Archive for the ‘Steve Sailer’ Category

Like the old legal privileges, tax immunities, and public honors accorded to aristocrats, from an early age, black Americans of any ability are taught in today’s America that they are special, immune from public criticism, and entitled to accomplish less at work and in school to succeed.  We’re told publicly (and quite unbelievably) “they need to work ‘twice as hard,'” but this is clearly false, as evidenced not least by the lower test scores and lower grades needed for blacks to get into elite institutions, and later in life by the intense mentoring, lower expectations, and tolerance for bad behavior in the work place.

Michelle Obama is a product of this system, getting into Princeton and Harvard Law School throug a combination of her successful brother’s athletic prowess and her race.  But she was no longer the class success (salutitorian) as she was at her much less challenging South Side high school; she was uncomfortable at Princeton, studied a “gut” major (sociology), and almost certainly could not pass the bar exam the first time around (as evidenced by her late admission to the Illinois Bar a year after graduating).  She later left “Big Law” after refusing assignments she thought she was too good for. She ultimately got a cushy job (six figures) matchmaking “community activists” with the University of Chicago Hospitals, making more than $300K annually when her husband was elected Senator. She’s still very ungrateful.

University of Chicago has always been a brainy place, where students actually care about learning, are intellectually curious, and do not suffer fools.  There’s nothing in her personality or life or words or anything else about her to suggest she’d have done well there.  During my time there, there were always a good number of “high average” local students–black and white–who did not really fit in and either dropped out or muddled through, not quite sure why so many of their peers were at the library at 11 pm on a Friday. The school has  also has been in many ways a compassionate place, where every year hundreds of students volunteer in soup kitchens, tutoring local students, and generally reach out to the largely impoverished and black local community.  But the school did not send an invitation to Michelle wrapped with a pink bow, so she’s pissed off to this day. At a commencement speech delivered this week at UC Merced, she remarked:

The context: Many of the UC Merced graduates were the first in their families to earn college degrees, and Mrs. Obama said, “By using what you have learned here, you can shorten the path perhaps for kids who may not see a path at all.

“I was once one of those kids. Most of you were once one of those kids,” and then told the students how she grew up just a few miles from the University of Chicago.

“Yet that university never played a meaningful role in my academic development. The institution made no effort to reach out to me — a bright and promising student in their midst — and I had no reason to believe there was a place for me there.

“Therefore, when it came time for me to apply to college, I never … considered the university in my own backyard as a viable option.”

She really knows how to hold a grudge!  It’s sad that her “inspirational” vignettes always come down to “don’t let the man hold you down.”  The minor indignities of life always appear in her speeches:  her weak test scores, her feelings of alienation at Princeton, and now her beef with her very generous employer of many years.  This is, nonetheless, understandable.  She has an inflated and demanding sense of entitlement, coupled with the vague sense of inferiority–these, the contradictory traits that always accompany unearned privileges.  Why else the $400 sneakers and heavy debt load in the 90s and now the somewhat hard-to-accept makover of herself as the First Mom?  She’s a combination of the Real Housewives of NY and Omarosa, a pretty disagreeable (but all too familiar) character that would be causing her husband a lot more problems but for a very compliant and well trained media.

One of the Obamas’ achilles heels might be the habits formed from years of navigating the relatively calm water of liberal, guilt-ridden whites in academic settings.  The Obamas are used to being accomodated and coddled, but as soon as they are challenged the barely suppressed anger comes out, particularly in the case of the more choleric and resentment-driven Michelle.

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Above is an interesting chart. So is this one:

There clearly were many factors in the housing bubble, all of which aligned to create a perfect storm of sorts: higher levels of leverage among investment banks, a trade imbalance, reliance by institutional investors on misleading ratings by ratings agencies, inflationary monetary policy, conversion of housing assets into opaque financial instruments, reduced lending standards, the pressures of the Community Reinvestment Act, the mystique of home ownership, business models that invited fraud, and a pervasive mania of speculation. But one factor that seems increasingly undeniable is the Bush administration’s belief that Hispanics were “natural Republicans” and that the best way to get them into the fold was to give them a stake in the “ownership society” through various housing subsidies. Hispanics’ increasing numbers in the so-called “sand states” had a lot to do with the bubble’s disproportionate influence in those regions, and these subprime borrowers’ low levels of human capital and earnings eventually led to the music stopping as payments were unmade and new borrowers could not materialize to prop up the inflated housing prices. I mean, throughout the boom, no one said, “Does it make sense a sheetrocker from Chiapas making $11/hour can afford a $400K McMansion in Anaheim?”

This is what may be called an “overdetermined” event. In other words, without large levels of Hispanic immigration and Bush’s obsession with cultivating Hispanic political support, the bubble may still have happened. But it seems unlikely that it scale would have been quite so huge and the wave of defaults quite so numerous in the absence of the low-skill Hispanic immigration wave the U.S. has undergone since the 1986 amnesty. A million people per year is a lot of people. As the chart above shows, subprime lending tripled in the boom and the bulk of that expansion was increasing lending to blacks and Hispanics. Even more important, as shown in the second chart, blacks and Hispanics–according to the Boston Fed–have default rates nearly two times higher than white subprime borrowers. Of course, the media, the Democrats, and the Republicans don’t want to discuss such things; it’s not considered polite, and, thus, the greatest demographic and social change of the United States since the Civil Rights movement is thoroughly and deliberately under-analyzed and misunderstood by well-meaning (and not-so-well-meaning) political elites.

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Steve Sailer has a very funny piece on WaMu’s advertising, which bragged about the company’s contempt for stodgy old bankers. Pretty obvious generational and ethnic subtext in this ad: WaMu positioned itself as a new kind of bank for the the age of diversity and free spirits.

Interesting piece from the Von Mises Institute on the Federal Reserve’s direct involvement in Mortgage-Backed Securities (MBS). I was under the impression almost all of the Fed’s assets were in Treasury Bills, a near equivalent of cash. Since its liquidity, stability, and the like are supremely important, I’m a bit disturbed to learn this was going on through the System Open Market Account (which is also the institution that holds the Bear Stearns bailout entity, Maiden Lane, LLC.) I have no idea how much direct MBS exposure the Fed has, and I’m surprised this has not been discussed by more commenters.  Does anyone know the scoop out there? I think from this chart it’s either the “other loans” or “other assets” portion of the Federal Reserve’s asset pool. In any case, this year’s expansion of the Fed’s asset pool should be worrisome; it usually portends an equally significant expansion of their liabilities, i.e., printing of money either directly or otherwise.

Apparently the bailout is a done deal. There is no significant change in concept from original Paulson proposal other than a bit more oversight. Still no word on pricing goal, i.e., lowest possible, above market (to create upward bidding), or something in between. I will make a rare series of predictions: a rally of stocks for 1-2 months with big days this week, i.e., the last of our inflationary bubbles. A few months from now, probably after Christmas, Paulson with lame duck President Bush will solemnly announce massive and continuing losses from first wave of MBS purchases and continued deleveraging by nonparticipating or ineligible entities. The losses will stem from overpricing of the Mortgage and Asset Backed Securities (ABS) Paulson bought for the US, the stagnation of third party securities, the impact of declining credit on our consumption-oriented economy (and trade partners), and the failure of the market to push prices upwards for debt-based assets because of continuing, excessive housing inventory. In other words, this debt is toxic for a reason, and its revival depends upon an upward-moving near-term housing market, which will not materialize.

On news of the failure of the first stage of the bailout, the market tanks. Bonds fail and numerous big, credit-dependent companies seek bankruptcy. Runs on banks become more common. Credit markets manifest serious breakdowns in everything from commercial paper to auto loans. Deleveraging by institutions continues having an additional negative effect on the immediate money supply. Foreign bond rating agencies downgrade Treasury Bills, but the US rating agencies stand firm for fear of retaliation.  This creates a crisis of confidence in all US-rated paper.  There is a swift shift away from dollars as a reserve currency overseas.  A severe and also inflationary recession starts January-February 2008.

The federal government will have blown the foreign creditors’ wads on the first stage bailout. But the more important FDIC bailout for commercial banks will become strained as nervous customers yank money from their longer-term accounts, just as unemployed depositers quit paying on their various loans. Instead of a sharp chastening lesson for Wall Street sorted out reasonably quickly in bankruptcy, the government will find that this bailout has strained its own ability to meet ex ante obligations to ordinary commercial banks. The banks who shifted their mortgage debt off the books to Fannie Mae, Freddie Mac, and other investors will now find the government’s bailouts of third-party holders of ABS and MBS left less money and weaker government credit available to fund the FDIC during the second-stage of the crisis (i.e., more WaMu-type failures and fire-sales).  Since money in checking accounts and saving accounts being wiped out is totally unacceptable politically,  the government begins monetizing the debt in short order.

I hope I’m wrong.  Bonus question below.

Which recessions since the Great Depression have been inflationary?

Answer: Every single one of them.

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