Liberty & Power: Group Blog
Suppose at Nuremberg in 1946, we had said,"Well, we now have laws against Genocide, so let's pay for some lawyers to defend these poor fellows who devised and carried out this policy against Jews, Gypsies, Slavs and others." Years ago, in discussing the evolution of civilizations, I wrote about the institutionalization of real Law into"Legalism." We are now loaded to the gills with that kind of so-called law which always accompanies Empire.
Here is another piece, by Bill Pfaff, on the rigidities of US Foreign Policy, where the bureaucratic rot in the State Dept. is at least as great as in Justice, and, let us not even think of the Defense Dept. as well as the various Welfare bureaucracies.
But, have faith, Hillary Clinton will rescue the situation, with what is now being touted as"Smart Diplomacy," which one can only hope is a great deal"smarter" than her Health/Welfare plan of the early 1990s.
"Tired Empires never die, they just rot away." And, the stench from such a rotting carcass can have one God awful smell, even unto the heavens.
"The financial crisis was caused not by bankers' incentive plans but by a systematic failure to price risk correctly. Without accurately priced risk, there is no way of giving bankers the right incentives, however long the period over which their performance is measured. And with accurately priced risk, there is no incentive problem to be solved."
Moreover, you could use your house as the basis for a line of credit and live high on the hog while you waited for your house to appreciate as surely as the sun rises in the east.
Thus, real estate loans at all commercial banks increased from January 2002 to January 2009 by 110 percent, and the banks’ total consumer credit outstanding increased during the same period by 37 percent. Household credit-market debt outstanding rose between the first quarter of 2002 and the third quarter of 2008 by 77 percent. Got the picture? The country was, and remains, awash in debt. Of course, these huge increases in real-estate and consumer debt would not have been possible had the Fed not engineered a great increase in the money and credit coursing through the system: thus, the money stock (M2) increased from January 2002 to January 2009 by 51 percent. Greenspan and Bernanke, you gotta love ‘em — real good-time Charlies.
It was paradise, or as close to paradise as we’re likely to come in this vale of tears, but it was a fool’s paradise, which has long since become obvious to anybody with more than half a wit. Once the real-estate prices turned around and headed south, everything pyramided on top of them began to crumble — mortgages, mortgage-backed securities, real-estate-related derivatives of various sorts, credit default swaps, bank balance sheets, big investment banks, stock prices (especially financials), interbank lending, you name it. About the only things that have risen appreciably in the past year or more are fear and despair. (The smart money has taken a long position in them.)
Now, before we lose our focus, allow me to remind you that this whole sad story is a tale of excessive debt. If householders, banks, businesses, and, of course, governments at every level had not become so outrageously overleveraged, the piper would not be in a position, as he is now, to demand such extreme payment. But debt and more debt and still more debt formed the stairsteps by which the U.S. economy (and others) ascended to the dizzying heights from which the world is now in the process of plunging.
But never fear: our government will save the day. Or so it promises us. Especially since last September, the Fed and the Treasury have scarcely stopped for a decent night’s sleep. They have frantically seized upon one “plan” after another (God save us from the central planners!) to “thaw the frozen credit markets,” to “prevent the credit-market meltdown,” to restore the flow of credit to one and all — in short, to make sure that we do not reduce our excessive, unsustainable indebtedness, but instead resume our all-out borrowing whether it is prudent to do so or not, and for most individuals and businesses at present, it most emphatically is not.
This morning’s New York Times announces the latest installment in this cavalcade of cuckoo crisis-fighting, something called the Term Asset-Backed Securities Loan Facility, or TALF. The headline reads: “U.S. Tries a Trillion-Dollar Key for Locked Lending.” The article explains that
The Treasury Department and the Federal Reserve plan to spend as much as $1 trillion to provide low-cost loans and guarantees to hedge funds and private equity firms that buy securities backed by consumer and business loans.
The Fed is expected to start the first phase of the program, which will provide $200 billion in loans to investors, in early March.
The program . . . does not try to change securitization practices that, many investors say, spread risks throughout the world and destroyed financial institutions. Policy makers acknowledge that for now, fixing credit ratings, reducing conflicts of interest and improving disclosure can wait.
Under the program, the Fed will lend to investors who acquire new securities backed by auto loans, credit card balances, student loans and small-business loans at rates ranging from roughly 1.5 percent to 3 percent.
Depending on the type of security they are borrowing against, investors will be able to borrow 84 percent to 95 percent of the face value of the bonds. Investors would not be liable for any losses beyond the 5 percent to 16 percent equity that they retain in the investment.
In the initial phase, the Treasury will provide $20 billion and the Fed will provide $180 billion. Treasury Secretary Timothy F. Geithner said last week that the Treasury could increase its commitment to $100 billion to allow the Fed to lend up to $1 trillion.
Well, there you have it. If you can imagine anything more idiotic in the present circumstances, your imagination is more powerful than mine.
I have this recurring nightmare in which Tim Geithner is lying in a dark corner of a saloon. His bosom buddy Ben Bernanke comes in, sees him lying there in a heap and rushes to his side. He finds his comrade breathing heavily and reeking of a warehouse worth of booze. He shouts for help: “Bartender, get over here quick. Bring this man a whiskey. And make it a double!”
Into such hands has fate delivered us. May God have mercy on our souls.
David T. Beito
When I was seven years old or so growing up in the small town of Albert Lea, Minnesota, Paul Harvey was one of the first voices I heard in the morning. His memorable over-the-top delivery kept me entertained as I gulped down my mother’s signature “mush” (which, contrary to the name, was a tasty Norwegian dish of cream, cinnamon, and butter). None of the reserved Minnesota adults I knew sounded like that! Harvey’s bracing “Good Day!” helped get me in the right frame of mind for the coming day in school--one my least favorite activities.
After we moved to Minneapolis, I rarely heard him on the air. Even the old fogie stations didn’t seem to carry him. His fan base was always in small towns, where he often preceded or followed the daily crop report. Like many, I eventually came to dismiss Harvey as an antiquated vestige from a 1950s time warp, a sort of precursor to such bumbling and pretentious fictional new announcers as Les Nessman (“WKRP in Cincinnati”) or Ted Baxter (“The Mary Tyler Moore Show.”)
Later, however, in my research for my book on tax revolts I gained a new appreciation for Harvey. He stood out as one of the last prominent survivors of the once powerful Old Right of the 1940s and 1950s. Old Right conservatives had fought a dogged rear-guard action against the New Deal welfare and warfare states. The man who published Harvey’s first books in the 1950s was none other than John M. Pratt. An ardent FDR hater, Pratt, while in Chicago during the 1930s, had led one of the largest tax strikes in American history. He obviously saw something in young Harvey.
While Harvey moved away from his earlier Old Right isolationism, events sometimes pulled him back to it. It was Harvey, along with Walter Cronkite, who was instrumental in turning the heartland against the Vietnam War. In 1970, when Richard Nixon was still popular in countless small towns Harvey announced dramatically in his daily commentary: “Mr. President, I love you ... but you're wrong." He was deluged with angry mail and phone calls.
For this expression of old fashioned Midwestern horse sense alone, Paul Harvey deserves the recognition and thanks of all Americans who value peace.
Meanwhile Defense Secretary Robert Gates is praising Mexican President Felipe Calderon for initiating the chaos and he promises more U.S. assistance, including joint military operations, to keep the violence going.
On the other hand, essayist for the Orange County Registrar, Alan Bock places the blame for the killings squarely where it belongs on drug prohibition. He asks us to substitute the phrase “drug law related violence” for the misleading drug related violence now commonly in use. Bock is arguing that so called successes in this war are actually failures when he points out that those “who have sought to win the ill-considered War on Drugs by main force have discovered time and time again, that the drug cartels are hydra-headed monsters. Kill or imprison the head of a particularly brutal cartel, as the authorities were able to do recently with the notorious Felix Arellano organization in Tijuana, and a half dozen contenders for leadership quickly emerge, all of them skilled to one extent or another in the dark arts of violence, concealment, intimidation, and cruelty.”
Cross posted on The Trebach Report
I found this interesting tidbit in Wikipedia's entry on the Gramm-Leach-Bliley Act:
Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the anti-redlining Community Reinvestment Act...
G-L-B, the last significant bank deregulation that occurred in the U.S., repealed the part of the New Deal's Glass-Steagall Act that forbade a single institution from engaging in both commercial and investment banking. G-L-B was passed by the Republican-controlled Congress in 1999 and signed by Democratic President Clinton. His treasury secretary at the time was Larry Summers, now President Obama's top economic adviser. It's important to remember this when people say that banking deregulation during the Bush years created the economic mess. The Bush administration didn't deregulate anything of importance. G-L-B in no way contributed to the financial turmoil.
What's important about the quote is that it shows that the Republicans acquiesced in the strengthening of the Community Reinvestment Act, which is partially at fault for the mortgage meltdown. This is the law that compelled banks to increase their mortgage lending to people with low incomes and poor credit histories.
As we've long noted, both parties are guilty of creating the house of cards that has fallen.
Cross-posted at Anything Peaceful.
Read here how legalizing brothels in 2003 worked out.
If the Gold idea flies, who will loan us the money to continue to fight our foreign wars, finance our health care, and bail out Wall St.?
Charles W. Nuckolls
But why is the citizen motivated to participation? This is something I would consider essential to preserving democracy and preventing the rise of an entrenched elite. Citizens must take the initiative. But we find less and less of that today, especially in the universities, which have become holding pens for inert and essentially passive consumers-in-training.
The difference between American universities and ancient Athens is that the latter depended on the willingness of members to take the initiative. 'Ho boulomenos," that is,"he who wishes" is a key figure in the operation of the Athenian democracy. He stands for office, speaks in the assembly, and brings charges in cases of injustice.
We do not possess a similiarly institutionalized role in the American university, nor do we attempt to inculcate the free exercise of responsible citizenship necessary to the preservation of liberty. Instead, we have"food courts," and the only decision we expect to be exercised is in the choice of high-fat foodstuffs. A course catalogue, these days, is the food court's intellectual equivalent -- and often contains roughly the same nutritional value. The Athenian"He who wishes,", however, was more than a consumer of cheese-doodles.
What might this mean for us? To institionalize the mechanisms of deliberative democracy, I suggest, requires that every citizen of a local rea has an equal change to participate. It matters that these citizens come to see themselves as connected, and not primarily transients for whom exit is an easy option. The local unit, therefore, must have a plausible claim to being an functional boundary. People must"feel" themselves to part of something both political and economic. I would therefore propose that within a locality a randomly selected group of citizens be invited to participate in a deliberation about a significant policy question.
The nature and functions of their deliberation -- and how they might contribute to the rehabilitation of the 'ho boulomenos' I will describe in a subsequent message.
Mind you, I'll believe it when I see it.
David T. Beito
Although"Consider Her Ways" can best be described as science fiction, it first appeared as an episode in the"Alfred Hitchcock Hour" in the 1960s. It it easily the strangest, and one of the best, shows in the entire run of that mystery-murder series. Produced in the era now widely associated with the television show,"Mad Men," it has some surprising, and thoughtful, things to say about both feminism and collectivism.
Chris Matthew Sciabarra
The massacre received comparatively little coverage both at the time and in the months that followed. Far less coverage, it might be added, than any ballot-rigging by Viktor Yanukovych that precipitated the Orange Revolution in Ukraine. It's also noteworthy how little the American, British and other European governments have protested the massacre. Yet from all accounts it can only be described as government terror of the worst sort. So, George Bush and Tony Blair, where is the outrage? Or are the demands of U.S. and Nato policy in Central Asia determining whose rights are worth protesting and whose rights can be ignored?
David T. Beito
There are some problems that can't be solved by shouting"yes we can," even if backed up with more U.S. blood and treasure, and this is one of them.
I noticed that the previous years' conferences were not on the ideologies of other schools of economics, but perhaps future years' conferences will be. Anyone going?