Why Individual Freedom Sucks and We Shouldn't (Necessarily) Fear China

image courtesy of www.patriotdepot.comI'm about to commit an American taboo worse than almost anything except making a racist joke: I'm about to make the suggestion that the individual freedom held as a sacred value in Western Democracies can be bad.  As a libertarian, this is especially uncharacteristic of me, but self-criticism is necessary and awesome.  Keep in mind that I'm not saying that individual freedom is always bad; I'm simply making the point that there are trade-offs, and a strong case to be made for restraint coercive or otherwise, preferably otherwise. 

Click to read more ...

Our Obese Economy

Panics do not destroy capital; they merely reveal the extent to which it has been destroyed by its betrayal into hopelessly unproductive works. - John Stuart Mill

David Leonhardt recently wrote a column for the New York Times in overwhelming praise of the stimulus.  Leonhardt goes to great lengths to castigate opponents as political opportunists, visceral reactionaries, or ideologues, but Leonhardt, and many other proponents of economic stimulus - including Paul Krugman - fundamentally misunderstands the nature behind the opposition; it's not about doubting the math or denying that government programs designed to create jobs create jobs.  Reasoned opposition relies on the idea of malinvestments contaminating the economy and the creation of moral hazard inevitably postponing a bigger collapse.

Click to read more ...

Greek Tragedy of the Commons

The Eurozone faces its first big test this month as revelations of a Greek debt crisis have raised the possibility of an insolvent country within the Euro 16.  So far the rest of the E.U. has insisted that Greece take measures to immediately reduce its deficit to the mandated maximum allowable 3% of GDP by 2012, after it was revealed to have run deficits four times that large in 2009.  The richest countries in Europe, most of whom have passed debt financed economic stimulus plans themselves, forcing new taxes, entitlement cuts and payroll freezes on one of the relatively poorer countries is tough medicine to stomach; however, given that other Mediterrian countries, notably Spain and Italy, face their own debt problems, setting a tough precident is not just justified, but essential.

Click to read more ...

The Bank Tax: Hardly Townsfolk with Torches and Pitchforks

The Obama Administration's proposal for a new tax on bank and insurance debt to repay TARP funds is a stroke of policy genius, albeit only an opening gambit.  The best policy is easy to sell, understand and is beneficial to the country and the government.  This tax accomplishes all of that.  The rough outline is that banks and insurance companies with assets in excess of $50 billion would pay .15% interest on all liabilities apart from insured savings deposits and "Tier 1" capital: stock, disclosed cash reserves and retained earnings.  Making the exceptions, rather the inclusions, explicit ensures that all tricky derivative financing will still count as debt.  With one fell swoop this policy will quiet populist outrage at huge bonuses amidst a painful recession, discourage banks from becoming "too big to fail" and raise needed revenues for the government.  Nevertheless, the Obama administration should improve the proposal by toning down the populist rhetoric, making the link to TARP less explicit and increasing the tax rate and generated revenue.

Click to read more ...

Pay Attention to the Number of Zeros

We've all heard the stories of primitive humans only possessing words to express "one", "two", and "many".  Yet most modern people still think of numbers in terms of these basic units.  When we visualize three of something, we think of one group of one and one group of two.  Four is two groups of two.  Five is two groups of two and one group of one, etc.  Certainly, for things like money, we have relative anchors to which we assign values.  For example, one dollar is roughly the amount of money that buys me one pack of M&Ms.  Ten dollars buys me a used Bloodsport DVD.  300 dollars buys me a Playstation 3 or pays for one-month's rent in a mediocre apartment.  7,000 dollars buys me a ten-year-old economy car in decent condition.  A 100,000 dollar loan puts me through business school.  If I'm lucky and work hard, in ten years, 200,000 dollars could be my annual salary.  If I make the right choices, use my money effectively, and save, I might even be able to buy my one million dollar dream house in twenty-five years.  This is the absolute limit for 95% of Americans.  Numbers above this limit often are simply assigned the value of "many".

So it's no surprise that people all over the country are getting all up-in-arms about stimulus scandals and banker bonuses.  But, to put it in perspective, here is a list of "many"s expressed in terms of dream houses:

Click to read more ...

Goldman's Selfish Altruism

Lloyd Blankfein, CEO of Goldman Sachs.There is a line of thinking that nothing can be done purely selflessly, because even charity inspires a positive self-image.  Anyone who believes that will be giddy to learn that Goldman Sachs is considering getting into philanthropy.  Nothing like charity designed to misdirect attention away from the stuff that inspires people to become pitchfork wielding mobs, which is the express purpose according to a senior level executive:

Click to read more ...

The Rich get Richer

After Goldman Sachs announced its record setting profits (and bonuses), the reaction was mixed: some people thought Goldman was scum and others thought it was a “great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money.” Probably the truth lies in the middle: Goldman is a money vampire, but they are also pretty scummy about it.

The list of Goldman’s offenses is astounding: juicing IPO prices that cost average Amercans billons of dollars, selling garbage sub-prime-backed morgage securities while betting they would fail, heavily trading oil futures leading to over $4 a gallon gas and receiving billions of dollars from tax payers (at the behest of former Goldman employees like Hank Paulson) and then only paying 1% in taxes (a total of $14 million) by shifting all of their money abroad. Understand, these things aren’t in dispute.  Goldman settled out of court for millions of dollars for unfair IPO and subprime mortgage practices, though it did so without admitting wrongdoing and all of the other things are in the public record.  This is just how the bank works, they figure out a way to exploit the system and then they pay a token afterward to make any questions go away.

Click to read more ...