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  • Archive for March, 2011

    If Obama Ruled China

    Posted by David Foster on 16th March 2011 (All posts by )

    NYT, via Phineas at Sister Toldjah:

    Mr. Obama has told people that it would be so much easier to be the president of China. As one official put it, “No one is scrutinizing Hu Jintao’s words in Tahrir Square.”

    What might possess an American president to tell people that it would be easier to be president of China? Some possibilities…

    For one thing, Obama is clearly much more interested in domestic policy than in foreign policy. He views it as his mission to reconstruct American society in ways that are more to his liking, and considers the need to deal with other countries to be an irritating distraction.

    Another factor is that people often view other people’s jobs as being easier than their own–see the old children’s story about the farmer and his wife for an example. This is particularly true, it would seem, of people who are constitutionally of a jealous nature, who devote much of their mental energy to the suspicion that someone else has it better. Barack Obama seems to me to be of this ilk: there is no possible position in life he could assume that would overcome his feelings of jealousy and resentment toward others. His comment during the campaign about bitter clingers sounds like pure projection.

    What if Obama really did become the leader of China? Would he actually find the job easier than his present one?

    Read the rest of this entry »

    Posted in China, Economics & Finance, Obama, Politics, USA | 10 Comments »

    Posted by Jonathan on 16th March 2011 (All posts by )

    good morning

    Good morning.


    Posted in Photos | Comments Off on

    Complicity and Collaboration

    Posted by David Foster on 15th March 2011 (All posts by )

    An important article about the demonization of Israel–and increasingly, the outright anti-Semitism—which has been instigated by far too many members of the Chattering Classes: writers, entertainers, behind-the-scenes media people, and college professors. Carolyn Glick: Itamar’s Children. Excerpt:

    Israel’s leaders were caricatured as Fagin, Shylock, Pontius Pilate and Hitler on the front pages of newspapers throughout Europe. IDF soldiers were portrayed as Nazis, and Israeli families were dehumanized.

    No longer civilians with an inherent right to live, in universities throughout the US and Europe, Israeli innocents were castigated as “extremist-Zionists” or “settlers” who basically deserved to be killed.

    Professors whose “academic” achievements involved publishing sanitized postmodern versions of anti-Jewish Palestinian propaganda were granted tenure and rewarded with lucrative book contracts.

    Read the whole thing.

    UPDATE: See also Robert Avrech at Seraphic Secret.

    Posted in Academia, Europe, Israel, USA | 13 Comments »

    USA, Inc from the view of Kleiner Perkins.

    Posted by Michael Kennedy on 14th March 2011 (All posts by )

    Powerline today has an analysis of the USA as if it were a firm applying for funds from Kleiner, Perkins. The presentation has a number of slides, some of which I will reproduce here. The link to the full presentation doesn’t work, unfortunately.

    [Jonathan adds: Click on the large charts to display them at full size.]

    The net worth of the US is on the right side scale. The trend is pretty obvious. The small improvement is probably a sign of some recovery in the past year.

    Spending has followed historical events, such as World War II. The trend, however, is not good. After 1930, spending on entitlements began and has grown out of control.

    Defense spending is blamed by leftists but there has not been a lot of defense spending since Vietnam.

    Taxes have followed a steady trend line until Obama was elected. The sharp rise has not helped as costs far outstrip revenue.

    What, then, is the problem ?


    Entitlements plus interest alone will exceed revenue by 2027. That’s 16 years from now.

    The left wants to raise taxes.

    How high must tax brackets go ?

    How do we compare to other countries ?

    Better than some and not so good as others.

    Can the left stop denying reality and start to discuss it?


    Here is the response I got:

    I am certain that not everyone here is as stupid as I am.

    I try very hard to keep factual information from you. To wit, here is some bad analysis of our fiscal situation.

    Of course, I could be wrong and I’m not this dumb. But probably not.

    [fixed it for you. If you’re not even going to acknowledge our good faith attempts to allow you to comment while simply requiring that you not insinuate everyone’s stupidity then we can only assume you don’t mind the same treatment in return – mod.

    Posted by: Mike K

    They constantly use fake versions of my signature, which of course the moderators could stop. It fits their pattern. Modifying my comments is also standard and they actually think this is clever.

    No, I am not optimistic.

    Posted in Big Government, Business, Conservatism, Economics & Finance, Politics, Public Finance | 18 Comments »

    “AfPak 2020: A Symposium”

    Posted by onparkstreet on 14th March 2011 (All posts by )

    We asked four experts what US policy in the AfPak theater would yield in the next ten years—and what, if anything, Washington might do differently. Military historian Victor Davis Hanson begins by offering a contemporary context for American efforts; New York Times Magazine writer James Traub envisions what a partition might look like; Ann Marlowe, returning from her latest trip to the region, suggests that demography will play a more important role than we might think; and Matthieu Aikins reports from Kandahar on the need to spend less, talk more, and shed the illusion of “victory.”

    World Affairs Journal

    I haven’t had a chance to do more than quickly skim the above article, so I’m not sure how to compare the entries to the ChicagoBoyz Afghanistan 2050 Roundtable. I do have one quick comment on Victor Davis Hanson’s interesting contribution to the World Affairs Journal Symposium: Afghanistan is not Iraq, and some critics of the current counterinsurgency doctrine (we provide development aid, the population turns on the Taliban) don’t want to leave full-stop – and never have. We want a plan more tailored to the Afghanistan environment. But the good Dr. Hanson has forgotten more about things military than I’ll ever know, so we shall see how our current efforts are faring in the spring, summer, and fall. Bing West did say in his talk at the Chicago Council on Global Affairs that the Obama Administration will declare victory this summer. “You can count on it.”


    Anyone who has been watching the war in Afghanistan for the past two years knows that ISAF, having focused on southern Afghanistan for the past 18 months, now aspires to shift its focus to Afghanistan’s east, where the war has been underresourced and where, in contrast to southern Afghanistan, the Taliban has been gaining momentum. Speak to any commanders on the ground, and they will tell you that if they have their way (and on account of its complexity), eastern Afghanistan will be the last place from which conventional western forces will withdraw in 2013 and 2014.

    Abu Muqawama

    Posted in Afghanistan 2050, Afghanistan/Pakistan, International Affairs, Military Affairs, National Security | 3 Comments »

    Teachers Unions Explained

    Posted by Dan from Madison on 14th March 2011 (All posts by )

    Posted in Education | 12 Comments »

    Neat Product: Super Jiggler Siphon

    Posted by Shannon Love on 13th March 2011 (All posts by )

    Growing up on the farm, I got more than my fair share of mouthfuls of gasoline, diesel, stock tank water and other liquids-I-don’t-like-to-think-about, all while sucking on a hose trying to start a siphon.

    That is why I was pleased when I stumbled on an innovative siphon hose while web surfing for parts for my death ray.

    The hose has a little one-way valve mechanism in one end. When you put that in the liquid you wish to siphon and jiggle it up and down, the one-way valve functions like a pump and lifts the liquid up the hose until it hits the tipping point that establishes the siphon and the liquid flows down hill as nature intended.

    It’s great! No more sucking, wheezing, gagging and thinking, “Wait, that wasn’t diesel. What the hell did I just swallow?”

    So, without further ado: The Super Jiggler Siphon Hose.

    Posted in Tech | 12 Comments »

    What Works

    Posted by Ginny on 13th March 2011 (All posts by )

    (Ramblings with no links)

    Some definitions of the “American Dream” don’t comport with human nature but then fault America for not achieving a fantasy no one (no sane man would have) ever posited. But the essential American dream is of a society freely joined, each respectful of others but autonomous and fulfilled.

    That society tests the workability of our theories of the good life. We, if often unconsciously, value natural law: the primacy of moral fulfillment of our nature. The thinkers who defined our culture and then our government often spoke of the great irony of power through submission, becoming our best selves by acknowledging larger powers. That is most efficient not when we are clapped in a theoretical or real prison, but by enlarging horizons and testing ideas – we learn humility through perspective & experience, we learn what works. The Puritans, not surprisingly, saw this in religious terms. Winthrop argues the test of their religious love for one another and their God: could they demonstrate a community bound by the ligaments of that love succeeds? If so, others might be persuaded; if they failed, certainly others would not choose their path.

    Does it work? A century later, this guided Franklin’s experiments with bifocals and a government constrained by the Constitution. What works may be humbling – Lysenko was surely humbled when he found his ideas replaced. But it is also bracing.

    Read the rest of this entry »

    Posted in Academia, Americas, Anti-Americanism, USA | 9 Comments »

    Well, That’s That – Or Not

    Posted by Dan from Madison on 13th March 2011 (All posts by )

    Last week Scott Walker signed the budget repair bill, at least the parts they stripped out of it that they could pass without the quorum. The missing senators who have disenfranchised their constituents finally came back to (expected) heroes welcomes.

    Stephen Hayes and John McCormack of the Weekly Standard write an excellent synopsis of what went down with whom. I like this quote:

    But even as they offered to contribute more, unions throughout Wisconsin were rushing through contract extensions that would exempt them from having to pay more towards benefits. In some localities, public employee unions were not only pushing to avoid the increased benefit contributions, they were attempting to force through pay raises.
    Unions claimed that they objected chiefly to the limits on collective bargaining, which they said would leave public employees vulnerable to unjust firings and unfair changes to their benefits. The unions also objected to a provision that would allow public employees to choose for themselves whether to join the union and pay dues—a departure from current law. Other states that had implemented these changes had seen union membership drop precipitously, and union leaders understood that the corresponding loss of power and money would be devastating.

    In the end, as others have pointed out, it wasn’t about all of the made up things like “human rights” or any of that other b.s. It was about money, and the money train looks as though it is about to end.

    That article is well worth reading to see how the Democrats were acting in bad faith all along. Walker got a favor from his opponent in last falls gubernatorial race Tom Barrett, who said he would have done the same thing that Walker did, which in the end was the nuclear option.

    The article also points out that the Republicans have apparently done their homework on this thing and checked with three non partisan bodies in the Wisconsin legislature, as well as the senate clerk to make sure no laws were violated. It looks like court time will be wasted by the Democrats to try to get any of this stuff shot down.

    Meanwhile, protests rage all around the capitol here in Madison. I haven’t gone down there for a week now since I had a business trip, but from what I saw on TV the crowds look immense. So what are they all here for? When will it end?

    Our capitol building and grounds are an utter disgrace. I am having a hard time believing that everyone here in Madison doesn’t want these people to just diaf. Well, that might be a bit strong, but I am betting that many just want to move on. Spring is near, and I cannot imagine a worse way to spend a warm weekend than marching around the square yelling “hey hey, ho ho, Scott Walker has got to go”. It is just so mind numbingly insane I can’t wrap my tiny brain around it.

    I drove from Milwaukee to Madison yesterday and passed no fewer than six school buses loaded with protesters. Sheesh I just cannot believe these people want to spend their weekends this way. Of course many of them could be getting paid.

    Paul Milenkovic (forgive me if spelling is not correct) and others have argued in these pages that a more moderate approach would have been better and they have great points. I was leaning that way, but now I disagree since we can see how the Democrats were negotiating in bad faith. I am happy that Walker nuked them. Now that they are back it is time to ram all the rest of it through. Screw them. They lost. If the people don’t like it they can re-elect the Democrats next time around and they can bankrupt the state for all I care. We have to try, at least, to do what is right while we can.

    Posted in Politics | 3 Comments »

    Union Rule

    Posted by Michael Kennedy on 12th March 2011 (All posts by )

    The situation in Madison Wisconsin has been so well covered by Ann Althouse on her blog, that I have not felt it necessary to mention it. Yesterday, the situation began to change. This is what union rule would look like:

    The state Senators had passed the limited budget bill that included only the collective bargaining provisions. The Democrats had blocked the fiscal portions of the bill by fleeing the state two weeks ago. Walker has had this option since they left but he and Majority Leader FitzGerald, were negotiating with the Democrats in hopes the standoff could be ended. The negotiations (not reported by the MSM, of course) broke down when it became apparent that the Democrats are nationalizing this controversy. Walker then encouraged the Senate Republicans to go ahead with Plan B. They did and the law was signed by Walker yesterday.

    Why has this issue been so inflammatory? There are even leftist academics who are advocating serious violence.

    My prediction: 10 years from now public higher education, at least in many states, will have ceased to exist. 20 years from now state governments will realize that they still own the buildings and property on their former state university campuses and start charging us rent to use them. 25 years from now citizens will complain that they can’t afford to send their children to college–any college. But by then the peasant class will be so firmly established that it won’t really matter.

    Welcome to the 19th century.

    Read the rest of this entry »

    Posted in Civil Society, Economics & Finance, Elections, Law Enforcement, Politics, Public Finance, Video | 11 Comments »

    “Dinosaur Bones”

    Posted by Jonathan on 12th March 2011 (All posts by )

    A Belmont Club thread linked to this great scene from the movie, Flight of the Phoenix. I saw that movie on TV when I was a kid, and ever since I wanted to know what a Coffman Starter was. And now there is the Internet. Drunk with power, I googled… and found this web site. Holy cow. I emailed the URL to Lex and he replied, “Fragments, like dinosaur bones.” He got that right. In a couple of hundred years, who is going to know what any of this stuff was?

    (BTW, it appears that a Coffman Starter works by directing gas from an exploding cartridge against a piston, which is connected to a shaft, and that this shaft turns the engine. If that’s the case, how could James Stewart “clean out the cylinders” by firing a cartridge with the ignition off? Wouldn’t he have merely turned over the engine without cleaning out anything? Perhaps the movie makers used some artistic license here.)

    Posted in Aviation, Diversions, Internet | 9 Comments »

    Around Key West

    Posted by Carl from Chicago on 12th March 2011 (All posts by )

    Upper left top – the inevitable “Eat it Raw” photo near the docks. In high school I wore a shirt with this image and they made me go home and change. Upper left middle – a view of Duval street from the 2nd level of the Hard Rock Cafe. Left bottom – they came to our hotel and cut all the coconuts off the palm tree and then cleaned everything up. We appreciated it the next day with high winds. Right top – a view on Duval street as the night heats up. Middle bottom – a large cruise ship along the docks. Lower right – the frozen drinks on tap on Duval street. Someone walked by and shouted “You can’t drink all day if you don’t start in the morning!”

    Don’t know what it was about Key West but they had a lot of odd cars. I like Red Stripe because I always associate it with hanging out on the beach and relaxing so a truck full makes me very relaxed.

    Cross posted at LITGM

    Posted in Humor, Photos | 3 Comments »

    The End of the Nuclear “Renaissance” is Now

    Posted by Carl from Chicago on 12th March 2011 (All posts by )

    I am a big supporter of nuclear power but have written numerous posts on the financial, regulatory and legal issues that make the “nuclear renaissance” in the United States an illusion that could be deflated by the simplest of journalistic research.

    One issue that I have touched on is “contagion” which basically means that the entire nuclear industry can be sent into a deep freeze by a single event hitting any nuclear plant anywhere around the globe. Mention “Three Mile Island” (which effectively halted new reactor construction in the US) or “Chernobyl” (which put a bullet in most reactors in the Western world) and you can see how a single event can dramatically impact the entire industry.

    With this single photo that I got from the BBC site here (I usually don’t put up other people’s photos but in this case the image will soon be so iconic I think it was appropriate) now you can see the end of the Nuclear Renaissance in the United States.

    That photo or some variant will be everywhere… the risk of a catastrophic event at a nuclear plant (even though the Japanese seem to be handling it well so far, all things considered) will be played up continuously, which will be more fodder for protests and will make financial executives think that much harder before committing all their company’s capital to such an uncertain venture as building a nuclear plant in the litigious USA.

    The inflection point of a major event is rarely so obvious as this. I guess the real issue is whether this is even an inflection point anyways, since nuclear activity in terms of new construction in the US was confined to a couple of units in Georgia, a couple in Texas, and one in South Carolina anyways. We’d be lucky if out of these 5 units even 3 saw the light of day and were commissioned (remember that even if built protesters can shut it down – see what happened to Shoreham in Long Island). As for new ones beyond these, it goes from unlikely to remote.

    All natural gas from here on out.

    Update – It only took a few minutes for the French “Greens” (I don’t know how they are against nuclear power and call themselves green but they are all really against any progress whatsoever) have already started their calls to end nuclear power – find it here and wait for a million more just like it.

    Cross posted at LITGM

    Posted in Energy & Power Generation | 25 Comments »

    An Update and Other Links

    Posted by onparkstreet on 12th March 2011 (All posts by )

    This past Wednesday, I heard Bing West give a talk about Afghanistan and his new book The Wrong War: Grit, Strategy, and the Way Out of Afghanistan, at the Chicago Council on Global Affairs. When I get a chance, I will write up a post. He is a very good public speaker: energetic, lively, clear.’s The Big Picture has some truly horrifying photos of the Japanese tsunami and earthquake. Here is the American Red Cross link. If our readers and commenters have additional links or sites they think important, please leave them in the comments section.

    I think the following two articles might be of interest for our readers:

    Bryson has pulled off a marvelous feat. He devotes almost every chapter to a room in his Victorian house in England. He then considers why the room is the way it is and what preceded it. In doing so he produces an important economic history, only some of which will be familiar to economic historians and almost all of which will be unfamiliar to pretty much everyone else. A large percentage of it is important, for two reasons: One, you get to pinch yourself, realizing just how wealthy you are; and two, you get a better understanding than you’ll get from almost any high school or college history textbook of the economic progress that made you wealthy. Not surprisingly, given that I’m an economist and Bryson isn’t, I have a few criticisms of places where he misleads by commission or omission. But At Home’s net effect on readers is likely to be a huge increase in understanding and appreciation of how we got to where we are.

    David R. Henderson, Hoover Institution, Stanford University.

    The disturbing truth that modern Western COIN theory is built on a handful of books based upon practitioner experiences in a handful of 20th-century conflicts is not mitigated by the less famous but broader COIN works. Country studies by lesser known writers are similarly restricted. The core texts cover Vietnam (French Indochina), Algeria, Northern Ireland, the Philippines, and Malaya. The less-well-known writers will go on to discuss Mozambique, Angola, El Salvador, or Afghanistan under the Soviets. Only the most adventurous writers and theorists braved traveling as far as Kashmir or India to look at what could be learned there. Subsequently, the modern study of counterinsurgency and the doctrine it gave birth to are limited to less than two dozen conflicts in a century that witnessed more than 150 wars and lesser conflicts, domestic and interstate (see table 1).

    Sebastian L.v. Gorka and David Kilcullen, Joint Force Quarterly (JFQ)

    Posted in Academia, Afghanistan/Pakistan, Arts & Letters, Book Notes, Economics & Finance, History, International Affairs, Japan, Medicine, National Security | Comments Off on An Update and Other Links

    What are Those Incompetent Wimps Going to Do Anyway?

    Posted by Shannon Love on 11th March 2011 (All posts by )

    Instapundit notes the trend towards leftists advocating or at least thinking of violence in response to their electoral failures. Professor Leiter:

    At some point these acts of brazen viciousness are going to lead to a renewed philosophical interest in the question of when acts of political violence are morally justified, an issue that has, oddly, not been widely addressed in political philosophy since Locke.

    But this raises a serious question in my mind: What kind of violence could those incompetent wimps get up to anyway?

    After all, leftists don’t join the military anymore and have no military training, they don’t own guns and they get an attack of the vapors over the mere thought of fireworks. Meanwhile, non-leftists do join the military and are highly trained, do own guns and love to shoot off fireworks. If it did come down to a violent conflict who do you think will win?

    Pick any nationally prominent lefty you can think of. Now, imagine that they physically attack Sarah Palin. Who do think is going to win? My money is on the one who shoots caribou.

    What is the good professor quoted above going to do if he starts a brawl with a Texan Tea Party member? Will his erudite and devastating bon mots deflect a punch to the face?

    Read the rest of this entry »

    Posted in Leftism, Political Philosophy, Politics, Rhetoric | 18 Comments »

    Nanny State Running Amok

    Posted by James R. Rummel on 10th March 2011 (All posts by )

    Enraged over an argument, a young woman snatched up the family gerbil and crushed it to death. Now she faces criminal charges. A felony!

    The accused doesn’t seem like a very nice person. Anyone who would slaughter a harmless family pet in such a manner isn’t someone I would invite over for afternoon tea.

    But, even so, I can’t help but wonder if this is an appropriate use of scarce government resources.

    Read the news article, and please note that the author listed the causes of death for the rodent. Did the Medical Examiner perform an autopsy on the deceased? It would seem so.

    Do any of our readers have memories of dissecting a rodent for biology class? Maybe you had to kill the rat as part of the process. I wonder if you would land in jail if you tried it today.

    I see that this sorry little drama is taking place in New York, a bastion of Liberal groupthink. Even so, I would be surprised if the votyers there were happy to learn that this is what the tax dollars they pay for their criminal justice system is buying.

    Posted in Big Government, Crime and Punishment, Leftism | 30 Comments »

    Cutting To The Heart Of The Matter

    Posted by James R. Rummel on 10th March 2011 (All posts by )

    I really don’t have anything of substance to add to the current NPR scandal. The bigotry and naked verbal venom exhibited by Ron Schiller, it would appear, aligns with the views that most Liberals have of those who hold opposing views.

    What is a mystery to me, however, is why he voiced those opinions in the first place. It should have been common knowledge around the NPR water cooler that Conservative activists have been trying to get Liberals to say provocative things on camera now for years. James O’Keefe, the young man behind this latest effort, first gained fame with his devestating expose of ACORN. Why wasn’t it painfully clear that keeping such views quiet was the best policy possible?
    Read the rest of this entry »

    Posted in Leftism, The Press, Video | 11 Comments »

    Fourteen Days of Vileness

    Posted by David Foster on 9th March 2011 (All posts by )

    At about this time every year, Texans and others mark the anniversary of the siege of the Alamo (Feb 23–March 6, 1836), sometimes referred to as the thirteen days of glory.

    At about the same time, for the last several years, college campuses in the U.S. and elsewhere in the western world play host to something called Israeli Apartheid Week…a very long week, apparently running from March 7 to March 20: indeed, we could (and I will) refer to it as the fourteen days of vileness.

    Information and analysis concerning the 14 days of vileness can be obtained from Phyllis Chesler, CAMERA, Judith Levy, and many other sources,

    Hostility toward Israel has become a defining characteristic of the “progressive” Left, and the recent NPR case shows just how acceptable anti-Israel attitudes–even extremely strident ones–have become to the mainline liberal establishment. Especially when they don’t think anyone is listening.
    Read the rest of this entry »

    Posted in Anti-Americanism, History, Islam, Israel, Leftism, USA | 27 Comments »

    Create Borrowing and Paid For Budgets

    Posted by TM Lutas on 9th March 2011 (All posts by )

    In these times of fiscal insanity, the US desperately needs as many moments of clarity as it can get. One way to get an institutionalized moment of clarity on federal spending is to explicitly state which programs are paid for by our own tax monies and which programs we pay for by borrowing money. The most important programs go into the paid for budget and the stuff that’s nice to have goes into the borrowing budget.

    There is little cost associated with this process. All the same spending will happen except that instantly all the incentives change. Getting a spending item into the paid for budget makes it secure. It is a statement that we are willing to pay taxes to do this activity. Getting a spending item into the borrowing budget means that if there is a fiscal crisis (and at this point that’s more a when than an if) we would all have a first order screen that we could instantly use to focus our cuts on the stuff that Congress determined was not as important.

    Another very good effect on our politics is identifying where do interest payments go, in the paid for or borrowing budget. Every US consumer knows in their bones that if you’re paying off your debts with borrowed money, you’re in deep, deep trouble. So where would Congress put debt interest payments? By putting them into the paid for budget, they inspire confidence but at the same time this decision would push many more programs onto the borrowing budget.

    As a separate process, a bipartisan committee (similar to the successful BRAC committees that cut defense spending in the 1990s) could take the borrowing budget and provide a yearly fiscal sanity bill that took the borrowing budget and identified cuts to distribute fairly across the nation and across all the low priority programs in an intelligent way.

    But even without an institutionalized spending cut process, this change would improve things by setting priorities and getting the spending conversation where it should be, is program x, y, or z worth borrowing money to fund.

    Posted in Big Government, Economics & Finance, Politics | 4 Comments »

    Reviewing a Book on the Collapse of Lehman Brothers

    Posted by Carl from Chicago on 8th March 2011 (All posts by )

    Recently Dan and I both started trying to read less military history because the books tend to be depressing. Knowing that I was going to be stuck on an airplane for a few hours and needing some light “by the poolside” reading I picked up A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by McDonald (yes I do realize that this sounds strange to most folks).

    A bit of background; Lehman Brothers is a famous financial firm that failed during the 2008 crisis and became the biggest bankruptcy case in US history, since it had a balance sheet of over $600 Billion in listed assets at the time of its collapse. Here is a wikipedia summary of the bankruptcy proceedings. Note that at the time of its bankruptcy Lehman had a 33-1 asset leverage ratio, meaning that only a small decline in asset values wiped out the equity and made the firm insolvent. The US Government declined to rescue Lehman Brothers, which remains controversial to this day, and the fall of Lehman also caused an immediate crisis at AIG which led to a huge US government backstop of $85B to halt further failures of other investment institutions.

    While the book is interesting, the author, who is a trader, misses most of the essential elements of WHY Lehman was doomed to collapse, focusing on the remoteness of the CEO Fuld, the exposure to toxic real estate mortgages that couldn’t be “packaged” into assets and sold (because the securitization market had collapsed), and Lehman’s purchase of real estate at the “high water” time of 2007 (virtually everything bought in 2007 turned out to be a bad idea, look at your portfolio at the time).

    Note that I think that the book is very interesting and entertaining and recommend that readers buy it. These are more “conceptual” than “literary” or typical journalism reviewer type concerns.


    However, these items are merely symptoms of the root cause. The author inadvertently stumbled upon the root cause while discussing the history of Lehman and Fuld’s rise to power, when disputes among the partners led to partners leaving the firm, taking significant amounts of their capital with them (the firm had to utilize their cash to buy back their stock).

    When Lehman was spun back out as a public entity, in 1994, essentially the partners no longer mattered, regardless of their title, because Lehman was a public company and the board was “captured” by Dick Fuld. The board was admirably satirized in the book:

    Nine members of the ten-person board were retired. Four of them were 75 years of age or older… only two of them had direct experience in the financial services industry – and they were all from a different era.
    From this disparate group of old stagers, Lehman created a risk committee, chosen and controlled by Fuld himself. It met only a couple of times a year, which is an unusual way to monitor the company’s ongoing risk.

    In addition to “capturing” the board and stuffing it with out-of-touch retirees, and nullifying its risk management capabilities, Fuld did what many CEOs do, installed a #2 who was in no position to challenge him to ever run the company.

    A key factor in the appointment was that his ambitions did not apparently include becoming CEO. His great concern was with what he called the “culture” of Lehman Brothers.

    Packing the board with retired and out-of-touch geezers, ensuring that no one competent is in place to succeed you, and limiting opportunities for your already-supine board to govern your actions are often immediate actions of CEOs that want to ensure their reign will be long and profitable (for themselves).

    Read the rest of this entry »

    Posted in Book Notes, Economics & Finance | 13 Comments »


    Posted by Jonathan on 8th March 2011 (All posts by )

    My friend Val Dorta emailed to say that Foundersweb, a new conservative networking site that he and his son are involved in, is up and running. It’s worth looking at and spreading the word about. (Val’s essays and posts are always worth reading.)


    Posted in Announcements, Blogging, Conservatism | Comments Off on Foundersweb

    Free-Market Job Protection for Teachers

    Posted by Shannon Love on 8th March 2011 (All posts by )

    Megan McArdle quotes E. D. Kain arguing for teachers’ unions by saying:

    Teachers need protection from over-zealous bosses and ideological politicians. This is the same thinking behind seniority rules, which protect more expensive teachers (i.e. veterans) from being laid off due to budget cuts. Teaching is not a high-paying job compared to jobs in the private sector, and one of the benefits is some job security. Occasionally this means bad teachers take longer to fire.

    Because of and not in spite of my free-market beliefs, I think Kain makes a valid point. Public-sector employees are not protected from arbitrary firings to the same degree that private-sector workers are and that does create a somewhat compelling argument for public-sector unions.

    The free market actually protects workers from being fired for reasons unconnected to their job performance. This is not to say that such firings never occur but rather that the free market provides a built-in mechanism for punishing managers who don’t make personnel decisions based solely on merit. This immediate and powerful feedback means that private-sector worker have more built-in and systematic protection against managerial bias, incompetence and malice than do public-sector workers.

    The best way to protect teachers and other public sector workers is to increase the exposure of their managers to market forces.

    Read the rest of this entry »

    Posted in Big Government, Economics & Finance, Education | 21 Comments »

    Going Dark

    Posted by James R. Rummel on 8th March 2011 (All posts by )

    I’ve mentioned the concept of water empires here before.

    The idea is that a central government has control over a vital life-sustaining resource, such as water. If a province rebels or otherwise acts up, then the supply is cut off. The problem takes care of itself in a year or two of savage starvation, since there will be no harvest if the fields are dry.

    Water empires invariably lead to both despotism and corruption. It is so easy to exert total control over life and death, why wouldn’t the people in charge work to consolidate their power? They’d be idiots if they didn’t, after all.

    And, since the aforementioned people in charge are in total control, the rules simply don’t apply to them. They can indulge their every whim, favor this person or industry over another, simply because they can. Who is going to stop them? Anyone who tries will be in big trouble when the water stops flowing, after all.

    So what happens if the vital resource is electricity instead of water? Why wouldn’t history repeat itself?

    (Hat tip to Glenn.)

    Posted in Big Government, Britain, Energy & Power Generation, History | 12 Comments »

    Bing West at the Chicago Council on Global Affairs March 9

    Posted by onparkstreet on 8th March 2011 (All posts by )

    On the Afghan frontlines, soldiers are feeling the strain of General Petraeus’ counterinsurgency strategy as it has forced them to become nation-builders as well as warriors. Bing West argues that the American military’s three current objectives in Afghanistan – protect the population, provide money and projects to stimulate patriotism, and link the population with the central government – have weakened the warrior ethos of the troops and prevented the U.S. from developing a winning approach. With the imminent withdrawal of NATO troops by 2014 and Afghan President Hamid Karzai’s call to negotiate with the Taliban, is winning even possible for the Allied forces? Join The Chicago Council as Bing West discusses his perspective on a U.S. exit strategy and why Americans cannot afford to lose in Afghanistan.

    I just bought Bing West’s The Wrong War: Grit, Strategy, and the Way Out of Afghanistan. So far it’s very good, if disconcerting. He will be giving a talk this Wednesday at the Chicago Council on Global Affairs and I plan to attend. Bing West is appearing earlier the same day at the Chicago Pritzker Military Library (which has moved to 104 S. Michigan Ave., across the street from Millennium Park and the Art Institute of Chicago.)

    Posted in Afghanistan/Pakistan, Arts & Letters, Book Notes, International Affairs, Military Affairs, National Security, Terrorism, War and Peace | 2 Comments »

    Deep Thought

    Posted by Jonathan on 7th March 2011 (All posts by )

    Is burrita the word for a female burrito?

    In researching the answer to this question we came across this interesting website. Needless to say, Chicagoboyz condemns the popular practice of donkey sex slavery in the strongest terms.

    (But perhaps we could use more donkeys in the chain of command.)

    Posted in That's NOT Funny | 2 Comments »