Archive for November, 2008

Why do all large organizations skew left authoritarian?

Monday, November 24th, 2008

Constant drew my attention to the fact that Fox news, originally created to provide an alternative to the Mainstream Media orthodox ideology, is joining it, which led me to reflect on the tendency of big corporations to go left authoritarian and support socialism, gun control, political censorship, government health, and so on and so forth – as for example, the failure of the owners of shipping lines to allow deadly arms on their ships to meet the problem of piracy.

The Smallest Minority drew my attention to this:

socialism in action

There are some lies that lie so deep in the hopes of man that they can never be killed, no matter how many are executed to make the lie true.

Martin Malia, in “The Soviet Tragedy”, page 50, summarizes the core ideals of left versus right:

And so, by 1914, a dual process of amalgamation had occurred: on the Right were aligned capitalism, unbridled individualism, nationalism, militarism, and social hierarchy;  and on the left were arrayed socialism, economic rationality, internationalism, peace, and equality.  The stage was thus set for the great Auseinandersetzung, the world historical clash, between capitalism and socialism that would dominate our short twentieth century.

Now reflect that all large organizations are, by definition, internally socialist. Capitalism is what you get when independent actors pursue their individual interest – instead of someone’s vision of the greater good being imposed on all. But in a large organization, everyone is supposed to pursue the greater good of the organization, team players and all that. Team players are automatically inclined toward the left side, the left as defined by Martin Malia, the left that leads to terror, slavery, and mass murder. Organization man is basically a leftie.

And that brings me back to the interesting fact that merchant ships are not defending themselves on the high seas against pirates. The kind of people who run shipping companies simply do not feel in their guts that it is right for ordinary seamen to kill pirates.

My intuition would be that someone who owned just one ship would have no hesitation in stacking it with whatever weapons it takes to keep the ship safe, but that someone who owns a shipping line would be horrified by the idea


Global Average temperatures to 2008-October

Friday, November 21st, 2008

This is the running twelve month average world temperature, as measured by satellites, as reported by The National Space Science and Technology Center.

World temperature change in centigrade degrees.
Global temperature change in degrees centigrade to 2008 October

It goes up, it goes down. If there is any trend, the trend is less than the decade to decade fluctuations, and is not at all apocalyptic. This differs from other graphs you may have seen because it starts at the start of the satellite data and ends at the present, instead of starting in with a reconstruction of what might have been a cool year if we had accurate global data way back then, which we don’t, and ending in 2005, the most recent warm year.

Similarly for the amount of ocean ice

Again, it goes up, it goes down. If there is any trend, the trend is less than the decade to decade fluctuations, and is not at all apocalyptic. Again this differs from similar graphs you may have seen, which usually start in 1988 (a year with exceptionally large ice area) and end in 2007 (a year with exceptionally small ice area), and show only the Northern Hemisphere, where we recently had some exceptionally warm years, leaving out the Southern Hemisphere, where we recently had some exceptionally cold years.

As you can see, nothing much is happening – looks like the world is warming, but not enough to be noticeable – nor enough to be sure that it actually is warming.

Thus irrespective of the validity of anthropogenic global warming, the belief that apocalypse is upon us, that something urgent must be done, is religious, based on the feeling that we have sinned against Gaea and her wrath will come upon us, not based on any scientific evidence.

Why iceland went bust – and why the US went bust

Monday, November 17th, 2008

The usual answer, of course, is the evils of capitalism:

this country’s banks – virtually unregulated – to borrow more than 10 times their country’s gross domestic product from the international wholesale money markets. Watch as a Graf Zeppelin of debt propels its self-styled “Viking Raiders” across the world’s financial stage, accumulating companies like gamblers hoarding chips.

In fact, of course, the government regulators made lots of easy money available to ordinary Icelanders. 100% down no deposit, with easy payments – payments that failed to cover the interest, so that the debt grows every year. This was worse than the the loans that the US regulators made available to Hispanics – the Hispanics got no money down loans, but their payments had to cover the interest, plus the Icelandic loans were for everyone, while the US easy money loans were mostly to favored voting blocks.  Most US loans were not negative amortization, while all Icelandic loans were “indexed” – the equivalent of negative amortization.

The Financial Times reports

Easy access to 100% mortgages …

Iceland is the only country in the world that indexes its loans in addition to charging interest. This means that when Icelanders borrow IKr1,000 from the bank and inflation increases by 5 per cent, the bank increases their debt to IKr1,050 at the end of the year. A great deal for the bank and fine for you, too – so long as the property’s value and your salary are increasing by inflation and more.

The collapse of Iceland illustrates the “Micawber Principle”

Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.

Around the world, politicians promised voters they could live above their means, and created the pretense that it could be done.  And now the bill is due.  The bust is worse in Iceland, because the lie was bigger.

China’s boom

Wednesday, November 12th, 2008

China in the 20th century had two major revolutions, a civil war, a World War, The Great Leap Forward [sic], mass starvation, the Cultural Revolution, arguably the most tyrannical dictator ever and he didn’t even brush his teeth, and now they are going from rags to riches without even a business cycle burp.  While the world plunges into major recession, China is suffering a barely noticeable hiccup, and has become the locomotive that is pulling the rest of the world out recession.

How so?

I say it is Cypherpunk economics.  The Chinese economy, the non state part of the economy, is run by overseas Chinese through vpns from servers located in tax havens.  And so long as China does not kill the golden goose by blocking those vpns at the great firewall of China, I predict that its economy will go from strength to strength.

The lesson of the 2008 American Presidential election

Friday, November 7th, 2008

You win elections from the base, not the center.  Obama appealed to the Democrat base, the Democrat wing of the Democrat party, and the lunatic wing of the Democrat of the Democrat party,  Just as Reagan appealed to the Republican party base. McCain tried to appeal to the wobbly Democrat wing of the Democrat pary – mainly by spitting on the Republican party base. McCain followed in the path of Bush by trying to outbid Obama by promising to give away more goodies, but when Obama promised to give away goodies he could credibly sound as if he believed that handing out goodies enriched and ennobled the recipients, whereas McCain sounded like he was handing out goodies after the fashion of a community organizer giving drunks a bottle of whisky to register to vote – if you got your goodies from Obama, it made you noble and superior and proved you deserved them, if you got you goodies from McCain, it made you mooching scum.  Why would anyone vote for McCain?

How many CRA loans, how much affirmative action payout?

Wednesday, November 5th, 2008

From 2000 to 2007, blacks and hispanics received six hundred and thirteen billion dollars more in home purchase mortgages than they would have received had they received the same proportion of the money that they received in 1999 – a figure that strikingly resembles the total cost of the bailout.

In 1999, people warned that CRA loans, affirmative action loans, racial quota loans, began to endanger the financial system

Fannie Mae, the nation’s biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people …

…These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, …

… “If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.”

1977 was the start of turning the finance industry into a political slush fund, and with each regulatory  intervention, the amount of money at risk increased  exponentially

How many CRA loans, affirmative actions loans, racial quota loans, were there?

Fortunately the data for new house loans by race is available, and from this data we can calculate that CRA loans, affirmative action loans, racial quota loans, for new house purchases, in the period 2000 to 2007 were at least  six hundred and thirteen billion dollars, which is pretty close to the total US bailout cost.

613 billion dollars.

So this was an affirmative action financial crisis, and we are for the most part bailing out financial institutions that were forced to lend to unqualified borrowers by race, and perhaps also bailing out the culture of corruption that results from rating mortgage securities AAA that were generated in the course of signing up people to vote democrat with a bottle of cheap whiskey and a million dollar mortgage – because rating them differently would be racist, much as Princeton was corrupted because when it graduated Obama’s wife, fearing that it would have been racist had it failed to pass her thesis merely because it was a barely literate rant against racism.  We are required to pretend Obama’s wife is educated, and we are required to pretend that these borrowers are credit worthy.  It corrupts the universities, and it corrupts the financiers.

There was a massive increase in the value of loans to black and hispanic borrowers.  To the extent that these loans grew much faster than loans to white people, this most likely represents affirmative action.  This is a conservative estimate, since affirmative action lending has been enforced by the Community Reinvestment Act (CRA) since 1977.  What was new in 1999 was not affirmative action lending, it was affirmative aciton lending on a scale that threatened the financial system.

In 1999, mortgages to black and hispanic new house borrowers were 10.4% of mortgages to white new house borrowers.

In 2006, mortgages to black and hispanic new house borrowers were 36.5% of mortgages to white new house borrowers.

I calculate what new home mortgages would have been had new home mortgages to black and hispanics remained 10.4% of new home mortgages to whites.

The excess, the difference between hypothetical mortgages and actual mortgages, is a conservative estimate of CRA loans, affirmative action loans, racial quota loans.

In this table, the first column is new housing loans to whites, the second column is new housing loans to blacks and hispanics. Estimated CRA loans are the difference between the actual and hypothetical loans, and at the bottom I total numbers.

The numbers for new house mortgages in billions of dollars come the government racial quota monitoring website.  The number for affirmative action loans is my estimate, calculated as new house mortgages to blacks and hispanics minus 10.4% of white new house mortgages

The numbers for new house mortgages in billions of dollars come the government racial quota monitoring website.  The value for affirmative action loans is my estimate, calculated as new house mortgages to
blacks and hispanics minus 10.4% of white new house mortgages

Home Purchase Mortgages in Billions of dollars

Year Black and
White estimated
1999 37.60 359.90 0.00
2000 43.72 364.54 5.63
2001 51.18 381.41 11.33
2002 89.44 469.03 40.44
2003 128.40 537.96 72.20
2004 135.26 547.41 78.07
2005 236.06 757.33 156.94
2006 247.55 678.20 176.70
2007 129.53 547.41 72.34
Total 1098.75 4643.20 613.65

Unfortunately, no racial breakdown on default rate is available, but the Hispanics I saw buying houses in Sunnyvale in 2005 and 2006, looking at them from twenty paces, you could tell in two heartbeats that the chances of them making payments was very poor indeed.

Implicit government guarantees produce a vast river of easy credit to the too-big-to-fail beneficiary of that guarantee, and inevitably politicians are tempted to direct that river to political voting blocks – sometimes political voting blocks that are unlikely to repay the money.

It is a fundamental moral hazard problem in government regulation and intervention, which cannot be regulated away.  Instead of regulating, the beneficiaries of these guarantees must be shrunk – regulated to become small enough to fail, instead of regulated to benevolently hand out money to the politically favored.  Instead of sending that mighty river of money in the direction of desirable voting blocks, politicians must shrink it – which, like dieting, is hard for them to do.

The financial crisis in America was one of affirmative action and the community reinvestment act, of Black and Hispanic deadbeats robbing honest hardworking whites, but thinking of it in those terms of the particular voting blocks is not useful, will not get us to a financial system that moves savings from honest thrifty savers to honest hard working investors who can put the money to profitable use.  Such thinking, thinking in terms of voting blocks, will at best merely change the skin color of the deadbeats robbing the honest folk.  The financial crisis in the rest of the world had different beneficiaries with diverse skin colors, but the common factor was political favor sending funds to political voting blocks, rather than to people able to put the money to profitable use.  It is more useful to think in terms of moral hazard – that politicians cannot regulate, for they have perverse and dangerous incentives, and therefore corrupt financiers.

That politicians dispatched our money to cat eating wetbacks should enrage us, but we should be enraged at the politicians, rather than at migrants looking for work who have difficulty affording meat from a butcher, migrants who are prohibited from honest work by those politicians, and then offered welfare and a million dollar mortgage no money down by the same politicians.  The politicians corrupted Hispanics and financiers alike.