Posts Tagged ‘collapse’

Astroturf

Friday, October 8th, 2010

Casting Call: It’s a Bit Part Playing a Concerned Ordinary Citizen
Shannon Love found an interesting job listing at website advertising acting jobs:

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10/7/2010 PRESIDENT OBAMA TOWN HALL, DC
PRESIDENT OBAMA TOWN HALL, DC MTV, BET, and CMT (prods.) are casting the audience for a town hall meeting with President Obama. Shooting Oct. 14 at 4 p.m. in Washington, DC. Seeking—Audience Members: males and females, 18+. To apply, email townhallaudience@mtvnmix.com and put “Town Hall” in the subject line. To ensure that the audience represents diverse interests and political views, include your name, phone number, hometown, school attending, your job and what issues, if any, you are …[more]

The cause of the crisis

Monday, September 13th, 2010

One of a series of posts titled “the cause of the crisis”, each discussing a different cause, but each of these causes caused or was caused by each of the other causes:

When the universal franchise was introduced a hundred years ago, people said the system would go to hell.  Now it is going to hell.

Obviously a government cannot go on forever spending much more than it collects.  For a while printing money and borrowing money will work, but eventually, it is bound to lead to trouble, and big trouble is approaching fast.

Government inexorably and rapidly gets more expensive and more intrusive.  No doubt more taxes could be collected if they went after the politically well connected, but overall taxes are close to the Laffer maximum – if they raise taxes on those whom it is easy to raise taxes on, for example a tax on luxury yachts, they will get less money, not more money.

A tax on gas, beer, and cigarettes would work, but be unpopular with the electorate.  A tax on bankers, educationists, and lawyers would work, but would be unpopular with the well connected – and even such taxes would merely postpone the day of reckoning.  Government’s existing commitments are unsustainable with any politically realistic, or even politically unrealistic, tax rise.

The welfare state is simply running out of money.

There are two related problems:  Theocracy and democracy.  The masses are stupid, the elite is theocratic.

Because the elite is theocratic, they compete for power by each being holier than the other, that is to say, more politically correct than the other – but because their religion is this-worldly, they are required to have religious beliefs about this word rather than the next, thus each member of the elite competes to be further out of contact with reality than the other.

Because the masses are stupid, they succumb to politicians promising that the voters can vote themselves rich.

A hundred years ago, progressivism was a sect of Christianity with ambitions for theocracy and world conquest.  To better pursue these goals, it discarded theism, becoming theologically indistinguishable from universalist Unitarianism, thus evading the restraints imposed by the first amendment.

Consider, for example, the doctrine that men and women are equal – therefore the same and interchangeable:  Women, supposedly, can be firemen and soldiers.  Men, supposedly, can marry other men.

The modern progressive theory of equality is in fact a variant of Christianity.

Equality of men and women, and of the races, makes no common sense or biological sense. Men and women, for example, are biologically so different, that pretty much however you decide to measure them, chances are slim that they will prove to be equal.

When I discuss the matter with leftists, the main argument is some kind of skepticism with regard to efforts to measure people (which always end up demonstrating sexual and racial differences). For example, Gould is skeptical about IQ and race.

Roissy wonders why the elites are so stuck on the obviously false idea of literal equality.  Understood as a species of Christian belief, it makes sense, because the Christians believe that the most important part of the self is immaterial. If it’s immaterial, then material differences have nothing to do with it. So Christians are free to believe pretty much anything they want about this most important part of the self, unconstrained by material evidence of any sort. They are free to believe that deep inside everyone, there is a core, an essence, that is not the slightest diminished by bodily infirmity etc. etc. I.e., the soul.

The progressives jettison God, replacing God with, presumably, Nature. So “equality before God” becomes “equality before Nature”. That is, natural equality (of some unspecified sort). And this could be how the progressives manage to believe in some unspecified “natural” (biological or whatever) equality even though no evidence backs them up. Their belief is derived, not from evidence, but from the Christian heritage of progressivism. Their belief looks superficially like a scientific hypothesis because all the terms in it could be interpreted as referring to natural things, but it doesn’t really have any empirical content, because “equality”, while it could refer to something measurable, does not actually refer to anything measurable. Any attempt to measure something to test the claim of “equality” is attacked by progressives.

Progressives are using naturalistic-sounding words to talk about equality, but they are behaving as though it didn’t make any sense to try to measure it, which is how Christians would behave with respect to attempts to rigorously test equality before God. Their reaction would range from skepticism that it could be done, to the sense that it doesn’t even make sense to try, and finally to the certainty that it is heresy to even suggest such a thing and the person suggesting it is evil and possibly a sorcerer and should be burnt at the stake.

The progressive reaction to naturalistic attempts to assess equality is exactly the same as the Christian reaction would be.

The Christian view of equality is entirely impervious to empirical evidence, and so is the progressive view. It makes sense, then, to interpret progressives, when they talk about male and female equality, and about black and white equality, as really talking about the Christian soul, even though they themselves do not realize this is what they are doing because they have forgotten why they are going through these mental motions.

Rigging the vote

Thursday, September 9th, 2010

Rigging the vote seems to me to be redundant, since even the tea party supports unsustainable welfare, affirmative action, social security, and healthcare programs, yet oddly, vote rigging is under way.  Pajamas reports vote rigging in Texas and around the US

When the only people with a chance of winning are lunatic left, crazy left, and demented left, why bother? I conjecture this is because the major function of government has become handing out the gravy to true believers. This leads to everyone believing more truly than the next guy, everyone trying to be twice as holy as everyone else, but it also leads to vicious battles between the insider true believers, and those they doubt believe truly enough. As more and more government is handouts to political factions, the stakes are higher, so electoral contests are starting to use any means necessary, for although the election makes only a minute difference in what policy the US will follow (observe, for example, that Obama has been pretty much indistinguishable from Bush) the election will make a huge difference in who gets the gravy.

After mass democracy

Tuesday, September 7th, 2010

A couple of hundred years ago, the conventional wisdom was that democracy with broad voter participation was unstable, violent, ruinous, and short lived.

A hundred years or so ago the world moved to mass democracy, universal franchise.  Many people predicted that this would result in the masses trying to vote themselves rich, resulting in social and economic collapse

Well guess what.  The masses have been trying to vote themselves rich, social collapse is under way, and economic collapse looms.

The success stories of governance are Singapore, Hong Kong, China, and Botswana, which would suggest the future is not democratic.

Mass democracy is visibly self destructing.  In 2005 nearly half of births in California were on medi-cal, and the disappearance of statistics after 2005 suggests the situation is rapidly deteriorating, hence the present Californian meltdown.  The world of “the Marching Morons” is now.

Clearly this is unsustainable – Liverpool and Detroit represent the future of democracy – majority underclass. Detroit is the future of California, Liverpool the future of England if the Caliphate does not take England first.

I am hoping for anarcho capitalism, but a more likely outcome is military dictatorship evolving into monarchy, or gangs evolving into feudalism.

Mencius suggests an interesting form of futuristic government:  The sovereign corporation with cryptographic control over its weapons.  The vote of the board creates a cryptographic secret that gives the CEO control over the weapons of corporation’s security forces. If there is a coup by the armed forces against the CEO or the CEO against the board, the coupists weapons stop working.

Mencius’ proposal reflects the typical nerdly assumption that guns are all powerful. In practice, the way that power works is that the elite males settle things between themselves by means that are not overtly violent, and then the outsiders find they face a united, and violent front from the elite males. Once the elite males have agreed amongst themselves, the weapons are merely an afterthought, making the cryptographic locks irrelevant – which would suggest that if Kingship revives, it will have more resemblance to traditional kingship than to Mencius’s CEO.

Switzerland’s plebiscitary democracy is also an outstanding success, though it could be argued that this  mainly because it is sufficiently unwieldy to prevent the government from actually doing much, and therefore  prevents the government from vote buying in the fashion that led to the meltdowns in California and Detroit. Switzerland is a blast from the past.  The future is more likely to be China, though I think that anarcho capitalism, or the revival of feudalism are also possibilities.

The minimum necessary reforms are to stop the financial system leaking money, and put welfare on a sound basis – but only the most extreme elements of the tea party are proposing anything approaching this, and they are clearly far too extreme for the voters.  If reforms that would actually enable the system to survive were on the table, Christine O’Donnel would be unelectable left, not the unelectable right.

To put welfare and affirmative action a sound basis means imitating Singapore’s welfare, social security healthcare, and so forth.  Pigs will fly first.

Let us consider the seemingly more achievable problem of stopping the finance system from leaking money.  All bankers are criminals, for they were all party to the grossly improper loans that led to our present crisis.  Any honest banker was fired, because any honest banker got in the way of affirmative action and got run over.

To stop the system leaking money, have to fire crooked bankers, and replace them with honest bankers.  To replace them with honest bankers, have to end affirmative action lending.  That does not seem too hard.  After all 99% of the voters oppose affirmative action lending, and a clear and substantial majority oppose all affirmative action.  But it is hard.  We have affirmative action lending for a reason:  As I said before:

When they gave a Nobel prize to Marie Curie for being female, that did not hurt anyone except more deserving potential Nobel prize winners.   But handing out phony Nobels on the basis of sex, race, and nationality necessitated handing out phony degrees on the basis of race and sex, and handing out phony degrees on the basis of race and sex necessarily led to a crisis where these phony degrees were being ignored by employers, so employers necessarily had to be forced to give out well paid phony jobs on the basis of race and sex.   But being given well paid phony jobs on the basis of race and sex failed to result in recipients living a middle class lifestyle, so lenders had to be forced to give out a middle class lifestyle on the basis of race and sex.  Which has led to our present financial crisis.  It all began with Marie Curie.

So if you roll back the most unpopular, extreme, and disastrous form of affirmative action, you then immediately face a problem with less extreme and more popular forms.  And if you roll them back … All solutions are either radical or unworkable.  Roll back affirmative action loans, and pretty soon you are going to have to restrict the franchise, or bring affirmative action loans back.

How to fix the financial crisis

Friday, May 21st, 2010

Proposed reforms, both left and right, are unlikely to have any effect on the continuing massive misappropriation from the financial system.  It is absurd that people are discussing obscure details of the credit swap market.

To fix the financial crisis, we have to revoke, or at least denounce and denigrate, Marie Curie’s Nobel prize.

When they gave a Nobel prize to Marie Curie for being female, that did not hurt anyone except more deserving potential Nobel prize winners.  But handing out phony Nobels on the basis of sex, race, and nationality necessitated handing out phony degrees on the basis of race and sex, and handing out phony degrees on the basis of race and sex necessarily led to a crisis where these phony degrees were being ignored by employers, so employers necessarily had to be forced to give out well paid phony jobs on the basis of race and sex.

But being given well paid phony jobs on the basis of race and sex failed to result in recipients living a middle class lifestyle, so lenders had to be forced to give out a middle class lifestyle on the basis of race and sex.

Which has led to our present financial crisis.  It all began with Marie Curie.  Each lie required a new and bigger lie.  We need to start by acknowledging that genders and races tend to have different abilities – that if you are looking for people that are the best at something, whether the fastest runners or the greatest mathematicians, they will almost all be of one particular race and gender, and some races will be completely absent, and if you are merely looking for people that are acceptably good at something, for example accountants, basketball players, or donut makers, they will be mostly of one particular race and gender.

We cannot end the crisis unless we admit who is defaulting on their mortgages, we cannot admit who is defaulting without admitting that they cannot perform their jobs either, we cannot admit they cannot perform their jobs without admitting that their degrees are phony, and we cannot admit their degrees are phony without admitting that many Nobel prizes, starting with Marie Curie, were phony.

Yale Harvard and Basel style Free Enterprise

Sunday, May 16th, 2010

After the collapse of socialism, the elite support free enterprise – they support it the way they support free speech.

If anyone is allowed to disagree with the orthodoxy taught at Yale and Harvard, or even doubt it, this endangers the free speech of people from Harvard and Yale, and similarly if any enterprise run by people from Harvard or Yale could go bust, this endangers the free enterprise of people from Harvard and Yale.

Basel II is tens of thousands of pages of regulations, no one knows how vast it is, because not all the regulations can be found in any one place, but it could all be replaced by two simple rules:  Politically correct victim groups shall always find it easy to borrow money, regardless of their ability or intention to pay it back, and politically well connected businesses shall always make money, regardless  of whether they are competently run or not.

The seeds of the crisis were the CRA and the ratings agencies.  I have discussed the CRA at length, but the CRA would have been resisted had it not been for other changes in the system that insulated the players against the consequences of making bad loans.  These changes, guaranteeing that badly run businesses would succeed, started with the bailout of the ratings agencies in the seventies, forty years ago.

Back then, the ratings agencies were in trouble, because they had made a lot of bad calls.  It seemed that whenever an institution was going under, the guys at the credit rating agencies were the last to know about it.  Back then, they sold their assessments of credit risk to subscribers. So no one wanted to subscribe.

So in the seventies, the regulators stepped in to make people use the credit rating services. In 1975 the SEC created the Nationally Recognized Statistical Rating Organization (NRSRO) designation. Credit rating agencies so designated received what was in effect a grant of governmental power. The SEC then relied on the NRSRO’s credit risk assessment in establishing capital requirements on SEC-regulated financial institutions – which meant that for SEC-regulated financial institutions to borrow and lend, they had to get rated.  A cascade of regulatory decisions followed over the years, each decision forcing more and more reliance on the risk assessments issued by these demonstrably incompetent institutions – and less and less reliance on other people’s risk assessment.  For more and more organizations, it became illegal for them to make their own judgments about risk.

By the 1990s, as Levine and Partnoy tell us, the NRSROs were not selling assessments of credit risks, but licenses to issue securities.  The rating agencies did not genuinely assess risk, nor did anyone really expect them to.  Nor could repeatedly demonstrated incompetence reduce demand for their services, so the ratings agencies had no incentive to provide correct credit ratings.  Since their income was entirely dependent on the state granting them power, they did, however, have an incentive to make politically correct credit ratings.  If you lend to the poor, the oppressed, etc, and you are run by good old boys from Yale and Harvard, and you make donations to the right politicians, the NRSROs have a very powerful incentive to give you a good credit rating.  And if you have a good credit rating, you can borrow as much as you like – and if you go bust, the government will bail you out.

Badly run companies that had been empowered to borrow as much as they pleased got in trouble – and were bailed out for the same reasons as they had been empowered to borrow as much as they pleased.

In addition to corruptly favorably rating the politically correct, the NRSROs corruptly favorably rated those who simply gave them money, which is perhaps what those who complain about “deregulation” have in mind.  The banks creating structured financial products would first pay the rating agencies for “guidance” on how to package the securities to get high ratings and then pay the rating agencies to rate the resultant products – a glaring conflict of interest, though one less apt to lead to bailouts when the proverbial hits the fan.

Now since all this dirty dealing has cost the taxpayer trillions, you may well ask what measures have been taken to punish the NRSROs for bad conduct, or give them incentives for better conduct in future, or indeed restrain them from continuing to do this stuff?

All the strengthened regulation is regulation to make people continue to treat NRSRO ratings as true, even though it has become horrifyingly apparent that the ratings are generally false.  All the strengthened regulation is more of what caused this mess in the first place.  Any real reform would necessarily start by abolishing the legal privilege of NRSROs, would have to start by rolling back regulations to what they were in 1974.  Instead, compulsion and bailouts are being applied to make NRSRO ratings true, or to enable people to continue pretend that they are true.  Their power has been increased, their misconduct unpunished, and their incentives have become even worse.

Where the money went

Monday, February 15th, 2010

The government has been shuffling the money around to obfuscate who stole it.  It lends money, and then announces that there is no problem, the money has been paid back.

But after much fiddling, the money has mostly come to rest, in that the government is now the proud owner of about one trillion dollars of mortgage backed securities guaranteed by Fannie, Freddie, and the FHA, plus some Fannie, Freddy, and FHA debt.

The first graph in the above link is the money wizzing around in complicated circles to obfuscate who is at fault, the second graph is the bailout of private entities, other than General Motors, and the third graph is primarily the bailout of Fannie, Freddy, and the FHA.

That these Mortgage Backed Securities are “Fully guaranteed by Federal Agencies” implies that the vast majority of the crisis, the vast majority of the bailout, was dud mortgages rubber stamped Fanny, Freddie, and the FHA, that privately issued mortgage backed securities have been liquidated – that the dud mortgages underlying privately issued mortgage backed securities have been settled by foreclosure and bancruptcy, but the dud mortgages underlying Fannie, Freddy, and FHA issued mortgage backed securities are on the tax payers tab to the tune of about a trillion dollars.

Overtime, as the mortgages are resolved, the trillion dollars of mortgage backed securities will diminish with time.  In proportion as they were worthless, the agency debt will correspondingly increase.

American debt

Sunday, September 6th, 2009

Total federal debt twelve trillion

That is not too alarming in itself. It is a bit less than GDP, and for most countries, trouble ensue when debt is around twice GDP. The liberty papers are not too worried.

Total American indebtedness (public and “private”) is sixty trillion, which is much larger than federal debt, and has been rising very rapidly. The primary cause of this rise has been implicit and explicit governmental and quasi governmental guarantees – FHA guarantees, debt of too-big-to-fail corporations, guarantees by too-big-to-fail corporations, state debt, for example California, and so on and so forth.

Some substantial part of this sixty trillion is secured by real assets such as houses and the income stream of hard working people, and some substantial part is not.

Thus the excess “private” debt is not private.  The normal level of public and “private” debt is about twice GDP, say twenty six trillion, so we are about thirty trillion or so in the hole and getting deeper fast – well past the danger level of twice GDP.

Prospects of hyperinflation

Monday, August 24th, 2009

Arnold Kling thinks that “hyperinflation would be political suicide” and that therefore that the US government will sooner or later do the extraordinary and drastic things necessary to avoid it.

Even if it was political suicide, this is like arguing that someone will lose weight because his morbid obesity is about to kill him – but it is not political suicide.  Incumbents that engage in hyperinflation usually gain political benefit in the short run, and the short run is all they care about.  The Weimar government was not punished at the polls. (more…)

Inflation looms

Friday, June 19th, 2009

Bryan Caplan, favorably citing Sumner, tells us “stop worrying about inflation

Supposedly we should stop worrying about inflation, because the bond markets predict only moderate levels of inflation. Supposedly we can determine future inflation by looking at the difference between Treasury Securities, and Treasury Inflation Protected Securities. Supposedly, this tells us what the people investing in securities think that inflation will be, and they are pretty good at predicting inflation.

However, this tells us only what people who are confident that inflation will be moderate think inflation will be, because if you are worried about immoderate levels of inflation, you do not diversify into long term Treasury Inflation Protected Securities, you diversify into gold, silver, guns, ammunition, rice and beans, which is roughly what the Chinese are doing, except that they are also diversifying into copper and iron, and private Chinese are not allowed to diversify into guns and ammo.

The bond market does not tell us what the smart money people think inflation will be. It tells us what those among the smart money people who do not expect very high levels of inflation think inflation will be.

What are the Chinese worried about?

They are not worried about the possibility four percent inflation in 2011. They are worried about the possibility of four hundred percent inflation in 2020. And so they are not buying Treasury Inflation Protected Securities. And so the difference between Treasury Securities and Treasury Inflation Protected Securities fails to reflect their concerns. And so, if we look at the bond market, what it tells us is that the Chinese think inflation may well hit four percent in 2011, but does not tell us what they think inflation will be in 2020. But if you listen to what they are saying, what they are saying is that they think there is a substantial risk of very high levels of inflation in eight years or so.

Governments tend to go down the tubes when total public debt is around two hundred percent of GDP or so. Thus a deficit of ten percent of GDP or so is sustainable for ten or twenty years or so. Trouble is that in addition to an on budget deficit of ten percent or so, there is also a much larger off budget deficit, in the form of an ever growing pile of government guarantees, which there is no will to restrain. Put the two deficits together, crisis looms.

Trees do not grow to the sky. That which cannot continue, must stop.