As an authoritarian intolerant party that appeals to the elderly the GOP can not square losing a Republican stronghold in upstate New York because of Congressman Paul Ryan`s Medicare plan. They are going to cave on entitlements to keep their hold on a dying constituency.
Ron Paul because of his Libertarian ideology attracts the young, tolerant and fiscally conservative voter, the future electorate. I predict that he will do very well in 2012. Good enough to give the GOP a Goldwater catharsis that will lay out the party`s ideological framework for the future? Let`s see.
Wednesday, May 25, 2011
Thursday, May 5, 2011
Republicans need a catharthis
Where would we be if the the Republican Party were to win the 2012 presidential election? I put to you that the managerial class failed so miserably during the Bush Administration that the GOP does not have the ideological compass to take over the helm after four short years. They suffer from a muddle of authoritarian views that lead us to war and economic crisis in the previous decade.
To my mind the dichotomy of Rand Paul and Mitch McConnell is one that Republican's have to resolve. One is the Tea Party standard bearer and the other is quite frankly, King George the 3rd of England, the conservative that sparked the revolution.
To my mind the dichotomy of Rand Paul and Mitch McConnell is one that Republican's have to resolve. One is the Tea Party standard bearer and the other is quite frankly, King George the 3rd of England, the conservative that sparked the revolution.
Wednesday, May 4, 2011
Co-opted Regulators
Tokyo Electric apparently has had its way in Japan for the past few decades and now you can see how one small concession leads to another until you have a concentration of six Nuclear Power Plants built in a small city in North East Japan that suffered a massive tsunami only a short eighty years ago. I say short because in actuarial terms I believe you look at events possible within a hundred years. Possibly the nuclear time horizon should be more like five hundred years and I am not anti nuke.
BP's oil rig disaster was regulated by a co-opted agency whose name escapes me but who never the less proves the point that depending on regulators who really have no skin in the game is futile. I know that we are considered a litigious society but as a Libertarian I prefer private market solutions such as performance bonds and the court system to redress a harm committed.
The fact that the Congress has not taken off the $75 million dollar liability limit for offshore oil drillers is an indication of how powerful the oil lobby is. Banks with an even bigger lobby make sure no proposal to limit the size of our bank's ever sees the light of day.
Japan's earthquake and subsequent tsunami were devastating enough, but to have a major bulkhead of the infrastructure fail so completely in the hour of greatest need is the true calamity. To have the co-opted regulators who failed so miserably in protecting Japan re-assure its citizens, especially it's children, to remain in a nuclear hot spot is the final insult. I understand the Japanese character is stoic but their treatment by their government provokes revolution similar to the Congress's lack of action against the oil and bank lobbies.
BP's oil rig disaster was regulated by a co-opted agency whose name escapes me but who never the less proves the point that depending on regulators who really have no skin in the game is futile. I know that we are considered a litigious society but as a Libertarian I prefer private market solutions such as performance bonds and the court system to redress a harm committed.
The fact that the Congress has not taken off the $75 million dollar liability limit for offshore oil drillers is an indication of how powerful the oil lobby is. Banks with an even bigger lobby make sure no proposal to limit the size of our bank's ever sees the light of day.
Japan's earthquake and subsequent tsunami were devastating enough, but to have a major bulkhead of the infrastructure fail so completely in the hour of greatest need is the true calamity. To have the co-opted regulators who failed so miserably in protecting Japan re-assure its citizens, especially it's children, to remain in a nuclear hot spot is the final insult. I understand the Japanese character is stoic but their treatment by their government provokes revolution similar to the Congress's lack of action against the oil and bank lobbies.
Wednesday, February 23, 2011
Trying to Rein In ‘Too Big to Fail’ Institutions
http://www.nytimes.com/2009/10/26/business/economy/26big.html
What a mish mash is Dodd Frank's attempt to rein in TBTF's. The nuanced regulation is sure to get co-opted so that once again the bonus' are for the banker's and the ruinous invoice is for the taxpayer. The Pecora commission's break up of investment and commercial banks brought us the Glass Steagall Act which protected the economy from a financial calamity the likes of the depression for seventy years. This new supposedly hard hitting version is going to get run over once the speculative juices begin to flow again and bank executives like Angelo Mozilo re-appear.
What a mish mash is Dodd Frank's attempt to rein in TBTF's. The nuanced regulation is sure to get co-opted so that once again the bonus' are for the banker's and the ruinous invoice is for the taxpayer. The Pecora commission's break up of investment and commercial banks brought us the Glass Steagall Act which protected the economy from a financial calamity the likes of the depression for seventy years. This new supposedly hard hitting version is going to get run over once the speculative juices begin to flow again and bank executives like Angelo Mozilo re-appear.
Tuesday, February 22, 2011
Corporate Taxes
Reading Barron`s magazine I note a push for reducing or eliminating the corporate tax for all the obvious reasons. Let me add efficiency as a not so obvious a reason. The corporate side has an army of expensive lawyers and accountants battling an expensive IRS bureaucracy. The battles rages at great cost and is pure consumption.
Inefficiencies create tax avoidance schemes which keep capital and job creation overseas. It builds a cadre of cake eaters in the economy. Many are Wall Street financiers who create un-economic tax avoidance instruments.
Legislators under the guise of fairness have a way of making fund raising complex. Complexity generates inefficiencies and inefficiency then creates special interests which makes it unfair again.
As a libertarian I recognize that the government has to raise revenues so that it can provide essential services such as a justice system, police and defense. The old fashion way was with import duties. I submit to you that eliminating the corporate tax and in compensation putting in a $100 a barrel oil import tax would raise revenues and repatriate capitaL and jobs. It would be unfair at the beginning, Texas oilmen will be thankful, but less so as time goes by as alternative energy develops a following. Similar to the Constitution`s command structure there is less micro managing and more sweep with this swap of inefficient with efficient taxing.
Inefficiencies create tax avoidance schemes which keep capital and job creation overseas. It builds a cadre of cake eaters in the economy. Many are Wall Street financiers who create un-economic tax avoidance instruments.
Legislators under the guise of fairness have a way of making fund raising complex. Complexity generates inefficiencies and inefficiency then creates special interests which makes it unfair again.
As a libertarian I recognize that the government has to raise revenues so that it can provide essential services such as a justice system, police and defense. The old fashion way was with import duties. I submit to you that eliminating the corporate tax and in compensation putting in a $100 a barrel oil import tax would raise revenues and repatriate capitaL and jobs. It would be unfair at the beginning, Texas oilmen will be thankful, but less so as time goes by as alternative energy develops a following. Similar to the Constitution`s command structure there is less micro managing and more sweep with this swap of inefficient with efficient taxing.
Wednesday, February 16, 2011
Hoodwink Germany
Previously I mentioned that it would take a century before German bankers would listen to a wall street proposition. With the announcement that the German Bourse is about to buy the New York Stock Exchange, I guess I was wrong. My reference was Michael Lewis's "Liars Poker" where he was in London in the 1980's and sold a German investor a bill of goods under the guise of a smart deal. I can't understand why today's German Banker would countenance another good investment from Wall Street.
In the meantime getting the conservator of Fannie and Freddie to convert a big percent of their debt to equity is no hoodwink of our friends in China and elsewhere that are big investors in that debt. The Prospectus clearly stated that the debt was not covered by the full faith and credit of the U.S. Government. Making this debt to equity conversion will teach future investors not to mistake GSE debt for U.S. GOV debt again and pretty well kill all the MAES, Sally and so on.
Congress can not mandate that sovereign funds to buy crap. The best insurance is one where the seller has the most to lose if the loan goes bad. If a bank wants to sell it's portfolio but has to keep the riskiest first 10% tranche, then I believe our Swiss and German friends may consider buying Mortgage Backed Securities from them in the future. I don't believe, on the other hand, that they will will feel secure because of greater government regulatory scrutiny and credit scoring from Moody's and the like. And I don't believe that without a 10% retention scheme that the private market will be able to bundle mortgages in a similar manner as Fannie and Freddie.
Finally I get annoyed when there is a call for greater regulation as a solution to a market problem. Fear of failure is the great regulator. If Congress would legislate less like a micro manager and more like a commander, for example banks are to be regulated under such and such rules versus no financial institution can be bigger than one percent of the U. S. GDP, the later would give a much a healthier result.
In the meantime getting the conservator of Fannie and Freddie to convert a big percent of their debt to equity is no hoodwink of our friends in China and elsewhere that are big investors in that debt. The Prospectus clearly stated that the debt was not covered by the full faith and credit of the U.S. Government. Making this debt to equity conversion will teach future investors not to mistake GSE debt for U.S. GOV debt again and pretty well kill all the MAES, Sally and so on.
Congress can not mandate that sovereign funds to buy crap. The best insurance is one where the seller has the most to lose if the loan goes bad. If a bank wants to sell it's portfolio but has to keep the riskiest first 10% tranche, then I believe our Swiss and German friends may consider buying Mortgage Backed Securities from them in the future. I don't believe, on the other hand, that they will will feel secure because of greater government regulatory scrutiny and credit scoring from Moody's and the like. And I don't believe that without a 10% retention scheme that the private market will be able to bundle mortgages in a similar manner as Fannie and Freddie.
Finally I get annoyed when there is a call for greater regulation as a solution to a market problem. Fear of failure is the great regulator. If Congress would legislate less like a micro manager and more like a commander, for example banks are to be regulated under such and such rules versus no financial institution can be bigger than one percent of the U. S. GDP, the later would give a much a healthier result.
Sunday, February 13, 2011
What to do about Fannie and Freddie
The treasury just released their report and it misses the most important idea completely, which is that the taxpayer can never be a back stop to the mortgage business. Private markets are completely capable of securitizing loans and it was Fannie`s misguided attempt to keep market share, when all their models said pull out, that exacerbated the real estate bubble. William Ackman`s idea of converting a significant portion of Fannie`s debt to equity would speed privatizing to a matter of a year and not the expected decade of the report. Another idea not mentioned is that mortgage issuers retain the 1st 10% of risk of loans sold to those who bundle the loans into securities. This feature would improve the quality of the loan`s underwriting, documentation and freedom from fraud more reliably than a micro managed regulatory approach.
Have no fear that these points are just too simple for the administration and Congress to fathom. Complexity, fairness, influence and perverse Washington group think will keep the GSE`s festering forever. In the meantime it will take a century before Wall Street can hoodwink German banker`s into shoddy Detroit slum based product again. If I were a Swiss or German Banker I`d drop the phone at the first mention of the caller`s assertion of a Wall Street connection.
Have no fear that these points are just too simple for the administration and Congress to fathom. Complexity, fairness, influence and perverse Washington group think will keep the GSE`s festering forever. In the meantime it will take a century before Wall Street can hoodwink German banker`s into shoddy Detroit slum based product again. If I were a Swiss or German Banker I`d drop the phone at the first mention of the caller`s assertion of a Wall Street connection.
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