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Name: john
Location: granite bay, CA
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Never Mind

Posted by john on Thursday, December 04, 2008 5:04:32 PM
Consistent with Rush's recent expressions of wonderment regarding the degree to which the press and democrats (I know, a redundancy), including Barry O himself, are now learning that "that GWB, he's really a heckuva guy", I saw a piece in the Nov. 4 WSJ concerning Guantanamo Bay entitled ,"Guantanamo Revelation". This piece was a response to a 1600 word study of Gitmo in the New York Times, which could have been entitled "Never Mind".

It seems that upon extensive examination of the details, the Times has found that "gee whiz, many of the terrorists at Gitmo really are dangerous terrorists." In fact, the Gitmo detainees include many implicated in such crimes as the 1998 Kenya Embassy bombing, the USS Cole bombing, as well as the "Dirty 30" - OBL's personal bodyguards. Moreover, the poor little lambs are in fact so notorious that "at least 60 detainees have been cleared for release or transfer but no other countries will accept them." Any democratic congressman care to offer up his district?

Here's the upshot. Now that GWB is on his way out, neither he, nor his policies, need to be destroyed. "Delendo Carthago Est" no longer applies. I have maintained for years - since shortly after the initial invasion phase of Iraq - that GWB had to be destroyed, because success in Iraq would yield to the GOP electoral riches almost beyond imagining. In short, party before country (not a problem for those who don't believe in country anyway - "Imagine"!).

Now, their "mission accomplished", having gotten what they apparently wished for (the actual responsibility of governing), I guess we can expect to hear more about how that GWB is not such a bad guy after all, and his policies really weren't so far off. In fact, they can probably be made to work - with just a little bit of that old magic from the Obamalama.
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Investment Thought of the Day

Posted by john on Thursday, December 04, 2008 2:11:40 PM
From Doug Kass, courtesy Larry Kudlow's kudlowsmoneypolitics blog. According to Mr. Kass, we are witnessing a "once in a lifetime short opportunity in fixed income investments".

I agree. After all, how much closer to zero can we get? Besides which, I'm becoming more and more convinced by the day that, as the old French economist (Jacques Reuff) might say, "The Age of Inflation" is upon us. It is only a matter of time, as I see it, before significant inflation premiums are once again priced into bonds. (See Robert J. Samuelson, "The Great Inflation and its Aftermath").  

This will not be good for stocks. It would be the flip side of the phenomenon which occurred beginning November, 1994, when the 30-year yield peaked at, if I recall, 8.04% on Election Day! The downward reversal of the long-term interest rate trend in the wake of the Republican takeover of Congress was the precipitating factor in the stock market boom of that decade (though other factors, particularly the capital gains rate reduction in Clinton's second term, later contributed greatly).
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Stimulus, Hangover; More Stimulus, Bigger Hangover

Posted by john on Thursday, December 04, 2008 12:08:34 PM
Reading the sometimes-excellent Steve Sailer's lengthy piece yesterday on infrastructure spending, the old lightbulb-in-a-balloon over my head illuminated. Actually, it was the last segment of Sailer's piece that caused this phenomenon(?), in combination with a 24-month chart of crude prices that went up on CNBC. Try this on for size: we are now in the hangover phase of a Keynesian stimulus, whose origins lie with Alan Greenspan's (aka, "The Maestro") post-9/11 efforts to postpone the economic effects of the terrorist calamity by creating a housing bubble. Now, it seems, we are going to try to power our way out of this hangover with even greater Keynesian stimulus. How should we expect this to end?

Here's how I came up with this crazy theory. First, per Mr. Sailer, "California got us into this mess." How? A classic, banana-republic 2-step: (a) as epicenter of an affirmative action housing bubble, which was engineered as a post-9/11 stimulus; and (b) as poster child for the irresponsible and clueless inability of state and local governments to balance a budget even during boom times.

Next, of course, is the federal gummint, and its massive deficits during a lengthy expansionary phase. And third, there is the bursting of the oil bubble. Not that the oil bubble was stimulative, of course, but that it may have been symptomatic of all of the above-mentioned, 1960s-style, guns-and-butter, over-stimulation and hangover.

Conclusion? The problem with Keynesian stimulus is that, as with so many ingestibles, recreational or otherwise, the more you use it, the bigger the dose that's needed to achieve ever-decreasing effect, ending eventually in a painful detoxification (see 1981-82, depression of). Washington is now determined to drink its way out of the current hangover, by throwing cash by the tens of billions at failed business models, inept state governments, and jobs programs slated to cost upwards of $1M per job created (per WSJ editor Stephen Moore). As the highly-esteemed Holman Jenkins describes in yesterday's WSJ with the wonderfully apropos athletic/religious metaphor of the "Hail Mary" pass, "unless Gerard Phelan catches the ball (from Doug Flutie) in the end zone and GDP bounces back strongly, the bailout's end result may be towering tax rates, domestic spending cuts or serious inflation - or all three."

All of this points back to November, 2006. In fact, it really points back to a time many moons earlier when "The Maestro" pounded his fist on the table and told us all to buy houses and take loans, because he's going to keep rates low. I felt at the time that this was an appropriate response to the 9/11-caused recession, provided that responsible fiscal policy could pick up the slack once the bill on this gambit came due. As dubious a proposition as "responsible fiscal policy" may have seemed at the time, as of November, 2006, it became completely implausible (and the markets knew it). Thus, the current hangover, and it looks to me like the Obamalama is prescribing (at least) a liter of Vodka therapy. So unless, per Holman Jenkins, Flutie actually connects with Phelan, the next stop on this Keynesian ride is going to be a lengthy detox.
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Today's CAFE Update

Posted by john on Thursday, December 04, 2008 11:07:43 AM
From the WSJ, 11/19/08:
"It is difficult to overstate the damage that CAFE has done to GM over the years. The entire purpose of CAFE is to force companies like GM to do something other than build and sell the vehicles that would earn them the greatest profit...CAFE has bled GM of tens of billions of dollars in profits over the years. If they had all of those dollars in the bank today, they would not be on the brink of bankruptcy. CAFE forced GM to build millions of small cars and sell them at a loss. To make matters worse, CAFE made it illegal for GM to exploit its single most profitable brand, Cadillac."

Louis Woodhill, Club for Growth, as quoted from Real Clear Politics
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CAFE and the Ruin of Detroit

Posted by john on Wednesday, December 03, 2008 10:02:04 PM
Holman Jenkins of the WSJ recently hit upon a tremendous idea that would not only help the Detroit Three survive (and perhaps even thrive if and when the economy returns to growth mode), but also save the taxpayers from massive subsidization of failure, which, as we know all-too-well, will only beget more failure. His solution: abolish the ridiculous "two fleet" rule that guides CAFE compliance.

The "two fleet" rule holds that in determining CAFE compliance, manufacturers must segregate their fleets by "domestic" and "non-domestic" production. Then, a determination is made for each of these categories, separately, whether they comply with CAFE. Thus, even if your combined "domestic" and "non-domestic" fleets are in compliance, if your "domestic" fleet, by itself, is not, it must bring itself into compliance or pay heavy fines.

The effect of this approach, according to Mr. Jenkins, is that domestic manufacturers are trapped into making large numbers of money-losing, high-mileage vehicles in the U.S., as a sop to the UAW. This dilemma has potentially huge consequences not just for the health of Detroit, but for economic recovery generally.

Folks, this is the 21st century. Walter Reuther died in 1970. Ancient rules such as the "two fleet" rule are the barnacle-encrusted residue of a world in which the "Big Three" ruled like Triceratops, and the UAW squeezed them for their share. Now, in a world in which the "Big Three" are clinging to life, thanks to this anachronism we are faced with two alternatives, on promising, one ugly.

The good: permit a company, such as Chrysler "which has a perfectly salvageable business" to meet CAFE standards by making low value-added, high mileage vehicles offshore, thus leveling the cost structure playing field with "foreign" makes (which not only aren't unionized, but infamously evade the two-fleet rule by minimizing domestic content in their U.S.-made cars so they can count as "non-domestic").

The ugly: a never-ending bailout, consisting not only of direct taxpayer aid, but massive indirect costs to the nation in terms of protectionism and "taxpayer financed industrial cronyism".

I wish I could be optimistic about where this is headed. In theory, the indications of apparent willingness on the part of the UAW to go along with "concessions" might indicate the possibility of a solution along the lines set forth above. But, as mentioned in other posts, I'm afraid the endgame doesn't involve putting the Detroit Three on a solid footing for profitability as private (non-goverment sponsored) entities. This, I'm certain, bodes ill for economic growth.
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Schumer Mobiles

Posted by john on Wednesday, December 03, 2008 11:55:50 AM
As Holman Jenkins has noted repeatedly in his Wednesday WSJ columns, the government's choice to "bail out" Detroit, rather than revise or revoke onerous rules that have contributed mightily to its downfall, suggests nationalization as the endgame. Why? According to Charles Krauthammer, "once the government owns Detroit, it can remake it." What does this mean? "Liberals have always wanted the auto companies to produce the kind of cars they insist everyone should drive: small, light, green, and cute. Now they will have the power to do it." 

The next question is, will anyone buy them? To the extent this scenario plays out, we will suffer yet again the consequences of liberal fixes for liberal problems. Detroit going down the tubes because they can't sell unprofitable cars the government forces them to make? Make them make more. As Mr. Krauthammer noted,
 
"If you think we have economic troubles today, consider the effects of nationalizing an industry of this size, but now run by bureaucrats issuing production quotas to fit five-year plans to meet politically mandated fuel-efficiency standards - to lift us to the sunny uplands of the coming green utopia." 
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Today's Economics Lesson

Posted by john on Wednesday, December 03, 2008 11:03:40 AM
Is from Thomas Sowell, on minimum wage laws and human capital:
 
"How does removing one of the options of people with few options make them better off? Similar one-stage thinking is also apparent in many observers who wax indignant over low-wage workers employed in the Third World by multinational corporations. While the pay of such workers is often low by comparison with that of workers in more affluent industrial societies, so too is their productivity. An international consulting firm determined that the average labor productivity in the modern sectors in India is 15 percent of that in the United States...
 
"In other words, if you hired an average Indian worker and paid him one-fifth of what you paid an average American worker, it would cost you more to get a given amount of work done in India than in the United States. Paying 20 percent of what an American worker earns to someone who produces only 15 percent of what an American worker produces increases your labor costs, even though you are hiring 'cheap labor' and are virtually certain to be accused of 'exploitation'."
 
Applied Economics, Thinking Beyond Stage One, pp.40-41
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The Era of Illusory Peace

Posted by john on Wednesday, December 03, 2008 12:28:22 AM
Many thanks to the editors of the WSJ for this reminder that the Clinton Administration was no kind of "foreign-policy golden age":
 
"We recall it mostly as an era of illusory peace as problems festered with too little U.S. attention. Al Qaeda was left unchecked, Saddam Hussein banished U.N. inspectors and exploited Oil for Food, North Korea embarked on a secret nuclear program, Russia's post-Cold War spring faded, and Pakistan's A.Q. Khan spread nuclear-bomb technology around the world."
                          
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Today's Andrew Jackson Lesson

Posted by john on Monday, December 01, 2008 7:21:52 PM
Today on Michael Medved's show a very informed (he said he was a history teacher) caller raised a point concerning Indian Removal which I had never before encountered in all my reading on this subject. The caller pointed out that because of the very real threat that existed, even in the 1830s, of secession, Jackson felt it was paramount that he do whatever may be within his power to make sure that the ringleader, South Carolina, remained isolated. Hence, Removal as a policy was advanced largely as a sop to Georgians who were anxious to "remove" the Indian threat from their midst. 

I think this is a point worth considering. Although it is certainly accurate, as Jon Meachum has said, that Jackson's Indian policy can be explained, but never justified, Jackson, like Lincoln, placed preservation of the Union above all other interests and considerations. Thus I believe it is likely that, had Jackson any notion that pursuing Removal would keep Georgia in the Union camp, that would have been enough reason right there.  
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