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Media Infiltrations: Of Interventions and Conservative Principles  National Review Online September 23, 2008 Quit Doling Out That Bad-Economy Line The Washington Post September 14, 2008
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Chronicle of the Conspiracy
Join us as we discover, document, expose and challenge the bad people, the bad institutions and the bad ideas that stand in the way of wealth creation -- and show you how to fight back!
Saturday, April 14, 2007
I LOVE 'LOUSY' A reader who asked for anonymity has some sage words to share, after reading my bull/bear debate with Barry Ritholtz.I took a few minutes this morning and read the bull /bear debate. I was left thinking after your opponent's last word: some statistics (or the misuse thereof) don't mean much. We have very low unemployment and a strong economy and yet we keep being told how rotten things are, like the low savings rate. I contribute to that low savings rate, having retired in the fall of 1998 at age 53 (corporate downsizing during those wonderful 90's). Not being rich, it was a bit scary at the beginning of these last 8 1/2 years. Yet, despite our negative household savings rate and this "lousy" economy, our net worth has more than doubled during that period thanks to strong stock market returns, the rapid real estate appreciation, and things like being able to refinance our sizeable mortgage at a dramatically lower interest rate (less money spent on mortgage is a big help when income has taken a nasty hit). So, I wish for more of the same "lousy" economy we've had since 2003. I do fear that inflation will end up being the killer, and have been unable to understand why anyone would want to own a long term bond yielding under 5% (or could it be that a lot of those 20 year old wiz kids that participated in the tech bubble moved on to bonds?).By the way, I came from a rural poor up bring, obtained an engineering degree and worked as an engineer at a utility company. I've watched enough economic cycles to appreciate that the world is always changing, and no amount of clinging to the past will stop change (although we may be able to make change harder on ourselves by resisting). Our friends in the media, business and union leaders, economic pundits and politicians are always right there resisting change. And most of the propaganda that we get fed daily is like you say: to keep us poor and stupid. In the past few years, we keep being told over and over that things are terrible. I guess that we just have to let the Bush tax cuts expire and all will be wonderful (and yes, I'm being sarcastic).
Posted by Donald L. Luskin at 10:55 PM | link
THERE'S NO DOUBT WHERE CANDIDATE THOMPSON STANDS Fred Thompson in this morning's Journal:
Unfortunately, the tax cuts that have produced our record-breaking government revenues and personal incomes will expire soon. Because Congress has failed to make them permanent, we are facing the worst tax hike in our history....we need to maintain economic growth and healthy tax revenues. That is why we need to reject taxes that punish rather than reward success. Those who say they want a "more progressive" tax system should be asked one question:
Are you really interested in tax rates that benefit the economy and raise revenue--or are you interested in redistributing income for political reasons?
Posted by Donald L. Luskin at 11:50 AM | link
Friday, April 13, 2007
PEACE WITH SLAVERY Here's the worst idea yet to solve the mess in Iraq. Lawrence Kotlikoff suggets imposing slavery on the male population:The Iraqi government should institute a draft of all Iraqi men between the ages of 18 and 35. This is the demographic most responsible for the violence. The removal of these 3 million men from the cities and countryside to army barracks would likely bring an immediate end to Iraq's horrific nightmare. Any men older than 35 suspected of involvement in terrorist or insurgent acts would also be enlisted in the Iraqi army.So let me get this straight. First we get Sunnis, Shiites and Kurds to unanimously agree on what the slaves should do. Yeah, right. Then we force the slaves to do it. Then they go to sensitivity training class.The role of the enlarged Iraqi army would not involve bearing arms or training in the use of arms. Rather the role would be to reconstruct the country. All army units would be assigned specific reconstruction tasks and be jointly commanded by a Shia, a Sunni, and a Kurd who would make unanimous decisions...
Inductees would be taught the skills needed for their assigned reconstruction tasks, receive general and practical educational instruction, and learn respect for diversity and human rights.
Thanks to reader Corey Snow for the link.
Posted by Donald L. Luskin at 1:12 PM | link
BUCHANAN ON IMUS I'm not normally a fan of Pat Buchanan, but I think his analysis of the Don Imus "ho's" affair is pretty much right on the money.
Who, after all, believed the slur was true? No one.The only thing I'd add -- and it surprises me that Buchanan left this out -- is to note the role played in both affairs by Al Sharpton and Jesse Jackson, America's premier fomenters of racial divisiveness.Compare, if you will, what was done to them – a single nasty insult – to the savage slanders for weeks on end of the Duke lacrosse team and the three players accused by a lying stripper of having gang-raped her at a frat party.
Duke faculty and talking heads took that occasion to vent their venom toward all white "jocks" on college campuses. Where are the demands for apologies from the talk-show hosts, guests, Duke faculty members and smear artists, all of whom bought into the lies about those Duke kids – because the lies comported with their hateful view of America?
And hate is what this is all about.
Thanks to colleage Tom Demas for the link.
Update... This may be taking things too far, though.
Posted by Donald L. Luskin at 12:51 PM | link
NOW HERE'S A CONTRARIAN! Why a real estate boom is coming. Yep, you heard me right.
Posted by Donald L. Luskin at 8:55 AM | link
Thursday, April 12, 2007
EVERYONE SEEMS TO THINK SO! The anonymous coward at the Angry Bear blog who calls himself only PGL thinks I'm betraying myself when, in my bull/bear debate with Barry Ritholtz, I said that 4Q 2006 overall real GDP growth of 2.5% was "ho hum" while 3.7% growth ex-housing was "spectacular." Here's the critique:The average real GDP growth rate has averaged [sic] about 2.5% [under Bush] or as Luskin said was “ho-hum”. Real GDP growth during the Clinton Administration averaged 3.7%, which Luskin said represented “spectacular results”.Sigh... and snore... these Leftists will seize on the most innocent comments to try to trash Bush and beatify Clinton. Never mind the structural differences in the economy that may facilitate different growth rates in different periods (for example, the Fed is constantly revising its idea of "potential growth" based on many factors over which a president has no control, such as demographics). Even within the mentally limited terms of PGL's president-centric analysis, PGL ignores that the economy under Bush had to spend the first couple years digging out from under the aftermath of the loony and corrupt Clinton years -- burst dotcom bubble, corporate scandals, and so on. Once the clean-up was done and the Bush program kicked into place after the massive tax cuts in the second quarter of 2003, real GDP has averaged 3.5%.
Posted by Donald L. Luskin at 8:30 AM | link
HAVE I BEEN A HYPOCRITE? Economist John Seater takes me to task:
Your graph of GDP growth shows a robust economy - growth is positive all the time and even now stands at a respectable level. BUT note that the graph shows the growth rate falling over 2006. Isn't that *exactly* like the New York Times graph you blogged about this week, that showed sustained positive growth rates of employment but that also showed declining growth rates? No one - well, no one with any brains - would accuse you of trying to make US economic performance look bad. Much as I detest the Times, I must say that we owe them the courtesy of applying the same standard to them.
Posted by Donald L. Luskin at 8:23 AM | link
VOX POPULI Paul Krugman's students have voted. Lousy teacher. Not hot.
Thanks to Jameson Campaigne for the link.
Posted by Donald L. Luskin at 2:07 AM | link
Wednesday, April 11, 2007
A THOUSAND MORE WORDS IN THE DEBATE My bull/bear debate with Barry Ritholtz on the Capital Commerce blog has completed its third round. Another chart is required for the fourth round that will be posted tomorrow. Here it is:
Posted by Donald L. Luskin at 6:41 PM | link
EXPERT TESTIMONY Want an "expert" to comment on the state of the economy? How's this, from a Bloomberg story crowing over poll results that purport to show a majority of Americans predicting recession despite a low 4.4% unemployment rate:
"We're living on borrowed time," said Andrew Herring, 43, a chemical engineering professor at the Colorado School of Mines in Golden, Colorado, who took part in the survey. "We spend ridiculous amounts of money on the war and now we have issues with the subprime housing market," said Herring, a Democrat.Thanks to "Donny Baseball" for the link.
Update [4/12/2007]... Now here's an experet! Reader Jim Ashmore protests:
I am a Chemical Engineering and Petroleum Refining graduate (Mines Class of 91) and all I can say is that I am embarrassed for my alma mater.Update 2... Our monetary policy correspondent "Irrational Exuberance" has a view, too:Things are great down here in Texas. Things are even better in Colorado, judging from my frequent trips home to visit family. The front range is booming. What used to be farms are now high-dollar houses. Andrew Herring does not have a clue.
The seemingly empty story resided much of the day on Bloomberg's top story menu. After receiving it a few times from brokers and colleagues, I glibly fired back the following to one of them,Actually, I believe I recall that the last time this survey result was obtained was in December 2004. The economy subsequently did very well, as did the stock market.Quoting from the story, "similar to the 64 percent who anticipated the economy would contract in a December 2000 poll by the Los Angeles Times three months before the last decline..."But the article fails to note if there were any false positives. To have any informational value and ascend beyond purely anecdotal status, it's relevant to look at something like (1) whether there is a correlation between this figure and subsequent GDP growth or (2) whether there is a correlation between this figure and future equity returns. I mention the latter since people use stuff like this to blindly support a bearish stance in equities. I wouldn't be surprised, though, if there is actually a *negative* correlation with future stock market returns given the obvious discounting function of the market coupled with what might be a slight tendency to overshoot. I realize you're only sending the story because it's a meme this morning, but I still can't help indulging myself with a Niederhoffer-style attack on it.
Posted by Donald L. Luskin at 9:58 AM | link
GENIUSES CAN BE SO STUPID Seems that "pi" has been misdefined all these centuries, according to mathematician Bob Palais. Reader Mark Spahn sums it up like this:
At present, pi is defined to mean the ratio of the the circumference of a circle to its diameter. It should have been defined, argues the author, as the ratio of the circumference of a circle to its radius. Because of the wrong choice, 2Got that?pops up everywhere, where a simple pi would be more elegant. As another example, if pi were defined properly, the formula for the area of a circle would be A = (1/2) r^2, which is analagous to the familiar formulas s = (1/2)gt^2 for the distance s fallen under gravitational acceleration g in time t, or E = (1/2)mv^2 for the kinetic energy E of a body of mass m moving at velocity v. This wrong choice is like the wrong choice made by Benajamin Franklin. He assigned "+" to one kind of static electricity and "-" to the other kind. He could not have known it at the time, but the extra particles, which should have been associated with "+", turned out to have the charge he labeled "-". So now we have to make a distinction between "current" and "electron flow".
The wrong choice for pi has implications for our intergalactic reputation. If we send out "3.141592654..." to S.E.T.I. (S.T.I.) listeners elsewhere in the universe to show how smart we are, they will laugh at us for peculiarly broadcasting only half of the universal constant 6.283185307... .
One fix that has been suggested is to use a three-legged pi for what we now call 2
; formulas using the three-legged pi are given in the article.
Update... Spahn continues...
As a follow-up to an earlier note about the misdefinition of pi, and how to fix the problem by using an new consonant defined as equal to 2Update 2... Mark adds,and represented by a three-legged version of the lowercase Greek letter pi, we will need a distinctive name for this three-legged pi. I propose calling this consonant "poi". The allusion is not to the goopy taro-based Hawaiian food, but rather to a form of Maori juggling with balls swung at the end of cords held in the hands. The association of circles with this "poi" is obvious, both because of the shape of the balls, and because of their circular trajectory when juggled.
... Just my little contribution to the progress of mathematics.
In rereading my note on "poi" as a three-legged lowercase Greek letter pi, I notice that I called it a "consonant" when I meant to say "constant". To cover my embarrassment, let's say that "poi" is both a constant and a new Greek consonant which is pronounced like "p", but very vigorously, so as to moisten nearby listeners with spittle sprayed out in a circular arc.Update 3... Reader Mike Daley sagely observes,
As G.K. Chesterton so aptly stated, “Without education, we are in a horrible and deadly danger of taking educated people seriously.”
Posted by Donald L. Luskin at 9:53 AM | link
BULL VERSUS BARRY All this week I take the bull position in a bull/bear debate on the Capital Commerce blog at US News & World Report, hosted by James Pethokoukis. Taking the bear position is Barry Ritholtz, with whom I occassional cross paths on CNBC's Kudlow & Co. If you want to catch up on the debate, here's a link to round one, and here's a link to round two. For round three, I present a couple of graphics. They can't be posted directly on the US News site for some reason, so I am posting them here and linking to them from there. So if you're here because you followed those links, welcome! As long as you're here, why don't you sign up for email alerts! Here are the charts...
The point of these charts is to puncture the myth of MEW -- "mortgage equity withdrawal," cash raised by homeowners by refinancing appreciated homes. The myth is that the current economic expansion has been artificially fueled by MEW, which has allowed US consumers to spend far more than they otherwise would have. As you can see, growth in spending just isn't correlated to MEW at all. What explains consumption is income -- and income is growing just fine, and should continue to do so with an unemployment rate of only 4.4%.
Posted by Donald L. Luskin at 8:58 AM | link
Tuesday, April 10, 2007
HOW TO MAKE SARBANES OXLEY LOOK GOOD It really doesn't get any stupider than this. Bloomberg:U.S. lawmakers want to stem the rising number of mortgage delinquencies by targeting investors who finance such lending through the purchase of bonds backed by home loans.This violates a bedrock axiom of regulatory theory, which is that regulatory burdens should be placed on the economic actor who can most efficiently bear them. Bond buyers are in no position to police or bear liability for the potentially unknowable acts of non-compliance by lenders in the field. But there's one bright spot in this dark idea -- it will be a boom for trial lawyers. Just think of the deep pockets they can sue...The top Republican and Democrat on the House Financial Services Committee both said they want laws making investors who buy mortgage bonds liable for deceptive or bad loans. An agreement by lawmakers in two parties to increase investor liability for abuses in subprime lending increases the chances for legislation to pass this year.
Putting the burden on investors may deter the subprime mortgages that have pushed delinquencies to a four-year high by making it more expensive for lenders to make and sell the loans, Representative Spencer Bachus, a Republican from Alabama, said in an interview in Washington.
Update... Reader Andrew Terhune observes,
Aren't investors who buy mortgage backed bonds already liable in a very real sense? Isn't their money on the line? If the mortgages are in default, their bonds don't get paid. Seems pretty simple to me, and self regulating.
Posted by Donald L. Luskin at 8:20 AM | link
Monday, April 09, 2007
LITMUS TEST FOR ENVIRONMENTALISTS Russell Roberts and Don Boudreaux at Cafe Hayek are just so damn good at coming up with pithy metaphors, thought experiments and reductions to absurdity that really open up the mind to their arguments. Here's Roberts with a great one:It's a one question quiz:Suppose we discovered that the earth was cooling rather than warming due to a natural cycle. Would you encourage people to drive more and use more carbon-based energy as a way of warming the earth?I suspect that some people's ideal policy towards the earth's climate is that it should be whatever it would be if people didn't exist. Or whatever it would be if people lived in loincloths without fire. That is, the ideal climate is the natural one, because our species is unnatural. In this world view, humans are a poison on the earth and the reason we should put on a carbon tax or discourage fossil fuels is that our use of the earth's resources is somehow immoral. Obviously, not all people who worry about global warming feel this way. That's the point of the quiz.
Posted by Donald L. Luskin at 9:01 AM | link
WHY DOES ZELL BUY? Joseph Epstein on Sam Zell's acquisition of the Chicago Tribune, and the dabbling in newspapers by others of the ultra-rich:
If I were a cartoonist, I should draw these gents together, in a large motorboat, with lots of Louis Vuitton luggage piled up at the stern, racing to catch up with and board the Titanic. For one of the strong conclusions of the day is that newspapers are on the way out, and well beyond saving, even by the application of sound business principles. The young rarely read them, advertisers are losing interest in them, the Internet appears to be beating them at every turn as the news and information medium of choice.
Posted by Donald L. Luskin at 8:44 AM | link
"MONEY QUOTE" INDEED My DC lawyer/lobbyist friend is worried...
This runaway spending habit of the woman her "friends" (loyal minions) call HRC will be her undoing as a candidate or our undoing as a nation if she wins. Money quote from Newsweek:"HRC" stands for what? "Her Royal... "Clinton spent on average more than $1.4 million a month during her Senate campaign last year, including $400,000 a month on consultants. It's not clear how much cash she's burning now, but her consultants remain the same.
Posted by Donald L. Luskin at 8:35 AM | link
Sunday, April 08, 2007
SPINNING IN HER GRAVE I guess this is what happens to any cultural icon -- you become a public good, free to be used as an element of language within the culture, even those dimensions of it that portray a malevolent universe that would have been repulsive to Ayn Rand. From the film A Scanner Darkly, a junkie commits suicide:The planning part had to do with the artifacts he wanted found on him by later archaeologists. He had spent several days deciding, much longer than he had spent deciding to kill himself. He decided he would be found lying on his back in his bed with a copy of Ayn Rand's The Fountainhead and an unfinished letter to Exxon protesting the cancellation of his gas credit card.
Posted by Donald L. Luskin at 10:37 PM | link