Category Archives: Natural Liberty

Thugs and Intolerance

Most of the friends I made in graduate school would probably be placed on the liberal wing of the American political spectrum. They’re awesome people and I like them a lot.

But I often struck by how intolerant and hate-filled many liberals are. Certainly, more so than conservatives that I meet, or see on the news.

For instance, take this thug, Mona Eltahwy. After seeing speech she disliked, Mona’s response was to vandalize it. When someone attempted to place her own body between Mona’s spray-paint and the speech Mona despised, Mona sprayed her too.

And now on CNN, there is a puff piece support Mona, talking about how she “brought attention” to an important issue, blah blah blah.

So why are so many liberals hate-filled and intolerant, when explicit rejection of hate and intolerance is generally seen as a “liberal” virtue?

My assumption is that people generally self-select friends, co-workers, and opinion leaders who they are already politically agree with. So political intellectual diversity is rare in almost everyone’s life. But the high-visibility media clearly shares more of the world-view, perspective, and priorities of “liberals” than “conservatives.” This means that it’s rare for liberals to hear any serious voice with a fundamentally different perspective (outside the existing liberal political coalition). It’s very common for conservatives to do so.

Therefore, when a thug like Mona Eltahwy encounters speech she disagrees with, of course she reacts violently. And her friends in the media likewise are very sympathetic: who wouldn’t censor speech they dislike?

UnAmerican

To the best of my knowledge, I have never called any American “unAmerican.” I have generally thought people who complain of this are making up strawmen.

But life is full of changes. Today I read this:

The White House asked YouTube on Tuesday to review an anti-Muslim film posted to the site that has been blamed for igniting the violent protests this week in the Middle East.

Tommy Vietor, spokesman for the National Security Council, said the White House has “reached out to YouTube to call the video to their attention and ask them to review whether it violates their terms of use.”

However, the video remained on the site as of Friday afternoon, and it is posted many other places on the Internet.

This activity is unAmerican. It is a direct assault on the First Amendment, because the White House finds it easier to censor American speech than defend it from terrorists.

Those individuals who authorized or participated in this are unAmerican.

It is important that they be removed from office.

I am not talking here of President Obama, Secretary of State Clinton, or others. It seems deeply improbable that either of them would be stupid or evil enough to authorize this. Evil tends to be to banal to directly be the result of great men (or women).

Rather, I am talking of the individual who “reached out to YouTube to call the video to their attention and ask them to review whether it violates their terms of use.,” in the words of Tom Vietor.

That individual or those individuals should be removed from office.

The Constitutional form of government would face less harm if the unknown person or person who engaged in this act are removed from office by means of violence (assassination, bombing, intimidation, or otherwise), than if they were allowed to stay.

Thank God that Google stood up to the White House:

Messages to YouTube, and Google, which owns the site, were not immediately returned Friday. On Wednesday, a YouTube spokesperson said the video “is clearly within our guidelines and so will stay on YouTube.”

Google, of course, is a private company. What they do with the video should be their concern.

But for an Administration flunky to try to remove speech because it is politically troublesome is un American. That flunky must be removed.

A Novel Criticism of “Mark-to-Market” Accounting Rules

One of the many ways hat Obama is artificially inflating the value of bank stocks is by allowing “mark to market” accounting rules.

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Bankers often complain about mark-to-market accounting rules these days. To see what they wish for, and how they would have to value their assets in order to operate like other actors in the global marketplace, consider the following thought-experiment.

Say you have $6. You spend $5 of that monie on a can of coca-cola, because you are foolish and easily tricked. You now want to go into the insurance business, but because this means that the quality of life of many people you do not even know would be in your hands, the government has regulations to make sure no fly-by-night insurance companies run by foolish and easily tricked CEO get off the ground.

“You can be in the insurance business,” the government official says, “as long as you prove to me you have at least $3. This way, we know you aren’t a complete fraud or loon.

“No problem!” you say. “I have $6! $1 in cash, and $5 worth of one can of coca-cola!”

At this point, the government regulator gets a headache from your attempt to make him as recklessly optimistic about pop can futures as you were, and points you to a sign. “Mark-to-market accounting rules only.” “I’m sorry,” says the regulator,” but unless you can prove that someone, somewhere, is selling the can of pop for $5, you can’t say it’s worth $5 to me. That means, you can’t go into the insurance business!”

This is what bankers are complaining about. Why aren’t the assets they bought for a price accounted for according to that price? Why can’t their wishes become your reality?

But, in this thought experiment, you go outside, and check all the stores, gas stations, and pop machines for their prices. Walmart is selling pop for a quarter. The machine at Target is going for 50 cents, and the machine at your kid’s school is at 60 cents. In the mall a can costs $1, and at the airport across town is a machine selling a can of coca-cola for $2.

Eureka! You found it! You can go into the insurance business! And if a plane crashes, a trail derails, or a comet strikes, you’re covered! You can just sell your cans of cola for $2!

Now for several years these are going well. Of course, you complain that the government is only allowing you to “mark-to-market.” Go to the movie theatre (it’s closer than the walmart, and you need them now!), buy a can that cost about 12 cents to distribute, and is for sell elsewhere for 50 cents, for $5 (as I said, your foolish and easily tricked). Account for it as $2 (because that’s what their charging for it at the airport), and sell insurance policies. You’ll need to borrow money for this, but you secrelt know (somehow) that the real value of the pop can is at least $5. For every $2 in policies you sell, you “cover” it with $2 worth of a pop can you paid $5 for, but expect to get rich from in the future! What a profit! life is good!

But then tragedy strikes. A plane crashes, a trail derails, and a comet strikes. Many houses burn down. People look to you for money. You don’t have it. Cash if fact, capital is theory, and you are sort of funds and way long on pop cans.

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So what do you do? Declare pop cans to be “toxic assets,” go on the Treasury Department, and demand a bail-out. Blame mark-to-market accounting while you’re at it, because the market price for pop cans (a measily $2, according to your accounting) is artifiicial low! You paid $5 for them!

Fortunately, in this thought experiment you have made the right friends, and your pals in the White House and Congress give you billions to cover the cost of insurance policies you sold, but could never cover in the first place. At first the government says you need to pay them back (the government takes preferred shares in exchange for the money), and then when you complain loudly enough, the government clarifies that you only will need to pay some fraction of the profit you make when pop cans magically cost more than $5 (by converting the preferred shares into common shares).

So what do you do? Go on CNBC, and complain about mark-to-market accounting rules! They are making you account for your wealth at only $2 a can, instead of $5, even when there are “no buyers.” (By this, you mean that only people nearly as optimistic and risk-taking as you will pay $2).

This is how mark-to-market accounting rules work. Mark to market accounting rules work as a bailout to banks, buy allowing them to list assets at prices too high to sustain regular market operations. The price of the marked-to-market assets only appears to be as high as it is because the banks aren’t selling the assets they do have. The price required to find many buyers is much lower than the price to find just a few buyers. In the same way, you can probably find someone willing to pay $2 for a can of coca-cola. If you want to sell a million cans, however, you’re looking at something closer to 50 cents.

Those poor people in million dollar homes

Barack Obama will be sending welfare checks to people living in million dollar homes.

March 4 (Bloomberg) — The U.S. Treasury released new eligibility guidelines for homeowners seeking federal aid that will allow troubled borrowers to lower their mortgage rate to as low as 2 percent.

The rules released today require applicants to fully document their income with pay stubs and tax returns, and sign an affidavit attesting to “financial hardship,” the Treasury said. People living in their homes who have an unpaid principal balance of as much as $729,750 can participate.

So say someone lives in one of these million dollar (well, technically $729,750) homes. Mothly interest payments on a 30-year, 7% mortgage are $4,855.04. But as I understand Obama’s plan, it will loser those payments to $2,697.30.

Under Obama’s plan, some people living in million dollar homes will receive the equivalent of $2200 a month in welfare checks.

As I said, only fools pay their mortgages and only fools bought homes they could afford.

Why Obama wants to bail out the banks

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If Obama is President, it’s a fair guess that there’s a new plan to give your taxmoney to shareholders in banks

Calculated Risk: WSJ: Leaked Details on Public-Private Entities Buying Bad Bank Assets
By offering low interest non-recourse loans, these public-private entities can pay a higher than market price for the toxic assets since there is no downside risk. This amounts to a direct subsidy from the taxpayers to the banks. It is amazing how many different ways they’ve tried to recycle the same bad idea.

Now, I don’t think this is because of campaign loyalty to bankers (though I am sure they gave far more to Obama’s campaign than you and your friends did). And it is not because Obama is setting up an administration of hacks and toadies (though he is, why else do you think a political nothing like Kathleen Sebelius was chosen as HHS chief over Governor / Chairman / Dr. Dean?).

It is because Obama does not know what he is doing.

As I said wrote in June 2008

An Obama Presidency offers a reasonable hope in the Establishment: a vote for Obama is a vote for the status-quo. As the status-quo is one of the best in world history, that’s a solid argument.

As it relates to Obama, many commentators are now raising the hope that Obama will be bureaucratically captured in the same way that Petreaues and Gates were. Even better for us, Obama will have little operational control over what actually happens.

When America elected Barack Obama, it said by a majority vote, “We like the powers that be as they are!” Given this, it’s natural that Barack Obama should divert funds from the treasury to banks. In the Age of Obama, this Age of the Establishment, the simple fact that banks made catastrophically bad decisions is no reason they should lose money, power, and influence.

Citi Undead

As I write this, it appears that Obama has chosen the worst of all possible paths and chosen to turn Citigroup into a Zombie bank.

Reports from CNBC, Wall Street Journal, Marketplace, Calculated Risk, and so on indicate that the government will in effect sell its preferred shares at a large discount to Citi in exchange for a 40% of the common stock. The government essentially is trading tens of billions of dollars of preferred stock that we bought as part of the TARP into $4 billion, or so, of common stock.

Citi is undead. Citibank is a zombie bank. We are using capital that could be used in other ways to save Citi. We are saving shareholder value for shareholders who helped create this crisis. A few cosmetic changes will be made, a couple people will resign on the board, but we will Citi to continue to act like a growth-oriented company while letting it socialize its losses onto us.

Citi is a zombie bank, like the Zombie banks Japan created in the 1990s. Now that we have demonstrated we care Citi’s shareholders more than the Treasury, and that we have invested in Citi in the most speculative and least safe form imaginable (common shares), does anyone believe that we will let Citi go bankrupt?

If not, there is no reason for any business to use any bank except Citi. Indeed, not doing so may open up officers to charges of negligence. There is some chance that some honest community bank may be seized by the FDIC, and deposits in excess of $250,000 may be lost. Is there anyone left who thinks Citi may suffer the same way?

Today, what remained of the functional parts of our banking system is gone. Instead, our banking system is as corrupt, politically-centered, irresponsible, and worthless as, say, the Chinese banking system in the early 1990s. The difference, of course, is that the Chinese did help pay for millions of dollars worth of bonuses annually. While signaling that shareholders of politically powerful banks should not be wiped out, that upper management of those banks should not be fired, that those who risked assets on such risky institutions should not be wiped out, Obama is clearly stating that he is behind the high salaries and bonuses of those who work in these institutions.

We have corporations in the United States that run on socialized, low-risk, heavy-government-influence lines. They are utilities. They are run to do a technical job well. Those who work in utilities tend to enjoy a middle class lifestyle. I see no signs that Obama is willing to allow his Wall Street fundraisers to fall to such depths. Obama is continuing to subsidize Citibank, allowing Citi shareholders and Citi executives to continue to hold and earn tremendous amounts of wealths while the U.S. Treasury is on the hook for all losses.

The government, by bailing out Citi in the worst way possible, cripples our banking sector.

Props to Obama on Iraq and Mortgages

Obama’s “residual force” is of course a way to keep us in Iraq for years (like McCain wanted)

House Speaker Nancy Pelosi , D-Calif., suggested a smaller contingent of 15,000 to 20,000 troops, and said she wanted to study Obama’s proposal. “I don’t know what the justification is for the presence of 50,000 troops in Iraq,” Pelosi told MSNBC on Wednesday.

House Defense Appropriations Subcommittee Chairman John P. Murtha , D-Pa., said only a complete withdrawal would suffice. “I don’t think we need to leave anybody there,” he said. “They have got to be on their own. Their presence alone makes them vulnerable.”

Likewise, Obama’s “upper income” limit on mortgage deducations should slow the reemergence of the high end of the home price bubble

The tax increases would … [reduce] the value of such longstanding deductions as mortgage interest … for people in the highest tax brackets. Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments.

Now for Obama to let GM go bankrupt and stop throwing away money on F-22s

Obama’s Distracting Fear-based Unilateralism

Protectionism may be Obama’s Iraq War, a huge, costly, error-prone, distracting, program that generates enemies and just might work.

The enemies are all over, including the generally pro-Obama CNBC

Just as Bush’s foreign policy was consumed by the Iraq War, there are signs that Obama’s economic plans may consume his foreign policy.

On Obama’s visit to our largest trade partner:

US President Barack Obama said he had assured Canadian Prime Minister Stephen Harper on Thursday that a “Buy American” clause in his new economic stimulus law would not harm trade between the two allies.
Obama was asked about the language in the package, which he signed into law on Tuesday, during a press appearance with Canadian Prime Minister Stephen Harper here

On Secretary of State Clinton’s visit to Japan:

TOKYO, Feb 5 (Reuters) – Japan has sent a letter to the United States expressing concern about protectionism stemming from a “Buy American” plan in Washington’s mammoth stimulus package, the top government spokesman said on Thursday.

The letter, sent on Wednesday to top aides of U.S. President Barack Obama and the Senate’s majority and minority leaders, echoes concerns by other U.S. trading partners, including Canada and the European Union. [ID:nN03517537]

“The common responsibility shared by the two countries, which are the world’s No.1 and No.2 economies, is to resist protectionism together,” Chief Cabinet Secretary Takeo Kawamura told a news conference.

On Secretary of State Clinton’s visit to China:

Secretary of State Hillary Clinton travels to Beijing, where Chinese leaders’ are concerned about the “Buy American” clause in the stimulus package. Steve Chiotakis talks to Marketplace’s Scott Tong about why China and the U.S. are both worried.

“Old Europe” piles on:

BRUSSELS (Reuters) – The European Commission will monitor closely a “Buy American” requirement in a $787 billion U.S. economic stimulus package, the EU executive said in its first response since the bill came into force on Tuesday.

“Following the concerns expressed both in the U.S. and internationally, President (Barack) Obama’s administration has assured its partners that it will adhere to its international commitments,” the Commission said in a statement to Reuters.

Obama has signed two “Buy American” laws: one to keep out foreign workers, and another to keep out foreign goods. Obama’s first moves have President have been to cave in to fear, turn his back on allies, and go-it-alone on the most important foreign policy issue we have.

Only fools bought houses they could afford

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(Based on the Detroit Bailout, using a photo from Wikimedia Commons)

A nice follow out to only fools pay their mortgages

By David Leonhardt (corutesy Calculated Risk):

Now, not all economists buy this argument. They say that the psychology of the current bust is different from what it was in Boston in the early 1990s. In a handful of metropolitan areas, including Phoenix, prices have fallen almost 50 percent from their 2006 peak.

Homeowners in such places may wonder if their houses will ever be worth more than their mortgages. So fairly small changes in their lives — like a reduction in work hours or the breakdown of a car — may lead them to walk away from their homes.

“I would not minimize that risk at all,” said Frederic Mishkin, a member of the Fed’s board of governors until last year.

If even 10 percent of the underwater homeowners walked away, Mishkin notes, foreclosures would soar, exacerbating the economy’s many problems.

Other economists who share his view are calling for across-the-board programs that would reduce interest rates or otherwise juice the housing market. They are worried that without bolder government actions, the housing market will continue to spiral downward.

In the end, the choice between the two approaches becomes a matter of cost-benefit analysis. The more aggressive approach would almost certainly do more to reduce foreclosures. But it would also be enormously more expensive.

If the economists from the Boston Fed are right — or even close to right — then the aggressive approach may cost something like $500 billion to prevent 500,000 foreclosures.

That’s $1 million per prevented foreclosure. Is that really worth it? Or could the money be better spent in other ways? (There is also the small matter of whether Congress would be willing to spend another $500 billion anytime soon.)

An example of the sort of house that you may soon be paying for are these McMansiosn in California, which have lost a million dollars worth of value.