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    GM Death Wish

    Found on Instapundit:

    VOLT ENGINE PLANT ON HOLD: “Word is that GM has shut down construction because it doesn’t have the cash to pay for steel structural members.” Ouch.

    At The Truth About Cars link:

    The new Flint, Michigan engine plant slated to build the ICE for the Chevrolet Volt has been put into deep freeze. AP (via Yahoo) has this latest tale of woe. Word is that GM has shut down construction because it doesn’t have the cash to pay for steel structural members.
    Only four short months ago GM said it would spend $370 million building the new engine plant, and scored $132.5 million in Michigan tax incentives for its efforts.

    If this vehicle is really GMs future, building the facility should be the most (or really close to it) important activity at the company.

    I think GM’s inept executives and managers and short-sighted employers have a death wish.

    Please, no bailout for GM.

    Chapter 11 is the way to go. Wipe out the stockholders. Clean out the execs. Break the union. Toss the dealer contracts.

    A smaller, different GM maybe be able to survive.

    These “industries” are need of entrepreneurs with radical innovations

    Just a few stray thoughts…

    Housing – 30% of income for Housing? Jeez.

    Personal Transportation – Where is my $5k car?

    K12 Education – Too much money, too little results, little customization, wasted human and material capital. There has to be better ways.

    Post-K12 Education – Cost are out of control, benefits are overstated. There has to be better approaches.

    Government – It shouldn’t be as intrusive, nor should it cost as much.

    The “I am too Lazy/Busy to post” Open Thread & Linkspasm

    I have been both too busy at work to post or read much and also too tired/lazy in the evenings to post, so here are a bunch of issues that might interesting. I will make updates in the comments.

    I will engage in comments here and elsewhere, but I most likely won’t post much if anything the rest of the week.

    Anyways, here we go:

    National Security / Global Security

    Positive side-effect from the US involvement in Iraq: “A top Iraqi official is calling for the formation of a regional economic security union to share water, energy and other resources, and mediate disputes among its members.”

    Newspeak example: Ayers and the Weathermen were not doing terrorism, they were doing “extreme vandalism”.

    The Greek Youth Riots: Leftists, not Muslims.

    Military Theory vs. Philosophy: “My point is that real benefit comes from focusing on real and testable change, not extravagant theories on the nature of warfare. An example of a testable hypothesis would be that direct and accurate portable HE projection could replace MG in the primary infantry support role. Best platform would be the XM-109 payload rifle with air-fuzed and HEAP rounds. This could be tested through computer simulation, modeling, field testing and historical review etc etc. While all those methods have there weaknesses and biases, they provide more feedback then is achievable is from the “nature of warfare” theories, so why are focusing on these non-productive concepts of 4GW and EBO etc. to define how we fight COIN?”

    Michael Yon on Afghanistan: “But Afghanistan is a different story. I write these words from Kandahar, in the south. This war here is just getting started. Likely we will see severe fighting kicking off by about April of 2009. Iraq is on the mend, but victory in Afghanistan is very much in question.”. His blog should be in your RSS feed.

    Cyberwar? “The report calls for the creation of a Center for Cybersecurity Operations that would act as a new regulator of computer security in both the public and private sector. Active policing of government and corporate networks would include new rules and a “red team” to test computers for vulnerabilities now being exploited with increasing sophistication and frequency by identity and credit card thieves, bank fraudsters, crime rings, and electronic spies. “We’re playing a giant game of chess now and we’re losing badly,” says commission member Tom Kellermann, a former World Bank security official who now is vice-president of Security Awareness at Core Security.”. This should be a big money hole. I think the threat is overblown (and I am a IT Security guy). The real problem is that the approaches to information security at the Macro level seem pretty immature and need to be rethought. That is where the money should be spent.

    – …and yet: “They propose that botnets should be designated as ‘eWMDs’ — electronic weapons of mass destruction.”

    – Podcast to Listen to: Covert Radio

    Economics & “On The Bailout”

    – [Forbes] Makes the case to cut taxes across the board instead of increasing Government  spending. Here was my “stimulus” idea. So does Human Events.

    – The interference into Bank business by politicians has begun.

    Heh: “Practically speaking, however, public works involve long start-up lags. Large-scale construction projects of any type require years of planning and preparation. Even those that are “on the shelf” generally cannot be undertaken quickly enough to provide timely stimulus to the economy” and “Some of the candidates for public works, such as grant-funded initiatives to develop alternative energy sources, are totally impractical for countercyclical policy, regardless of whatever other merits they may have. In general, many if not most of these projects could end up making the economic situation worse because they would stimulate the economy at the time that expansion was already well under way.” Check out who said that.

    Oops: “These finding are not consistent with standard Keynesian theory”

    Amity Shales: “The idea is to revive the economy and create jobs for America’s unemployed. But huge public works projects often fail to revive national economies. Consider the example of Japan in the 1990s.”

    – BTW, Real Clear Markets is a nice roundup web page.

    Dissing (rightfully) Macroeconomics

    – “One new reality is the imperative that our government modernize America’s aging energy, water and transportation infrastructure.

    Also: “It’s important that the elected officials view public works investment not as a short-term stimulus for stimulus’ stake, or a vehicle for politically driven job creation. The goal should be to create the best and broadest necessary and permanent infrastructure for the most responsible minimal price needed to build it. Being careful here is necessary because this is borrowed, finite money; it could become prohibitively expensive for the feds to borrow as debt levels skyrocket. Spending is not investing.” and “Similarly, funding regular maintenance work that states and cities should pay for isn’t a wise investment. Federal money should pay for replacing obsolete assets and making well-thought-out improvements.”

    Blamestorming the Crisis: “Free markets did not bring the world’s financial system to the edge of collapse. Rather, the epicenter of the crisis was a massive dose of state capitalism. By state capitalism, I mean that the state, in this case the federal government, used its vast powers to intervene in, and distort capital markets in a manner that led directly to the creation of trillions of dollars in bad loans. Moreover, in the pursuit of a social policy to increase affordable housing and home ownership, the federal government engaged in policies that disrupted the financial market’s ability to be self-regulating; that is to attenuate if not avoid the crisis we are in.”

    – “Buffet U

    – I am not surprised: “Recent data suggests that many borrowers who received help with mortgage modifications earlier this year tended to re-default on their payments, a top U.S. banking regulator said Monday.” […] Dugan said recent data showed that after three months, nearly 36% of borrowers who received restructured mortgages in the first quarter re-defaulted.

    – Podcast to listen to: Econtalk and Planet Money

    Detroit and the Auto Industry

    Truth to power:  “GM, Chrysler, and Ford are failing in part because of their foolish attempts to manipulate the government into protecting them from the market”

     – The (first) Detroit handout bailout will be $15billion. Morning Joe (a pretty good morning news show) was saying that the House Speaker didn’t want anybody with business experience to be the Car Czar. Also, no chapter 11 for GM.

    – FYI…that $70/hr figure for UAW workers is just current workers. Retirees cost are above that.

    Chrysler should open its books: “Chrysler LLC says it’s almost broke and needs federal aid to survive. Perhaps that’s true. Yet taxpayers should be asking: How do we know? Sure, we can surmise from all the awful vehicles Chrysler makes that it’s losing mountains of dough. Really, though, we have no idea. We don’t even know who sits on the company’s board of directors. That’s because Chrysler and its owner, Cerberus Capital Management LP, won’t disclose the information”. I suggested this sometime back.

    Milwaukee and “Fixing Milwaukee”

    – The City can’t even do the basics right: “Up to $780 million more needed to fix worst residential roads“:

    The audit from Comptroller W. Martin “Wally” Morics’ office found that 214 miles of residential streets, or nearly 21% of the total, were in the worst shape, as measured by a city Department of Public Works scale.

    Auditors also found that the department is taking an average of 106 years to repave or replace local streets as of this year. That’s down from the 2005 peak of 163 years, but it’s still more than twice the streets’ expected lifespan.

    To deal with the problem, auditors recommended shifting from a policy of working on the worst streets first to a strategy of keeping the best streets in good shape while catching up on the backlog of poor streets.

    Retro Milwaukee

    – The County Board chair wants to forgive the debt a do-gooder organization and let them be a county contractor again.

    Entrepaunership Stuff

    – “Bathroom for Rent

    – Podcast to checkout: Struggling Entrepreneur

    Science, Technology and Gadgets

    Bad news for future Potential Space Elevator: “n a report on NewScientist.com, researchers working on development of a space elevator (an idea we have discussed numerous times) have determined that the concept is not stable.”

    – “The 10 big energy Myths

    “Ten ways the world could end”

    Tech Dirt has Doug Engelbart’s 1968 demo. “That demo was the first time the world saw an awful lot of things that are common today: from the mouse (and, yes, he talks about naming the mouse), to a graphical user interface, to hyperlinks, among many other things (including a few computer bugs).”

    – Podcast to check out: Talk of the Nation’s Science Friday.

    Pop Culture

    – Podcast to check out: All Songs Considered

    Other / General

    The Chicago Way! How disgusting.

    Hmmm: “Joe Wurzelbacher says he felt “dirty” after “seeing some of the things that take place” on the campaign trail.” It is not fun to see how sausgage is made.

    More evidence the Football Playing skill and Gun Safety are negatively correlated (sample size=2): “Mississippi Football Star Shoots Self During Traffic Stop”

    Please add your thoughts and links in the comments.

    The Folly Of USGOV Stimulus packages and Keynesian Economic Theory: (On the Bailout, Part 31)

    Stimuluses (Stimuli?)  don’t work from an economics PoV.

    As blogged here, it may sounds good…

    An economist named John Maynard Keynes argued that the economy could be boosted if the government borrowed money and spent it. According to this Keynesian approach, this new spending would put money in people’s pockets, and the recipients of the funds would then spend the money. This would, according to the theory, “prime the pump” as the money began circulating through the economy. The Keynesians also said that some tax cuts — particularly lump-sum rebates — could have the same impact since the purpose is to have the government borrow and somehow put the money in the hands of people who will spend it.

    …but it has a flaw:

    It overlooks the fact that, in the real world, government can’t inject money into the economy without first taking money out of the economy. Put more bluntly, Keynesianism only looks at one-half of the equation. It conveniently ignores the fact that any money that the government puts in the economy’s right pocket is money that is first removed from the economy’s left pocket. As such, there is no increase in what Keynesians refer to as aggregate demand. The bottom line is that Keynesianism doesn’t boost national income, it merely redistributes it.

    Economics is hard to understand and is poorly taught in the US. The Macro-Economist oversell it predictive and proscriptive qualities. It should be no surprise therefore that junk economics is consider public policy “common sense”.

    Update: Here’s question: Is there a non-economic effect of a Stimulus Package that can lead to a positive economic outcome (keeping opportunity costs in mind)?

    John Maynard Keynes

    Interesting “Inflation” discussion…

    …at Reason.

    This definition of Inflation sound right to me:

    Inflation is an increase in the money supply without a corresponding increase in actual produced wealth.

    …because this means average price levels will be higher.

    “The Credit Card Bailout” and the failure of Business/USGOV Leaders (On the Bailout, Part 30)

    TDAXP covers it all:

    What is disturbing about our President, and our even worse Congress, is that we are throwing good money after bad in a way that is not only wasteful, but also foolish.

    The purpose of the credit card bailout is obviously to increase spending. The credit card bailout does so by socializing the losses that individuals and banks have taken because people bought things they could not afford, while allowing the individuals to keep those toys and the bansk to keep collecting interest payments.

    Without the credit card bailout, less bad offers would be made, and more people would forced into bankruptcy by institutions desperate to get whatver cash back is possible, as soon as possible.

    However, instead of rewarding bad behavior, this money can be spent on ways that will help our country and our world.

    It is clear to me, that we are witnessing an incredible failure of leadership at the Business and USGOV level.

    Furthermore, the undermining of the American system of Democratic Capitalism – the obvious lack of support/understanding of that system –  by Business and USGOV leaders will continue to have non-trivial short-term and long-term negative effects.

    Stimulus Package: “spending in the range of $500 billion to $700 billion”


    I predict every Democrat special interest will come out for their payoff handout.

    Most of this spending will crowd out other spending and investment. Capital Investors will be more likely to sit out given the uncertainty of USGOV actions.

    I laugh (sadly) when I hear politician talk about the jobs they will create. These will not be viable jobs. They will only exists because taxes are sucked from the viable jobs to pay for these news jobs (and the bureaucrats to manage them).

    One thing you hear is that people will be put back to work building or rebuilding schools. That should help fuck up US education for another 50 years. US taxpayers provide plenty of money per student. The problem is that way too much of the capital of the public schools is tied up in their facilities and the management of their facilities (and management/bureaucratic overhead). Throwing more money at school facilities will keep the American K12 stuck were they are. It will do nothing to improve math and/or science education. It will do nothing to improve reading. It will do nothing advance the American K12 system to a 21st century system.

    Public Policy Guidance on “Too Big To Fail” (On the Bailout, Part 28)

    Note for Public Policy going forward:

    If a business enterprise (public, private or GSE) is or becomes Too Big To Fail, then it needs to be broken apart into smaller components.

    If this can’t be done under current anti-trust legislation, then new legislation is needed to support this – perhaps in a mostly pre-canned way.

    “Monetize the TARP” (On the Bailout, Part 27)

    What a fascinating idea from Ray Hennessey!

    What’s the best way for the government to exit these investments and give back the money (and interest) to the taxpayers?

    Here’s a thought: Make it a big closed-end fund and sell the shares to the public. That’s right. Make TARP the biggest-ever initial public offering.

    Already, TARP will have the characteristics of a closed-end fund. It will hold preferred shares that pay up to a 10 percent dividend and will carry a net asset value based on the health of the underlying banks.

    What Treasury can do is first carve out 10 percent of the fund by selling shares to the public in an IPO. Mutual funds, pension funds and hedge funds can all buy the shares from underwriters, with the government (read: taxpayers) getting all the proceeds from the first sale. In return, the investors get up to a 10 percent yield and can trade the shares freely in the public markets. After all, preferred shares are far more liquid than the troubled debt TARP was supposed to buy, so keep liquid shares in a liquid market. At times, like with all closed-end funds, the TARP shares will trade at a discount to NAV, but, hey, that’s what free markets are about.

    Even retail investors could be offered the shares, possibly through an auction-style IPO akin to Google’s IPO or the OpenIPO process Bill Hambrecht created. That gives regular folks even bigger leverage to the upside

    Over time — maybe every six months to a year — Treasury can hold follow-on offerings, selling more shares to the public to monetize the TARP.

    Along the way, the banks themselves will also buy back their own preferred shares from TARP at a premium, and the proceeds from those sales are then given to investors as a special dividend.

    Essentially, a TARP IPO would act like a giant privatization of government assets. It could would have the implicit backing of the U.S. government, have a very healthy yield and return bank stocks to the stock market, not Washington vaults.

    Best of all, it would also not last. Because banks don’t want to have to pay the high dividends on the preferreds, there is an incentive to buy back these securities. As time goes on, individual TARP shareholders would see the share value decline, but in return they would be getting cash from all the buybacks, which they could use to reinvest in the broader market.

    I love this idea!

    It gets the Feds out of the business of “owning” chunks of private banks. It gets taxpayers of the hook for the most part. Hell, make the dividends for the shares be federal tax free.

    Good News: “Treasury Secretary Paulson Says Government Won’t Buy Troubled Assets” (On the Bailout, Part 25)

    This is good news!

    Treasury Secretary Henry Paulson said Wednesday that original plan to purchase distressed mortgage assets from Wall Street firms is not the best use of the $700 billion financial rescue package, and officials will now focus on direct capital injections into the struggling financial firms.

    I always preferred something like
    secured loans (along with other measures) or the Soros plan – USGOV is coming close to that.

    Also, I had not thought of the all of the direct action in the commercial paper markets and that USGOV action has worked out to.

    Buying up MBSs was always a lousy idea because “between the bad and fraudulent loan data and the flawed risk models, currently, complex mortgage securities can not be valued with any reasonable accuracy” thus the US Taxpayers were going to get screwed.

    Update: HotAir covers the issue a bit differently but evenhandedly.

    On the Bailout, Part 24: Rewarding the wrong people at taxpayer expense

    I found this via TDAXP:

    Have you been paying your mortgage? Then it sucks to be you

    Read it and the discussion and be pissed off like me:

    GRRRR!!!!! How about for $400, me and a few buddies rough them up and shove a copy of Personal Finance for Dummies up there….well I digress.

    The essentials: USGOV will pay each financier $800 to reduce interest, interest rates, and required monthly payments for people who are missing payments on the mortgages for the houses they speculated on and can no longer afford to get them down to where their monthly payment is less then 38% of gross incomes

    Note: The personal finance rule of thumb is 30%

    So who are the losers on this?

    Do you have a mortgage you pay every month? Or were you saving up to make a big down payment.

    Then you made the wrong decision.

    Hey if anybody out there still wonders why I think USGOV interference in the economy is mostly is bad thing, it is because of shit like this.

    On the Bailout, Part 23: “Bank holding company status to aid American Express funding”


    American Express said on Monday it won approval to become a bank holding company, in a step that could cut its borrowing costs and give it more access to government money. [Link]

    I am not sure how this lowers their borrowing costs. Could someone explain that to me?

    I think this is all about making it easier for AmEx to get government money meant for banks.

    Update: Duh,I answered my own question. The USGOV bailout money is provided at below market rates.

    On The Bailout aka The Panic of 08, Part 22: The Tally So Far…

    totaled nicely by Reason magazine:

      – $29 billion for Bear Stearns
      – $143.8 billion for AIG (thus far, it keeps growing)
      – $100 billion for Fannie Mae
      – $100 billion for Freddie Mac
      – $700 billion for Wall Street, including Bank of America (Merrill Lynch), Citigroup, JP Morgan (WaMu), Wells Fargo (Wachovia), Morgan Stanley, Goldman Sachs, and a lot more
      – $25 billion for The Big Three in Detroit
      – $8 billion for IndyMac
      – $150 billion stimulus package (from January)
      – $50 billion for money market funds
      – $138 billion for Lehman Bros. (post bankruptcy) through JP Morgan
      – $620 billion for general currency swaps from the Fed
    Rough total: $2,063,800,000,000

    That’s a little over $6,800 for every man, woman, and child, or just under $15,000 for each of America’s 140 million taxpayers.

    This is just the start.

    Entrepreneurship Stuff: Mitt Romney on “making America more competitive”…

    …here at CNN:

    First, America must substantially improve our education system. We’ve fallen behind, particularly in areas of math and science.

    Second, we’re going to have to remedy our disproportionate health care cost disadvantage. America spends far more than any other nation as a percent of GDP on health care. This effectively is an enormous tax on the economy and on our businesses.

    Third, our national debt is excessive and our entitlement obligations pass a massive burden onto the next generation.

    Fourth, tax and regulatory policies weigh down our ability to compete. Specifically, our products carry an embedded tax which makes American goods less competitive abroad and at home.

    Fifth, America’s apparent retrenchment from the concept of open, free and fair trade could put us further behind other nations that are aggressively seeking trade relations around the world.

    Sixth, our lack of an effective energy policy drains our economy by approximately half a trillion dollars a year.

    And, finally, the blow that Wall Street has taken may make us less competitive in financing entrepreneurship.

    This is really a list of problems, not solutions. It is a start though.

    Capturing My Thoughts: Mortgage interest tax deductions, and a better personal income tax syste,

    Made at TDAXP.

    On Mortgage interest tax deductions…

    Why subsidize homeowners at all over renters? Why subsidize them even more? There is no reason to have any federal mortgage credit. Once again, this is the government distorting economic decisions made by regular people.

    Related: Many of the forms I have seen over the years invoke “tax deductability” as a reason to but over renting (or to buy even bigger). Most of those worksheets had the math/tax ramification wrong and therefore nudged people to owning who should not have, or nudged people to buy a bigger house (take a bigger mortgage) then they should have bought.

    On a better income tax system…

    I think “real change” would be a simple flat tax or perhaps a 2 rate tax on all income. One rate for income up to the Poverty line (or 1.5X Poverty Line), and a second rate for all income above that. No deductions.

    I am okay with a Consumption Tax version of the above.

    I used to think that such a plan shouldn’t tax income until the poverty level (or something close to it) was reached. I have read info recently showing how people below the poverty line hold/vote overwhelming socialist views/candidates. So, I thin having them pay taxes would be a good education.

    I should flesh this income tax thing out.

    Also note this interesting idea at the same post by commenter Brent Grace:

    Putting aside the recent crash in the real estate prices, I wonder if the encouragement of homeownership places constraints on labor mobility that harms overall GDP growth. Would we be better off as a society of nomadic renters whose primary wealth was largely in IRAs or 401ks? I don’t know, but I’m not longer quite so sure that widespread homeownership is a net positive.

    Great thinking! The homeowner constraint does effect the economy negatively in that mobility of deployment/redeployment of Human Capital is slowed and reduced as individuals economic choices are reduced. That has to effect growth.

    There are lots of positive reasons to own a house. There are negatives (e.g. maint cost, reduced mobility). The positives and negatives may wash out.

    My bottom line: USGOV should not be distorting individual economic choices with regard to renting vs buying (and vs buying how much).

    Update – Another comment by me at TDAXP:

    If there is going to be a tax on C Corporation type businesses, I would do it as a flat rate against cash flow, not based off earnings.

    Earnings can be manipulated all sorts of ways…cash flow reporting not so much. Investors know that cash flow is a better signal then earnings anyway.

    The cost of tax compliance would go way down because businesses would not need to keep separate books for different types of earnings reporting (Sec, IRS, States, Investors). Businesses already keep track of cash flow.

    A positive side effect of taxing the cash flow is that businesses can get immediate tax benefits from capital spending (capital spending reduces earnings over time – as depreciation – but hits cash flow right away).

    A Single Rate Cash Flow tax on businesses could be revenue neutral to USGOV and still be a positive in reduced expenses for businesses and for USGOV.

    Of course, most US Businesses pay no income taxes so they would pay no cash flow tax. This harping point by anti-capitalism politicians depends upon most people not noting that most businesses are not C-type corporations – which are the only ones that pay a corporate tax.

    Most businesses are S-type corps, LLCs, LLPs, partnerships, or sole proprietorship. For those, earnings flow to the owners where it is then taxed as personal income. So for these, as cash is passed thru to the owners, it could be taxed as income.

    As far as personal income taxes, I would also be okay if the income tax was replaced completely with a partial flat tax and partial national sales tax.

    Almost any of the reforms you here bandied about are better then the current system.

    On The Bailout aka The Panic of 08, Part 21: Transparency (not)

    I am sadly not surprised by this at NPR:

    BailoutSleuth tracks one of the first Treasury contracts in its $700 rescue plan.

    Guess which part got redacted. “The Financial Agent shall receive a monthly fee” of . . .


    Update: I got the link from TechDirt.

    OpenYale Link: “Financial Markets with Professor Robert Shiller”

    I found this at OpenYale (thanks Zenpundit): “Financial Markets with Professor Robert Shiller“. The class sessions look interesting – and timely (and free).

    Ah the good old days…

    On The Bailout aka The Panic of 08, Part 20: The Good, The Bad, and The Ugly

    So how is the USGOV Bailout Coming?

    GOOD: The FDIC is insuring all non-interest bearing deposits.

    GOOD: The USGOV has not bought an MBS or other derived complex securities

    BAD: …yet.

    BAD: Nobody is talking about changing bank deposit capital requirements to allow banks to loan more (which could be done right away without taxpayer money).

    BAD: USGOV is not using impartial Bank Examiners to determine proper capitalization levels (from the Soros plan)

    GOOD: USGOV is increasing the capitalization Banks some $250billion…

    BAD: … 1/2 to 9 large banks (whch 9 and why those 9)  and 1/2 small banks

    SO-SO: Instead of using secured loans (my prefered plan) or secured loans plus warrants,they are using Preferred Shares.

    UGLY: The prefered shares are below market rates (meaning taxpayers are coming in after stock holders to some extent). The lender-of-last resort should have a higher dividend rate.

    BAD: The president says we are not nationalizing the banks, but I fear USGOV will pressure the banks to do things that have nothing to do with the short-term or long-term problem.

    DOUBLEPLUS UGLY: The one-man capitalism wrecking crew has the bailout at $2.25trillion for his buddies. We knew this was going to happen.

    GOOD: NY Times thought: “Banks that are loudly demanding that mark-to-market rules be suspended should receive special attention, for the same reason that the police are suspicious of people who hurriedly hide something as a cop approaches. Banks that want government cash should have to prove they are providing accurate market values of the assets they own.”

    WTF UGLY: The confusion coming from USGOV and pundits is creating much uncertainty and causing the problem to spread. Uncertainty worsens panics by delaying investors. This has happened before. Banks will also be slow to act.

    Other Ref: NY Times (also here)

    On The Bailout aka The Panic of 08, Part 19: Power, Accountability and “a nasty crossover dribble”

    From a FoxBusiness Blog:

    From the NYTimes today (in passing of course, heaven forbid we highlight and focus on how alarming the changed TARP Bailout has already become): “All told, the potential cost to the government of the latest bailout package comes to $2.25 trillion, triple the size of the original $700 billion rescue package, which centered on buying distressed assets from banks.”

    Yup, within two weeks of one single person getting the limitless authority to centrally control all aspects of our financial system and monetary supply via the TARP Bailout bill, that one single person has already more than tripled how much of our hard-earned money he’s going to give his old partners from Wall Street. Oh, and the terms of this $2. 25 TRILLION INITIAL BAILOUT PACKAGE just got completely changed in the banker’s favor. They don’t even have to trade in the toxic stuff that they Paulson and Bernanke and everybody on TV told us that if we’d take off their hands that we’d make huge money. So, what…now we just give them the money at way below market rates (Buffett got twice as much in interest from both GE and Goldman) without even getting the junk that’s supposedly being way undervalued and that we taxpayers were therefore supposed to make a bunch of money on.

    Hank Iverson, nay, Paulson sure has a nasty crossover dribble, don’t he?

    The USGOV has screwed this up.

    Judy Shelton’s WSJ OpEd – “A Capitalist Manifesto”

    Read this at the WSJ. Highlights:

    Where are the champions of free-market capitalism?
    These days, it seems difficult to defend the efficacy, let alone the morality, of an economic approach to human interaction that is now blamed for having put the entire global economy at risk. But that is exactly what we need — most importantly, from America’s next leader.
    “The financial crisis is not the crisis of capitalism,” according to Mr. Sarkozy. “It is the crisis of a system that has distanced itself from the most fundamental values of capitalism, which betrayed the spirit of capitalism.”
    What are the basic principles that we can forge together toward this “true capitalism” that Mr. Sarkozy has described, this market economy that utilizes the power of genuine competition to serve the needs of individual producers and consumers? It is a capitalism that accords primacy to the entrepreneur — that compensates hard work, innovative solutions, stalwart commitment and personal discipline.
    Honest capitalism requires the following:

    Free-market clarity. Consumers must be able to properly judge the inherent value of goods brought to the marketplace if markets are to function properly; this applies to financial instruments as wholly as it does to products and services. When the trade-off between risk and return is obscured by an implicit government guarantee — as exemplified by Fannie Mae and Freddie Mac securities offered with a “wink” from Uncle Sam to eager purchasers around the world — the consequences can prove extremely damaging. False advertising leads to compromised market outcomes; it constitutes a betrayal of the consumer.

    Monetary integrity. Monetary-policy decisions that “stimulate” the economy by issuing too many claims to real production, or “constrict” the economy by reducing the amount of available purchasing power or capital investment, utterly confound the notion of stable money. Money represents a moral contract between government and ordinary citizens — the sanctity of money rests in its reliability as a store of value. Inflation robs the worker of savings he has accumulated through his labors; by means of government stealth, it diminishes his future purchasing power. The U.S. mortgage mess can be partially traced to the environment of perpetual inflation that seduced citizens into believing the price of housing would rise forever.

    Financial validity. What turns the reputable practice of granting credits to deserving borrowers into a high-stakes casino game where the biggest stacks of chips are held by speculators working for the world’s largest banks and investment houses? […] Exotic financial derivatives that gamble on the anomalies of the global economy — currency movements, interest-rate disparities, governance incongruities — mock the very concept of “investment” to generate future higher returns from production.

    Regulatory responsibility. Rule of law is a core requirement for civil society; without it, anarchy reigns. Government regulation does not create wealth, but it is a necessary condition to provide the stable and predictable environment that permits buyers and sellers to carry out economic and financial transactions with confidence. Trust is achieved through transparency, first and foremost. And while government regulation, at its best, merely functions as the incorruptible referee — it will never dream up the breakthrough projects that become capitalism’s greatest success stories, nor have the discernment of the venture capitalist who recognizes an entrepreneur with a brilliant idea — it nevertheless plays a key role. Governments should view economic freedom as a basic human right, to be respected and protected by ensuring that markets function smoothly and openly.

    Entrepreneurial opportunity. Much of the resentment felt by citizens toward the massive investment companies who peddled bad government paper, and the craven politicians who promoted the practice, stems from the perception that capitalism is rigged toward the most powerful. When the owner of a small retail outlet or medium-sized service firm gets into financial trouble — who steps in to help? Why are the rules to start a business so onerous, why is the bureaucratic process so lengthy, why are the requirements for hiring employees so burdensome? When does the entrepreneur receive the respect and cooperation he deserves for making a genuine contribution to the productive capacity of the economy? Equal access to credit is sacrificed to the overwhelming appetite of big business — especially when government skews the terms in favor of its friends. It is time to pay deference to the real economic heroes of capitalism: the self-made entrepreneurs who have the courage to start a business from scratch, the fidelity to pay their taxes, and the dedication to provide real goods and services to their fellow man.

    If we can build a new financial and monetary order to serve the needs of these people — wherever they exist around the world — we will help to bring about the fulfillment of the highest ideals of capitalism.

    The boldings and italics are mine. The OpEd is just fantastic. It is a great foundation for what must be done.

    Capturing My Thoughts: Public Choice Theory / Public Choice Economics

    From here (spellchecked) at TDAXP:

    Generally my take on Public Choice is…

    Bureaucrats and politicians (in the public sector or inside corporate bureaucracies) have an incentive problem. They do not have a price system to guide them. They do not have a beneficial profit motive. They do not fear for the loss of their job for reasons of failure (e.g. Peter Principle, incumbency re-election rates). These actors lack good incentives.

    So,they tend to uses metrics like size of budget, number of reports, personal affluence, perceived power of position, accumulation of perks,and personal status as the guiding incentives. They are not primarily motivated by the success of the others or the organization as a whole.

    Really public choice economics is just looking at decision-making from the point of view of economics keeping in mind the driving incentives are different.

    The design of any government or internal bureaucracy should purposefully try to minimize the effects of these bad incentives and include counter-balancing incentives (to create a negative-feedback loop).

    Some things that come to mind:

    – Funding of robust and aggressive Auditors and Inspector General offices to root out graft and corruption and abuse

    – Term Limits, Job rotations, automatic cutting of low-performers

    – Open records, transparency of records and actions, sunshine, ridicule of abuse (name names)

    – single-subject legislation (harder to hide stuff); no conference report hidden earmarks

    – all legislation and project should have “expire on” dates, requiring purposeful renewal for continuation

    – decentralization / federalism / spinoffs

    …so I don’t have to remember it.

    Interesting discussion of the U.S. Auto Industry at TDAXP

    Here’s the link.

    Social Credit Nonsense

    Things are getting weird on the Bailout (or Panic).

    On a Fox Business blog, the dumb idea of Social Credit was floated…and no one called the poster on it here.

    My own negative reply was never approved:

    How messed up are things that somebody can push nonsense like Social Credit in the comments and not have anybody call him on it? Jeez.

    I don’t think I was too snotty. Nonsense like Social Credit deserves some snot.

    Question: “SO IS IT GOOD NEWS, OR BAD NEWS? U.S. gasoline price marks biggest drop ever.”

    Question: So asks instapundit.

    Answer: Bad news. It means that the markets are predicting a significant reduction in demand. They are not predicting a Green Revaluation. They are predicting a significant reduction in economic activity worldwide.

    On “The Bailout”, Part 15: Wisconsin Congressman Ryan – “vote for bailout went against his principles”

    So says this Link in the Milwaukee Journal.

    I think Representative Ryan doesn’t understand what “principles” means.

    He had a chance to signal his what his principles are. He signaled something else:

    “This bill offends my principles,” the Janesville Republican said in an impassioned speech Sept. 29, before Congress’ first attempt to pass the measure. “But I am going to vote for this bill in order to preserve my principles, in order to preserve this free-enterprise system.”

    What poppycock. What doublespeak. Did Ryan offer any alternatives? No. Did he even see other alternatives? No mention is made in the article.

    “Obviously, I don’t like this. What’s disturbing about these bailouts is the moral hazard it produces.”

    Not obviously, Congressman. Votes matter, not words. You voted for it.

    Ryan says he hasn’t lost his zeal for the free-market system and, despite the losses in the stock market, …

    Blah blah blah. You had your chance Rep Ryan. Go fuck your rhetoric. When the chips were down, you voted on the wrong side. You had a chance to express your “zeal”.

    Not all congressmen were confused on what to do:

    “How can we have capitalism on the way up and socialism on the way down?” said House Republican Study Committee Chairman Rep. Jeb Hensarling (R-Texas), who opposed the plan. “If we lose our ability to fail, will we not soon lose our ability to succeed?”

    Quite right and good on you.

    Note: Ryan is one of the professional congressman. He really hasn’t done anything else in his adult life but be a congressman. The US has enough of those types in congress. Throw him and the others like him out.


    Daniel Mitchell, a supply-side tax policy expert at the right-leaning Cato Institute, takes issue with any conservative who voted for the package.

    “They can call themselves conservative all they want, but when push came to shove, they grabbed $700 billion from taxpayers and gave it to the fat cats on Wall Street,” he said. “It’s hard to say any of that is fiscally responsible.”

    Its not. Ryan’s actions define him, not his words.

    Note the ironic words on the background