The Paygo Joke

The 'Paygo' Coverup - WSJ.com

All politicians lie, the problem is that Democrats usually get away with it:

The truth is that paygo is the kind of budget gimmick that gives gimmickry a bad name. As Mr. Obama knows but won't tell voters, paygo only applies to new or expanded entitlement programs, not to existing programs such as Medicare, this year growing at a 9.2% annual rate. Nor does paygo apply to discretionary spending, set to hit $1.4 trillion in fiscal 2010, or 40% of the budget.

Paygo isn't even really a "gimmick" -- it is just a flat out ruse to say one thing and do another. The other cool thing about being a Democrat is that you can "stack your lies".

The President also revived the myth that paygo was somehow responsible for eliminating budget deficits during the Clinton years. In fact, that brief era of balanced budgets was due to: mid-decade spending reductions by a GOP Congress elected on a balanced-budget pledge; an excessive cut in defense spending to 3% from 5% of GDP across the decade; and an unsustainable revenue boom due to the dot-com bubble. But harking back to the 1990s lets Mr. Obama avoid having to defend his own spending record.

Note also that none of those things had anything to do with Clinton, other than he signed the budgets. CONGRESS shall appropriate -- then and now, and guess what has been happening to deficits (not to mention the economy) since Pelosi and the Democrats took over in 2006:

That's what Democrats also promised in 2006, with Nancy Pelosi vowing that "the first thing" House Democrats would do if they took Congress was reimpose paygo rules that "Republicans had let lapse." By 2008, Speaker Pelosi had let those rules lapse no fewer than 12 times, to make way for $400 billion in deficit spending. Mr. Obama repeated the paygo pledge during his 2008 campaign, and instead we have witnessed the greatest peacetime spending binge in U.S. history. As a share of GDP, spending will hit an astonishing 28.5% in fiscal 2009, with the deficit hitting 13% and projected to stay at 4% to 5% for years to come.

Again, the WSJ is being optimistic -- they are assuming that the economy is going to recover and GROW in order to have the huge deficits account for "merely" 4-5% for years to come. That remains to be seen.

Kooks, Demagogues, and Right Wingers On Tax Day

A Short Citizen's Guide to Kooks, Demagogues, and Right-Wingers On Tax Day | Robert Reich's Blog

The nice thing about the left is that they are always so caring and respectful--they believe whole heartedly in diversity, and as the intellectual cream of the crop, they know that diversity of thought is the only kind that really counts. That is why they are so open minded.

A buddy of mine asked me which of the key messages of the tea parties will resonate with the general public? That they are deranged, or that they are dangerous? I responded that with something like 80% of the public, even though it looks like millions turned out in protest, what will resonate is "Tea Party"? Who did that, and did anyone show up? I looked out on CNN today a couple times, not a word about the tax protests.

Mr Reich, and a few of the more radical of the lefties are of course up in arms about anyone showing up from the right to protest for any reason. What right do those people have to a different opionion? Well, to listen to Bob or most lefties, none at all. Our founding fathers created a nation dedicated to total thought agreement and maximum enjoyment of the payment of taxes. The essense of "American" is to transfer as much of your income as possible to the government to redistribute to any bank, deadbeat mortgate holder, defunct brokerage house, failing unionized car manufacturer, or just someone that has less money than you for whatever reason. The reasons we are all Americans is that we believe in the government taking as much of our money as they want, and anyone that questions that is simply "not patriotic".

I was unable to attend the local tea party as I had a business engagement that evening, but I did get to drive by. Looked like in excess of 1K people peacefully and quite quietly gathered with signs that were generally pretty tame -- "Trillions in Debt: CHAINS we can believe in" was pretty good I thought. What a far cry from Code Pink throwing buckets of blood on people or all manner of "Bush is a Terrorist", etc anti-war signs. Cindy Sheehan in a ditch outside the Bush ranch in the summer of '05 was a national story for weeks. One woman and some occasional hangers on saying "get out of Iraq" was worth hours of coverage, millions of people questioning the spending of many trillions of dollars is worth virtually none. Our press has no biases.

I shudder to think what would have happened if the Bush administration had come out with a Homeland Security finding on "Left Wing Anti-War Protesters" the week of some sort of planned anti-war demonstration. The press would have been apocolyptic for weeks -- and I'm not sure that if such a thing had happened, I might somewhat agree with them. Surprise, the BO administration comes out with a finding on "Right Wing Extremeism" on Monday of this week. Not a single MSM invocation of "chilling", even when the report goes so far as to indicate that "returning servicemen are a special threat". Oh, really? I thought the "demean the soldiers" went out with Vietnam -- apparently not.

A lot of the lefties seem to think that if you didn't protest a $400 Billion deficit, you can't protest $2 Trillion deficit. Huh? If I don't get mad over someone driving 40MPH, I'm not allowed to say anything about someone driving 200MPH? If I don't bitch about someone having 4 beers, I'm some sort of a hypocrite if I say that 20 is too many? There seems to have been a sudden development of some sort of logic that would receive rather shrill laughter were the shoe on the other foot. I believe that it is supposed to be the claim of the left that the right has all these "hard line views" and doesn't understand "gray". Most Republicans I know are "unhappy" with any deficits at all, were VERY pleased when the combination of the Repubilcan congress and Bill Clinton gave us a surplus, and VERY dissappointed when the combination for Bush and a Republican congress gave us deficits.

BO is exceeding the entrie Bush 8 year deficit spending in 4 months, and will exceed the entire deficit spending of all US presidents prior to him in 8 years by his own rosy estimates. The protests are not primarily about CURRENT taxation, they are about the DIRECTION that our country has turned. Some of us believe that we have turned in a direction that calls into question the very meaning of "America" in ways that may not be possible to ever recover. Are we right? Only the future will tell, but at one time we were a country where "diversity of thought" was considered a very good and prudent thing. We believed in not only an economic market, but even more importantly in a market of "idea competion" where concerned citizens were willing to stand up and take a postiion, even if (and sometimes especially) if it was contrary to the views of the masses.

Has that day passed? Maybe, but I'm proud to cast my lot with the "Kooks, Demagogues and Right Wingers".

Bottom?

How Will We Know When the Economy Hits Bottom? - NYTimes.com

This article contains 3 very well done charts. There is no way of knowing if history is any guide at all to the future, but it is pretty much the only thing we really have to look at. Based on the P/E ratio, we MIGHT be either just at, or close to a bottom in the market.

The consumer spending chart would indicate that we are still at pretty high levels of spending relative to savings and will likely need to do some more catchup before we "return to the mean".

The housing chart is the most depressing of the 3 -- Fannie, Freddie and the Democrats took us a LONG way up a steep bubble and we likely to have to drop another 30-40% before we are close to returning to THAT mean.

Poverty In America

Michelle Obama serves food to D.C. poor and homeless, but... | Top of the Ticket | Los Angeles Times

Gotta love a country where the homeless have cell phones! Man, those 7 years of Bush neglect must have been hell -- suppose the standard after 8 more will be the the homeless have electric cars?

Obama lied; the economy died

Washington Times - BLANKLEY: Obama lied; the economy died

Very well written, I love this opening, but ignor my little tirade here -- the piece is a MUST READ!

I am trying to capture the spirit of bipartisanship as practiced by the Democratic Party over the last eight years.

What rational person could deny that? The supposed "bipartisan Democrats" used "Bush lied, people died" over and over ad-nauseum. As Blankly points out, Bush didn't lie, he was mistaken. BO clearly uttered "I'm not in favor of larger government" after signing $800 Billion in stimulus, deciding he was going to sign on to $400 Billion from last years Democrats with 9,000 earmarks, and had his $3.6 Trillion largest budget and largest deficit ever by ALL measures ready to roll. To absolutely KNOW one thing and say the other live on national TV talking directly to the nation is CLEARLY "lying to the American People".

When Bush said in the State of the Union of '03 that "The British say that ---", there would have been a "lie" had the British NOT said that -- in fact they DID, **AND** what they said (Saddam was trying to get Yellowcake from Niger) was in fact verified by their own intelligence agency (not ours) to be true.

But, the left was certain that was "impeachable" on the grounds of "lying to the American people". Naturally, since the left is such a bunch of fair minded and impartial people, I'm certain they will be demanding impeachment post haste.

Of course, with the havoc that the Democrat congress and BO have wreaked in just a couple short years, having BO eating off a tin tray would be small consolation for the rest of us eating dog food pizza.

Sharing the Fixed Pie

RealClearPolitics - Articles - Do We Want a More Equal Society?

"Over the past two or three decades, the top 1 percent of Americans
have experienced a dramatic increase from 10 percent to more than 20
percent in the share of national income that's accruing to them," said
Peter Orszag, Obama's budget director. Now, he said, was their time "to
pitch in a bit more."

• US GDP in '82 - $5 Trillion, 90% of 5 Trillion = $4.5 Trillion

• US GDP in '08 - $12 Trillion, 80% of 12 Trillion = $9.6 Trillion

Now, I ask you, would you rather have $4.5 Trillion or $9.6 Trillion? How about if it meant that someone else went from having $500 Billion to having $2.4 Trillion? Would that bother you? If so, why? You more than doubled what you had, why does it bother you if someone else got 5x what they had? How about if the choice was either that, or you got $2.25 Trillion, and they got only $250 Billion? Does that make you feel better, because it is more "just"? Can't you do a whole lot more good with $9.6 Trillion than you can with $2.25 Trillion? If you can just ignore those awful people that got more money?

EITHER, Democrats don't understand growth at all, OR, their envy exceeds their common sense -- or I suppose both.

What they ALSO apparently don't understand is contraction! When their policies seek to "take a little more", the tendency is for all that wealth to simply disappear, because a lot of it is based on expectations for the future. In case you haven't noticed, the market isn't very positive on the future at the moment!

Democrats and Sweaters

George F. Will: FDR's Sweater Fable | Newsweek Voices - George F. Will | Newsweek.com

Do all Democrats have some fascination with sweaters? This little fable does a good job of explaining why things got so bad in the '30s and late '70s:

The factory, which FDR said was the town's only industry, normally
employed about 200 people who "had always been on exceedingly good
terms" with the owners. However, "it was difficult to sell enough
sweaters to keep them going because there were so many sweater
factories" in the nation, all of which had had only about six weeks'
worth of work in the past year. The town, FDR said, was "practically
starving to death." So the people decided that they all could work if
they reduced everyone's wages 33 percent. That would cut the cost of
their sweaters and enable them to undersell competitors. FDR said the
factory's sales agent went to New York and "in 24 hours" sold "enough
sweaters to keep that factory going for six months, 24 hours a day,
three shifts.

A heartwarming triumph of community solidarity over adversity? Not as
seen through the pince-nez of Roosevelt, who pronounced it "bad
business, in all ways." Granted, "they get a good deal of cash into the
community." But "they undoubtedly, by taking these orders, put two
other sweater factories completely out of business." So:

"That brings up the question as to whether we can work out some kind of
plan that will distribute the volume of consumption in a given industry
over the whole industry. Instead of trying to concentrate production to
meet that consumption into the hands of a small portion of the
industry, we want to spread it out … It might be called the regulation
of production or, to put it better, the prevention of foolish
overproduction."

In other words, competition is bad and centralized control can do better! Once one moves to a leveling redistribution strategy, there is no end to what needs to be controlled. Rather than a system that runs imperfectly but well on natural principles, you get one that lurches all over the place on conflicting commands from a bunch of bureaucrats.

The end result has been seen over and over in the world in the past century -- the poor economy starts kicking and hitting itself and running into things like some macabre slapstick clown or failing horror movie robot and soon the wreck that remains is unable to even feed the bulk of the nation that has been so foolish to turn down this path.

Put on a sweater!

Extremely!

Power Line - How Dumb Does He Think We Are?

Some words from our supreme odiferous unifying leader:

These steps won't sit well with the special interests and lobbyists who
are invested in the old way of doing business. I know they're gearing
up for a fight as we speak. My message to them is this: So am I.

I give BO more credit than PowerLine here -- the OLD "special interests and lobbyists" may not ALL be happy -- but there are certainly a whole bunch new ones that are positively ecstatic! TRILLIONS of pork being larded out is a bounty that hasn't been seen since the Johnson era!

Fight, oh yes, it is clear that BO is way ahead in the fight to turn a $14 Trillion economy into one that is $7 Trillion or much less!

The End of Growth

Economic Scene - Obama’s Budget Plan Sweeps Away Reagan Ideas - NYTimes.com

Remember the 70's? If not, no matter, you are going to get to live at least that level of want again, if not the 30's. Why? Because ideas are important, but reality is even more important. The "genie" that improves all lives is GROWTH, and "income" is just one small part of that improvement. There are lies, damn lies and statistics, and while statistics are a useful tool, they ought to be looked at as being as dangerous as firearms. Guns are fine, but if someone is explicitly using one to do harm, they are very bad indeed. That is pretty much what this article is doing with statistics.

As a result, the average post-tax income of the top 1 percent of
households has jumped by roughly $1 million since 1979, adjusted for
inflation, to $1.4 million. Pay for most families has risen only
slightly faster than inflation.

Before becoming Mr. Obama’s top economic adviser, Lawrence H. Summers
liked to tell a hypothetical story to distill the trend. The increase
in inequality, Mr. Summers would say, meant that each family in the
bottom 80 percent of the income distribution was effectively sending a
$10,000 check, every year, to the top 1 percent of earners.

This kind of thinking from an economist who is now a top economic adviser is like having his top medical advisor announce that evil spirits cause disease. This is envy incarnate and frightenly wrong! The bottom 80% didn't send ANY check, in fact, the bottom 50% paid nearly NOTHING in income taxes! The income of BOTH groups went up because of GROWTH!!!

Mr Summers HAS to realize that, so his story is a bold faced lie of the most obnoxious kind. What kinds of "income growth" does he expect in a country that is CONTRACTING at 6% a quarter??? Well, he better expect NONE -- in fact, the top will fall faster than 6% and the bottom will approximate the 6% decline, so yes, it reduces "income inequality", but at the expense of everyone having FAR less.

In the past 30 years, neither Europe or Japan has achieved "income growth slightly faster than inflation" for the bulk of it's population. The fact that a country of 300 Million has been able to do is AMAZING!!

This has to rank on my new list of the scariest things I've read in the "past month". To not understand that is has been growth that has driven all the good things of the last 30 years for this country and we have now turned to naked redistibution and forgotten the advantages of growth is extremely sad for all Americans.

Waking Up To Radical BO

RealClearPolitics - Articles - A Radical Presidency

I wish my predictions weren't so correct.

Gov. Bobby Jindal's postspeech reply did not come close to recognizing the gauntlet Mr. Obama has thrown down to the opposition. Unless the GOP can discover a radical message of its own to distinguish it from the president's, it should prepare to live under Mr. Obama's radicalism for at least a generation.

I'd argue that in terms of what America was supposed to be, Reagan wasn't "radical" at all -- he was a mild return to a TINY bit of our roots. He CONTINUED to prop up the corrupt Ponzi scheme called FICA that makes it perfectly common and acceptable for people to live their entire lives saving nothing and often live BETTER in retirement than they did during their working years. Thus we get a savings rate less than zero vs China where people have FAR less and save 30% privately, 50% when national savings are added in.

Living beyond our means and shirking responsibility for our own lives has become "the American way".

BO feels that our tiny feint back toward just a SMALL bit of realization that "delaying gratification / making good decisions in life" can have significant differences in income and overall life results. BO wants to change that and punish those that are successful and reward the failures. The markets are already responding. Why invest and get yourself over the level of government help? All that risk and work for no reward? Why?

Barack Obama is proposing that the U.S. alter the relationship
between the national government and private sector that was put in place by Ronald Reagan and largely continued by the presidencies of Bill Clinton and the Bushes. Then, the private sector led the economy. Now Washington will chart its course.

Mr. Obama was clear about his intention. "Our economy did not fall into this decline overnight," he said. Instead, an "era" has "failed"to think about the nation's long-term future. With the urgency of a prophet, he says the "day of reckoning has arrived." The president said his purpose is not to "only revive this economy."

There we have it. Unless by some MIRACLE some political voice can rise from the right and get a movement going again in a HUGE hurry, we are lost for at least a decade and probably two.

Obeynomics

Obeynomics

Nice little article ... the leadoff:

The results are clear. The market hates Obama’s stimulus package and just about everything related to Obamanomics. Or shall we call it Obeynomics? (I'll explain in a minute.) Stocks are down 27% since the Nov. 4th election. Stocks have plummeted more than 40% since Obama sewed up the Democratic nomination in June.

Capital is on strike. And why wouldn’t it be? Private capital has no idea what the future holds in terms of taxes, regulation, trade, deficits and the value of the dollar. None whatsoever.

Capital has figured out one thing, however. The politicians in Washington most hostile to private investment are running the show. Example: David Obey, chairman of the House Appropriations Committee. From Wikipedia: “Obey is one of the most liberal members of the House; he considers himself a progressive in the tradition of Robert La Follette.”

So the people that have a choice of "invest or not" seem to think that a political regime that is anti-business, anti-investment, and has an unknown economic plan makes for the wrong environment in which to sink a lot of capitol into things you expect to make money on?

Ya suppose?

It's The People Stupid!

RealClearPolitics - Articles - Deconstructing Krugman

When Slick Willie was running against Bush Sr, the mantra was "it's the economy, stupid!" -- the media loved it, calling Republicans stupid is always good sport. Perhaps we have a turn about here -- BO and his economic advisors are "doing it by the numbers", but people don't always behave "by the numbers".

But why is the economy performing below capacity in the first place?
Many reasons, too many to list here. And why won't it simply recover on
its own, as it has many times in the past? Here things get a bit more
interesting. Like many economists, Krugman points to Keynes's "paradox
of thrift": in uncertain times, ordinary people defer consumption and
businesses postpone investments. The economy shrinks below capacity,
because of people's desire to save money.

It's hard to escape the sense that the best economists and the
President of the United States are blaming ordinary people for the
economic crisis. If only we'd spend our money instead of save it, we
wouldn't be in such a big mess.

This is where devotion to mathematics gets the better of those who
would do better to try to understand people. Krugman is very concerned
that the liquidity trap we're arguably in will degenerate into a sticky
and persistent deflationary spiral, with far lower output for years to
come (an American "lost decade").

People feel uncertain about the future -- and the government spending Trillions of dollars of their future money at a time that every bone in their body tells them to save makes them even MORE uncertain! So they spend even less.

The economic wizards are so intent on following their models and
ignoring the people, that they will waste tremendous resources trying
to postpone a reckoning that is fated to come. What we really should be
talking about is mortgage finance. We have to figure out how to reduce
the burden of mortgage debt on millions of people (including people
that can perfectly well afford their payments, but are unaware of the
creeping effects of deflation on their purchasing power).

Illusion Agreement

Op-Ed Columnist - Paul Krugman - Decade at Bernie’s - NYTimes.com

It isn't often I find something to agree about with Krugman, but I think he is right about the "illusion of wealth", he is just really wrong about the time period.

First of all, in this world, wealth is ALWAYS an illusion -- that has been known since the Bible came out. Is it a special illusion "the last 10 years"? Maybe, but he has the trend right -- wealth has been even ore illusionary than normal since FDR signed FICA into law. That is when we as a people started signing up for belief in a false Ponzi scheme that makes Madoff look as honest as Abe Lincoln. We has a nation have been on the path of taking money now and transferring debt to future generations since we bought into that scheme.

Once we are all in a "group scheme", the little schemes just pile on. Sub-prime loans and Fannie and Freddie are another example -- if the Government is PUSHING and taking part in serious mortgauge irregularities and "wink, wink, nod, nod" insuring them, well, then why not have some other folks making even MORE money off "the deal"??

At one level this should come as no surprise. For most of the last
decade America was a nation of borrowers and spenders, not savers. The
personal savings rate dropped from 9 percent in the 1980s to 5 percent
in the 1990s, to just 0.6 percent from 2005 to 2007, and household debt
grew much faster than personal income. Why should we have expected our
net worth to go up?

Golly, who was President in the '80s? I bet it wasn't someone that Krugman liked, but at least savings (and most everything else) was better than. What Krugman doesn't quote is that the home credit binge took off from '90 - 2007 ... $2.5 Tillion in '90 to $10.5 Trillion in credit backed by homes by 2007.

So Krugman finally decides that unless we have another WWII level of spending, it will be a "long painful slump". Lovely -- Krugman hates the idea that conservatives are optimistic when Republicans are in power, but I guess the fact is that the left is ALWAYS pessimistic, even when all their folks are pulling the levers!

Since nothing like that is on the table, or seems likely to get on the
table any time soon, it will take years for families and firms to work
off the debt they ran up so blithely. The odds are that the legacy of
our time of illusion — our decade at Bernie’s — will be a long, painful
slump.

Whither Growth?

RealClearPolitics - Articles - A Lost Decade Ahead?

The article compares the current US situation with the Japanese situation circa '90, and I think does a reasonable job. The answer is pretty much in the last couple paragraphs, and I think is also correct. We can argue all we want about "stimulus / no stiumulus / socialism / etc", but the real question is "what is the engine of growth"? I'd quibble with Samuelson that the Internet, high tech and finance itself were strong engines for US growth as well as consumerism, but there is no doubt that consumption based on rising asset values was a major part of our growth strategy. Where do we grow now??

Still, the operative word is "temporarily." Hannity is correct in
that serial stimulus plans become self-defeating. The required debt is
unsustainable. At some point, the economy must generate strong growth
on its own. Japan's hasn't. Will ours?

Since the early 1980s, American economic growth has depended on a
steady rise in consumer spending supported by more debt and increasing
asset prices (stocks, homes). Just as the mid-1980s signaled the end of
Japan's export-led growth, the present U.S. slump signals the end of
upbeat consumption-led growth. But its legacy is an overbuilt and
overemployed consumption sector, from car dealers to malls. The
question is whether our system is adaptive enough to create new sources
of growth to fill the void left by retreating shoppers.

Over The Ledge

RealClearPolitics - Articles - Obama Stimulates Fear, Doom & Gloom

NPR was in full chortle mode this AM as they discussed the huge victory for BO, a COMPROMISE PACKAGE brought about by those 3 courageous Republicans -- the RINO Twins (Collins and Snowe), and the "Spectre" -- of destriction, despair and death.

When the Republicans were in charge, they NEVER had more than 54 Senators, so they ALWAYS had to get 6 votes in the Senate -- yet when they would pass legislation, it was "partisan politics" and "party lines" -- with Harry Reid able to point out how "The Bush Administration and Republicans refused all the attempts of the wonderful Democrats to make this bill better" -- and meantime, 6 of them voted to avoid filibuster and no doubt got more than their pound of flesh, of which we will never know.

Why is that important? Because even this AM, while seemingly giving strong thanks to the 3 Republicans that broke ranks, the seeds were being sold of "how much worse they made the bill". David Obey of WI hedged the bets sniff of "it isn't big enough". As is always the case with the MSM and Democrats, they lack the conviction of what they do, since they have no firm conviction of anything -- freedom, the abilites of the American people, the rightness of the Constitution, or a faith in God for that matter.

So they "hedge" -- and they would STILL hedge if they had all seats in both houses of congress, because the essence of liberalism is NEVER taking responsibility and NEVER staking yourself to a consistent position. Every business person and investor, not to mention soldier on the line, knows that it is ONLY putting yourself in a spot where you can succeed, fail and KNOW THE DIFFERENCE do you even begin to really exist. All else is a form of self negation -- by never taking responsibility for who you are, what you do, or the outcomes of same, you have effectively denied your own existence. Your life isn't even a life -- typically, it is only a "complaint".

Dow Votes No on Porkulous

Senate Passes $838 Billion Economic Stimulus Bill - washingtonpost.com

Well, BO managed to get the gigantic $838 hunk of lard through Congress, and the Republicans managed to hold together well enough so only 3 RINOs supported it.

The Dow cast it's vote with a 4% 382 point drop.

The Rich are Worried

Wealth Matters - It’s Not Just the Money, It’s the Mind-Set - NYTimes.com

We have had downturns before, but people feel this one is different. Are they right? I don't know, I have money in BOTH the market and the "mattress", and plenty of firearms and ammo as well.

“This feels absolutely different because it’s so widespread,” said Eric
Dammann, a Manhattan psychoanalyst, in comparing this crash to 2001 and
1987. “It feels like everything is imploding at the same time as well
as this sense that there is no light at the end of the tunnel.”

Strange behavior is not limited to Wall Street. Brad Klontz, a
financial psychologist in Hawaii and partner in Klontz Kahler, a
financial therapy and planning firm, said someone he worked with had
liquidated his portfolio, put the money into gold and silver and bought
a safe to store the bullion. This person, he says, is considering
buying an assault rifle to protect his wealth. “If it really got down
to that point it would be total anarchy, and there would be nothing you
could do,” Mr. Klontz said. “And this is a really smart guy.”

Dead President Election

Op-Ed Columnist - The Same Old Song - NYTimes.com

This article ends with the sentence:

"This is a party that, given a choice between Abraham Lincoln and Ronald Reagan, would choose Ronald Reagan in a heartbeat."

Now THERE is a "testable hypothesis", but potentially, it was the most cogent part of the article.

Democrats have been arguing for years that "tax cuts are spending" -- at least in their universe, where everything belongs to the government, and what you keep is really the government's too. It is a universe to the left of France, somewhere in the vicinity of the old USSR. So far, the Democrats have failed to notice, that when everything is the government's, there is inherently a whole lot less to tax, spend, or eventually, even borrow. Money may just be printable willy nilly, but value is not. It requires somebody to "create something of value", and the people that do create value expect to be paid more than those who do not -- if they are not so paid, they tend to produce less, or not at all.

Morris is an Optimist!

http://thehill.com/dick-morris/the-obama-presidency--here-comes-socialism-2009-01-20.html

I've covered almost all of this in one post or another, but a good summary. The only thing I REALLY disagree with him on is the idea that we will be through this all by 2012. My guess is that BO will be very successful with the realignment of the country into > 50% "tax takers" and < 50% tax payers along with adding a lot of illegal aliens to the voting roles, along with Acorn Style "here, let me vote for you" absentee voting to create a nearly impregnable Democrat majority for a good long while.

The big issue is that we will mostly likely face a rapid decline in quality of life on all fronts -- income, crime levels, medical, education, etc, but that will be solidly blamed on "the country having gone in the wrong direction for so long". My thinking is that it will be 8-12 years before some coalition of some set of folks can start to get the point across that we have to re-ignite the free market economy or the quality of life here will continue to drop.

So I guess that I think Morris is a optimist!

The End

The End of Wall Street's Boom - National Business News - Portfolio.com

I'm about 3/4 of the way through Alan Greenspan's book as well. One "little known fact" (at least by me) is that the whole of the world equity (stock) markets are "a pimple on the ass of world finance" in the crude terms of one of the guys in this article.

The cumulative world stock markets are something order $30-$40 TRILLION (they vary--a LOT). The Bond markets are like $50 Trillion (they vary less), and the Derivatives Market is like $500 Trillion !!! or something like 12x the value of the entire world GDP for a year. Derivatives are complicated -- the easiest to understand is the "futures contract" that is commonly used by farmers or people buying their fuel for next winter the summer before, or farmers selling their crops expected in the fall in the spring. The contracts have a couple of functions -- spreading risk and providing a speculative vehicle. The homeowner buying in the summer speculates that the prices are lower in the summer than the winter -- but this year, that is likely wrong by a lot. A fuel contract purchased in the summer is likely very costly compared to the actual price of the fuel if one had waited until the winter to purchase it. BUT, it COULD have been much higher-- so the person buying the contract "hedged" against that risk and speculated that they would actually pay less in the summer than the winter.

Farmers likewise might usually assume that corn prices will be lower in the fall than in the spring, so selling part of their crop in the spring allows them to speculate on that assumption and hedge against the risk that the price will be lower. This year the prices were A LOT higher in the spring than they now are, so a farmer could see 2-3x as much profit off the grain in his field if he had sold it in advance.

I'm not even going to try to go into the long and short sales of stocks, credit default swaps, etc, but suffice it to say that it is all those derivatives build off the home "mortgage backed securities" that blew up when the sub-primes were downgraded. It is those losses that drug down the financial system, and are a major reason that the way forward is quite unclear. Greenspan certainly believes that the world markets need those derivatives, but given the level of leverage that was created, it seems that it may be very hard to unwind all of this to get the system operating again.

Add in all the uncertainties of "change" with the upcoming coronation of BO, and even with the rather staid picks he has made to date, a lot of his economic claims during the campaign would lead one to believe that he may at least desire to do a lot of tinkering with the financial engine, and it is an engine that tends to react badly to uncertainty.

In any case, the article is long but quite worthwhile. This is a nice little anecdote about how far out of hand things got when folks thought that Freddie and Fannie would be bailed out and housing values would always rise:

Long Beach Financial was moving money out the door as fast as it could, few questions asked, in loans built to self-destruct. It specialized in asking home­owners with bad credit and no proof of income to put no money down and defer interest payments for as long as possible. In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.