Politics

What lies ahead, I fear.

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UPDATE: An an article at Belmont Club describes interest in alternative money creation as a way of anticipating inflation. It also goes further into a discussion of general competence.

The idea that Virginia should consider issuing its own money was dismissed as just another quixotic quest by one of the most conservative members of the state legislature when Marshall introduced it three years ago. But it has since gained traction not only in Virginia, but also in states across the country as Americans have grown increasingly suspicious of the institutions entrusted with safeguarding the economy.

What has changed is faith in the federal government, not just in Virginia but in a growing number of places. The lack of faith in the competence of government — and the soundness of the dollar — has been growing leading some states to create contingency plans in case the currency goes bust.

Once again, I apologize for my pessimism but this is what I see. First, there is this article, which quotes a well known financier.

There may be a natural evolution to our fractionally reserved credit system that characterizes modern global finance. Much like the universe, which began with a big bang nearly 14 billion years ago, but is expanding so rapidly that scientists predict it will all end in a “big freeze” trillions of years from now, our current monetary system seems to require perpetual expansion to maintain its existence. And too, the advancing entropy in the physical universe may in fact portend a similar decline of “energy” and “heat” within the credit markets. If so, then the legitimate response of creditors, debtors and investors inextricably intertwined within it, should logically be to ask about the economic and investment implications of its ongoing transition.

Certainly “growth” seems to be fundamental to our economic health. That, of course, presumes a growing population but it also would be affected by a stagnant population with a growing age disparity. The obvious example of the latter is Japan.

The creation of credit in our modern day fractional reserve banking system began with a deposit and the profitable expansion of that deposit via leverage. Banks and other lenders don’t always keep 100% of their deposits in the “vault” at any one time in fact they keep very little thus the term “fractional reserves.” That first deposit then, and the explosion outward of 10x and more of levered lending, is modern day finance’s equivalent of the big bang. When it began is actually harder to determine than the birth of the physical universe but it certainly accelerated with the invention of central banking the U.S. in 1913 and with it the increased confidence that these newly licensed lenders of last resort would provide support to financial and real economies. Banking and central banks were and remain essential elements of a productive global economy.

The effect of asset bubbles on such a system is worrisome as the history of Japan and the recent history of the US have shown. The Panic of 1907 was largely responsible for the creation of the Federal Reserve. That financial crisis is thought, by the authors of a recent book, to have been a consequence of the 1906 earthquake in San Francisco, which destroyed a large amount of real assets and the insurance costs that were associated. The immediate cause was financial speculation but the real losses had added to the fragility of the system.

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The Republicans in opposition

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Bill Kristol (corrected thanks to Joe) has an excellent column today on where Republicans could go in the next four years. I have little confidence that the House GOP can bend Obama to their will on the deficit or spending. He is riding high with the aid of the mainstream press and TV. The public does not understand the spending issue, or at least not enough of us do. The Republicans represent the “Eat your vegetables or there will be no dessert” philosophy and that is not popular right now. What do we do ? Here is one suggestion.

He quotes UN Ambassador Pat Moynihan in 1975.

The United States goes into opposition. This is our circumstance. We are a minority. We are outvoted. This is neither an unprecedented nor an intolerable situation. The question is what do we make of it. So far we have made little—nothing—of what is in fact an opportunity. We go about dazed that the world has changed. We toy with the idea of stopping it and getting off. We rebound with the thought that if only we are more reasonable perhaps “they” will be. .”‰”‰.”‰”‰. But “they” do not grow reasonable. Instead, we grow unreasonable. A sterile enterprise which awaits total redefinition.

I feel much the same way. I would have much preferred the GOP to have voted “present” when the “fiscal cliff” matter was before the House. I would like to see them do the same when the debt ceiling issue is voted on. Let Obama have his way but show that we do not agree.

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Hubris

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Hubris is a Greek word that signifies overweening confidence that leads to a big fall. It is a common component of tragedy. The Wiki article seems to get lost in ancient Greek references and, having read a lot about Greece and Greek history, I don’t think they are on target.

In its modern use, hubris denotes overconfident pride and arrogance; it is often associated with a lack of humility, though not always with the lack of knowledge. An accusation of hubris often implies that suffering or punishment will follow, similar to the occasional pairing of hubris and nemesis in Greek society. The proverb “pride goes before a fall” (from the biblical Book of Proverbs, 16:18) is thought to summate the modern use of hubris.

This is a bit closer to the definition I prefer.

I think we are about to see a grand spectacle of hubris on the part of the re-elected president. The Washington Post describes the outline, as if it was a done deal.

The White House is weighing a far broader and more comprehensive approach to curbing the nation’s gun violence than simply reinstating an expired ban on assault weapons and high-capacity ammunition, according to multiple people involved in the administration’s discussions.

A working group led by Vice President Biden is seriously considering measures backed by key law enforcement leaders that would require universal background checks for firearm buyers, track the movement and sale of weapons through a national database, strengthen mental health checks, and stiffen penalties for carrying guns near schools or giving them to minors, the sources said.

To sell such changes, the White House is developing strategies to work around the National Rifle Association that one source said could include rallying support from Wal-Mart and other gun retailers for measures that would benefit their businesses. White House aides have also been in regular contact with advisers to New York Mayor Michael R. Bloomberg (I), an outspoken gun-control advocate who could emerge as a powerful surrogate for the Obama administration’s agenda.

Nowhere in the article does it acknowledge that the enemies of gun bans include, in addition to the NRA and the “gun manufacturers,” a majority of the people. This is why second terms are so well know for trouble for incumbents.

The gun-control push is just one part of an ambitious political agenda that Obama has pledged to pursue after his decisive reelection victory in November, including comprehensive immigration reform, climate-change legislation and long-term deficit reduction. Obama also faces a reshuffling of his Cabinet, and a looming debate over the nation’s debt ceiling that will compete for his time and attention in the coming months.

In addition to potential legislative proposals, Biden’s group has expanded its focus to include measures that would not need congressional approval and could be quickly implemented by executive action, according to interest-group leaders who have discussed options with Biden and key Cabinet secretaries. Possibilities include changes to federal mental-health programs and modernization of gun-tracking efforts by the Bureau of Alcohol, Tobacco, Firearms and Explosives.

The election victory was less “decisive” than the White House and the political left seems to believe. It is no surprise that they are looking for ways to avoid Congress. Now that we know how the EPA evaded the Freedom of Information Act with secret e-mail accounts, nothing should surprise us.

I was going to go to the gun store today but got bogged down in running errands and will have to go tomorrow. The nearest one has a good price on Colt 1911 model .45 calibre pistols. Since the proposed actions by the Obama folks are aimed at banning “military-style handguns,” I guess I had better hurry.

One potential strategy would be to win support for specific measures from interest groups that are normally aligned with the NRA, according to one person who works closely with the administration on gun-related issues and who spoke on the condition of anonymity because of the issue’s sensitivity.

For instance, this person suggested, Wal-Mart and other major gun retailers may have an incentive to support closing a loophole that allows people to bypass background checks if they purchase firearms at gun shows or through other types of private sales. That could result in more people buying guns in retail stores.

I think Wal-Mart is too smart to get into bed with this administration but maybe not. Certainly, Obama is no friend of non-union Wal-Mart. The same applies to gun retailers who can’t keep enough guns and ammunition in stock. I think they know who their friends are. If not they will learn quickly.

Finally, At the White House meeting, Stanek said, “the vice president indicated that there was a very short timeline for him to get back to the president with his recommendations because the American public has a short memory.”

Yup. Get that unconstitutional law going before anybody wakes up.

Happy New Year

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I wish I were more enthusiastic but I still wish everyone a good year. The “fiscal cliff” talks have ended about as I expected. The Republicans have pretty much rolled over. The House has yet to vote and I wonder how that will go. If they all grew a spine (or some other anatomical parts) they would vote “present” and let the Democrats pass the bill by themselves. Drudge has a link to the Breitbart story.

According to the Congressional Budget Office, the last-minute fiscal cliff deal reached by congressional leaders and President Barack Obama cuts only $15 billion in spending while increasing tax revenues by $620 billion—a 41:1 ratio of tax increases to spending cuts.

When Presidents Ronald Reagan and George H.W. Bush increased taxes in return for spending cuts—cuts that never ultimately came—they did so at ratios of 1:3 and 1:2.

“In 1982, President Reagan was promised $3 in spending cuts for every $1 in tax hikes,” Americans for Tax Reform says of those two incidents. “The tax hikes went through, but the spending cuts did not materialize. President Reagan later said that signing onto this deal was the biggest mistake of his presidency.

“In 1990, President George H.W. Bush agreed to $2 in spending cuts for every $1 in tax hikes. The tax hikes went through, and we are still paying them today. Not a single penny of the promised spending cuts actually happened.”

This will be another such fake compromise. However, The Gods of the Copybook Headings are coming.

In the Carboniferous Epoch we were promised abundance for all,
By robbing selected Peter to pay for collective Paul;
But, though we had plenty of money, there was nothing our money could buy,
And the Gods of the Copybook Headings said: “If you don’t work you die.”

Then the Gods of the Market tumbled, and their smooth-tongued wizards withdrew,
And the hearts of the meanest were humbled and began to believe it was true
That All is not Gold that Glitters, and Two and Two make Four —
And the Gods of the Copybook Headings limped up to explain it once more.

It’s too long to post all of it and, for those who are unsure of the source of the title, copybooks were supplied for all school children in England, when it was still England. The copy books had traditional aphorisms on each page that children were expected to learn.

Another expression that relates to the books was someone “blotted his copybook.” This meant making an error that was difficult to correct.

The “copybook headings” to which the title refers were proverbs or maxims, extolling virtues such as honesty or fair dealing that were printed at the top of the pages of 19th-century British students’ special notebook pages, called copybooks. The school-children had to write them by hand repeatedly down the page.

The work has been described as “beautifully captur[ing] the thinking of Schumpeter and Keynes.”[2] David Gilmour says that while topics of the work are the “usual subjects”, the commentary “sound better in verse”[3] while Alice Ramos says that they are “far removed from Horace’s elegant succinctness” but do “make the same point with some force.”[4]

I don’t think I would agree that Keynes is an example of the copybook headings’ wisdom although his recommendations have been wildly distorted by politicians.

We are coming to a period when math will be far more determinant than wishful thinking in terms of our lives.

As it will be in the future, it was at the birth of Man —
There are only four things certain since Social Progress began —
That the Dog returns to his Vomit and the Sow returns to her Mire,
And the burnt Fool’s bandaged finger goes wabbling back to the Fire —
And that after this is accomplished, and the brave new world begins
When all men are paid for existing and no man must pay for his sins
As surely as Water will wet us, as surely as Fire will burn
The Gods of the Copybook Headings with terror and slaughter return!

Hopefully, not this year. Happy New Year.

The Connecticut Massacre

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There is information still coming to light about this awful case. Early reports, such as the name of the shooter and the alleged murder of the father, were predictably wrong. It turns out that the shooter, named Adam Lanza, a 20 year old with a history of odd behavior and some evidence of mental illness, such as autism, was living with his mother who was his first victim. There are a number of suggestive reports, that she decided to “stay home to care for” her 20 year old son.

The treatment of severe mental illness in this country has been altered for the worse by a movement that began in the 1960s when mental illness began to be described as a “civil rights ” issue. Several books and movies described abuse of power in commitment of the mentally ill. The first such movie was “The Snake Pit” in which a young woman is committed for what sounds like schizophrenia. The treatment of the time (1948) can be seen as barbaric but there was nothing else available. She did recover, although we know that without adequate treatment, recovery from schizophrenia is unlikely.

The movie that really devastated the mental hospital system was called “One Flew Over the Cuckoo’s Nest” and starred Jack Nicholson.

The movie was powerful in showing the Nicholson character as a guy who just is “different” and harmless.

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