant player it has become of late (and had become in Europe in the late 19th Century under the Rothschilds et al.).

The post Great Depression era of a smaller, less dynamic, and thereby more stable banking and finance sector appears in many ways superior to the present.  And conservatives should avoid a knee jerk support for free markets among fair-weather-friends of capitalism that benefit from various government largese including access to artificially low interest rates, FDIC insured deposits, and most recently the TARP.  If Obama were a more serious person and not a dilettante stuck in the ideas of his youth he’d hire guys like Jeremy Grantham and Paul Volker to come up with appropriate regulations to prevent speculative bubbles and other abuses of finance.  Instead, he is selling last year’s model and ignoring most of what goes on on Wall Street to our collective detriment.

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Not Getting It

Thomas Friedman has gone from being a cheerleader for globalism to a cheerleader for un-American, command-and-control industrial policy of the type enjoyed recently by China and, less successfully, the Japan, Mexico, and Brazil of yesteryear.  What he does not understand and is completely dishonest about is the widespread American rejection of the measures undertaken by Obama on the stimulus and healthcare that emulate these foreign models.  He says for example:

That is why I believe most Americans don’t want a plan for deficit reduction. The Tea Party’s vision is narrow and uninspired. Americans want a plan to make America great again, and at some level they know that such a plan will require a hybrid politics — one that blends elements of both party’s instincts. And they will follow a president — they would even pay more taxes and give up more services — if they think he really has a plan to make America great again, not just bring him victory in 2012 by 50.1 percent.

That hybrid politics will require hard choices: We need to raise gasoline and carbon taxes to discourage their use and drive the creation of a new clean energy industry, while we cut payroll and corporate taxes to encourage employment and domestic investment. We need to cut Medicare and Social Security entitlements at the same time as we make new investments in infrastructure, schools and government-financed research programs that will spawn the next Google and Intel.

There is no evidence to support this. The American conservatives and moderates that rejected Obamanomics this last election have no interest in the kind of internal nation-building he calls for.  Instead, they are aware of and have rejected the economy-destroying implications of big government.  Some, no doubt, have not thought things through and still want generous benefits.  But, nonetheless, they do not want more government, even if they want the unsustainable same amount.  And they do recognize intuitively that large deficits create problems, not least inflation, but also constraints on the government performing essential tasks like defense. Finally, most Americans know that the first Google and Intel did not require government seed capital and direction; they simply required a government that did not get in their way.

Friedman has become delusional, and he is ensconced in a bubble of fancy dinners among wealthy foreign patrons and the carefree life created by his billionaire wife’s money.

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QE 2.0

Quantitative Easting 2.0 that is.  I really found Jeremy Grantham’s letter this month particularly insightful in exploring the ways that cheap money does little to advance the economy, while creating asset bubbles all over the places that must eventually be deflated.  He also makes the good point that a housing bubble is much more damaging and persistent than a stock asset bubble.  And, finally, he exposes the Federal Reserve for all of its foolishness and inability to do very much useful, other than kick the can down the road.  His bottom line:  “ In almost every respect, adhering to a policy of low rates, employing quantitative easing, deliberately stimulating asset prices, ignoring the consequences of bubbles breaking, and displaying a complete refusal to learn from experience has left Fed policy as a large net negative to the production of a healthy, stable economy with strong employment.”

Of course, the Austrians knew this a long time ago.  And, it should never be forgotten, the Federal Reserve was put in place in 1913, had much to do with the housing asset bubble of the 1920s, and in spite of its promises to prevent the business cycle, auguered the Great Depression, which, like our current depression, was made worse by various hair-brained fiscal stimulus projects under FDR.

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Web Round Up

Sorry kids, it’s been a busy week (out in the non-blogging world), but I found a few interesting things to share.

Lying Eyes had a nice piece on the limits of markets.

Jonah Goldberg notes that the taboos on criticizing Obama (and his manifest arrogance) are becoming the stuff of ordinary observation.  This breaking of taboos on criticizing bad politicians from “victim” groups is a healthy one.

The gang at Alt Right note the not-terribly-surprising interest of neocons in embracing gay marriage.

Larry Auster’s hippy past comes to light without shame or regret (or much explanation). Incidentally, this guy criticized John Kerry’s service record back in the day, as if he were the second coming of Audie Murphy.  It’s apparent that Larry served in the marijuana trenches of Colorado during the Vietnam War. And he banned me for noting the contradiction and absurdity of his highly judgmental grandstanding on the physical courage of a man, a man whom I do not particularly like, who at least spent some time on the Two Way Range.

Hillary Clinton suggests Serb minority in Kosovo might be oppressed (this after supporting her husband’s genocidal war of Muslim Kosovar liberation that left the Serbs to the tender mercies of the KLA terrorist regime run by head terrorist, Hacim Thaci).  For some reason, I think admitting that this was a huge mistake, the equivalent of Soviet “liberation” of the Poles in World War II, is quite unlikely, as are American promises of protection to the Serbs, who are the whipping boy of Europe.

In other news, Serbs will be Serbs:  young toughs were battling the cops this week in the street to stop a gay pride parade in Belgrade.  Honestly, I don’t support thuggish violence, but at least these people still have enough blood in their veins to know that Euro-decadence is the harbinger of national decline.  Conservatives in America react with a little venting and then a shrug at this and much else.  In a just world, no one beats up gays, and gays do not go out into the street in their bondage gear and expect to be treated as if they were anything but a dangerous, antisocial subculture.  (Sadly, Paladino in New York does not have the guts to defend his first instinct on this issue.)

I was happy to see the Chilean miners be freed  from their long ordeal.  It’s truly great news.  To his credit, their president mobilized national and international resources to help, including America’s NASA, and thereby showed a self-confidence that is often absent in the prickly, insecure Third World.  (Of course, Chile is probably the least Third World of all such countries, not least due to the stability and economic growth of the Pinochet years.)

Everyone is in a tizzy about the fraud of mortgage lenders being addressed now by BofA’s moratorium on foreclosures.  These issues, frankly, are interesting only to lawyers, and I’m one of them, and even my eyes glaze over at the details.  Mortgages and foreclosures are far too technical, as is our old-fashioned regime of property transfer and registration.  Once payments are stopped and a workout cannot be had, the rest is all details. No one has alleged anyone had their house taken when they were making timely payments; it’s all a question of whether some highly technical documents that no one reads or understands were signed by the right bureaucrat or not. The whole thing is a tempest in a teapot.  Since post-foreclosure any title is good against the world, contrary to the hype, this should all blow over.  More important, how much national wealth do we want sacrificed so that a completely outdated and overly expensive process is conducted with scrupulous regard for the defense bar.  That said, if you’re of a Machivellian bent, now is a great time to stop paying on your house; you could probably live their for four to five years with minimal efforts at defending from the bank, particularly in hard hit areas like California and Florida.

What can we make of all this news.  Well, America and the world are having a reckoning with their loose money fiat regime unleashed barely 70 years ago after World War II.  This whole system is unsustainable, and now the real gap between our perceived (i.e., paper) wealth and real wealth is more and more apparent.  The name of the game is deleveraging, which means paying back debts individually and collectively.  And that means pain, austerity, and, due to our nation of welfare addicts, instability in the transition. In such times, anything is possible, both in foreign and domestic affairs.  The best one can do is try to hedge.  And this means being prepared for uncertain times, i.e., anything from the Dust Bowl 30s to the Somalia 90s. And the best way to do that is to reduce debt, sock away some cash (literally, under the mattress), buy tangibles, adopt a minimalist personal philosophy, and be prepared for anything.  America may have sold its soul for granite countertops, but right now a few gold coins, an AR-15, and a month or two worth of stored food and some tradeable stuff like a generator will do a hell of a lot more for you than a stainless steel refrigerator or a jet ski.

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Immigrants Are Taking American Jobs: The Numbers

Most people recognize that there are disparities of unemployment by region or education.  Florida and the other “sand states” are particularly hard hit. But VDare did an interesting review of unemployment differences between native-born and immigrant workers, and this revealed a serious disparity in unemployment that tilted in favor of the newcomers.

Why might this be?

The folks at the WSJ would suggest this is because immigrants are harder working, more “real” Americans than the lazy welfare cases that are born here.  But is that all of it?  Could it be immigrants don’t want things like insurance or are more willing to walk away from mortgages or have less compunction about paying taxes, nor do they care as much if companies’ adhere to safety protocols?  (By way of illustration, I once observed a Mexican construction worker welding without any eye protection whatsoever.)  And could it be companies like to hire people that are “living in the shadows” because they are more easily exploited?

Here’s Ed Rubenstein’s numbers:

Over the past 12 months:

• Foreign-born employment rose by 1.7%, or more than eight-times native born job growth (0.2%)
• The immigrant unemployment rate declined by 4.2%, while the rate for natives declined only 2.1%—half as much.
• The share of the native-born working age population that is actually workingdeclined for natives; the share of the immigrant working age population that is actually working rose.
• Perhaps most indicative of future trends: the foreign born population 16 and over (i.e., of working age) rose by 1.6%, nearly double the 0.7% increase for natives.

America’s people, habits, and demographics are all being transformed, and so is our workforce.  These changes benefit a small number of rich business owners and the immigrants themselves, while burdening native-born Americans with lower wages, higher crime, a less solvent state, worse schools, and a weakening of the American character.

America’s Constitution makes no promise to the world or to immigrants or to anyone other than its citizens and their progeny, as it was made to “secure the Blessings of Liberty to ourselves and our Posterity.” But the false consciousness of America as an “immigrant nation” and the willful blindness to the facts by decision-makers and the American people has blinded large swaths of the country too the harm that mass, Third World immigration does to our country’s health and prosperity.  While the more dramatic cases of immigration policy failure are those of terrorist Muslim interlopers, the larger numbers (and problems) come from Latin America. Here the consequence of that is undeniably harmful American worker displacement.

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Shadow Stats Sees the Apocalypse

The economic journalist and consultant behind Shadow Stats has an absolutely off the wall interview in a mainstream business publication that begins reasonably enough, but ends sounding like a cross between Ludwig von Mises and the Road Warrior.

It’s worrisome when guys in pinstripes who went to Ivy League schools begin to make the kooks talking about the Illuminati at gun shows sound like the moderate wing of the movement.  These are very tough times for so many Americans. I hope our country somehow pulls through.  But I fear that it will get much worse before it gets better.  There is so much that is unsustainable right now; it can’t go on like this indefinitely. 

I try to count my many blessings in times like these–a job, a great family, freedom, my education, my faith–but it’s so downright depressing to see so many good, hardworking people caught up in a storm beyond their control, while the worst of the worst, the least productive and most parasitical in DC and Wall Street, are living the high life on a combination of government bailouts and central bank sponsered hustles.

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Obama Care and Cost Control

The oft-stated conservative fear of Obamacare is that it will lead to painful rationing through various government mandated standards of care, “death panels,” rationing, and the like–our state-of-the-art healthcare system would decline in quality.  But this does not seem the pattern of American entitlements.  Section 8 hasn’t led to lower quality housing for the poor, nor have Social Security, Medicare, or Medicaid shrunk over the course of their existence.  Indeed, by disbursing costs and concentrating benefits in certain groups–in the case of healthcare, that group being the elderly, the sick, and the medical providers themselves–it seems far more likely that costs and spending will expand precipitously, accelerating  the insolvency of the American government.

Robert Samuelson today makes an apt comparison with Massachusetts, which enacted a similar plan statewide, and can’t seem to control costs:

Aside from squeezing take-home pay (employers provide almost 70 percent of insurance), higher costs have automatically shifted government priorities toward health care and away from everything else — schools, police, roads, prisons, lower taxes. In 1990, health spending represented about 16 percent of the state budget, says the Massachusetts Taxpayers Foundation. By 2000, health’s share was 22 percent. In 2010, it’s 35 percent. About 90 percent of the health spending is Medicaid.

State leaders have proven powerless to control these costs.

Republicans need to grow up on the “death panel” talk.  The problem with healthcare, at least in part, is overspending due to perverse incentives brought about by third party insurance.  People do need to ration care, but the correct position is that it should be through the pain of price and the freedom of markets, just as we ration spending everywhere else, including necessities like car repairs or clothing or food.  For anyone who is destitute, such rationing needs to be through the logic of non-profits and the supervision of the “poor house.”

Nothing is free, and this is certainly true with health care.  Conservatives and Republicans should not be defending the recently minted notion that the elderly can bankrupt the young and the country as a whole on the basis of some perverse and false pro-life principle that says all cost-benefit analysis is immoral.  It’s not.  But it’s better accomplished by the decentralized decisionmaking of multiple actors in the market than it is by a government bureaucracy. Indeed, the long dormant notion of central planning is making a comeback, and on this issue free market principles are thoroughly and verifiably superior.  On healthcare, it seems most likely, we will feast for a while, and then have a famine.

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Castles Made of Sand

Probably the scariest revelation I’ve had in recent years is coming to undesrtand how little the experts at the top know what they’re doing, even as greater and greater trust is placed in them.  As I’ve gotten older, friends have become CEOs, high level government officials, partners in law firms, and the like.  While most are conscientious and careful, they are also generally, as a group, aware of their limitations.  They are also aware that the public’s expectations and concomitant esteem for their respective roles is grossly out of proportion to their talents.  But the academic economists, some of whom have moved laterally to advising hedge funds and the like, are as cocksure as the most precocious graduate students, replete with “six sigma” predictions and prognostications.  And, as a consequence, a great many pension funds, homeowners, home builders, government authorities, foreign investors, FDIC insured banks, and other major institutions were long on housing well after the conditions for a major bubble had emerged.  And they were cheered on by numerous economists and their explanations of “impounded information” and “efficient markets.”

The cause, in part, has to do with the empirical blindness of many economists, who eschew deep historical, data-driven inquiry for elaborate–indeed “perfect”–models, viz.:

The mainstream of academic research in macroeconomics puts theoretical coherence and elegance first, and investigating the data second,” says Mr. Rogoff. For that reason, he says, much of the profession’s celebrated work “was not terribly useful in either predicting the financial crisis, or in assessing how it would it play out once it happened.”

“People almost pride themselves on not paying attention to current events,” he says.

In the past, other economists often took the same empirical approach as the Reinhart-Rogoff team. But this approach fell into disfavor over the last few decades as economists glorified financial papers that were theory-rich and data-poor.

Much of that theory-driven work, critics say, is built on the same disassembled and reassembled sets of data points — generally from just the last 25 years or so and from the same handful of rich countries — that quants have whisked into ever more dazzling and complicated mathematical formations.

Consider the view of economists on something like free trade, for example.  The free trade theory–a theory of comparative advantage–has been elaborated on by such diverse economists as Adam Smith and Ludwig von Mises.  But respond that a particular country did well and prospered under protectionism–such as the US in the late 19th Century–and they will say that the country would have done even better with looser tariffs.  Perhaps.  But what fact would prove or disprove this theory?  What kind of theory is it that can absorb any data set and not be adjusted thereby?  This is not real scientific inquiry.  It’s ideology . . . or religion.

It’s like Eliot Yeats said:  The best lack all conviction, while the worst are full of passionate intensity.

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Bailouts: The Anti-Capitalist Virus

I wrote this in March and it’s more true than ever:

Bailouts are bad for many reasons. But the two worst are that they cost a ton of money, and, second, they get government in bed with business. As a result, we’re becoming increasingly numb as a people to the idea that a $1T here and a $1T there is no big deal, just as we’re getting used to the idea of the government has any business directing how private companies should spend their money. The bailout is an anti-capitalist virus that attacks our public finances and our commitment to corporate independence. We must let these companies fail or we’ll destroy free market capitalism. That is the real systemic risk.

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Internet Roundup

A roundup of a few interesting things from the internet this week.

Great pieces by establishment conservatives George Will and Charles Krauthammer pointing out the increasingly wide gap between Obama’s rhetoric of post-partisanship and his narrowly partisan agenda.

A scathing editorial by Robert Samuelson on Obama’s phony economics agenda.

A nice tribute to one of my favorite writers, Steve Sailer, by John Derbyshire.

An interesting power point from Natick Labs that shows the Army’s dubious universal pattern was actually a poor performer in tests.  The best performer looked a lot like old Rhodesian camouflage and, like the earth around us, was comprised of greens, tans, and browns.  It is a minor scandal that the Army has made its soldiers appear worse in garrison and endangered them in the field with its new Army Combat Uniform.  Since so many soldiers are now slogging it out like their fathers and grandfathers on Afghan hills, it’s a decision worthy of revisiting by the DoD.

South of the border, things seem to be really melting down.  It’s kind of pathetic that Obama thinks we can have an unsecured border with Mexico and is considering sending in the military to stop narco-terrorists only, as if a border without controls can easily separate illegal aliens seeking work at car washes and restaurants and illegal aliens seeking work as pimps and drug dealers.  Without a secure border, the un-uniformed, un-named, disorganized, and visually indistinguishable criminal element from Mexico will continue to flow into the US.

I was never terribly impressed with the GOP since Bush took the helm.  Michael Steele is not helping things. More of the same is a recipe for disaster:  both politically and, if we somehow manage electoral success, on policy.  The gap between concerns of the rank and file–the economy, culture, immigration, national security, and moral decline–and the guilt-ridden, beltway rhetoric of the leadership is quite remarkable.

Dick Cheney said this morning that Obama’s policies make America less safe.  I, of course, said Bush’s border policies made America less safe, though Obama may even be worse on this score.  But so what if Cheney said this?  Isn’t this what criticism of another person’s national security policy always is saying implicitly?  One of the most dangerous developments in the media’s tone under Obama has been the idea that criticizing his policies–i.e., hoping they fail or saying they make us less safe–is out of bounds and unpatriotic.  If we can’t criticize Obama without being called racist, and we can’t criticize his policies without being unpatriotic, what is left other than blind submission?

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Economic History and Obamanomics

The absolute craziest convention on Wall Street, at the Federal Reserve, and among academic economists is simply to ignore economic history before the Great Depression. It’s particularly wacky to do so as the Federal Reserve, which was billed as a means of avoiding economic dislocation after the Panic of 1907, was established in 1913. In other words, the Great Depression happened on the Fed’s watch.

What’s happening now to the economy: the bankruptcy of overly leveraged institutions, falling prices, a general sense of uncertainty, and calls for high levels of government spending and control are hardly unprecedented. We heard such rhetoric throughout the 70s. And this shift took place once before, in Europe, in the late 19th Century in response to the “Long Depression” of the 1870s and the associated anemic recovery.

For Christmas, I received among other books Norman Rich’s The Age of Nationalism and Reform, 1850-1890. This book might seem obscure and irrelevant to all but the most die-hard history buffs. But consider the following passage, and ask yourself if you think anyone at Lehman Brothers or on Bernanke’s staff like has had much familiarity with this episode and whether it might have been useful:

The 1873 crash set off an economic depression which was to continue for another two decades in the form of a slower rate of growth, rising unemployment, and a general feeling of economic insecurity. This depression appears to have been caused primarily by overspeculation and overproduction. There was a decline in the rate of railway building, and a consequent drying up of this immense market for goods and materials. At the same time European agriculture was depressed by the competition of cheap agricultural products from the interior regions of Russia, America, and Australia, to which the railroad had given access.

During the depression years there was an actually an increase in the real wages and a rise in the standard of living of many Europeans as a result of a steady fall in the prices of agricultural and manufactured products. The fall in prices, however, which brought hardship or outright ruin to many economic enterprises, together with the increase in unemployment and the overall sense of economic insecurity, aroused a widespread feeling of dissatisfaction with existing government economic policies and anger at the threat of foreign competition. The liberal doctrine of laissez faire was discredited as industry, agriculture, and labor alike clamored for protective tariffs and state aid. And everywhere in Europe, with the notable exception of England, the state responded to these pressures. The 1873 depression thus inaugurated a new period of state intervention in economic affairs which was to increase steadily to he present day. It also contributed to the growth of an economic nationalism which was to strengthen the burgeoning forces of political and ideological nationalism.

I used to feel somewhat sorry for Obama for the crises he must now manage, a good many of which were not of his making. But then I realized: he likes this situation and this is good for his personal goals, even though obviously quite bad for the country. Crises, real and imagined, allow someone like Obama to aggrandize power, push through the most radical and spendy proposals, and–like FDR–will make a great many people worship him even more without regard to results, so long as he manages his own image carefully. Far from feeling sorry for Obama, I feel sorry for my future children and grandchildren. It’s a scary time, and we have an immature and untested demagogue at the helm, whose historical loyalties are tribal, whose background is in the cesspool of Chicago politics, and whose outlook is replete with various artifacts of 1970s cracker-barrel liberalism.

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The Audacity of Outdated Keynesianism

The Federal Reserve has just lowered interest rates to, in effect, zero.  Obama promises to spend perhaps $850 billion in a very dubious infrastructure program, as if filling potholes and repairing bridges that were too expensive to repair in good times, can now be gold-plated in times of austerity, and that, by some alchemy, spending money we didn’t absolutely have to spend will lift our collective fortunes, even though those ill fortunes have been planted, as we all know, on far too much private debt.

It is hard to see how hyperinflation won’t rear its head before long.  The wealth-generating economic activity to back our fiat money is not there, and enhancements in productivity are slowing down.  Instantaneously doubling the supply of money won’t make new wealth-creating activity happen.  Nor will the dubious infrastructure projects, which have real very slim theoretical and historical support. Consider, just by way of analogy, how Bush’s spendy combination of two wars, new entitlements, low interest rates, tax cuts, tax rebates, a modest regulatory climate, and the like only succeeded in pouring money down various dead-end bubbles, particularly housing, that could not sustain themselves as soon as the money needed to be collected.

Now, the problem will get even worse, with government (instead of speculators and home-buyers) deciding how to spend the dollars under the Roosevelt-style stimulus that Obama has proposed.  Of course, government can’t easily figure out where that money should be best spent. It will always be lumberously investing in last year’s model, giving us state of the art high definition CRTs, while real entrepreneurs risking their own money, are inventing plasmas.  Consider how goofy scenes of the future look in older movies.  That’s the government’s “investment” strategy:  unimaginitive, trend-following, unmoored by profit, slowed down by bureaucracy, and laden with nonmarket considerations, such as the cronyism that infects all government contracting and hiring.

Even if it does something well, these government investments will be too costly.  Government can’t help but gold-plate.  It may make a few nice parks, arenas, and the like, but this is not the same as real wealth creation.  Real wealth creation involves a profit.  Supplying something to someone he would pay more for if necessary at less than its cost to produce. We can never easily tell if we’re spending 2X, 3X, or 10X the real economic value of the projects as measured by willingness to pay in the arena of government spending.  By way of illustration, I’m always struck by something I once saw in the former Soviet Union.  I was walking down a railroad track and noticed that all of the ties were concrete.  The ties were quite a bit sturider and more robust looking than the treated timber ties in America.  The Soviets were surely proud of these tracks.  But the Soviet Union, lest we forget, was a corrupt basketcase, characterized by an order of magnitude difference in consumer wealth than the United States.  How do we know that everything from houses to cars to Ipods are valuable in the US?  How do we know, when designing something for oneself or others, whether it should last 10, 20, or 1,000 years?  The great information sorting power of market prices.  Markets rely on the profit and loss mechanism to make these decisions.  Of course, we’ll probably get some sharp-looking projects under Obama.  But we’ll spend too much to get it, and the collective impact won’t save jobs.

In an ideal world, government should be treated like the accounting department of a large company:  unglamorous, necessary, and a cost-center that should be stripped of all that is superfluous or costly, in particular majesty, expense, or the prospect of excessive power. As in accounts payable, it’s a task that needs to be done, and it should be done honestly and well, but we shouldn’t forget that it’s the handmaiden for the real society and its real important activities.  Instead, as it’s grown in size, government has become the preferred venue for the absent spirituality of people like Obama, Hillary Clinton, John McCain, and other “dreamers.”  They see in it not as the accounting department or the meter maid, but Change We Can Believe In, Country First, and the Audacity of Hope!!!  A great many fetishists of big government can’t imagine a worthy life in business, the ministry, or even private charity.  Lacking any sense of God or the eternal, they see that government alone can do mighty and seemingly eternal things such as the Hoover Dam or the Atom Bomb.  Of couse, some people make a similar fetishization of things like science, health care, or money.   But unlike government, these spiritual substitutes do not rely on taxes and can’t, if run amuck, destroy an entire civilization within a generation.

It’s no coincidence that the Greeks equated their gods with their city-states, often “establishing new gods” and temples in their honor upon the founding of a new regime.  Without the illumination of Christian truth, civil and political life is the closest analog to philosophical and spiritual life.  But there is another lesson they can teach us:  vanity, worldliness, fascination with splendor, and loose public morality cannot last, and their biggest harbinger is a lack of physical courage (as evidenced in our time by the offensive phrase “jobs American’s won’t do”) and the devaluation of the currency, as evidenced by. . . well . . .  everything.

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Bush’s Legacy of Crony Capitalism

Bush was never a real believer in Free Markets. He instead believed in preserving the power and privilege of people like him. He sold it as a new kind of middle way, so-called “compassionate conservatism.”

Bush did not work hard to get where he was, instead inheriting his name, his network, and most of his money from his family. My experience with these “fortunate sons” is that they have a certain blindness about their own and others’ economic fortunes. Not having attained their success through their own efforts, they either feel guilty about it and indulge in various guilt-driven flirtations with leftism, or, alternately, don’t care about the structures that allowed their enterprising ancestors to attain wealth, aiming instead to preserve what they have at the expense of the economy as a whole.  Consider Bush’s perception that a woman who needed three jobs to support herself and her family was “uniquely American” rather than a tragic consequence of a low wage, screwed up economy.

Bush has been willing to sell out American workers and manufacturers out for many years to China and Mexico in the name of a cockeyed notion of fairness.  Now, worried about his legacy, he’s willing to kick the auto manufacturing can down the road by giving away TARP money to the Big 3 automakers.  There is no rhyme or reason to it, and his selective involvement in the economy is an invitation to chaos and politically chosen winners and losers.  Instead of setting the rules of the road, under Bush, the government has chosen very distinct winners and losers in the economy.

Consider Bush’s numerous deviations from free market principles and basic fair play:

• The giveaway to MBNA and other credit card companies in the ex post facto bankruptcy reforms of 2005;
• The giveaway to the pharmaceutical industry in the form of the prescription drug Medicare benefit of 2006;
• The rescue of Bear Sterns earlier this year coupled with the rejection of a Lehman Brothers bailout;
• The $190B farm subsidy bill of 2002;
• The cheap-money, high deficit imposition of various costs on future generations in order to create the present day illusion of prosperity.

Bush has repeatedly put a particular social class–corporate America, its multinational managerial elite, and the wealthy in general–above the good of the country as a whole.  Unlike Reagan and the long traditions of the Republican party, Bush has shown indifference to American workers and businesses most threatened by globalization. Obviously the Big 3 have problems largely of their own making, caused not least by the short-sighted greediness of their unions.  But they did not create the last decade’s unbalanced trade with China, our overly leveraged and under-regulated financial sector,  the slow money-suck of constant inflation, nor the immigration-driven wage gap with the rest of the “blue collar” economy.  They should not be bailed out now, not least because they have a tool in bankruptcy to reform themselves.  But the trade and monetary conditions of the last 10-20 years should never have come to pass.  Now terrible decisions are being made under crisis conditions by an ideologically unmoored failure.

Unfortunately, Obama and the Democrats promise more of the same whether in the form of spending on make-work infrastructure programs, appointing an “auto czar,” or “investing” in new technologies.  Their policies, an exagerrated version of Bush’s with even less regard for the national interest, will perpetuate the legacy of cronyism and failure with slightly different winners and losers, i.e., giveaways to minorities, the unproductive, and politically correct Third World supplicants.  Whenever the government gets involved in these matters and insulates participants in the market from the usual requirements of profit, loss, and competition, then political considerations come into play, just as they do in a smaller way in the realm of government contracts, such as the practice of affirmative action set asides and other forms of patronage.

Bush did not embrace free markets tempered by some consideration of the necessity of a strong, vibrant, and diversified national economy.  Unfortunately, his term went down in the recent history books as “extreme conservatism” rather than the nonideological jumble that it was, the reflection of a man with a peculiar past and a worldview formed by lifelong associations with preservation-minded elites in the world’s most corrupt nations.

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Election Day Round Up

When the rich lose their wealth, it’s not a good thing for poor people.

What does Obama’s first book, subtitled “a story of race and inheritance,”  say about him, his motivations, his values, and their divergence from the campaign themes emphasizing unity and Obama’s technocratic excellense?  Steve Sailer’s “Half Blood Prince” is now available online and addresses these subjects in depth.

Good piece on myths and misunderstandings about the Depression which echoes themes published here at mansizedtarget.com.

My mind is not completley made up on whether a GM bankruptcy would be a disaster or a salutary measure of austerity, but this author makes a good point about how banks and big companies are quite different.  While bankruptcy is fatal (and thus not available) to the former which depend fundamentally on trust, bankruptcy does exist to protect and preserve the “going concern value” of the latter and should be allowed to do its work.

Oh, it’s election day.  And police in Toledo are packing the riot gear. 

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Boo!

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