The Coming Debt Repudiation

In-Cog-Nito sent me a pair of links, to an article entitled Why Default on U.S. Treasuries is Likely, and a shorter summary of the article. Troubling reading indeed, but still, RTWT.

It is not literally impossible that the Federal Reserve could unleash the Zimbabwe option and repudiate the national debt indirectly through hyperinflation, rather than have the Treasury repudiate it directly. But my guess is that, faced with the alternatives of seeing both the dollar and the debt become worthless or defaulting on the debt while saving the dollar, the U.S. government will choose the latter. Treasury securities are second-order claims to central-bank-issued dollars. Although both may be ultimately backed by the power of taxation, that in no way prevents government from discriminating between the priority of the claims. After the American Revolution, the United States repudiated its paper money and yet successfully honored its debt (in gold). It is true that fiat money, as opposed to a gold standard, makes it harder to separate the fate of a government’s money from that of its debt. But Russia in 1998 is just one recent example of a government choosing partial debt repudiation over a complete collapse of its fiat currency.

Zimbabwe option, anyone? Or the alternative of tax rates exceeding the peak from World War II — forever.

Have a nice day.

Danny Davis My Representative

When you see the tall buildings of Chicago and hear the history as a dynamic, leading center of industry and innovation, you’d expect that our local representative in the US House of Representatives would embrace measures to keep this sort of talent and engine of growth humming at high efficiency. But instead we get… Danny Davis, our 7th Congressional District representative (D).

Our Illinois districts have been completely gerrymandered so that the south side of Chicago and a slice of the suburbs going west, along with the loop and River North itself, fall into a single district. Here is a map link if you want to see a veritable “case study” in gerrymandering. Thus the representative, Danny Davis, treats the loop with its engines of economic growth as an afterthought and concentrates on the other constituents, mostly the poor, who reside in the rest of the district.

From the latest newsletter, discussing issues raised to Danny Davis:

They have been concerned about jobs, about the economy, about foreclosure, about education, about health care, about the wars in Iraq and Afghanistan, about torture and Guantanamo, about our policies in Latin America, about immigration, about youth violence, about criminal justice reform, about taxes, about family assistance

While certainly these are valid issues to be raised by constituents, no where is mentioned the types of policies that would keep the Loop, THE DISTRICT HE REPRESENTS, a leading beacon of business. These items would likely include:

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The Myth of “Security Through Rarity”

If malware was water falling from the sky, the experience of people running the big three desktop operating systems would go something like this:

Mac OS X: “Is it sprinkling? I thought I felt a drop there. Did anyone else feel a drop? No? Maybe I just imagined it.”

Linux: “Oh, yeah… I definitely felt a sprinkle or two there.”

Windows: [Can’t say anything because they’re pinned to the foot of Niagara Falls by tons of down rushing water.]

For the last ten years, there has been a raging debate among computer geeks as to why Mac OS X and Linux have virtually no problems with malware while Windows is often almost crippled by it. The most commonly accepted explanation is called “Security Through Rarity.” This concept holds that on a technological level Mac OS X and Linux are just as insecure as Windows but that the relatively small market share of the first two operating systems makes it unprofitable for malware programmers to spend the time trying to infect them.

I have longed believed that the basic premise of “Security Through Rarity” largely explained why I can run my Mac OS X machines without any additional anti-malware software but don’t dare do the same for my Windows machines. For the last decade, I and everyone else who believed in the concept have expected that “any day now” the Mac’s immunity from malware would end in a shocking gotterdammerung of a Mac malware pandemic but it hasn’t happened yet. Just as the failure of other types of apocalyptic prophesies undermine people’s faith in those prophesies, the fact that the long-prophesied Mac malware apocalypse has never manifested in more than a trivial manner has caused me to reexamine my belief in the “Security Through Rarity” concept.

There are several good reasons to doubt that “Security Through Rarity” explains the lack of malware that exploits Mac OS X in particular.

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Advice for Charlie Rangel

You.. can be a millionaire.. and never pay taxes! You can be a millionaire.. and never pay taxes! You say.. “Steve.. how can I be a millionaire.. and never pay taxes?” First.. get a million dollars. Now.. you say, “Steve.. what do I say to the tax man when he comes to my door and says, ‘You.. have never paid taxes’?” Two simple words. Two simple words in the English language: “I forgot!” How many times do we let ourselves get into terrible situations because we don’t say “I forgot”? Let’s say you’re on trial for armed robbery. You say to the judge, “I forgot armed robbery was illegal.” Let’s suppose he says back to you, “You have committed a foul crime. you have stolen hundreds and thousands of dollars from people at random, and you say, ‘I forgot’?” Two simple words: Excuuuuuse me!!”

Steve Martin

Snow Leopard, Macs and Malware

From Instapundit:

WELL, MAYBE I’LL WAIT A BIT: I mentioned Snow Leopard’s [Mac OS 10.6] malware protection earlier, but this says it only scans for two trojans. [bold added]

Why would Apple bother to create a system that only scans for two pieces of malware? Well, firstly, the system is designed to automatically update using Mac OS X’s software update feature. More malware definitions can be added in the future.

Secondly, there are really only two pieces of active Mac OS X malware .

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Recent Reading

Three mini-reviews in this batch:

“Vanity Fair,” William Makepeace Thackery
“The Promised Land,” Mary Antin
“Metropolitan Corridor,” John Stillgoe

I picked up Thackeray’s “Vanity Fair” from the shelf where it had lain unread, lo these many years, and spent two weeks utterly immersed in the world of Becky Sharp and her friends associates victims. I’d never read the book before, but did see a made-for-tv movie based on it several years ago…IIRC, the movie was far more centered around Becky herself, whereas the book develops the other characters to a considerably greater degree.

Very funny (once you get used to the dense writing style) and utterly unsentimental: Thackeray called it “a novel without a hero.” Those looking for escapism by reading about the elegant lifestyles of the English upper classes should definitely look elsewhere: for all others, this book is highly recommended.
“The Promised Land,” by Mary Antin, is the story of the author’s journey from Polotzk, Russia (a town which was part of the Jewish Pale of Settlement) to Boston, Massachussetts, with her family, in the late 1800s. Antin was a keen observer and a vivid writer–particularly impressive given that she had no exposure to English until she was 13. “The Promised Land” was published in 1912, having been first serialized in the Atlantic Monthly.

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Quote of the Day

The economy revolution we are experiencing in the United States is without parrallel, except for China under Deng Xiaoping. Just as Deng was, economically, the first post-Chinese leader of China, Obama may be the first post-American leader of America.* From automobiles to banking to insurance to health care, the government under Obama acts as both regulator and competitor, allowing it to influence the marketplace without any particular government minister fearing the bad consequences of his actions.


Kennedy the Catholic

A brief, charitable, fair yet accurate assessment of Sen. Kennedy. RTWT.

Many will speak and write of the legacy of Ted Kennedy in the days ahead. For me, as an East Coast “ethnic” grandchild of immigrants, Kennedy’s death symbolizes several cogent moments in Catholic America.
It marks the passing of a generation that thought that being Catholic, Democratic, and pro–New Deal were synonymous. We now live in an age where many Catholic Americans are very happy to be described as pro-market and are suspicious of New Deal–like solutions — as, of course, they are entitled to be in a way that they are not on, for example, life issues. Senator Kennedy had it exactly the wrong way around.

The author, Fr. Robert A. Sirico, of the Acton Institute, is a prolific writer and activist on behalf economic freedom: “The Mission of the Acton Institute is to promote a free and virtuous society characterized by individual liberty and sustained by religious principles.”

UPDATE: Here is an excellent article by Carl Cannon, about Sen. Kennedy, entitled “Mary Jo Kopechne and Chappaquiddick: America’s Selective Memory”. It is fair and fact-based.

In similar fashion, the editors of National Review do justice to the man, and end on a charitable note I will also end on: “May he encounter the divine mercy that both the greatest and the least of us will require at the end.” Amen.

Another aspect of Teddy Kennedy’s politics

I am immensely grateful to Iain Murray (who is well known to Chicagoboyz, I am sure) for pointing out that it was a Spartan who first coined the phrase “De mortuis nil nisi bonum dicendum est”. Indeed, it was Chilon of Sparta and that makes me feel a good deal better about the fact that I cannot think of single good thing to say of the recently deceased Senator Kennedy.

At first I was not going to post about him though like everyone else I felt nauseated by the paeans of praise, especially those coming from the BBC. Apparently one reporter even had the bad taste to say that the Senator never recovered from Chappaquiddick. Well, no, but then neither did Mary Jo Kopechne or her family.

Over on this side of the Pond many of us recall Kennedy’s support for the IRA, both politically and financially. We have not forgotten his visits here, his rudeness to our soldiers, his interference in British and Irish politics or the help he and his family gave NORAID.

As the day progressed I realized that there might be no mention of Kennedy’s rather curious relationship with President Gorbachev, whom he visited in 1986, allegedly to promote better understanding between the two countries. It would be nearer the truth to say that he went then and at other times and sent messages in before and after to promote his own and his party’s position.

Think of it: a United States senator apparently saw nothing wrong in negotiating with his country’s enemies in order to find the best way of defeating the President and undermine Congress because the government was formed by the other party.

I have more on this over on Your Freedom and Ours. I should dearly like to know how well this is known in the United States.

How Most Economists Make Their Reputations


From xkcd

Economics is not a predictive science, i.e., economists do not make better predictions than mere chance. Yet most economists build their careers based on selling the idea that they can predict the consequences of different economic decisions under real-world conditions. Just like the character in the cartoon, economists build their reputations by advertising the few times they got lucky and guessed right, while convincing people to ignore their many, many failed predictions.

As one wag said of Paul Krugman,”He has successfully predicted 9 of the last one recessions.”

He’s far from alone in that.

The only economists whose works stand the test of time are those who explain why economics isn’t a predictive science and that we shouldn’t make decisions based on the belief that it is a predictive science. This is why Adam Smith is still studied 230 years later while all his contemporaries who argued that they did have predictive powers have been forgotten or discredited.

Rose Friedman, “Advocate of Freedom”


Jay already had a post up. But I decided a picture, and a link to the University of Chicago obituary were in order.

Her most important contribution was the 1980 book Free to Choose, which she co-wrote with her husband, and the accompanying 10-part PBS series. Both were highly successful— the book topped the best-seller list for five weeks — and had a profound impact on public discussions of freedom. At a time when the nation’s confidence was at an all-time low, Free to Choose helped restore America’s faith in liberty[.]

One reason these times are as bad as they are is that even good people are terribly ignorant about freedom, including economic freedom, and what it means, and how it works, and what it means to lose it. Revisiting the popular work of Milton and Rose Friedman, and introducing other people to it who were not even born when Free to Choose was on television, could do a lot of good.

Eric Holder wants the American people, a nation of cowards, as he calls us, to have a national conversation about race.

I propose instead that the American people have a national conversation about freedom.

Amazingly, the entire Free to Choose TV show, all ten episodes, is available for free, here.

You can get a used paperback copy of the book for a penny (+ postage).

I am going to re-read it before the turn of the year.

Breaking the Springs

In 1944, the writer Antoine de Saint-Exupery was flying reconnaissance missions with the Free French forces. He was also working on what would be his last book: the philosophical musings of the fictional ruler of a fictional desert kingdom. St-Ex was killed in action before he got the chance to finalize the manuscript, but it was published as Citadelle in French and under the somewhat unfortunate name Wisdom of the Sands in English.

In one passage, the ruler muses that the criminal who has been sentenced to death may well contain an inward beauty of some form…but goes on to justify his execution:

For by his death I stiffen springs which must not be permitted to relax.

I thought about this passage when I heard about the decision of the Scottish authorities to release the Lockerbie bomber Al Megrahi, who has now received a hero’s welcome in his native Libya.

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So, Fox reports – but Not Nearly as Well as Iowahawk.

Iowahawk allusion (if you don’t want to entangle yourself in the rest).

Today Fox News discussed “Your Life, Your Choices” , an “end of life” booklet developed by the VA and recommended for use in counseling. The segment appears to have been prompted by Jim Towey’s piece in WSJ, “The Death Book for Veterans.” To counter Towey, the VA’s spokesperson was Tammi Duckworth, VA Assistant Secretary. The exchange was lively, if frustrating.

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“Candy” Tax – or how not to raise taxes

Recently I wrote about incentives and how to review tax programs on these two criteria

– Effectiveness – does the tax program raise the revenue in a manner that is cost-effective and have the lowest level of harm and distortion to the overall economy?
– Incentives – if the tax program is designed to promote a certain type of activity or “deter” a different type of activity, do the incentives actually drive the behavior that the law is intended to achieve?

The photo above is from an excellent Chicago Tribune article about a change in the Cook County (Chicago) sales tax rules which mean that “candy” is taxed at the highest rate (10.25%) rather than as “food” which is at a significantly lower rate (2%).

This tax shows the “down the rabbit hole” elements of tax complexity when incentives and effectiveness go haywire.

From a complexity standpoint, this makes no sense. Lots of items contain flour and are thus counted as “food”, but for the small shop owner, explaining this to staff and customers will be a difficult and time consuming process. For large retailers it likely won’t be as big a deal because this is all calculated by the register.

From an incentive standpoint, this makes even less sense. Since sales taxes are highly regressive, which means that they sock the poor harder than the rich (since the poor consume almost all of their income, and pay a high percentage on food), you could understand how the state might want to exempt food. But the line between candy and food is now blurry and complicated.

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Cotton Candy – the Pink Fog of Cloying Sensitivity

And paternalism.

Chet Edwards phoned tonight, his taped voice inviting us to a telephone “conference” already half through when they got to our number. I listened – I didn’t want to clean the kitchen.

The Democrats seem to be perfecting cotton candy speechifying. When given a captive audience that can’t speak back, they lean back, tell us they have our best interests at heart, and pontificate.

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What Edmund Burke said

I am not sure how much of it has made its way across the Pond but there is a bit of palaver going on about the only thing that might interest our so-called representatives in the House of Commons, their remuneration. The trouble with the debate is that nobody can really agree or even understand what it is MPs are supposed to do. We know for certain that they do not do the two things that are definitely part of their job: legislation and holding the government to account. But beyond that it is all a bit muddy.

Here are links to two postings, one on Your Freedom and Ours, in which I discuss (well, rant about) MPs, their claims to more money and their complete lack of responsibility. The other one, on the Conservative History Journal blog, goes back to what Edmund Burke really said to the electors of Bristol when he became their Member of Parliament. It is not quite what many people think.

What, Precisely, is “Creativity”?

From this article:

At the Kansas University School of Journalism, enrollment is currently 70 percent female, according to the school’s dean, Ann Brill.

“I’m sure there are a couple of reasons for this,” Brill said. “It’s probably a right brain/left brain thing. That sounds sexist, but there’s some truth to it.”

Men tend to be drawn to more analytical majors such as engineering or business, whereas women enjoy the creativity that journalism allows for, she said.

Ignore, for the moment, the gender stereotyping and the lack of supporting data (are women really that rare in undergraduate business programs? I don’t think so) and concentrate on the implied assertion that journalism is inherently more creative than either business or engineering.

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