San Juan Mountains

San Juan Mountains
San Juan Mountains: Grenadier Range

Friday, March 9, 2012

Americans Are Stunningly Ignorant About The Economy

Two items showed up in the media this morning.  The Denver Post, in an article headlined "Market Doubles in Three Years, So Where Is The Party?", reported that individual investors are staying away from the stock market in droves, despite the fact that recent returns have been stellar.  The author of the article, Bernard Condon, points out that investors have "missed a breathtaking bull market" while "corporate earnings have racked up double digit profit gains."  He goes on to point out that "if investors valued stocks at normal historic levels based on profits, we would be celebrating Dow 15,000, not Dow 13,000".  In searching for a reason why so many individual investors have missed the most recent bull market he concludes that "everyday investors are more aware of the risk of the market...they're nervous...they're scared." 
The second item was found at cnbc.com.  There, in an article entitled "Most Wealthy Americans Think US Is Still In Recession", it was reported that, "Wealthier Americans aren't very optimistic about the economic recovery, with a surprising 63 percent saying the US is still in a recession, according to a new poll.  Some 55 percent think the economy won’t fully recover until 2013 or later, and 14 percent say the recession won’t end at all." 
The last recession began at the end of 2007 and ended in late spring of 2009.  It has been nearly three years since the end of the recession.  GDP surpassed the pre-recession high in early 2010, so we have experienced over two years of expansionary growth since the last recession.  GDP is today at an all time record high.  Furthermore, after tax corporate profits exceeded their pre-recession highs in late 2009.  Today corporate profits are at record highs, and increasing.  In light of these stark realities, how can almost two thirds of the group that was polled come to the conclusion that the recession of 2007-2009 still continues?  Even more incredible, how can 14% of those polled persist in their belief that the recession continues and will never end?
I believe a couple of things are going on here.  The first is fear.  Investors in the stock market are afraid because they have been through a time when they saw the value of stocks decline by 57%.  That is a huge drop and even though they knew that losses are only realized when an investor makes the decision to sell, many investors made the foolish decision to sell, thus locking in those negative returns.  Fear makes fools out of many people.  People do things because they are afraid that they would never do otherwise.  The stock market is not a place for the fearful.  Those who sold out at market lows because they were afraid should never have been in the market in the first place. 
The fear of market declines drives fearful investors to seek out "guaranteed" investment returns.  The world is full of investment groups that will sell fearful investors an investment in which the return is "guaranteed".  The one thing these investment groups (insurance companies and banks primarily) will not bother to mention to their clients is that to pay them a guaranteed rate of return they have to take the money invested with them and put it into the stock market.  Insurance companies and banks know that the only place to get high rates of return over the long term is in the stock market.  Insurance companies and banks are not afraid of market volatility.  So, they invest their client's money in stocks, pay their clients a guaranteed return from the profits, and pocket the difference.  That is a steep price to pay for fear.
The second thing that is going on here has to do with wanting to be right.  I believe most conservatives hate President Obama with a passion.  I further believe that most conservatives blame (wrongly, I might add) President Obama for the last recession.  Conservatives look at the federal debt (a joint effort of both Obama and Bush, I might add) and determine that we are doomed.  Like everybody else, conservatives want to be right.  So they simply create an alternative universe in which the recession has never ended because Obama is still in power.  It does not matter that none of the data supports their view.  
I believe most liberals hated President Bush with a passion.  I further believe that most liberals blame ex-President Bush for the last recession.  Liberals look at the federal debt and blame Bush.  Furthermore, liberals believe that President Obama can "fix" all of the problems started by Bush so he needs four more years to right the economy.  The economy has to still be broken (even though it clearly is not) to justify calling for four more years to fix it.  It does not matter that the economy is doing fine.  Liberals create an alternative universe in which the economy is not doing well so Obama can be called upon to save us all.
In both cases folks are allowing their political prejudices to influence their view of economic reality.  In other cases people are allowing their irrational fears to create their view of economic reality.  In no case are these groups seeing the truth.  Because of powerful erroneous presuppositions, Americans are stunningly ignorant about the present state of the economy.  And many, if not most, of these people vote.  Kind of makes you want to have a pre-qualification test on economics prior to allowing anyone to vote, does it not?

Thursday, March 8, 2012

J Edgar

Last weekend I had the pleasure of watching J. Edgar.  It was produced and directed by Clint Eastwood.  In fact, Clint even composed and performed a great portion of the score.  I found the movie to be thoroughly enjoyable and entertaining.  Equally important, I found the movie to be extremely close to the historical truth about J. Edgar Hoover, founder and 48 year Director of the Federal Bureau of Investigation (FBI).  I left the movie with several powerful impressions.
My first impression was that government grows fastest when citizens are most prepared to give up their constitutional rights and freedoms in the face of a perceived threat.  Hoover was the master at weaving a scenario in which the very survival of the United States was seen as tottering in the balance due to the attack of some evil influence or group of people.  He orchestrated his own personal rise to power by convincing many in Washington that the American Communist party was going to take over the government and destroy the country.  There were several poignant scenes in which Hoover is testifying before a Congressional committee with the clear intention of scaring them into giving him what he wants.  Never a personally popular person, Hoover was able to scare others into giving him the power to protect them.  With hindsight it is very easy to see that the threats Hoover trumpeted to Congress never were real threats to domestic tranquility.  Sounds awfully similar to today, does it not?
My second impression was that Hoover was able to use the media to create an image of himself that was far from real but that gave him the ability to expand his power.  In his many attacks against organized crime, he was able to set up the confrontations with the criminals in such a way as to cast him in a light of glory.  He used the press to fashion a public persona that oozed confidence and power.  People came to believe that he could protect them from the Mafia.  It was not simply Hoover who was shown as an expert in media manipulation.  President Kennedy and President Nixon were both accurately portrayed as men who used the press to shield their true natures from public scrutiny.  As is generally known by all, Kennedy was a womanizer and Nixon was a profane and obscene man of the ultimate degree.  Nevertheless, both were able to keep their secrets hidden from the public, if not from Hoover.
The third impression I had was that Hoover, being an extremely paranoid and insecure individual, was an expert at getting the dirt on Washington politicians.  His rise to power was, to no small degree, made possible by the fact that he obtained information on the immoral behavior of hundreds of politicians and then used that information to bribe and blackmail them into giving him what he wanted.  What most impressed me was not that Hoover had hundreds of secret files stuffed full of accounts of personal immoralities.  What most impressed me was how easy they were to get.  One cannot watch J. Edgar without coming away from the movie with the overwhelming impression that everyone in power in Washington is a terrible scoundrel.  Everyone in Washington is leading a double life.  Every politician has his persona that is projected to the public via the press and his real persona which is despicable. 
As I drove home from the movie I pondered how it is that politics seems to attract the dregs of human society.  People of high moral character tend to be attracted to careers in which they can prosper by serving others.  People of low moral character tend to be attracted to careers in which they can prosper by dominating and controlling others.  Political action is, by definition, dominating and controlling.  It is not surprising that those who rise to the highest levels in politics are those who are most adept at subterfuge, lying, double-dealing and gamesmanship. 
As I pondered the nature of the political man it occurred to me that today is no different than the time of Hoover.  As I watch the various campaigns for political office this year I see nothing but public adulation for "my guy" and public hatred for "the other guy".  There seems to be no real comprehension of the fact that they are all duplicitous men (do not accuse me of being sexist....I use "men" in the generic sense and it includes women).  We continue to delude ourselves with the belief that there really are good guys running for political office who have the ability to protect us from real threats to our liberty simply by creating new laws and adding additional levels to the police state.  As I thought about J. Edgar it occurred to me that we have really learned nothing at all from the past. 

Wednesday, March 7, 2012

Protecting A Woman's Right To Steal

The current uproar over Rush Limbaugh's comments in regard to the college student who believes she has a civil right to free birth control pills is a topic I was hoping to ignore.  But, it keeps coming up in conversations and I do have some ravings that I believe are worth posting on the topic. 
First, contraception is any medicine or mechanical device designed to prevent conception.  Hence it is called contra-conception; it prevents conception.  Any medicine or mechanical device that kills (terminates the life of, inhibits further progress of,  deters the birth-event, pick your choice of term) a gamete is, by definition, not contraception.  Conception has already occurred and it is too late to do anything about it.  So, my first point is that since this discussion is about both contraceptive and abortive devices and medications, it should not be described as being exclusively about a "woman's right to contraception".  Anybody who tries to frame the debate in those terms is being deliberately deceptive.
Second,  although it is woefully out of fashion in our modern world, a woman (or a man, I am an equal opportunity accuser of those who would commit sexual immorality) who is sexually promiscuous (defined as engaging in sexual activity outside of marriage) has almost always been considered immoral.  President Obama's phone call to the college student, in which he informed her that her parents "were proud of her" and that she was "a good woman" are incorrect and entirely out of place. Most parents, I believe, would not be proud of a sexually promiscuous daughter.  Furthermore, most systems of morality believe that sexual promiscuity is not a characteristic of a "good woman".  So, let's set all of that talk aside.  If you do not like the term "slut", use the phrase "immorally sexually promiscuous woman" instead.
Third, and most important from my perspective, is the fact that all modern "civil rights" involve theft.  The state can only provide money to one group after first forcibly taking the money from another group.  This basic fact is constantly ignored in all talk of civil rights. This college student believes she has a civil right to birth control.  Furthermore, she also believes that her employer has a civic duty to provide her with free birth control.  She is making two moral claims.  First, she is asserting that she has a moral claim on some of the money of  the taxpayers in this country and that the taxpayers are responsible to pay for her birth control, or sin against her.  Second, she is asserting that she has a moral claim on the behavior of her employer and that he is morally obligated to provide birth control to her or else be in sin against her.  Both of her moral claims are spurious.  Furthermore, her belief that taxpayers and employers are committing immoral acts against women by not paying for and delivering birth control to college students is in error. 
The belief on the part of this college student that because she is humiliated simply because she has to go to a pharmacy to purchase birth control is ridiculous.   Because of her embarrassment she concludes that she has a right to force me to pay for it and provide it to her. Her discomfort does not make it morally proper for her to utilize the coercive power of the state to steal my income and use it to purchase birth control on her behalf.  She ignores my right to my own income and asserts a moral claim over it.  She ignores my right to be left alone and enlists the services of the state to extract my income, under threat of penalty of law, and use it for her personal desires. 
Her use of the coercive power of the state to steal my money and pay for her birth control is bad enough.  It gets worse when she declares that her employer is also morally required to be the means by which her birth control is provided.  There is no conceivable argument that would allow any rational person to arrive at the logically necessary conclusion that her employer has a moral responsibility to provide her with birth control.  Only  the mind of an extraordinarily selfish woman, dedicated to the worship of state power,  could conjure up the idea of a civil right to employer provided birth control.  I am not sinning against her when I object to having my income stolen and spent on birth control.  I am not sinning against her when I object to having her employer be forced, under penalty of law, to be the means by which she obtains her birth control. 
On the other hand, her insistence that she has a civil right to employer provided free birth control is a direct moral offense against all taxpayers and employers.  No good person would ever use the coercive power of the state to do her dirty work. She would never personally cross the street with a gun and take her neighbor's income to buy birth control.  She would never go to work with a gun and use it to force her employer to go to the pharmacy to buy her birth control.  But she is more than willing to use the state to accomplish the exact same ends. For this, this college student is being praised by the president.  For this, this college student has become the beacon for all who want to protect a woman's right to steal.  

Tuesday, March 6, 2012

Tornadoes, Politicians, And Real Heroes

Most everybody is familiar with the record number of tornadoes that struck parts of the Ohio valley last Friday.  Several small towns in southern Indiana are practically gone.  I have had the misfortune of watching many news reports on the tornado damage and there have been two consistent themes in the coverage.
First, the people in the area are tough, courageous and going to rebuild.  This I will not dispute.  To have two small towns virtually eliminated from the face of the earth is a horrific thing.  The courage required to face down a tornado is something impressive.  The tenacity required to emerge from the tornado shelters and survey the damage is commendable.  The willpower evident in the assertions of the homeowners to rebuild their homes is a testimony to the capacity of human beings to endure hardship and persevere in the face of it.  All of these are praiseworthy activities and worthy of being reported on the news.
As a part of the coverage about the courage of those who have suffered loss are the usual reports of the "miraculous" events that have taken place.  A small baby was found alive submerged in the rubble of one home.  Pet owners and their pets are reunited despite long odds against the survival of the animals.  Big, tough guys are seen rummaging through the remains of their homes, searching for lost mementos of emotional significance to them.  More big, tough guys give interviews with quivering lips and tears in their eyes about how important their families are to them.  People from neighboring communities bring in water and set up barbecue grills to prepare meals for the displaced.  All of these are praiseworthy human interest stories worthy of being reported on the news.
The second theme in the television coverage of the tornado damage is not praiseworthy.  The second theme in the television coverage should be eliminated because it involves a parasitic class of people.  The second theme in the television coverage is about people who have flocked to the area purely out of their self interest and desire to be seen on the television.  Yes, you guessed it.  The second class of coverage is about politicians.
Practically every news report I have witnessed about the tornado damage has had, at some point in the report, an interview with some politician.  I have seen interviews with mayors and other local politicians.  I have seen an interview with the governor of Indiana.  I have seen an interview with one of the state senators of Indiana.  Unfortunately, I have seen President Obama's speech about the event.  In all of these interviews the politicians put on their gravest expressions and pontificate about how the government is rushing to the rescue.  Without exception, the help that the politicians promise to deliver consists of forcibly extracting the income from people who do not live in the area and giving it to politically connected people who do live in the area.  Disgusting!  In no case have I seen a politician actually open his own wallet and make a voluntary donation to a relief effort.  Politicians do not use their own money.  Politicians use other people's money and they use it very freely because it can buy them a lot of votes.
There is one theme that is conspicuously absent from all of the television reports I have watched about the tornado outbreak.  The theme that is missing is any story about the real heroes in this situation.  I have not seen a single report about the hundreds (probably thousands) of insurance adjusters and estimators who have rushed to the area to evaluate the damage to their client's homes and writen them checks to begin the rebuilding.  This is going on all over the area and not one single reporter considers it worthy to report.  Without the presence of corporations that sell homeowners insurance all talk of rebuilding would be in vain.  Without the checks from the insurance companies it would be impossible for this area to once again become economically productive. 
In addition to the checks being written by insurance companies, I have not seen a single report on the construction workers, plumbers, electricians, roofers, architects, and other folks involved in the building of homes who are rushing to the area in order to find work in the rebuilding effort.  The mere writing of a check would not rebuild a home.  It takes an entire crew of people to do the work necessary to rebuild a home. The insurance company pays the bill but the construction workers build the house.  These two groups are going to be entirely responsible for rebuilding the hopes and dreams of those who have lost their homes and these two groups are being ignored in the media coverage.  It is the insurance companies and the construction workers who are the real heroes in this event.  Politicians are getting lots of air time and pretending to care and look like heroes because they promise to throw around a lot of money that they have previously taken from someone else, but they are not heroes.  They are parasites. 
So, if you take a moment to consider the events of the past week in the tornado ravaged zones, remember those who are the real heroes.  Insurance companies and construction workers are all businessmen.  They engage the public in voluntary transactions that are for their mutual benefit.  Human beings engaging in voluntary, mutually beneficial transactions in the absence of government influence (also known as the free market) are who will rebuild this area.  They are heroes.

Monday, March 5, 2012

More Fed/Treasury Lies And Hypocrisy

Remember back in the depths of the "financial crisis" when we were told that American International Group (AIG) was doomed to bankruptcy?  AIG allegedly held the greatest number and proportion of "toxic" mortgage backed securities and was doomed, so we were told,  to collapse if the bureaucrats from the Federal Reserve and the Treasury had not ridden in at the last moment to save the world.  As it turns out, all of what we were told about these "toxic" mortgage backed securities was untrue.
On February 29th the online version of the Wall Street Journal reported that,  "The Federal Reserve Bank of New York on Tuesday sold the last distressed mortgage bonds from an entity that aided the bailout of American International Group Inc., reaping a $2.8 billion gain for U.S. taxpayers on the sales over the past year and closing a controversial chapter in the central bank's response to the financial crisis. Tuesday's deal represented the third and final bulk sale from a portfolio of securities known as Maiden Lane II..."
The Federal government basically forced AIG to accept $180 billion in loans during the course of the financial crisis.  The propaganda that streamed out of Washington during this time informed us that, if not for the government rescue of AIG, the "financial system of the world" would have collapsed.  Over and over again we were told that the government's efforts kept the world from returning to the economic level of the cave man.  As it turns out, all of that was a lie.
According to a March 5th article in the NY Times, AIG is selling off some of its foreign investments in order to raise funds to pay off the Treasury.  Meanwhile, as reported above,  the Treasury is selling off the assets it purchased from AIG.  What is most interesting about all of this is the Treasury is realizing a profit on the sale of "toxic" assets.  If those assets were so toxic, how could they be sold at a profit just a few short years later?
Furthermore, look at who is buying the assets from the Treasury.  In the same article in the NY Times it is reported that,  "the bonds, which were held in a vehicle known as Maiden Lane II set up by the New York Fed and funded with a $19.5 billion loan, were sold to investors including Goldman Sachs and Credit Suisse. A.I.G. itself bought back Maiden Lane II bonds with a face value of about $2 billion..."  So let me get this straight.  We were told the mortgage backed securities were worthless and would destroy the economies of the world.  The Treasury and the Fed conspired to buy these bonds with counterfeit (fiat money created by the Federal Reserve) and now they are selling them back to the very institutions that created them? And all of this at a profit?  Amazing.  But, it gets worse.
"The U.S. government still owns 77 percent of the outstanding shares of A.I.G.. Treasury officials have previously outlined broad plans to recoup the taxpayer dollars through sales of A.I.G. stock listed in New York. That stock must be priced about $29 a share for the government to break even; it is currently trading at $29.80", according to the same article in the NY Times.  So, not only has the government sold investment assets that were forcibly valued at zero (thanks to the government accounting rule called "mark to market") at a profit, the government forcibly purchased stock in AIG that it is now going to sell at a profit.
Don't get me wrong, I am glad the taxpayers are making a profit on these government investments.  The problem is not that a profit is being realized.  The problem is that the government ever got involved in the first place.  Clearly AIG and the mortgage backed securities it held were not nearly as distressed as the government told us.  Clearly AIG and the mortgage backed securities presented a fantastic buying opportunity for private investors back in 2008.  Clearly the government never needed to get involved.  Clearly the government at best was guilty of gross hypocrisy by purchasing shares of assets it knew were valuable while, at the same time, scaring the living daylights out of the public with tales of how these very same investments were about to destroy the economy of the United States.  While telling us we were on the cusp of a Great Depression that would make the Great Depression look like child's play, the government was buying up the very assets that were allegedly to be the cause of that Depression. 
I believe the situation is even worse.  I believe the government officials knew full well that the mortgage backed assets were only "toxic" because of the government  accounting rule they created and forced upon the banks.  I believe the government officials knew that AIG was not about to go bankrupt.  I believe the government officials took advantage of a relatively minor economic ripple and turned it into an emotional  mountain in order to expand its own power over banks, businesses, and the American people.  Remember, as Rahm Emanuel said in February of 2009 (he was chief of staff for the Obama administration at the time), "You don’t ever want a crisis to go to waste; it’s an opportunity to do important things that you would otherwise avoid."  Public terror is the health of government.  Don't be afraid.