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.