Failure number 7,894,423, give or take a few more million, of socialism

In the wonderful workers paradise that is Venezuela, where all people are equal and there is no strife as Chavez is concurrently Jesus, Castro and Barack Obama combined, El Jefe has made all people equal. Equal to rolling blackouts in one of the most energy rich countries in the Western Hemisphere. From the NYTIMES (of all places)

This country may be an energy colossus, with the largest conventional oil reserves outside the Middle East and one of the world’s mightiest hydroelectric systems, but that has not prevented it from enduring serious electricity and water shortages that seem only to be getting worse.

President Hugo Chávez has been facing a public outcry in recent weeks over power failures that, after six nationwide blackouts in the last two years, are cutting electricity for hours each day in rural areas and in industrial cities like Valencia and Ciudad Guayana. Now, water rationing has been introduced here in the capital.

Over the course of the last decade, Chavez has nationalized the better portion of the utilities industry as oil money flowed into the country and drove growth in Venezuela. Now that we have seen global demand wane, it looks like poor little Hugo is learning, probably for the first time, the inefficiencies inherent in centrally planned economies. As oil revenues poured in, things got better for the greater population in Venezuela right?

The deterioration of services is perplexing to many here, especially because the country had grown used to cheap, plentiful electricity and water in recent decades. But even as the oil boom was enriching his government and Mr. Chávez asserted greater control over utilities and other industries in this decade, public services seemed only to decay, adding to residents’ frustrations.

With oil revenues declining and the economy slowing, the shortages may have no quick fixes in sight. The government announced some emergency measures this week, including limits on imports of air-conditioning systems, rate increases for consumers of large amounts of power and the building of new gas-fired power plants, which would not be completed until the middle of the next decade.

So what does Hugo do? He moves towards a more efficient market based economy right?

In response, the president is embarking on his own crusade: pushing Venezuelans to conserve by mocking their consumption habits.

He began his critique last month with the amount of time citizens spent under their shower heads, saying three-minute showers were sufficient. “I’ve counted and I don’t end up stinking,” he said. “I guarantee it.”

Then he went after the country’s ubiquitous love motels and shopping malls, accusing them of waste. “Buy your own generator,” he threatened, “or I’ll cut off your lights.” He similarly laid blame with “oligarchs,” a frequently used insult here for the rich, for overconsumption of water in gardens and swimming pools.

Damn those clean people. How dare they want to wash themselves. Additionally those money changers are trying to throw their weight around.

Mr. Chávez is even going after his countrymen’s expanding waistlines. “Watch out for the fat people,” he said last month, citing a study finding a jump in obesity. “Time to lose weight through dieting and exercise.”

When Chavez writes his little red book the first political piece of advice will be "fatty, fatty two by four can't fit through the bathroom door." I wonder if that will show up in any of the speeches of Mark Lloyd and Anita Dunn in the future. Fat People are the scourge of existence they don't share their bounty.

Meanwhile, homes and businesses across the country are adapting to the erratic supply of power and, here in Caracas, of water. Sales of small generators, candles and water storage tanks are surging. Reflecting the unease of the already strained industrial base, which developed around access to ample and cheap power, Sidor, a steel maker in Ciudad Guayana, said it was shutting down its furnaces five hours a day because of the cuts.

“If this crisis teaches us something,” said Fernando Branger, an energy expert at the Institute of Superior Administration Studies, a Caracas business school, “it is that the immensity of our energy reserves means nothing if we cannot even get them out of the ground.”

Socialism will never be able to match up to the efficiency of capitalism. Can we finally throw this model on the dustbin of history.(see what I did there, I quoted Trotsky)

Hey Mr. Bi-Partisan I want ideas that work President, here is a plan that works better. I'm holding my breath as I know that you are my Messiah.

I would have liked to have been a fly on the wall in the White House when the C.B.O released this report. I can imagine that Rahm Emmanuel let loose with the F-bombs like the Allies at Dresden. To commence with the nana-nana-boo-booering

CBO and the staff of the Joint Committee on Taxation (JCT) estimate that the amendment would reduce federal deficits by $68 billion over the 2010-2019 period; it would also slightly reduce federal budget deficits in the following decade, relative to those projected under current law, with a total effect during that decade that is in a broad range between zero and one-quarter percent of gross domestic product.

This is good,good news as the bill after the after ten years would almost truly be "deficit neutral" And the hits keep on coming.

Regulatory reforms in the small group and non-group markets, including establishing association health plans (insurance coverage that is offered to members of an association) and individual membership associations, and allowing states to establish interstate compacts with a unified regulatory structure;

This is what Free-marketeers like myself have been calling for, truly increasing competition between evil horrific insurance companies on a state to state basis. The pool of risk will be larger and will drive premiums down. BET ON IT.

Federal funding for states to use for high-risk pools in the individual insurance market and reinsurance programs in the small group market; and Changes to health savings accounts (HSAs) to allow funds in such accounts to be used to pay premiums under certain circumstances, to make net contributions to HSAs eligible for the saver’s tax credit, and to provide a 60-day grace period for medical expenses incurred prior to the establishment of an HSA.

This might be my favorite portion of the amendment. While states are being further empowered with Federal funding(really their own dollars) for high risk pools and re-insurance programs in the small group market; direct Federal intervention is not happening. The idea behind the GOP's Health Care Bill is to put the individual in charge of his/her healthcare with as little Federal intervention as possible.

Here is the really good stuff:

Limits on costs related to medical malpractice (“tort reform”), including capping noneconomic and punitive damages and making changes in the allocation of liability;

Defensive medicine over. Dead, not coming back. The economic incentive that ambulance chasers like John Edwards has to sue over bad breast implants is gone.

CBO anticipates that the combination of provisions in the amendment would reduce average private health insurance premiums per enrollee in the United States, relative to what they would be under current law-by 7 percent to 10 percent in the small group market, by 5 percent to 8 percent for individually purchased insurance, and by zero to 3 percent in the large group market. Those are averages, however, and they are subject to a great deal of uncertainty; some individuals and families in each market would see different results.

Now, these are the initial estimates by the CBO. So, we can expect to see some changes in the numbers. If these numbers hold up, I believe they will, this is a powerful weapon in the fight. What defenders of this bill, you and I, need to do is be able to explain how the inclusion of free-market reforms in this measure will lead to more innovation and lower costs for the population at large. We need to draw the distinct differences between the efficiency of the private markets and the sprawling inefficiency of the government bureaucracy. This is a battle that we can win. History and economics are on our side. Hope and change are on the side of the Democrats, also I believe they may have a centaur, but we'll still survive. Let's Dance.



UPDATE

The Great Thomas Sowell hits the nail on the head.

Economics and politics confront the same fundamental problem: What everyone wants adds up to more than there is. Market economies deal with this problem by confronting individuals with the costs of producing what they want, and letting those individuals make their own trade-offs when presented with prices that convey those costs. That leads to self-rationing, in the light of each individual’s own circumstances and preferences.

Ruminations on the Recent Election

A few thoughts about the election last night. First, there is the old axiom that all politics is local. Very true, and one of the reasons that decentralized government is the best form of governance. It was comical to hear hard-core liberals last night pulling out this card. "This has no bearing on the President as all politics are local." If they really believed it, than they would be for a smaller central government and more power in the hands of the state and local governments. But I digress. Some interesting polling data I saw this morning in the New York Times caught my eye. The split in party affiliation is 33% Democrat, 37% Republican and 30% independent.

Pct. of voters Deeds McDonnell
33% Democrat 93% 7%
37% Republican 4% 96%
30% Independent or other 33% 66%

Deeds won 93% of Democrats, 4% of Republicans and 33% of independents. The figure that is not getting attention, and should is the 7% of the Democrat vote that McDonnell was able to siphon off. Almost 1 in 10 democrats decided to vote for the Republican in a state that all of the experts say is trending from purple to blue. McDonnell ran a positive, results oriented campaign and ended up winning big. Bob McDonnell won Virginia, my home state by 18 points. Republicans and conservatives need to run positive results oriented campaigns if they want to win in 2010. I am all for conservative insurgencies in primaries to let the squishes know who is paying them, but we need to focus on results oriented policies if their is to be another Republican revolution in 2010. We can't simply run against the party in power. This is a good start.

Al Gore is the Music Man

Al Gore is quite possibly the greatest con man in history. If I was Al Gore's agent, I would book him on a Broadway run of THE MUSIC MAN and cast him as Henry Hill. I can see and hear the Goracle running through his version of the immortal song Trouble.
(Apologies to Meredith Wilson)

Citizens of the world/Well either you're closing your eyes/To a situation you do not wish to acknowledge/ Or you are not aware of the caliber of disaster indicated/ By the presence of carbon in your community./ Well, ya got warming, my friend, right here/ Ya got warming right here in your community./ Why, sure I'm a carbon man/ Certainly mighty proud I say/ I'm always mighty proud to say it/ I consider the hours that I expand carbon/ flying my private jet are golden./ Help you cultivate a green thumb/ and a cool head and a preening eye/ Never take and try to give/ a Nobel Prize from/ a three railed sailing yacht/ But just as I say/ It takes judgment,brains, and pomposity to thrive/ in a rigged game/ I say that any boob kin take/ and shove a cap and trade bill/ and they call that progress/ the first big step on the road to World Sal-Va-/ I say, first, recycling plastic/ then then re-using TP/ An the next thing you know/ your son is trading carbon credits/ in a hemp made suit/ An listenin' to some big out of town movie star/ hearin him talk about sustainable living/ not some communal living but living where the world isn't going to pot/ Like to see some stuck up Commie boy smoking on green patch/ Makes your blood boil/ Well I should say/ Plebes let me tell you what I mean/ You got one, two, three, four, five, six, seven continents in the world/ continents that mark a difference/ between Europeans and a Yank/ With a capital Y/ and proceeded by W and that stands for WARMING/ And all week long your Republican/ youth will be debatin away/ I say your youth will be debating/ debating away their noon time suppertime indoctrination time too/ get the can in the recycling/ never mind doing study/ or reading Adam Smith or Edmund Burke/ never mind being charitable/ til the third world is caught under water/ on a Saturday night and that's warming/ Oh yes we got lot's and lots of warming/ I'm thinking of the kids in India/ bellies poking out cause they can't get any food after school/ That's warming/ with a capital W/ followed by Y and that stands for Yankee/ who everybody blames.

To remember the rhythm



Any-who, Al Gore is set to become the world's first carbon billionaire from his pushing of global warming on us the residents of River City. Pretty similar to the huckster selling the boys band, no actual knowledge of the issues at hand but knows how to sell the sheep.

Hey How about this Front Page Editorializing

From The New York Times

It is probably not wise to draw broad lessons from Tuesday’s results about what might happen in next year’s midterm Congressional elections and high-profile governor’s races. That said, it is worth watching whether Mr. Obama succeeds in turning out his supporters — especially people who voted for the first time last year — in New Jersey and to a lesser extent in Virginia.

That will be an early sign of his ability to transfer his own appeal to other candidates and of whether he has succeeded in building a sustainable new coalition of Democratic voters. That is something that will not be lost on Democratic members of Congress, especially those in moderate and Republican-leaning districts whom he will be pressing to cast tough votes on issues like health care and climate change.

Similarly, in Virginia, keep an eye on whether independent voters who supported Mr. Obama so strongly in 2008 turn out for Mr. Deeds, vote for Mr. McDonnell or just stay home.

History may not repeat itself but it sure does rhyme.

Market Forces Vs. Government Forces

Now, I'm not one to often gloat when I'm right, but the news of the "unexpected" profit by the Ford Motor Company this week just makes me want to dance around in my Milton Friedman Halloween mask. From the New York Times this morning:

While its crosstown rivals stumbled through bankruptcy this summer, the Ford Motor Company pressed its advantage, and delivered surprising news on Monday that its cost-cutting efforts and improving sales helped it earn nearly $1 billion in the third quarter.

Ford could have taken the bail-out money the same way that GM and Chrysler did. It would have been easy and completely understandable. Who says no to free money. Well, Ford did as they had put together a plan to work their way out of near bankruptcy. What is this plan that Ford came up with to once again become a profitable company. I'm sure that it must be something that the masters in DC could push GM and Chrysler to do.

Ford, which earned $997 million in the third quarter and made money in North America for the first time since 2005, has turned itself around largely by cutting costs and introducing cars that consumers want to buy, rather than resorting to deep discounts to lure shoppers into showrooms.

Let me get this right, by producing a product that consumers want to purchase, Ford was able to post a profit. That flies against everything I learned in my economics courses over the years(snark.) Look, this was a foregone conclusion that Ford was going to post a profit as they have been restructuring their business for the last several years with an eye on the future. Certainly, GM and Chrysler were able to clear their books by taking gubmint money, but the psychological and monetary edge that Ford picked up during the government restructuring of Chrysler and GM put Ford at a distinct advantage.

When Ford chose not to ask for government loans, the company was freed to continue spending on new products like its Fusion and Taurus sedans. G.M. and Chrysler, by comparison, had to rein in much of their product development programs to conserve cash while they awaited federal aid.A report by the Government Accountability Office released on Monday said that the federal government was unlikely to recover much of the $81 billion that was invested in G.M. and Chrysler, their suppliers and related financing companies.

Let this be another example for the inefficiency of Government Force Vs. the Power of Market Forces. While Ford investors will begin to see a return on the investment that they are making into Ford Motor Company, you and I, the American taxpayer, will never even sniff the 81 billion that we sunk into GM and Chrysler.

The Direction of the Republican Party

There has been alot of debate recently about the direction that the Republican Party is heading in. On one side of this chasm, we have the Republican intellectuals; David Brooks, David Frum, Peggy Noonan and George Will to name a few lining up against the conservatives; Rush Limbaugh, Mark Levin, Sean Hannity etc.

TO set it up in a far simpler fashion, we have the Old Guard Republicans vs. the New Media Conservatives. Also, what is lot in the cacophony of noise between the two camps is each sides interactions with everyday modern Americans, you and I. Now, David Brooks, who for me is always a must read, published a piece in the New York Times, decrying how talk radio is really aimed at a niche audience.

It is the story of media mavens who claim to represent a hidden majority but who in fact represent a mere niche — even in the Republican Party. It is a story as old as “The Wizard of Oz,” of grand illusions and small men behind the curtain.

What is most interesting in all actuality is that the niche audience that is being "preached" to by the small men behind the curtain is reaching more people than David Brooks column each week in the New York Times. What Brooks and the conservative intellectuals of today's day and age seem to think from their ivory tower is that the audience for Rush or Mark Levin are not free-thinking individuals who make their own decisions. Following Brooks logic, if Mark Levin was really all that influential, what he would say for his audience to do would be done lickety split, no questions asked by the stupid silent majority. It didn't happen, so they have no say within the conservative movement and should just let us handle the policy issues...mmm-kay.

This is childish thinking for someone as intelligent as David Brooks and goes to show that he is no longer in touch with conservative principals. If he was a conservative, Brooks would understand that we are all free-thinking individuals and are not happy to just hop onto the bandwagon of the first nice candidate with perfectly creased pants and a worn out copy of Reinhold Neibhur which he uses to Pied Piper proto-statists who are looking for a savior.

Conservatives are free-thinking individuals who understand the fallen nature of man and the ability of power to corrupt individuals and would thus like to keep as much centralized power away from the government as possible. This is why we prefer to allow the free-market to sort out our economic differences. Sure, we get walloped on the chin when we make mistakes, but we learn from them and begin to realize over the course of our lives that no one individual person is infallible. This is why the conservatives in the Republican Party were able to peg President Obama so accurately.

The conservative "intellectuals" are not the ones who are bringing forward the good ideas anymore, or trying to find ways to apply conservative principals to the issues of the day. Certainly, there are instances where the "intellectuals" position a plan for an issue of the day, such as George Will's column in the WPost last week.

So, instead, forces should be substantially reduced to serve a comprehensively revised policy: America should do only what can be done from offshore, using intelligence, drones, cruise missiles, airstrikes and small, potent Special Forces units, concentrating on the porous 1,500-mile border with Pakistan, a nation that actually matters.

This is similar to the thinking of Joe "I hope people take me seriously" Biden. Conduct a counter-terrorism operation from out of the country to reduce military casulties. Now, this is simply a re-tread of a democratic idea. Get out and take care of it without boots on the ground, it is politically tenuous. This is could be considered a conservative idea in the 1930's when we were isolationists, but one thing George W. Bush did tie to conservatism was the neo-conservative idea of nation building. Wouldn't it be better to try and give the Afghani's some true stake in the world economy. How about a pilot program to get some of our Opium for medical usage from the Afghans. Give them a stake in the world at large. That is was in conservative.

The idea that conservatives are no longer offering the types of policy and popular books that brought conservatism into vogue, Free to Choose, The Road to Serfdom, Conscience of a Conservative is a complete joke. Mark Levin's Liberty and Tyranny is one the best conservative policy cases that has been made in this generation. Also, JOnah Goldberg's Liberal Fascism is quite possibly the best history of the American Left, who make no mistake are in charge right now, that I have read.

What we are really seeing in this country now is a backlash against big government conservatism and liberalism. We are moving more in the direction of a Libertarian style conservatism. What will be interesting to watch is whether the movement we see now, Tea Parties etc, continue. I believe they will as the audience for talk radio and Fox News as well as anything attached to Andrew Breitbart and Glenn Beck continues to grow and the influence of the Ivory Tower Conservatives wane.

Big government conservatives had their man in George W. Bush(voted for him twice) and now the party wants to go in a new direction.

Health Care as Big Screen TV's

In the great debate that we are having about health-care in this country right now, I figured it was time to take a look again in my "free-market method" at a contentious issue and break it down into easier terms. It's what I do.

Any-who, as we can see from this study by the Kaiser Family Foundation

In the United States, which has had both a high level of health spending per capita and a relatively high rate of real growth in that spending, the share of GDP devoted to health grew from 8.8% of GDP in 1980 to 15.2% of GDP in 2003 (Exhibit 5). This almost 7 percentage-point increase in the health share of GDP is larger than increases seen in other high-income countries.

What we have seen, at least through 2003, is a huge jump in the increase of the health care sector's share of our GDP upon a cursory statistical analysis. Now over the course of roughly 23 years, this is a fart in the wind considering some of the life saving and prolonging medicines and technologies that we have developed. On an average evening at home, think of all of the ads that you see for either some heart drug, cholesterol inhibitor or other TV ad that you see for drugs for asthmatics. (Then again, if you are home reading Golf Digest it is a steady diet of Viagra and Cialis ads. Gives me a stiff neck, reading at home.) As the quality of care that we have received has increased so has the cost. Now, to be contrarian, why can't we have both, increased efficiency as well as lower costs. I believe that we can do both within the health-care market.

As we can see in this post from Consumer Reports,

a 32-inch 720p set will sell for $647, down 7 percent from December 2007
• a 37-inch 720p LCD TV will cost $782, down 5 percent
• a 40- or 42-inch 720p LCD TV will sell for $944, down 5 percent
• a 40- or 42-inch 1080p set will sell for $1,123, down 19 percent
• a 46- or 47-inch 1080p set will sell for $1,528, down 17 percent
• a 52-inch 1080p LCD TV will sell for $2,243, down 19 percent



High end expensive items are dropping based on the demand for these products. The supply of these items are meeting the demand. What you have is a fairly fluid market, essentially that there is not so much overhead and regulation that it is difficult for upstarts to get into the business of making a product and supplying a service that people want. How many TV making companies are there, I can think of several; Sony, Samsung, Pioneer, Westinghouse, Vizio etc. A good amount of them. What we have within the market for HDTV's is true competition. Lets' say that Samsung and Sony are servicing the "super prime" market, Pioneer and Westinghouse are serving the "prime" market and Vizio is the upstart, serving the rest of the general public. Sony and Samsung are competing with one another to make a product that the "super prime" consumer wants to purchase. At the same time, we have upstarts like Vizio who are trying to break into the market and make a profit by providing a similar, not better or discernibly worse product, by targeting a certain type of consumer who wants to have the HD technology but doesn't want to pay for the pomposity of the Sony or Samsung name brand. This is good for you and me, the average consumer, even though Samsung and Sony are not in a direct competition with Vizio as they will adjust their prices to try and pull from Pioneer and Westinghouse who are serving people in the "prime" part of the market. These forces drive the prices down for all consumers.

Now, this is a pretty crude picture that I've painted here, but the lesson to take away is that general competition between actors on an even stage will lead to lower prices for all consumers as each company is competing from a pool of consumers who wants to purchase their product.

On the other hand, what we don't have is a Czar of TV Pixelation who is dictating what each company needs to include within each television and how many pixels per inch that each TV should provide the viewer. The consumer is left to make that decision for themselves. Do they want the high end product, with the special gadgets and the mini robot which makes deviled eggs during half time, or the less expensive product which will only boil the eggs for you.

The "problem" with our health care system is that it is over regulated, overtaxed and overburdened with tort cases which have driven up the cost of providing medicine. Now, do I want just any Tom, Dick or Harry to set up a practice and begin to sell snake oil to the masses, of course not. The current health care debate isn't about "bending the cost curve" or insuring the uninsured. If it was, we would have broken down the barriers between purchasing health insurance across state lines and allowing in all states the kinds of plans that the uninsured would more than likely purchase, high deductible insurance to cover catastrophic accidents, not normal doctors visits. Or, we would have reformed tort law to cap the monies that could be won when Aunt Flo got a bad boob job and they came out lumpy. This is not the idea, the idea is control.

When the government is in charge of health care, they, the government underneath of the idea of cost cutting and trying to service the masses will have alot of say over what we can and cannot do with our lives. Hey, sorry Mr. Carlton, put that cigarette out as it will drive up costs. There is no greater control than the control over ones on day to day health.

Now, I would like to leave you with a thought, and hopefully if anyone reads this, a point we can debate. Since 1980 we have seen an increase in the cost of health care as a percentage of GDP grow by 7% points. Could it be from the government involvement and the slow creep of a socialized health care system? The health care markets have only become less free and the consumer has only lost choice. Where do we go from here?

Update

This story pertains pretty well to cost. Here

The Daily Twain

Facts are stubborn things, but statistics are more pliable.

The Daily Twain

Education: that which reveals to the wise, and conceals from the stupid, the vast limits of their knowledge.

The Daily Twain

I thoroughly disapprove of duels. If a man should challenge me, I would take him kindly and forgivingly by the hand and lead him to a quiet place and kill him.

Fears behind Government healthcare

Obama hits 'fear-mongering' on health care changes

Shared via AddThis

I must say, the President is throwing every ounce of political capital that he has at trying to sell his healthcare plan to the AMA and the American people. The truth is that more than likely he will not get what he wants(in the end, a single payer system) because he will not make the necessary political concessions to do it.

One such "scare tactic" the president cited Monday was an assertion that he favors socialized medicine. Obama again denied that, although he did say he thought that a "public option" should be available as a choice for those who currently have no insurance coverage. Obama said "we know the moment is right," citing the passage of legislation giving the government unprecedented control of the marketing and sale of cigarettes.





What is laughable is that the "public option" is essentially a collective, or in a more direct manner socialized medicine. What the President is calculating is that he will be able to charm the disparate sides; labor, doctors, insurance companies and the public and will be able to get his plan passed. This is hubris at the highest level. The good news for those of us who would like to see healthcare reformed without the intorduction of full blown socialized care is that the President is such an idealogue that he will refuse to push back against his base. Tort reform, not going to be touched he can say goodbye to the AMA. Pretax health benefits, goodbye union support. Rationing of care, goodbye middle class. We need to begin to chip away at his periphral support and I beleive that the best way to start is to push him on tort reform. We shall see

SANFORD / ATLAS: Alternatives to government health takeover - Washington Times

SANFORD / ATLAS: Alternatives to government health takeover - Washington Times

Shared via AddThis

Mark Sanford, the current governor of that rakish southern state of South Carolina, has proposed a free-market solution to the health care crisis that the country currently faces. What I believe we are seeing is the tables aligning for his run for President in 2012. This is the blueprint that conservatives and Libertarians should be following in the battle against Leviathan.

• We believe there's benefit to decoupling employment from health insurance coverage by ridding the system of tax preferences for health care. This single change would reduce health expenditures hundreds of billions of dollars while easing the burden of health costs on businesses. A great unspoken truth is that health benefits from employers come at the expense of employees' take-home pay. Raising lost wages would be the first of many benefits to American workers and their families from delinking health insurance and employment.

• We think it's critical that power shifts to the American consumer and away from government, employers and insurers, as evidence shows medical care prices come down when patients pay directly. Government should offer tax relief, such as refundable tax credits, to encourage private health insurance purchasing - especially for low-income families. Similar ideas, like those in the Patients' Choice Act recently put forth by Republican members of Congress, are important for Americans to consider. We would do well also to consider creative ideas such as changing federal payments to state-based medicaid plans to individual vouchers or expanding health savings accounts, as has been done in South Carolina.

• Government can lower the price of health insurance and increase choice for Americans shopping for their own coverage by breaking down arbitrary barriers such as state lines and reducing costly and unnecessary coverage mandates. For instance, a national market for car or life insurance means South Carolinians can buy an Ohio policy or New Yorkers one from California. It makes similar sense to allow people to buy a health insurance plan, no matter from what state, that best fits their family and their values.

• We believe it's imperative that we fix our medical liability system. By some estimates, abuse of our legal system costs our health system $80 billion annually. Key tort reforms, including reasonable caps on noneconomic damages; freedom to use dispute resolution outside of our courts; and requiring adherence to medical guidelines as a standard for liability in malpractice trials would be a good start.

• Finally, an estimated 80 percent of all the health care innovation in the world springs from American individuals, companies and universities. It is vital that government support an atmosphere that enhances such innovation and discovery rather than restrict it by overregulation. Specifically, the federal government should promote state-based experiments in health care delivery and technology in Medicaid and Medicare pilot programs (in preventive care and home-based nursing, to name two) and also facilitate and aggressively fund scientific research and innovation in both private and public sectors on advances in diagnosis and treatment as well as in disease prevention.


Good Stuff.

New GM Head Honcho: "I don't know anything about cars"

From Bloomberg:

“I don’t know anything about cars,” Whitacre, 67, said yesterday in an interview after his appointment. “A business is a business, and I think I can learn about cars. I’m not that old, and I think the business principles are the same.”

In other news the President admitted that he doesn't know shit about governing.

Kudlow is THE MAN

From NRO:

Right now, with oil trading through $71 a barrel, Treasury bonds closing in on 4 percent, and commodity indexes up 25 percent year-to-date, inflation fears are circulating through the markets.

There’s a way to nip this in the bud: First, the Treasury and Fed should work together to protect the value of the dollar. Here’s how they do it. At the Fed’s June meeting in two weeks, Ben Bernanke should put in the FOMC minutes a clear reference to an exit strategy that will curb the massive money creation that Art Laffer wrote about in today’s Wall Street Journal. Next, at its September meeting, the Fed should raise its target rate — which is now 0.0 to 0.25 percent — pulling it up to 25 basis points, the upper end of the current range. That’s a small, even tiny, move that would represent about a 12 basis-point hike. But the move would at least send a signal that the Fed has an exit strategy from excess money that it intends to implement. Just that tiny move would go a long way towards protecting the dollar and knocking down inflation fears.

Its good to see that he is on the same page with me.

File this under " No Shit item of the Day."

Get Ready for Inflation and Higher Interest Rates:



Normally I would quote liberally from Dr. Laffer's editorial as he is one of my favorite economists. However, what i want to discuss this morning is the inflation that we are currently seeing, especially with gas prices. Milton Friedman referred to inflation as "two many dollars chasing too few goods." I believe that we are seeing that in the rising oil prices.

As we can see from the chart above, the money supply has advanced at the fastest rate in the last fifty years. This was necessary according to Friedman. The money quote is at 1:38.

With the precipitous drop in housing prices being the central trigger in a deflationary spiral, Chairman Bernanke followed Friedman's advice and flooded the financial system with capital to maintain some level of price stability. This was a necessary step in halting a crisis that did have the possibility of throwing us into a Depression. However, what we are seeing now, with the Federal Reserve's monetizing of Treasury debt is something I believe will lead to a fairly ruinous situation.

In regards to oil prices, Since September, members of the Organization of the Petroleum Exporting Countries have pledged cuts totaling 4.2 million barrels a day, or nearly 12 percent of their capacity, a record in such a short time.

According to our own Energy Information Administration,

Oil prices rose for the third consecutive month in May, driven in part by expectations of a global economic recovery and future increases in oil consumption. In addition, a weaker dollar and increasing financial market activity are prompting higher prices for commodities, overshadowing weak oil supply and demand fundamentals. The weaker dollar may indicate that economic activity abroad, especially in Asia, is stronger than currently estimated, which would provide an upside risk to the oil price forecast. Downside risks, such as continuing weak demand as indicated by sluggish first quarter 2009 oil consumption data, high inventories, and increased surplus production capacity levels within the Organization of the Petroleum Exporting Countries (OPEC) could moderate the upward price pressure, especially if the global economic recovery is delayed and/or weaker than expected.

Interesting, why would we have a weak dollar. Possibly because
we have increased the monetary base over %100. Too many dollars chasing too few goods. It would seem to me that we have a large problem on our hands that we should get a handle on as soon as possible. An inflationary spike in commodity prices, oil specifically will ground to a halt a real recovery in the economy. It is time to stop the printing presses and suck some of that cash out of the system, it will be painful but a "real" recovery will not happen if we don't. To put a finer point on it , The Federal Reserve is caught between a rock and a hard place. To satisfy the demands of the White House, they need to keep the presses moving and printing dollars to fund the spending spree that the current administration is going on. The Chairman is in a tight spot, as this excellent piece from the American covers:

One has to pity Ben Bernanke as he tries to attain the Federal Reserve’s dual mandate of promoting economic growth while maintaining price stability. For the currency and bond markets are increasingly focusing on the long-run inflationary impact of the Obama administration’s budget, which according to the Congressional Budget Office will double the U.S. public debt-to-GDP ratio from 41 percent in 2008 to 82 percent by 2019. And the markets are also focusing on the Federal Reserve’s newly announced policy of “quantitative easing,” which they fear could be tantamount to monetizing the administration’s ballooning deficit.

Rising oil prices will severely affect economic growth and skew the budget deficit to an even higher percentage of GDP as tax receipts fall. Rough seas ahead my friends.

Miracles Happen Everyday

Here is a heartening piece from the WSJ:

The U.S. Treasury Department announced Tuesday that 10 of the nation's largest banks have met the necessary requirements to repay funds they received from the government's financial-rescue fund, making way for $68 billion to possibly be returned to Treasury.

"These repayments are an encouraging sign of financial repair, but we still have work to do," said Treasury Secretary Timothy Geithner in a statement.

We don't need a pay Czar now, right Timmy?

The 10 banks are: J.P. Morgan Chase & Co., Goldman Sachs Group Inc., Morgan Stanley, BB&T, U.S. Bancorp, American Express Co., Capital One Financial Corp. Bank of New York Mellon Corp., Northern Trust Corp. and State Street Corp.

I will be opening accounts with these banks today with my eight dollar tax cut. I might also by some G.M stock through Morgan Stanley as my brokerage firm. If my math is right I could afford 850,000 shares of "Government Motors."

This is my favorite blurb from the article:

Morgan Stanley said Tuesday that it is "pleased to be repaying its $10 billion in TARP Capital with an attractive return for taxpayers." J.P. Morgan Chase said Tuesday it plans to repay its $25 billion in TARP funds. Translated into non BS talk

Morgan Stanley said Tuesday that it is pleased " to be running as far as possible away from creepy Tim Geithner, the new PAY CZAR, and Joe Biden's douchebaggedness."

This should be a good thing, that we now have banks that are feeling comfortable enough with their capital situation and are able to raise private capital. It amazes me that private investors are willing to invest in these banks when they know that Chrysler and GM investors were bent over the barrel. But I digress. The street should be doing a dance today, no more government control, no pay czar, finally bankers can go back to Spago.

But then again will the FEDS let go and return TARP to the dungeon it belongs in along with wage and price controls:

In Tuesday's announcement, the Treasury said much of the money would be returned to its general fund and would "help to reduce Treasury's borrowing and national debt." Mr. Geithner has described plans to reuse TARP funds that come back into the fund, recently announcing that he'd open up the funds to smaller banks.

The announcements comes as large banks have eagerly declared intentions to repay government aid given the restrictions on dividends and executive pay that go along with TARP. Meanwhile, the public and Congress have shown greater signs of bailout fatigue, leaving firms uncertain about what new restrictions they'd have to face for tapping into the financial-rescue fund.

I don't like the " plans to reuse TARP funds that come back to the fund, recently announcing that he'd open up the funds to smaller banks." Me no likey. How about we suck that money out of circulation, or use it for small business tax relief. While things could be much, much worse I tend to fall under the skeptical heading. If this method, propping up zombie banks, or keeping that money available for the next failing institution, which will happen, how are these banks any more free to engage in non coercive market activity. We don't know all of the specifics yet but I think that the Presidents remarks are prescient.

"I've said repeatedly that I have no interest in managing these banks -- or running auto companies or other private institutions, for that matter," Mr. Mr. Obama said. "But I also want to say: the return of these funds does not provide forgiveness for past excesses or permission for future misdeeds. It is critical that as our country emerges from this period of crisis, that we learn its lessons; that those who seek reward do not take reckless risk; that short-term gains are not pursued without regard for long-term consequences."

TARP is not gone, it is only sleeping.

You can't make this shit up... but the President can.

White House Cites Progress on Economy Under Plan

WASHINGTON — The rising unemployment rate is giving President Obama’s critics an opportunity to raise questions about the effectiveness of his recovery plan and his economic leadership. The huge budget deficit is focusing fresh concern on the national debt.

So Mr. Obama began a new effort on Monday to show that his stimulus plan was yielding concrete benefits, saying that his administration expects to save or create 600,000 more jobs this summer, as the federal government spends billions to expand care at health centers, spruce up national parks, hire teachers and improve military facilities.

At a meeting with Mr. Obama and the cabinet, Vice President Joseph R. Biden Jr. outlined 10 major initiatives that he said would “build momentum and accelerate job growth” over the next 100 days. After Mr. Biden ticked off a list of programs — including water and waste projects in rural America and rehabilitation of 98 airports and 1,500 highways — the president took aim at his critics.

“Now I know that there are some who, despite all evidence to the contrary, still don’t believe in the necessity and promise of the recovery act,” Mr. Obama said, “and I would suggest to them that they talk to the companies who, because of this plan, scrapped the idea of laying off employees and in fact decided to hire employees. Tell that to the Americans who receive that unexpected call saying, ‘Come back to work.’ “

How stupid does the administration believe that the American people are; seriously?


Obama Drastically Scales Back Goals For America After Visiting Denny's

Its not like they haven't tried. Hell, I could save or create a job this weekend by hiring a babysitter and getting my snotty nosed neighbor's son to mow my lawn, but isn't that just a "McJob" I'm not going to promote my babysitter or lawn care specialist to prune my petunias, that is done by Korean man-servant Kato, no pay. Where are these jobs that have been saved? How about these jobs? I remember, this recovery plan was going to save those jobs at the Caterpillar plant right?



I wish that I could pull this off. I'm going to let my professors know that I am going to save or create my dissertation in the next several weeks by investing my time in playing Call of Duty 4. Of course the White House press corps is eating this up. Bill McGurn hit the nail on the head in the WSJ today.

The Obama numbers are pure fiction.

Told you so...

China airs fears on U.S. Debt
Senior Chinese leaders have privately voiced fear over the soaring US budget deficit and are increasingly looking to diversify from the dollar, a Republican congressman said.

"We heard across the board -- in private -- substantial, continuing and rising concern," Representative Mark Kirk said after a trip to China that included talks with government officials and central bank chief Zhou Xiaochuan.

This is what happens when you borrow more than you can afford. We have taken out a giant subprime mortgage and it appears that the bank is already contemplating cutting off our equity. Like it or not, China is a larger holder of Treasury debt and is our largest trading partner. We don't want to make them think we are going to inflate our way out of this problem.(Although that is what will happen whether or not the FED does it on purpose.)

Kirk's assessment differed with that of Treasury Secretary Timothy Geithner, who said last week on a separate visit that Chinese leaders had expressed "justifiable confidence" on the future of the recession-hit US economy.

Kirk traveled with Representative Rick Larsen, a member of President Barack Obama's Democratic Party, who also painted a less gloomy picture of Chinese officials' views.

China is the largest creditor to the United States with some 700 billion dollars invested in Treasury bonds. Zhou earlier this year floated the idea of replacing the dollar with a basket of currencies as the benchmark global unit.

Instead of a basket of currencies how about we make the global benchmark Kathie Lee Gifford blouses and copies of Mao's Little Red Book. What we always say, at least me to my friends, is that the Chinese would never call in the debt that we owe them as it would kill their economy which is heavily reliant on exports of cheap plastic shit to sell at Wal-Mart. What we have seen in the past several years since Bush starting running up his deficits is a rise in the Chinese Middle Class, as well as a global middle class which will be competing for ever more scarce resources. Per the Wharton School of business.

China is expected to become the world's third-largest consumer market by 2025 as an expected transition from an investment-led economy to a more consumer-focused model brings about continued growth. The McKinsey Global Institute projects China's middle class will increase from 43% of the population today to 76% by 2025. "The shift from investment to increasing consumption overall -- and as a share of GDP -- is very important to sustainable growth in the long-term. China has maxed out on the input model," says Diana Farrell, the Institute's director. India has been more open to consumption, but like China it has a very high savings rate that Farrell says should be converted to consumer spending to strengthen the overall economy.

So, let's look at this. We have a huge consumer base which has been saving money and being dutiful in a way that the American consumer has forgotten. The global currency which will be in vogue, so long as we don't cave on some kind of supra currency, is the dollar. What is the one thing that runaway inflation kills more than anything else... savings my friends. My hypothesis is that the Chinese will continue purchasing T-Bills, but they are going to want a higher RoR. This will push interest rates up for the average consumer.

Of course, this is just a guess, but then again we never thought that the ChiComs would prattle on about wanting to diversify their portfolio. Time to bring back King Dollar. What I believe that Ben Bernanke will begin to do after the repayment of some of the TARP monies to the FED is gradually raise the FED interbank rates, we need to begin to suck up some of the excess capital that is floating around and get it into circulation. Hopefully, this will satisfy the Chinese as well as bring a little order back to incentives to save money. Investment will come later.

Soak the Rich, Lose the Rich

In the WSJ today, Art Laffer and Steve Moore make a case that I have made in this space previously.
Of course, Dr. Laffer and Steve Moore do a better job of naming their piece.

Here's the problem for states that want to pry more money out of the wallets of rich people. It never works because people, investment capital and businesses are mobile: They can leave tax-unfriendly states and move to tax-friendly states.

And the evidence that we discovered in our new study for the American Legislative Exchange Council, "Rich States, Poor States," published in March, shows that Americans are more sensitive to high taxes than ever before. The tax differential between low-tax and high-tax states is widening, meaning that a relocation from high-tax California or Ohio, to no-income tax Texas or Tennessee, is all the more financially profitable both in terms of lower tax bills and more job opportunities.

Updating some research from Richard Vedder of Ohio University, we found that from 1998 to 2007, more than 1,100 people every day including Sundays and holidays moved from the nine highest income-tax states such as California, New Jersey, New York and Ohio and relocated mostly to the nine tax-haven states with no income tax, including Florida, Nevada, New Hampshire and Texas. We also found that over these same years the no-income tax states created 89% more jobs and had 32% faster personal income growth than their high-tax counterparts.

Did the greater prosperity in low-tax states happen by chance? Is it coincidence that the two highest tax-rate states in the nation, California and New York, have the biggest fiscal holes to repair? No. Dozens of academic studies -- old and new -- have found clear and irrefutable statistical evidence that high state and local taxes repel jobs and businesses.

Martin Feldstein, Harvard economist and former president of the National Bureau of Economic Research, co-authored a famous study in 1998 called "Can State Taxes Redistribute Income?" This should be required reading for today's state legislators. It concludes: "Since individuals can avoid unfavorable taxes by migrating to jurisdictions that offer more favorable tax conditions, a relatively unfavorable tax will cause gross wages to adjust. . . . A more progressive tax thus induces firms to hire fewer high skilled employees and to hire more low skilled employees."

Of course, this is sort of an easy argument to make, as high tax and regulation states are hemorrhaging capital and upper middle class inhabitants. Of course, then this tax burden will fall on the middle class. Of course, here we see another case for a flat tax at the state level. If the Feds won't implicate one, maybe the incubators of democracy will. Of course, people will make the argument that if not for these high taxes to redistribute income, how will the lower classes be affected.

Those who disapprove of tax competition complain that lower state taxes only create a zero-sum competition where states "race to the bottom" and cut services to the poor as taxes fall to zero. They say that tax cutting inevitably means lower quality schools and police protection as lower tax rates mean starvation of public services.

They're wrong, and New Hampshire is our favorite illustration. The Live Free or Die State has no income or sales tax, yet it has high-quality schools and excellent public services. Students in New Hampshire public schools achieve the fourth-highest test scores in the nation -- even though the state spends about $1,000 a year less per resident on state and local government than the average state and, incredibly, $5,000 less per person than New York. And on the other side of the ledger, California in 2007 had the highest-paid classroom teachers in the nation, and yet the Golden State had the second-lowest test scores.

Of course, Dr. Laffer destroys this class warfare rhetoric and puts it into it's place. As always Dr. Laffer is a good read here

School Choice

Another Fine video from my friends at Reason.tv



We can prop up failing industries but can't support a program which actually fucking works. This pisses me off so much. I would like to see some asshole defend this despicable move by the Obama Administration. If my President really wants ideas that work for education, vouchers work. As Twain says facts are stubborn things.

Update

From the Wall Street Journal Today:

See if you can follow this political syllogism. President Obama and his Education Secretary have repeatedly promised to support "what works," regardless of ideology. The teachers unions adamantly oppose school vouchers, whether or not they work. Ergo, Messrs. Obama and Duncan decide to end a D.C. school voucher program that works and force poor kids back into schools where Messrs. Obama and Duncan would never send their own children. What a disgrace.

Read the whole editorial here

The Road to Serfdom

If you have never read F.A. Hayek's The Road to Serfdom, or even if you have, watch this



The site

GM won't go into bankruptcy

From one of my favorite publications The Economist this afternoon Two passages of interest:

IN DECEMBER, when GM secured a large slice of government bail-out funds to keep it alive, the giant car company was jokingly dubbed Government Motors. The company’s latest—and most sweeping—restructuring plan, announced on Monday April 27th, could make the joke a grim reality. GM had until the end of May to present proposals to persuade America’s government to release billions more of taxpayers' dollars to keep it from the bankruptcy court. GM believes it has done the job already with a plan that gives the government a 50% stake in the firm. Now the important deadline is May 26th, by when the company’s creditors are supposed to agree to a deal which treats them far less generously.

This my friends is why Rick Wagoner had to go. No CEO worth his golden parachute would have devised a plan such as this; this makes GM a ward of the state and essentially launders taxpayer dollars to be paid out to the UAW through dividends and the continuing support of taxpayer dollars.

Despite protestations from the White House that the government had no desire to own or run a big car company, the politicians may have little choice but to get involved, if the deal goes through in its present form. The alternative might be to cede control to the UAW, the second-biggest shareholder, which is hardly blameless for GM’s current parlous state. Rumours also abound that a similar deal to avoid bankruptcy at Chrysler would see the UAW take a 55% stake in America’s third-largest homegrown car company. If so, it is unclear whether further concession from unions, if they are needed at the two carmakers, would be easier or harder to extract.

Standing in the way of restructuring outside of the bankruptcy courts are GM’s aggrieved bondholders. GM wants holders of just over $27 billion in unsecured debt to swap it for a mere 10% of shares in the company. If debts cannot be cut by 90% then GM will file for Chapter 11 bankruptcy protection. Bondholders smell an unsavoury deal cooked up between the UAW and Barack Obama, who had the union's support in last year’s election. Early signs suggest that the bondholders may conclude that they will do better to hope for a bigger pay-out in bankruptcy rather than agree to a deal on these terms.

It may be that by announcing the proposals early GM has left time for renegotiation with the bondholders. But the ferocity of their initial disapproval suggests that small sweeteners will not persuade creditors to change their minds. Bondholders face the prospect of a small stake in a clapped out car company run by a union-friendly government with a zeal for green cars that may not have much of a market. With that as an alternative, a gamble in a bankruptcy court may seem quite appealing.

If I were a bondholder in GM, I would hold off and allow them to go into bankruptcy court. Of course, with the way that we saw the FEDS handle the transaction of Merrill Lynch to BofA, the question becomes will the FEDS hold the bondholders feet to the fire in their quest for a "green" car company.

Read the article here.

I believe that this video covers it all.



Video H/T to Iowahawk

The Daily Twain

Always do right. This will gratify some people and astonish the rest.

More people staying put than before.

An interesting piece from the NY Times this afternoon. Two excerpts that I would like to comment on:

The Census Bureau reported that the annual rate at which people moved dipped last year to 11.9 percent, compared with 13.2 percent in 2007 and a recent high of 20.2 percent in 1984-85. It was the lowest rate since the bureau began measuring mobility six decades ago.

The declines appeared to be directly related to the housing slump and the recession.

“It represents a perfect storm halting migration at all levels, since it involves deterrents in local housing-related moves and longer distance employment-related moves,” said William H. Frey, a demographer with the Brookings Institution.

The decline in housing prices, as well as the home ownership rate being higher than ever before, makes it less likely that people will strike out like the Joads looking for their fortune elsewhere. These individuals who currently own homes and are "underwater" would, if they were just renters, strike out to another area of the country. This isn't the case. There is a dis-incentive for these individuals who are upwardly mobile to want to take the hit that walking away from a mortgage would do to their credit score, fiscal situation, etc. It's simple cost benefit analysis. If you rent, breaking the lease is simply monetary. As a homeowner your responsibility is not just the bank, who is the de-facto landlord. It is also to the municipality which collects taxes and other assorted fees from the homeowner for the general upkeep of the neighborhood. In the situation as a homeowner, those who choose to walk away from the home come out in the negative, even if they move to a lower tax and more economically viable neighborhood. Even with the loss of money in the current home owning situation the benefit is in staying in the current situation. Essentially they are trapped.

In 2008, the bureau said, 35.2 million people changed residences, compared with 38.7 million the year before.

People who moved were more likely to be unemployed, renters, poor and black. Those surveyed listed their reasons for moving as housing, family and job, in that order.

In all, 2.2 million people moved to the suburbs last year, while the major cities lost 2 million people.

The South recorded the largest net gain of people moving in, including a large influx of blacks. While the South also drew more children than any other region, it also lost more.

The Northeast lost the most residents of any region, as it has for years, but the West also registered a decline.


Two pieces of this snippet I want to comment on here. First, the south recorded the largest percentage of people moving into the region, while we saw a decline in the Northeast as well as the west. In regards to the Northeast. Here we have a high tax, high regulation block of states which has put the stranglehold on housing(rent control, public housing, subsidized housing, thus driving up the actual cost of housing across the board)as well as business; Also the state budgets grew larger through legacy costs as well as increased welfare payments. Now, the people who are supposedly benefiting from this welfare state are, as Friedman would say, voting with their feet. Also, we see high-income earners moving from high tax states like NY and Massachusetts to lower tax states. These two classes are in essence "going Galt." The social utopia that the do-gooders have created in these states is driving those at the extremes of the income scale out of the states and putting the burden for this ever-growing government on the middle class, who are the real drivers and creators of economic growth. It will be interesting to see how all of this shakes out.

The beginning of Corporate Capitalism

From National Review Online: My man Larry Kudlow

An old friend e-mailed me this week about how to characterize Obama’s economic interventions into the banking and auto sectors (with health care next on the list). He says it’s not really socialism. Nor is it fascism. He suggests it’s state capitalism. But I think of it more as corporate capitalism. Or even crony capitalism, as Cato’s Dan Mitchell puts it.

It’s not socialism because the government won’t actually own the means of production. It’s not fascism because America is a democracy, not a dictatorship, and Obama’s program doesn’t reach way down through all the sectors, but merely seeks to control certain troubled areas. And in the Obama model, it would appear there’s virtually no room for business failure. So the state props up distressed segments of the economy in some sort of 21st-century copy-cat version of Western Europe’s old social-market economy.

So call it corporate capitalism or state capitalism or government-directed capitalism. But it still represents a huge change from the American economic tradition. It’s a far cry from the free-market principles that governed the three-decade-long Reagan expansion, which now seems in jeopardy. And with cap-and-trade looming, this corporate capitalism will only grow more intense.

As always, Larry Kudlow makes some fine points and doesn't break down into mass hysteria or ridiculous populism. Although I would make one point. With the EPA designating carbon dioxide as a green house gas and impending cap-and-trade(which more than likely will not pass in it's current incarnation; I hope)the government will have a dictatorial hand in the day-to-day operations of business. Now, of course this is not a dictatorship in the everyday vernacular; however, what we are seeing is a "market" created and administered by the FEDS which will be oppressive to economic growth. There must be risk that comes with whatever "reward" our new titans of industry in Washington D.C deem is ok. Government should be equalizing the market by setting rules for business to work within that will not stymie growth. That doesn't appear to be the case.

Kudlow; as always a great read here.

The Daily Twain

Always acknowledge a fault. This will throw those in authority off their guard and give you an opportunity to commit more.

A Back door to Nationalization

A Headline from the NY Times, U.S. may convert bank bailouts to common stock:

In a significant shift, White House and Treasury Department officials now say they can stretch what is left of the $700 billion financial bailout fund further than they had expected a few months ago, simply by converting the government’s existing loans to the nation’s 19 biggest banks into common stock.

Converting those loans to common shares would turn the federal aid into available capital for a bank — and give the government a large ownership stake in return.

Any person who is worried about undo political influencing decisions about who should and should not be extended credit should shutter at the thought, even implication of bank nationalization. The Obama administration, and the President himself have tried to stay away from any talk of nationalizing the banks as the political hit that will arise from a power grab of this magnitude would sink even his ratings. How does the government "vote" at shareholder meetings? Will congress now be the largest shareholder, pushing aside private capital? These are serious questions that need to be addressed.

Read the entire article here

The Daily Twain

A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain.

Reason TV

As always, an excellent video from my friends at Reason.tv

The Daily Twain

I have never let my schooling interfere with my education.

An Excellent Website

From the Claremont Institute

Founding.com

George Will in "Fine" form

Here is a good one from the Washington Post today:

Denim is the carefully calculated costume of people eager to communicate indifference to appearances. But the appearances that people choose to present in public are cues from which we make inferences about their maturity and respect for those to whom they are presenting themselves.

Do not blame Levi Strauss for the misuse of Levi's. When the Gold Rush began, Strauss moved to San Francisco planning to sell strong fabric for the 49ers' tents and wagon covers. Eventually, however, he made tough pants, reinforced by copper rivets, for the tough men who knelt on the muddy, stony banks of Northern California creeks, panning for gold. Today it is silly for Americans whose closest approximation of physical labor consists of loading their bags of clubs into golf carts to go around in public dressed for driving steers up the Chisholm Trail to the railhead in Abilene.

I don't know whether I'm laughing at myself or with GW for having people read this.

Read it all here

Update

For the no one who reads this blog, this will waste minutes of your life.

The Daily Twain

I have been through some terrible things in my life, some of which actually happened.

Note to self: Don't Fuck your cousins

From the UK Telegraph:

Inbreeding caused demise of the Spanish Habsburg dynasty, new study reveals

The study found that nine out of 11 marriages over the 200 years were between first cousins or uncles and nieces, producing a small gene pool that made rare recessive genetic illnesses more prevalent.

Only half of the babies born to the dynasty during the period studied lived to see their first birthday, compared with about 80 per cent of children in Spanish villages at the time.

Also, we have found a few pictures of the last remaining members of the Hapsburg family.

Stress Tests and the Bank Situation

A good news piece from the WSJ this morning talking about the results of the Treasury's "Stress Tests" and how to handle the findings.

The Obama administration is considering making public some results of the stress tests being conducted on the country's 19 largest banks, said people familiar with the matter, a move that could help more clearly separate healthy banks from the weaklings.

Until now, the government has tried to treat all banks equally, pouring cash into both strong and struggling institutions to prop up the financial sector. The strategy has provided cover for beleaguered banks, which received funds along with their stronger brethren.

What the government has done through TARP and the capital injections has been to treat all banks that could be considered a systemic risk as though they all have, or might get the flu. The idea being that by inoculating all the banks with extra cash they will continue to lend.

This possible move, combined with first-quarter bank earnings and the push by some financial institutions to raise new capital and repay their bailout funds, could lay the groundwork for a new phase in the financial crisis. Within weeks, the stronger banks could emerge free of government shackles and flush with new funds, with weaker ones still reliant on federal largesse. That would transform how investors and the government view the financial sector.

Since announcing the stress tests earlier this year, the government hasn't made clear what, if anything, would be disclosed about the assessments. The Treasury originally suggested it would defer to individual banks to disclose results. But some regulators worried about banks selectively leaking information, causing a possible bias against rivals.

We should look at how these findings are released to investors, as we don't want to have a run on the weaker financial institutions. The truth is that we have signed up to support the flu-ridden banks until they get better. This is the fundamental problem with the intervention by the government. Banks that would have continued lending through the crisis and not over-leveraging themselves have been almost forced to over-leverage their balance sheets as the FEDS are forcing them to extend credit as a condition of the TARP funds. This is why the banks that are strong are doing everything possible to get out of TARP.

The stress tests were designed to build confidence that the nation's largest banks could weather a severe and prolonged economic downturn. Regulators are trying to determine how much assistance banks might need to continue lending in such circumstances. Banks that need more capital will get six months to raise it from private investors or take cash infusions from the government.

Banks not under the TARP protection will have an easier time raising capital than a large bank, like Citi, for instance. Investors know that the FEDS are in the capital injection game for the long-haul and are the lender of last resort. They should just drop the six months provision. They won't get the money from the market. We are trying to cure the flu with anti-biotics.

A senior U.S. Treasury official said the government will accept repayment of rescue funds from any institution whose regulator dubs it healthy enough to operate without federal capital.

The move to stop treating banks equally is sparking concern about the effect on specific institutions seen as weaker than peers. "You can create a run on a bank pretty quickly," said Eugene Ludwig, chief executive of consulting firm Promontory Financial Group and a former Comptroller of the Currency.

Of course you can create a run on a bank, just ask Chuck Schumer. However, I was under the impression that we increased the FDIC deposit insurance amount to $250,000 to prevent runs on the bank. What the government needs to do is make the "stress test" information available to the public so that they can choose what to do with their money.

Wayne Abernathy, executive vice president of financial institutions policy and regulator affairs at the American Bankers Association, said the government needs to provide information about the results but also protect examination data.

"I don't think they can ignore the appetite they have created for this information," Mr. Abernathy said. Having the government publicize some information would allow policy makers to control the message. "It's what can we say that is meaningful while still protecting the quality of that exam data," he said.

Mr. Ludwig cautioned that any information could give rise to mischief. "Bank exams are confidential for good reason," he said. "Given the kind of confidential information they contain, there is always the possibility of misuse or misinterpretation."

I fear that we will have some bad news come out of the release of the stress test results. Of course then again, the banks are lending free money so even a moron could make money, but we will see.

The Daily Twain

I have a higher and grander standard of principle than George Washington. He could not lie; I can, but I won't.

We need to have Dolphins with Lazers on them to fight the pirates.

I thought about this



Upon reading this.



The Chinese merchant ships escorted by a China's fleet sailed on the Gulf of Aden when they met some suspected pirate ships. Thousands of dolphins suddenly leaped out of water between pirates and merchants when the pirate ships headed for the China's.

The suspected pirates ships stopped and then turned away. The pirates could only lament their littleness before the vast number of dolphins. The spectacular scene continued for a while.


What the story doesn't cover is how the laser equipped dolphins melted the medulla oblongata of the Somali pirates. Sweet.

In honor of my more conspiratorial friends

Upon reading this story in the Washington Times yesterday, I got to thinking...

Enjoy...



Somebody's watching me

Kentucky Grilled Chicken... Popeye's is sounding better every day.

From the AP:

In a culinary gambit backed by buckets of big money, KFC is hoping to replicate its founder's recipe for success with the national introduction of Kentucky Grilled Chicken.




Get it, buckets of money, like chicken.


This week's rollout is KFC's most ambitious attempt to win over health-conscious customers as the chain known worldwide for fried chicken tries to reinvigorate lackluster U.S. sales.

"It's going to get people who haven't eaten KFC for a long time to come back into our restaurants," said KFC President Roger Eaton. "It's going to get people who have never eaten KFC to come into our restaurants."

I'm sure that the grilled chicken and veggie crowd are going to look forward to sharing dining space with guys named Skeeter and the average red-state voter. Hey, great idea, they could come up with a KGC "Famous Bowl" which could consist of the grilled chicken, soy gravy, tofu and alfalfa sprouts. There's a winner. I'm sure Skeeter would sign right up.

KFC's slow-grilled chicken drew strong reviews from the lunchtime crowd Monday at a KFC restaurant in Louisville, the chain's hometown. Eddie Collard proclaimed grilled better than fried.

"I think the colonel would be happy," Collard said of KFC founder Colonel Harland Sanders.

Like its predecessor, Kentucky Grilled Chicken has its own secret recipe. The original copy of the recipe — a blend of six herbs and spices — will be kept in an electronic safe at company headquarters. It will sit alongside Sanders' handwritten recipe of 11 herbs and spices coating the chain's Original Recipe fried chicken.

The difference is in the nutritional numbers.



I like the line about how the Colonel would be happy with the new recipe for the grilled chicken. Personally, I think he is rolling over in his grave, rotisserie style. IT'S CALLED KENTUCKY FRIED CHICKEN.

Mike Ash, who ate a grilled chicken lunch at the Louisville KFC, remembered the rotisserie chicken as "mushy and bland." He liked the new grilled offering, having picked it to the bone.

He said he might be more apt to pick up a bucket of chicken on his way home, though he predicted he might still "fall off the wagon every now and then" and choose the fried option.

The grilled chicken will cost the same as Original Recipe chicken. KFC will offer customers a free piece of grilled chicken on April 27.

But the push for grilled chicken doesn't mean KFC is abandoning its roots, Eaton said. The chain is testing new fried chicken products, and remains committed to its core product.

"It would be incredibly arrogant to think we could create a product that could supersede Original Recipe chicken," Eaton said. "But this product is easily good enough to sit alongside it."

Hey, KFC big-wigs, here is some market research for you. The reason that people like myself stop by KFC for a bucket of fried chicken is because frying chicken at home is a pain in the ass. Any moron can grill chicken. Hell, my son can grill chicken and he's not yet three. Even better, I think that Colonel Sanders, the dead guy, could probably grill chicken.

Anyway, I'm looking forward to this experiment falling to the way-side like the Fruit Cup offering at Wendy's and fast-food chains offering granola bars instead of fries. Follow the Hardee's example, I would eat the grilled chicken, after they fry it.