Begging for Alms

Watching Meet the Press this Sunday and I am presented with a feel good Citigroup ad directed at opinion makers. It's a desperate tug at the heart strings from a wounded corporation seeking more government favor. There are pieces of Citigroup that can stand on their own and there others that just suck the life blood out of those that have any left. Bernanke and Geither have studied the Japanese economic morass of the last twenty five years, and one conclusion they seemed to have agreed upon was that Japan was too kind to their banks. It's time to rip Citigroup apart because in their present state they are a leech on the economy. When the next crisis comes we can depend on their need for further help and certainly not to be of help. And finally and most importantly it is important to show a hard edge where failure is allowed to over come what in crisis was determined to be a too big to fail bank, but now that the crisis is working towards resolution can be sold off in pieces in an FDIC manner. The country is over banked, especially investment Banks. At one point I believe finance represented 20% of GDP. I think no more than half that would be healthy for the economy. Let's start by chopping Citigroup apart.

Bull by the Horns

Early in the financial crisis I recall the economist Simon Johnson describing the FDIC as a very effective and economical tool to resolve the perilous state of the financial system. It caused me to consider Sheila Bair, the former head of the FDIC, and her actions in a different light from what up to then was a predisposition to less regulation. FED Chairman Alan Greenspan's tenure was a disaster in spite of his Ayn Rand libertarian philosophical predilection because he forgot that free markets do not work as described by Adam Smith in a system spiraling toward concentration of economic power. The mix of government intervention and laissez faire economics is particularly noxious, and Alan presided over a witches brew that as a Libertarian I will not forgive.

Sheila Bair has a clear view how government guarantee's require private equity be completely at risk when reckless management puts a company in a difficult position. She understands how those who play prudently expect to prevail when others fail and how it is resented it does not happen because special favors are called. It appears from her book, Bull by the Horns, that Tim Geithner is Mr. Moral Hazard and that his tenure as Secretary of the Treasury has been a huge drag on the Obama administration. The AIG bonus debacle in the spring of the term, the laughable disrespect given by Wall Street Banker's that summer and the general public outrage over bailouts for fat cats over the years was the genesis of the Tea Party on the right and Occupy Wall Street on the left. That Obama was re-elected has more to do great electioneering than developing a mandate.

As a Libertarian I resent that neither side understood that the mandate from the beginning is to be a Teddy Roosevelt style Trust Buster. Punish with ruin the reckless goliath's in finance for the havoc they reeked on our citizens. Obama could really set a proper course for his second term by nominating Sheila Bair as his new Secretary of the Treasury. While she is a regulator at heart she understand's how to protect the public purse and authority.  Secondly, now that the market is less stressed, will someone go out and rip Citigroup apart.  It has no right to exist as presently constructed and it would do a lot of good to set the possibility of failing even though it is big. 

My President is busy

Tom Friedman's editorial in today's New York Times regarding Israel clarifies how authoritarian it has become.  Because of a history of easy wins over less prepared opposition the extreme element asserts greater influence and transforms the country toward a garrison state.  America's thorough repudiation of the evangelical right this past election leaves Israel abandoned by a hawkish ally.  All  I can say is, "Thank God".

 My President is Busy

Republican Hand Wringing

I am delighted by how the authoritarian element of the electorate got so thoroughly trounced in this last election.  Until Republican's can learn to answer in the manner of Joe Biden in the Vice Presidential debate, that while holding strong religious beliefs that they are not willing to impose them on others, the GOP is doomed.  There may be hope of a turn on this point by the Evangelical Right's recognition that they failed, but not for lack of effort.

“Millions of American evangelicals are absolutely shocked by not just the presidential election, but by the entire avalanche of results that came in,” R. Albert Mohler Jr., president of the Southern Baptist Theological Seminary, in Louisville, Ky., said in an interview. “It’s not that our message — we think abortion is wrong, we think same-sex marriage is wrong — didn’t get out. It did get out.

“It’s that the entire moral landscape has changed,” he said. “An increasingly secularized America understands our positions, and has rejected them.”

Christian Right Failed to Sway Voters on the issues

I disagree with the Reverend Mohler that it is the moral landscape that has changed.  I believe it is our core value separating Church and State that is rejecting religious positions that have no business being a part of government.  If this is the land whose first proclamation of independence includes the pursuit of happiness as a right, then how can we tolerate a religious movement that dictates what that happiness should be?  People voluntarily congregating into a community church is a expression of the pursuit of happiness for some and if it is a community of gay and lesbians, whose business is it but their own?

Gary Johnson for President

It's not a wasted vote.  A vote for Obama is a vote for more Government and Romney is a vote for less liberty.  I don't think either of the two major parties are ever gong to get it right until more of us stop wasting our votes on the lesser of two evils.

January 13, 2011 Extraordinary Financial Assistance Provided to Citigroup, Inc.

Thank you Gretchen Morgenson for finding this gem of a report from SIG TARP on her
"Citi’s Torch Has Passed. Now Find a Knife." editorial. It is apparent that some in Government understand NTBTF well.  I believe that Tim Geithner did his boss a dis-service by saving Citi from dismemberment and or bankruptcy and thereby not making it the example to have deflected the Tea Party and the 99 percent protestors.  The low rates that the FED has implemented has given Citibank the breathing room to rebuild its book at the expense of saver's in society and are part of the economic malaise that could cost Obama his re-election.

The gist of the report is in its opening written below.

Unless and until institutions like Citigroup can be left to suffer the full consequences of their own folly, the prospect of more bailouts will potentially fuel more bad behavior with potentially disastrous results. Notwithstanding the passage of the Dodd-Frank Act, which does give FDIC new resolution authority for financial companies deemed systemically significant, the market still gives the largest financial institutions an advantage over their smaller counterparts by enabling them to raise funds more cheaply, and enjoy enhanced credit ratings based on the assumption that the Government remains as a backstop. And because of the prospect of another Government bailout, executives at such institutions might be motivated to take greater risks than they otherwise would. 

The Dodd-Frank Act was intended in part to address the problem of institutions that are “too big to fail.” Whether it will successfully address the moral hazard effects of TARP remains to be seen, and there is much important work left to be done. As Secretary Geithner told SIG TARP, while the Dodd-Frank Act gives the Government “better tools,” and reduced the risk of failures, “[i]n the future we may have to do exceptional things again” if the shock to the financial system is sufficiently large. Secretary Geithner’s candor about the prospect of having to “do exceptional things again” in such an unknowable future crisis is commendable. At the same time, it underscores a TARP legacy, the moral hazard associated with the continued existence of institutions that remain “too big to fail.” It also serves as a reminder that the ultimate cost of bailing out Citigroup and the other “too big to fail” institutions will remain unknown until the next financial crisis occurs. 

The full report is available at the pdf link Extraordinary Fiancial Assistance

I prefer a one handed Economist

I believe it was Harry Truman who mentioned he preferred one handed economist versus the "on the one hand and on the other hand" version which he found useless.  Today's DealBook in the New York Times "Weighing the Dodd-Frank Restrictions Against the Power of Big Banks" by Steven Davidoff is an opinion piece that Harry would have despised because it had no opinion.

On the other hand St. Louis Federal Reserve President James Bullard is very clear.

Fed's Bullard-Banks should be smaller to manage failure

The most startling part of it was how big Goldman Sachs' asset base was.  I can't believe they would allow so much deadwood in their portfolio.  The old time partners are turning over and squirming in their graves.

The Command Perspective

Republicans profess a great belief in free enterprise, a chaotic economic competition described by Adam Smith's as individual's working in their self interest creating a general prosperity through an invisible hand; yet appear incapable of understanding the implication that such a system requires many undirected players. On the other hand being of the managerial class they have an aversion to undirected individuals. Quick to decry the nanny state yet eager to be the nanny the GOP needs a redirect back to the Wealth of Nations if they are not to wither into oblivion.

Joe Biden's response last week in the Vice Presidential debate that in spite of deeply held Catholic belief he was not inclined to impose his will on women in particular and those of other faiths in general. Paul Ryan on the other hand came across as beyond reproach and willing to do the Ayatollah's bidding. Ouch! So many instances in history of economic freedom masking an inquisition. It doesn't take much to further assume that Ryan is against gay marriage, which is difficult to square with the pursuit of life, liberty and the pursuit of happiness. And while we are in the mood of telling people what to do; how about increasing our military budget so that we get to tell other countries what to do?

Until the GOP can shuck aside the command perspective and let the Church provide moral persuasion and Government a free economic environment the party is doomed. Let's take Dodd Frank for example. Democrats concoct a heavily regulated nightmare of a piece of legislation and what is the Romney response? Yes we need regulation, but Dodd Frank needs some tweaking. Really? Is that all? The simplest and cleanest solution is the NTBTF title of this blog. Make every banking institution small enough so that no one but it's stockholders cares whether it fails or not. If it is government insured then it is regulated and managed by the FDIC. If it's not, then expect greater compensation to cover risk from a non bank and un-insured investment. This solution strikes me as rather more similar to the broad make up of the Constitution than the micro managing legislation determining the gallonage of a toilet flush. Is Romney enough of a TR to bust up the current bank trusts? I don't see it not nor do I think that Republicans think in terms that if Democrats are the party of the minutiae that they should be the counter to it.

Tweedledee versus tweedledum

After listening to Simon Johnson on NPR today I have to conclude sadly that there is no Teddy Roosevelt trust buster in Romney to counter Obama's  betrayal of his mandate by sucking up to the Too Big To Fail Banks.

Catalonia secede from Spain?

My name is Catalan and so is a part of my heritage and yet I find Ricard Gonzalez and Jaume Clotet's "Spanish Prisoner" editorial in the New York Times as pathetic, childish and trivial.  Why don't they examine Switzerland, the Helvetic Confederation, as a system of retaining their culture as well as nationality and stop wasting time dreaming of a solution that solves nothing.

A legislative vacuum cleaner

I find Conservatives too hard line with their unwillingness to talk and negotiate with the other side.  If I were in political office with a Libertarian agenda of More Liberty and Less Government I would make a pack with the devil along these lines;  Okay Mr. Big Government Politician I'll support your odious legislation if you include the deletion of ten laws, rules, initiatives and or whatever on a line by line basis as part of the package.

This sort of deal making could go on for a decade clearing the deadwood in the Congressional Record before a staffer may observe, "Oh my God we have run out of stupid laws to eliminate".  In the meantime looking them up and expanding upon the sheer unmitigated lunacy of many of them would be a fun activity from which to base a career as a political comedian and the effect would be like a legislative vacuum cleaner clearing the complexity of government.

The low hanging fruit has been plucked

Tom Friedman's editorial today on China makes clear that the command structure that developed the economy and brought about it's meteoric rise needs to morph into a system that crowd sources.  It appears that the leadership is resisting and clamping down on dissent more and more and if this continues I predict slower growth in China because of general mal-investment from crony capitalism.

Talk of China

Another editorial regarding tax cuts runs into a regular truism found in nature and the stock market, the the more you try one solution, tax cuts for example, the less effective it is.  This is especially true if the cuts are from 80%, a marginal tax rate prevalent before Reagan in comparison to the 35% rate now in effect.

Do Tax Cuts Lead to Economic Growth?

Regarding in-effective, we don't even want to talk about Ben Bernanke's efforts with Fed actions which are more akin to pushing a string. This gasoline he is spreading in the economy just refuses to ignite, but when it does, watch out!

Serving Constituents one at a Time is Expensive and un American

Fred Bernstein's opinion piece in today's New York Times hits the nail on the head.  I have been developing the thought for years now that Congress's attempts at micro managing is not what the Founding Fathers had in mind.  The Constitution gives Congress the job of legislating and the President the job of executing what was legislated.  Constituent services tries to serve local issues with federal tools.

A prime example of Congressional over reach to a local issue is mandating toilets having a certain gallonage per flush, something more appropriate to local building codes.  A Senator or Congressman asked to vote on such a micro issue has got to sense that this sort decision making is beneath them, not in a derogatory but in a chart of responsibility sense, and if they are so focused on constituent services they forget they are not the mayor anymore.

A Congress for the Many, or the Few?

Clint Eastwood GOP performance was terrific

I appreciate the Romney team's courage for letting Clint Eastwood perform unscripted on Thursday night.  He is the example of the individual type that everyone else at the convention was lauding but not being. The convention scripted as it was down to the last cough was a bore. Clint's remarks got right to my problem with Obama, so what is handwringing go on in the Republican hierarchy as reported by today's NY Times regarding his performance?  I say that and Paul Ryan's speech on Wednesday are the best moments of the convention.

Paul Ryan supercharges the GOP ticket

 Paul Ryan is the VP candidate that changes my mind about Mitt Romney's feckless campaign.  Finally we have an articulate engaging and happy warrior weaned on Ayn Rand, Friedrich Hayek and Milton Friedman debating on substantial issues. It is a fantastic selection that supercharges the GOP ticket.


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Weapons of Mass Destruction

I see Berkshire Hathway's earnings were affected by the giant derivative that Warren Buffet bought for the company a few years back.  His explanations in the annual reports of BKHT are not convincing that this instrument is other than a useless financial exercise and certainly not an example of masterful capital allocation.  I don't see the material good it provides society nor the company.  It's not remotely like buying Union Pacific, for example, which appears to be a terrific investment nor USAIR which was a terrible one but which at least was an investment and not a wager.

Investors vote to break up the banks

I feel some vindication from of all people, Charles Gasparino of Fox and the Post, ouch Murdoch properties! From his July 30th editorial  comes "the ultimate vote for any company is with investors; if they keep selling the megabanks’ shares, and only buying when it looks like they’ll be broken up, it’s only a matter of time before the breakups start.  And that would be a good thing: The vote of the investor class, as opposed to the political class in Washington or their cronies on Wall Street, offering the best hope to fix our broken banking system." 


The complete article is linked below, but the above is the real and only nugget.


http://www.nypost.com/p/news/opinion/opedcolumnists/investors_vote_to_break_up_the_banks_3mxN1i4SDHkb4DNGC4t8QM

Business Press is Clueless

Matt Taibb's observation in his Rolling Stone piece where he commented that Sandy Weill's reconsideration as "an instant YouTube classic. The very funniest part, I thought, was the response of Squawk Box host Andrew Ross Sorkin, the single most credulously slobbering financial reporter on the planet this side of Maria Bartiromo. Even he was so shocked by Weill’s comments that he lost his voice – "I’m speechless," he said. " 

Taibb's editorial jogged me enough to realize that I get better investment insight from everything other than business journalism.  This came to me particularly hard when reading in "Vanity Fair," of all journals, about Microsoft this past month.  That article explained the puzzlement I felt about Microsoft for many years about which I never got a hint in the business press.  My high opinion of Jamie Dimon, for example, comes from the business press and my current puzzlement regarding him and J P Morgan Chase requires another "Vanity Fair" article delineating where and when he went from promoting shareholder value to empire building.

Regulate, Don't Split Up Huge Banks

Steve Rattner is entitled to his opinion, but as an investor TBTF banks are losers.  The money required to lobby Congress and regulators is a waste as are compliance costs.  And for what?  The right to loose really big money with a prop trading desk?
Rattner's editorial is a plea to keep the legal staff supporting the banking system's regulatory structure pampered and well compensated.  If, as a the title of this blog states, a banker realizes that he puts the very existence of his company at risk then Adam Smith's invisible hand will self regulate the bank without need of a privileged class of expert advisors and a meddling government.      

Sandy Weill changes his mind

Some would say you could have blown me over with a feather when I saw Sandy on Squawk Box suggesting investment banks be separated from commercial ones. But I am not surprised.  Consolidating in the 90's made sense when the bigger the bank the cheaper it's funding.  Now that funding is cheap everywhere and opportunities few TBTF is a hinderance.  Bank trading desks have cheated their corporate and government clientel for so long that most CFO's hang up or don't let the call through  when a Wall Street "Boiler Room" tries to call. The only clients left for these trading desks are other banks and hedge funds.  As I keep repeating, these desks are just playing with themselves and create no economic good.

Investment bank's that advise clients should go back to being the "White Shoe" partnerships of old.  The trading desks should be peeled off onto Hedge Funds where they will diminish. Commercial banking should be boring again.  The Investment Bank may advise a P& G, for example, to hedge with a certain product from another firm;  but a Banker's Trust milking customers with their prop trading desk is so over.

Why I write

Barton Bigg's obituary stated that he wrote to clarify his thoughts.  I agree it's a good method.  For example why I can't vote for Mitt Romney comes down to the following logic: The economy is stagnant because of uncertainty.  To me Romney represents more uncertainty than Obama.  It appears to me that Republicans are unable to clearly state what they stand for.  They need a catharsis that defines them or they become as irrelevant as they are in California and thereby setting the ground for another party.  As a Libertarian I won't compromise to perpetuate the current pathetic choice.
What is the basis of my current antipathy for Romney and the GOP?  I believe that the instinct to  regulate morals clouds free market economic thought.  I am an Adam Smith, Wealth Of Nations, devotee who believes that the "invisible 'hand" described by Smith as guiding individual players acting in their own best interest reach the best result.  I believe this to be true of morals as well for economic activity. The GOP's current anti gay marriage, drug taking as a criminal activity and general anti immigrant  stance are indicator's of  a disbelief in Smith's "invisible hand" as a guiding principle in any activity.
Church and volunteer organizations are a result of the "Invisible Hand."  These voluntary organizations make better promoters of morality than any law or government organization.  It's the basis of my libertarian thought.  Until the Republican Party is purely a promoter of free market economic activity in a federal sense and defers morality issues to individuals, communities, including local religious organizations and finally local government  in what might be called an anti federal sense, then and only then will I have any respect for the GOP.

Comeback Kid

It took "The Economist," a foreign publication, to point out that the U. S. Economy is turning around  in a healthy direction. The primary goal is to "do no harm." No more stimulus please.  No jobs bill, as if a piece of legislation called a jobs bill would produce jobs.  Legislators can not and do not create jobs, so please don't try.

It's clear that the greatest hinderance to our economy is uncertainty.  Both sides of the aisle are equally guilty.  I resent President Obama's stewardship because it lacked the courage to take up the Simpson Bowles commission's recommendations as its mandate.  I resent Republican's bath mouthing the economy almost with glee. If this Presidential Election is based purely on attacks, then I don't see any relief in uncertainty.  A pox on both houses!

LIBOR - SMIBOR

This LIBOR Scandal is another case of Banks playing with themselves.  LIBOR is the basis of most of the World's finical contracts from the mundane to the arcane but the primary question society has to ask is what good do these players and contracts provide?  From what I see they just eat our cake.

To Save the Euro, Leave It

I found Ken Griffin & Anil Kashyap's  editorial of today in the New York Times to be an elegant solution to the Euro mess.  Germany should re-instate the Mark and leave the Euro much like the British pound is out yet Britain itself is a part of the Eurozone.
http://www.nytimes.com/2012/06/27/opinion/to-save-the-euro-germany-must-leave-it.html

What comes around goes around

I am reading Henry Adams History of the United States, the Administration of Thomas Jefferson.  It is as if the North and South Poles are switched around since the Revolutionary war.  The way I read the Federalist Papers by Alexander Hamilton, I see a force for federal control in finance, commerce and defense.  In Republican South and Democrat North of the era, I see the anti-federalist, those for states rights and local governance.  In my youth I thought highly of the Federalist and now less so.  On the other hand I thought Andrew Jackson was a crazy man in dismantling the Bank of the United States and now I think he was brilliant in doing so.  The tide has turned so that Democrats descended from Thomas Jefferson act like Federalists. For example Obama care is a Federalist over reach of States Rights. On the other hand modern Republicans who appear more ideologically in tune today with Hamilton's Federalism argue States Rights.

What Republicans Think. Do they?

Today was a good breakfast watching Lou Gerstner, former CEO of IBM, on Squawk Box and reading David Brooks' editorial in the Times, “What Republicans Think.” I bring this up because Lou has got to be the sort of constructive businessman that the GOP would bow and salute to. Yet he appeared non-plussed by the partisan politics practiced in Washington. “Look I am just a computer salesman from the past, so who cares what I think about Washington” he said more or less. Which got me to thinking when reading Brooks. Is there any thinking going on over there at the GOP?

What I detest about Romney in particular and Republicans in general is that they insult my intelligence. If Romney is anything like Gerstner then he will take a meat cleaver to the budget. He will cut and re-organize government and generally try to eliminate some of the strange life forms that develop in the petrie dishes of bureaucrats talking to each other in their own little world. But Romney explains nothing and with a vagueness directed by poll watching doesn't inspire confidence that he knows what he is about. Obama will probably be reelected by Romney's timidity.

Romney's present course is to be elected without a mandate.  Reagan, on the other hand,  talked radical and was not fearful of scaring some people away.  Never the less, he get's elected with a clear mandate to veer away from big government and toward individual initiative.  I don't see Mitt leveling with the people so that when elected he can convince them to do the heavy lifting required of all of us if we are to turn this global economic malaise around.

Thomas Hoenig now with the FDIC

I thought so much of Thomas Hoenig's criticism of the FED when he was president of the Federal Reserve Bank of Kansas City that I blogged about his resignation last year.  Saw him on Squawk  Box this morning and understand why I think he is great.  Good to see him at the FDIC where Sheila Baird, another who I think very highly of, use to rule.  If only we could get Hoenig, Baird and & Born, Brooksley - Former head of of the CTFC, to run the Fed, Treasury and Chair of Economic adviser's, in no particular order,  then I could sleep at night.

Freedom means Licentious?

On reading the Moral Sense I see that the Chinese understand freedom as licentious or allowing licentiousness.  I wonder how many American's feel the same way about Libertarians  because we want to decriminalize dope.  I understand human behavior has a guiding hand much like Adam Smith's economic model that works in the following sense: Those that practice risky behavior tend to die off and the more prudent among us thrive and propagate.  Society and it's mores are a result of this natural pruning which leaves a Conservative garden of church goers.  If only Evangelicals understood how truly conservative Libertarians really are.

Germany Resists Stimulus because of Costly Re-Unification

Today's article in the New York Times brings up Germany's lessons learned with their 2 trillion dollar re-unification effort.  Huge money was thrown at East Germany yet parts are sill depressed. Paul Krugman aside, throwing money at the problem is not a guaranteed fix. An entrenched Greek bureaucracy hampering private initiative is the most damaging factor to it's economy. It was reported in the Times how a Greek olive oil venture selling on the internet to others in the EU  took months with various agencies to get the required permits, one which required the owner's stool sample before getting approval.  Another report about a Greek American trying to start a beer company battling bureaucrats intent on keeping Heineken's, a Dutch company, dominance in the Greek beer market.  Finally the report on the $100,000 a year train conductors and a economist's conclusion that using taxis would be cheaper than transporting passengers on the government run train system are examples of money thrown at such an  inefficient and corrupt government would only add fuel to the fire of it's economic destruction.
Free markets are efficient at correctly directing capital.  Promoting an entrepreneurial economy is the best stimulus a government can provide.  Germany found out it takes time to change old East German attitudes that were such a dead hand on the economy when it was on the other side of the iron curtain. Until the austerity plan in Greece dismantles offices that keep a dead hand on the tiller, then I agree with Germany's reluctance to maintain the status quo.  

J P Morgan Chase's Loss

It means a lot to me that Jamie Dimon thinks this loss is stupid, avoidable and while no Volker rule had been broken, it broke the Jamie Dimon rule. There is a lot of talk that more regulation is needed. If Wall Street had understood their operations and shown the discipline described by Gillian Tett in her book Fools Gold about the J P Morgan group that initially developed many of the financial exotica out there,     then there would not have been a 2008 financial crisis.  What Jamie has to ask is what caused that discipline to falter recently?
Wall Street currently lobbies Washington against regulation making derivatives more transparent as if the obscure system in place is a sure money maker when actually it's a loser. Any bank that thinks its trading desk is adding value for its shareholders is deluding itself and does not deserve consideration as an investment.  The juice has been worked out of the system.  Today's bank proprietary desks are practicing financial masturbation. Making some heat but no issue. I think the Jeremy Irons character in the movie Margin Call had it right when he said, "I don't hear the music."
TEPCO the Japanese utility with the disastrous failure of its nuclear reactors is an example of a private entity currying favors from regulators in the name of  increasing shareholder value. The result is a total wipeout for shareholders and a staggering burden for Japan. The investment community ought to consider  bank's who want to do proprietary trading as entities destined for a total wipe out, just like TEPCO.  Regulation is sure to come, but investors should leave the TBTF banks to benign neglect because they are losers, with a capital L on their foreheads.

The Moral Sense by James Wilson

I have to thank David Brooks for his editorial in the New York TImes for this work that re-assures me that my libertarian  philosophy is not a point of view that can only mean chaos.  When I tell people I am against drug laws the normal reaction is that I am for a drug crazed chaotic society.  I think Wilson's argument shows that there are built in as well as taught self regulating actors within us that hold us back from chaos and in general make us civil.  Laws may codify but not modify accepted behavior so that a law against murder will get almost complete compliance while in many parts doing some weed won't.  His work takes you beyond the economic equation that some assume we make where behavior is always calculation of risk (punishment) versus reward (pleasure).  I don't do dope. It's a matter of self preservation which is the basis of my conservative lifestyle, if not thought.
Wilson's title is also appropriate for this NTBTF blog since what we are against is Wall Street's loss of Moral Sense as described by Greg Smith's "Why I am Leaving Goldman Sachs."  When a sense of fair dealing is broken in society, it sows the seeds of revolution.

France in Denial

The Economist is calling the French election as "the West's most frivolous."  Wait until this fall.

Conversation at a local bar pits me against the town pundit

“Vinny! How can you call yourself a Libertarian and think about voting for Obama? He's a socialist taking our rights and freedoms away. It's a fact, just look it up.” My protestations declaring an incapability of distinguishing between Obama and Romney make no dent at all against such an irreproachable source.

It seems to me that Obama is true to the FDR tradition of his party and Republicans on other hand campaign for small government and then administer a RINO (Republican in Name Only) stampede of too much Government. It took three terms before Democrats recovered the White House with Bill Clinton and after George W. Bush's pooh pooh pile Republicans don't deserve this next election and until they get their heads straight, nor the next few.

How is it that Republican's can only serve up RINOs? If you preach and believe in small government you have to be against a liberty sucking garrison state with an empire to defend. Other than Ron Paul, no other GOP candidate gets it. In last fall's Republican debates we saw most of the candidates decry the fact that Obama missed the opportunity to stay in Iraq longer! We saw Mitt Romney in South Carolina pandering to the defense industry by declaring we need an even bigger Navy with more aircraft carriers and nuclear submarines to fight the likes of Al Qaeda. Just how dumb are we suppose to be? Come on Mitt, a clear analysis of the U. S. Government from the perspective of a Bain Capital would have you taking a meat cleaver to the U. S. Defense budget. Why don't you say it? Otherwise what is your mandate? Build a bigger Navy?

Republicans are the management class and some believe they can tame government excess, show fiscal restraint and pay down the debt. The last time I looked it was Bill Clinton who managed our economy best. It was his tax increase early on his administration that created the fantastic boom of the nineties. George W. Bush, on the other hand, never made a hard decision. He just made easy ones such as tax cuts and spending increases setting the stage for a Japanese style lost decade.

Which brings up the point of what does left – right mean in the political debate? Liberal versus Conservative means nothing when you understand that the word “Liberal” meant a believer in the individual during the 19^th century. Because it was such a new and radical idea it became associated with “new and radical.” By the time of FDR's administration Liberal just took it's “new and radical” modifiers over to the government interventionist camp. Conservatives on the other hand are the general fighting the last war. They were the Tories in our revolutionary war, the America Firsters before World War Two and now the pre-emptive first strikers.

I became a Libertarian years ago because of my dis-satisfaction with the moral interventionist the GOP includes in it's tent along with its half hearted belief in free markets. The counter to libertarian is authoritarian. Let me posit that an authoritarian is a believer in government and a libertarian a believer in the individual. The spectrum from left to right extremes would be Stalin's or Hitler's regime, both equally horrifying and on the same side, versus a hermit on a deserted Isle. The middle of this spectrum is one where reasonable people can acknowledge some legitimacy in the other's argument and find a cordial way to compromise between more government and less government.

One ideological lever between the two sides is raising or lowering the bar of “Federalist,” proponents of central government, versus “Antifederalist, ” supporters of states rights. Obama's Health Care Act may be argued as federal over reach. My problem is that I can't trust Republicans to consistently push back protecting states and ergo individual rights. Rick Santorum, for example, appears to be much more willing to intervene with federal authority in our personal lives than any Democrat I know, when one considers his intrusive grandstanding performance in the Terry Shiavo case. What does the likes of a U. S. Senator from Pennsylvania have to pontificate about when the head of family makes a personal decision on pulling the plug on a body on life support in Florida? Jeb Bush's intervention was bad enough, but at least he was Governor of Florida at the time. 

"The Economist" Nuclear Energy - The Dream that failed

Nuclear energy requires a Libertarian democracy with fair well understood compensation offered to those who will accept a facility and massive legal recourse for damages when it goes awry.  Japan's experience at Fukushima shows that the Industry's pact with the populace depended solely on the trust of government regulator's efficacy.  That trust is now gone. Can Japan's bank regulator's be far behind?

Nuclear Disaster in Japan was Avoidable, Critics Contened

Today's article in the New York Times illustrates how a regulatory agency eventually gets co-opted by the industry it regulates. In this case the Nuclear regulatory agency in Japan is overwhelmed by industry insiders migrating from company to overseer.  The group think this migration engenders cuts through all types of government agencies. The Goldman Sachs executives migrate to high Treasury positions, for example, and quash proposals that allow customers to get real value versus illusory profits.

The decision making in all cases reeks of willful denial of the known, such as the launch of Challenger when there was a very specific warning that rocket seals would not function in sub freezing weather that Florida could never have, yet did on January 28 1986.

Character

Ron Paul doesn't get much credit for being a decent person. He doesn't wear religion on his sleeve.  He is polite and cordial to his opponents and he speaks about the issues directly without dwelling on character assassination. David Brooks editorial today about "The Rediscovery of Character" doesn't mention Ron Paul, but it ought to have.  Its the reason I am such a Ron Paul supporter.  He is a libertarian philosophically,  but his lifestyle and character is conservative. He is not a libertine.

Is this what Davis Polk was meant to do?

Thank you “The Economist” for the “Too big not to Fail” article on Dodd Frank which shows the law as such a boondoggle for lawyers and lobbyist that it is sure to concentrate finance into too big to fail institutions. With so much complexity subject to interpretation the law is sure to be gamed to absurdity. What isn't understood is that a lot of smart people with expensive degrees and resources will utterly waste their lives performing financial and judicial masturbation generating some heat and no result.  

Ron Paul is Barry Goldwater's disciple

“I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size. I do not undertake to promote welfare, for I propose to extend freedom. My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution, or that have failed their purpose, or that impose on the people an unwarranted financial burden. I will not attempt to discover whether legislation is "needed" before I have first determined whether it is constitutionally permissible. And if I should later be attacked for neglecting my constituents' "interests," I shall reply that I was informed that their main interest is liberty and that in that cause I am doing the very best I can.”

Barry Goldwater The Conscience of a Conservative

AU H2O was the bumper sticker for me when I was fourteen. It was the year Barry Goldwater took the GOP nomination from Nelson Rockefeller and the eastern establishment. It was a year that Republicans pressed the reset button. My parents were conservative, William F. Buckley conservative, but being from the Northeast they were doubtful about Goldwater. It took Ronald Reagan's half hour televised speech a few nights before the election to turn them around in spite of my urgings and the issues of the “National Review” lying on the table in the den. Ron Paul is of course my standard bearer today. His campaign is as pure as Goldwater's and it comes at another time that the GOP needs to renew its commitment to liberty.

Free market capitalism is the core value of the right. I would posit that unfettered free market capitalism is libertarian and that Adam Smith's “invisible hand” gives moral credence to individual's selfish pursuit of economic gain because the result of that independent activity by many players in a market promotes the general welfare better that if it had been directed from on high. It's a form of crowd intelligence beneficial to society. An extremely important caveat to Adam Smith's theory is that there be many players in a market system for this greater good to happen. Unfortunately Republicans have not been a trust busting force since Teddy Roosevelt and have let crony capitalist weeds overtake the garden.

Republicans resist liberty as an ideology because they think it's unelectable. Goldwater was swamped by a landslide. Ron Paul answered a question posed to him during the campaign on whether he realistically saw himself in the White House with a quiet, “not really.” This type of answer is an anathema to professional politicians who will say and do anything required to get the prize. The safe electable GOP candidate is one that answers the questions nobody asks. The Tea Party's message is of discontent with elite big government and so the party responds by nominating a Mitt Romney or Newt Gingrich?

George W. Bush's administration was so poor it should condemn the Republican Party to the dog house for at least two terms to ponder their utter lack of direction. Until they understand what a danger the “W” years were for the country they have no right to demand the seat of power. In the mean time Democrats are doomed to suffer poor economic results for many years. Junior wrecked the economy so thoroughly that no amount of tinkering is going to turn it around quickly. It's a case of Republicans be careful of what you wish for because you just might get Herbert Hoover's ghost.

Goldwater's primary battle against Nelson Rockefeller was against big government and Republican's in name only. It's an unfortunate trait post FDR to creep toward the big government side of the ledger. If you define the left as pro big government then Mitt Romney, Newt Gingrich and Rick Santorum are Democrats! Republican's have to learn to root out these impostors. It's only a clear commitment to Liberty as espoused by Goldwater, Reagan and now Paul, that should define a true Republican leader. With the GOP rudderless, now is the time for them to embrace Goldwater again and patiently preach liberty and avoid false gods claiming to be electable.

The current Tweedledee Tweedledum difference between the two parties guarantees a third party effort. Under those circumstances Obama wins and the GOP gets pushed aside with it's infirm, intolerant and old constituency. The concentration of money, power and influence flowing towards Washington needs a counter and if Republicans let go this opportunity to seize the representation of the people for the people, then they are as irrelevant as Newt Gingrich's protestations that he is not a lobbyist.

Audit the Fed

Ron Paul's Audit the Fed proposal is not unreasonable given it would be required before doing a massive restructuring of the banking system. My personal opinion is that the Fed be reduced to the FDIC. Its window to be open to banks who pay insurance and whose assets are one tenth of one percent of the nation's GDP. Banks with more assets, investment banking, proprietary traders and insurance will not be part of club. Hopefully, in this new world, the bigger they are the more risk premium the market will demand and get. Funding of large projects would go back to Wall Street syndicates managed by private partnerships. These partners will pay salaries as truly merited since they will go quickly out of business otherwise. Salaries at small banks will be very dull indeed as they were during most of the previous century.

Liberals - Weed your garden

David Brooks editorial in the NY Times is such a simple message that reduces Ron Paul's proposals to cut several government departments to practical suggestions rather  than ideological declarations.  Bloated government consumes resources that hinders the delivery of authority and liberty.  A Department of Energy does nothing for either side for example so that eliminating it should be an easy decision.  The Department of Education on the hand has a lot of political baggage attached to it, but if it consumes resources and does not deliver what's a liberal to do?

Give me your muddled masses

More thought on Ron Paul not really seeing himself in the White House.  I can see the higher ups in the Republican party agreeing about wanting smaller government but resisting his pacifists foreign policy.  Ron Paul will not get the GOP nomination because the Republican party does not know what it is about.  Is it Authoritarian or Libertarian? Until it chooses one or the other unequivocally its just a mass of discontents with a country club president in charge.

My belief is that there should be a two party system with one having an authoritarian and the other a libertarian perspective. Left and right are such a muddle that the electorate is confused. If the left would take the mantle of authority and justify government intervention then the right should represent liberty and push back.  The ying and yang of these two ideologies would more perfectly represent us then the current liberal versus conservative reality that is being defined for us.  I don't buy the status quo and neither does Ron Paul. But nobody else gets it, on either side.

There is a book in here.

Not really

I heard Ron Paul answer the question of whether he saw himself in the White House and my pundit brother in law jumped to say that he is not serious candidate if he can't see ultimately winning.  I beg to differ.  Serious enough to care more about what he stands for than getting elected.

Mitt Romney willfully unlearns his life lessons

Ron Paul is the only candidate that declares the emperor is naked! He wants to cut whole departments. Mitt Romney on the other hand wants to add more aircraft carriers to our naval fleet.  Who is the one willfully unknowing the known, that we are broke?   I hate seeing Mitt compromise and deny his personally conservative and money responsible upbringing with a politically blind appeasement to foreign adventure minded neocons. If he were at Bain and running a firm similar to the U. S. Government he would be attacking the budget with a meat cleaver. I can't stand the fact that he so wants to be President that he does not articulate any such thought.  He is willfully unlearning his life's lessons of prudent, modest and parsimonious behavior.

Unknowing the known - The Banks

Geoffrey Wheatcroft's January 1st opinion piece in the NYT unveils a political newspeak that I am not comfortable with. Generally it's a political discussion of truths that knock out all further investigation of a line of reasoning.  The editorial mentions Donald Rumsfeld famous line of knowns and unknowns. First there are the known knowns, then the known unknowns and thirdly the unknown unknowns. But curiously it takes an Irish author, Fintan O'Toole to illuminate the fourth of the series, the willfully unknown known.

The piece goes on to describe the Iraqi war and the Madoff ponzi scam as examples of willfully unknowing the known.  I find, with the exception of Ron Paul, that our political class on both sides of the aisle of practicing the unlearning of lessons learned. The best example that I can think of is the Pecora commission of 1933 which created the the Glass Steagall act.  The past fifty years was the gradual undoing of the act.  Today's version of Glass Steagall, Dodd Frank, will not withstand the test of time because it does not separate investment from commercial banks.  It's the known risk of giving a banker a huge bonus or the taxpayer a giant liability that is compromised out of Dodd Frank so that its an exercise in regulatory masturbation, much heat generated for no purpose.  Glass Steagall had a framework that was very clear. There was a need for bank services and insurance of those services in case of a calamitous event.  In order to play with FDIC insurance banks had to follow bank regulations and pay for the insurance. It works well as long as there are many small players where none are TBTF, so a new requirement should be that no bank can control assets more than x percent of GDP.   One tenth of one percent sounds good to me.  If you want to be free to fail then as a bank you opt out and serve as an investment bank with no safety net for the partners or customers.